FIRST DIVISION

[G.R. No. 102467. June 13, 1997]

EQUITABLE BANKING CORPORATION, Chairman MANUEL L. MORALES, President & Director GEORGE L.
GO, Vice-Chairman & Director RICARDO J. ROMULO, Vice-Chairman & Director JOHN C.B. GO,
Director HERMINIO B. BANICO, Director FRANCISCO C. CHUA, Director PETER GO PAILIAN, Director
RICARDO C. LEONG, Director JULIUS T. LIMPE and Director PEDRO A. ORTIZ, petitioners, vs. HON.
NATIONAL LABOR RELATIONS COMMISSION, First Division, and RICARDO L. SADAC, respondents.

DECISION
VITUG, J.:

In the special civil action of certiorari, the petitioners, in order to have a reasonable chance of success, must be
able to come up with proof that the tribunal, board or officer against whom the petition is brought has, in the exercise
of judicial or quasi-judicial function, acted without or in excess of jurisdiction or with grave abuse of discretion
amounting to lack or excess of jurisdiction. In the instant petition, the Court is asked to rule against the National Labor
Relations Commission (NLRC) in holding private respondent Ricardo L. Sadac, Vice-President for the Legal
Department and General Counsel of petitioner Equitable Banking Corporation, to have been a regular employee of
the bank whose services could only be terminated in accordance with the Labor Code. Petitioner bank submits that
the services of private respondent, its legal counsel, could be dispensed with at anytime pursuant to the provision on
the cessation of lawyer-client relationship under Rule 138 of the Rules of Court.
The facts, essentially, do not appear to be in dispute.
Private respondent Sadac was appointed, effective 01 August 1981, Vice-President for the Legal Department of
petitioner bank by its then President, Manuel L. Morales, with a monthly salary of P8,000.00, plus an allowance
of P4,500.00 and a Christmas bonus equivalent to a two-month salary.[1] On 08 December 1981, private respondent
was also designated as the banks General Counsel. Private respondent had these functions:

"Duties & Responsibilities

- Provides legal advice to the Board of Directors and Management of the Bank.

- Takes charge of all Bank cases arising from bank transactions and rendering opinions on legal questions
in connection therewith.

- Insures effective conduct of litigation, collection of past due accounts, and investigation of irregularities
and other legal matters affecting the interest of the Bank.

- Participates in action of major character, financing, amendments to the Articles of Incorporation and By-
laws of the Bank, changes in corporate structures acquisition and disposal of important segments of
enterprises or real estate, determination of action to comply with statutory and other government
requirements.

- Directs, plans, coordinates and maintains supervision and control over the staff of the Legal Department.

- Provides for and insures proper documentation and notarization of all Bank transactions.

- Assumes primary responsibility in the account of continuing research and studies on questions of law
affecting the Bank and its subsidiary corporations and the formulation and development of legal
opinions.

- Recommends appointments, promotions, transfers and disciplinary actions involving Legal Department
personnel.

- Establishes and maintains effective discipline, work performances, high level of morale and cooperation
among the staff.

- Performs such other duties as may be assigned from time to time by the President and the Board of
Directors."[2]

The turning point in the relationship among the parties surfaced, when, on 26 June 1989, nine lawyers [3] of the
banks Legal Department, who were all under private respondent, addressed a letter-petition to the Chairman of the
Board of Directors, accusing private respondent of abusive conduct, inefficiency, mismanagement, ineffectiveness
and indecisiveness.[4] The individual written complaints of each of the nine lawyers were attached to the letter-
petition. Private respondent was furnished with a copy of the letter.
Private respondent promptly responded and manifested an intention to file criminal, civil and administrative
charges against the nine lawyers. Petitioner Morales, by now Chairman of the Board of Directors, called the
contending lawyers to a conference in his office in an attempt to resolve their differences. The meeting held on 29
June 1989, in the presence of Vice-President for Personnel and Human Relations Dean Alejandro C. Reyes,
apparently did not amount to much and only resulted, it would seem, in a broad commitment of the parties to
implement the existing procedures and practices in the Legal Department.[5] The dialogue was marked, in fact, by
rancorous and very heated altercation between private respondent and his subordinates. Mr. Morales considered the
problem serious enough to merit the Boards attention. In its meeting on 11 July 1989, the Board of Directors, apprised
of the situation, adopted a resolution directing one of its directors, petitioner Herminio B. Banico, to look further into
the matter and to determine a course of action for the best interest of the bank.
Petitioner Banico met with the complaining nine lawyers on 17 July 1989. He was warned that if private
respondent were to be retained in his position, the lawyers would resign en masse. The following day, Mr. Banico saw
private respondent. The latter denied the charges leveled against him. Although the two would appear to have
explored various alternatives and avenues to solve the crisis, nothing positive, however, came out of their
meeting. Convinced that reconciliation was out of the question, Mr. Banico, on 08 August 1989, submitted a report to
the Board of Directors with these findings:

a. ABUSIVE CONDUCT

There is no doubt at all, in my mind that the charge of `abusive conduct against Atty. Sadac, in his treatment in
varying degrees, of the complaining lawyers, is true, as this is supported by overwhelming evidence. Atty. Sadac
himself, in effect, admitted this when he proferred his apologies in the presence of the Chairman in the
`confrontation held in the latters office.

b. MISMANAGEMENT

In my study and investigation, I found abundant evidence to support a finding of mismanagement of the Legal
Department by Atty. Sadac.

c. INEFFICIENCY, INEFFECTIVENESS, AND INDECISIVENESS

The above specific charges are each proven and/or established by the same nature of evidence.[6]

Two days later, or on 10 August 1989, Mr. Morales issued a memorandum to private respondent which, among
other things, pertinently stated:

"x x x. The Board, however, feels that because during all its existence of almost forty (40) years, the Bank never had
in its employ any senior officer who had compelled it to resort to the unfortunate, sorry and nasty spectacle of
conducting a formal hearing (which of course is distasteful to all parties concerned) of whatever charge such as the
one lodged against you just to terminate your services, consonant with the due process requirements of the
Constitution, the Labor Code, the Implementing Regulations thereof and other pertinent laws, it has chosen the more
compassionate option of waiting for your voluntary resignation from your employ with the Bank.

In the meantime, since all the lawyers under you, by petitioning for a change in leadership of the department despite
the fact that all these lawyers have all been hired and promoted to their positions upon your recommendation, have
thus shown lack of confidence in you, the Board feels it has no reason to continue reposing confidence in you and
therefore elected to exercise its prerogative as your client, under the rules of client and lawyer relationship to direct
Atty. William R. Veto, Legal Counsel of the Bank these many years to appear in substitution of you in all the cases in
which you are presently appearing as counsel of record for the Bank. For this purpose, the Bank as your client,
therefore, instructs you to deliver the folders of pleadings and documents of all cases you are now personally handling
and submit a list of all the cases where you appear as the counsel of record for the bank and the corresponding titles
thereof not later than the close of office hours on Tuesday, August 15, 1989 so that the Legal Counsel of the Bank,
Atty. William R. Veto, could file his substitution of appearance in all said cases where you are counsel of record. Atty.
Veto has already been instructed and authorized by the Board to take over from you the functions that you are now
performing in the Legal Department."[7]

Reacting to the above memorandum, private respondent, on 14 August 1989 addressed a letter to Board
Chairman Morales, furnishing the other members of the Board, to the effect that the report of Mr. Banico contained
libelous statements and that the implementation of the chairmans memorandum would lead to an illegal
dismissal. Pointing out that he could not now in conscience resign in the face of Mr. Banicos baseless and libelous
findings, private respondent requested for a full hearing by the Board of Directors so that he could clear his name.[8]
On 17 August 1989, petitioner Ricardo J. Romulo, Board Vice-Chairman, answered private respondent. Mr.
Romulo stressed that private respondents services were not terminated by the Board which, instead, was merely
exercising its managerial prerogative to control, conduct (its) business in the manner (it) deems fit and to regulate the
same. In reply to private respondents request for a formal hearing, Mr. Romulo reiterated the Boards decision that it
would be to the best interest of all concerned if the distasteful spectacle" of a hearing would not be resorted to "in
order to adhere to (the bank's) long standing compassionate policy."[9] Mr. Romulo also said:

"We would like to emphasize that our decision as a Board did not dismiss you from the service of the Bank. All that
the Board is saying to you is that it has lost its confidence in you and therefore it is patiently awaiting your resignation
of course with your right of retirement pay in accordance with the policy adopted by the Bank under these situations.
Trust or confidence like love are feelings which emanate from the heart and, as the song goes, `once a heart is torn
apart it is never the same again.' So also, confidence like a tooth once pulled can never be restored."[10]

In his memorandum of 28 August 1989 to the members of the Board, private respondent again made a request
for a full hearing and cautioned that, under Section 31 of the Corporation Code, individual members of the Board could
be held accountable for voting or assenting to patently unlawful acts of the corporation.
On 31 August 1989, Mr. Romulo wrote back expressing, in part, as follows:

"7. The charge that you have been constructively dismissed is likewise without basis because as we said before, you
are free to remain in the employ of the bank if you so wish, even if the bank were to incur the tremendous expense of
continuing to pay your high salary just so it can continue to adhere to its compassionate policy of avoiding ruining the
future of any of its officers by a possible dismissal for cause which is certainly bound to leak to the public. It is believed,
however, that there is no law which can compel an employer to give any of his employees any particular work at all."[11]

Mr. Romulo stated that the banks confidence on private respondent had been lost most especially in the light of (his)
threats and that the latter could bring the matter up in the appropriate forum.[12]
Undaunted, private respondent, in his memorandum of 07 September 1989 to the individual members of the
Board of Directors, persisted in his request for a formal investigation.[13] Having been unheeded, private respondent,
on 09 November 1989, filed with the Manila arbitration branch of the NLRC, a complaint, docketed NLRC Case No.
00-11-05252-89, against herein petitioners for illegal dismissal and damages.[14]
After learning of the filing of the complaint, the Board of Directors, on 21 November 1989, adopted Resolution
No. 5803 terminating the services of private respondent in view of his belligerence" and the Board's "honest belief that
the relationship" between private respondent and petitioner bank was one of "client and lawyer." Private respondent
was removed from his office occupancy in the bank and ordered disentitled, starting 10 August 1989, to any
compensation and other benefits. The Board instructed management to take the necessary steps to "defend itself and
all the members of the Board of Directors" from private respondent's complaint.[15]
Pursuing their stand that the association between the bank and private respondent was one of a client-lawyer
relationship, herein petitioners filed a motion to dismiss the complaint with the NLRC on the ground of lack of
jurisdiction.[16] Private respondent, opposing the motion, insisted on the existence of an employer-employee
relationship between them.[17] In their reply, petitioners added another ground for seeking a dismissal of the complaint,
i.e., that under the ruling in Besa vs. PNB,[18] the rule governing the duration of private respondents term was provided
for by the Rules of Court and not by the Labor Code.[19]
Following an exchange of position papers and other pleadings, Labor Arbiter Jovencio Ll. Mayor, Jr., on 02
October 1990, rendered a decision dismissing the complaint for lack of merit.[20] The Labor Arbiter was convinced that
the relationship between petitioner bank and private respondent was one of lawyer-client based on the functions of
the latter which only a lawyer with highly trained legal mind, can effectively discharge. [21]He distinguished the instant
controversy from the situation in Hydro Resources Contractors Corporation vs. Pagalilauan[22] in that herein
private respondent, he said, only performed functions encompassed by the practice of law while in Hydro Resources,
the involved lawyer was a mere legal assistant tasked with certain duties not all that related to the practice of law. The
Labor Arbiter concluded that the complaint stated no cause of action because a lawyer-client relationship should
instead be governed by Section 26, Rule 138, of the Rules of Court. On whether or not there were valid grounds to
terminate the services of private respondent, the Labor Arbiter, noting the letter-petition of the nine subordinate
lawyers of private respondent, said:

"x x x. The truth and veracity of these complaints were respectively affirmed under oath by each and every one of
these nine subordinate lawyers in their individual affidavits (Annexes `1-J' to `1-R', inclusive), (Ibid). From these
individual statements, it can be culled that complainant has been charged, among others, with committing such acts
as shouting and insulting lawyers even in the presence of clients, having frequent outbursts of temper, being
indecisive even on simple and fundamental questions, of devoting time to private and personal matters such that he
is always out of the office, of being closed and narrow minded to the ideas of subordinates, and other similar acts.
These charges were never refuted by herein complainant and instead narrated a general refutation x x x."[23]

The Labor Arbiter brushed aside private respondents claim that he was denied due process, holding that private
respondent was heard exhaustively on the matter of the charge lodged against him and that, for valid practical
reasons, petitioners were not in a position to accede to the demand for a formal hearing.[24]
On appeal, the NLRC concluded differently. On 24 September 1991, the First Division of the NLRC rendered a
resolution[25] reversing the decision of the Labor Arbiter. It held that private respondent was an employee of petitioner
bank which never stated that complainant was an outside counsel for he was never so [26] as against the
pronouncement of the Court in Hydro Resources that distinguished between an in-house counsel and
an outside counsel hired on a retainer basis. Certain other circumstances that likewise did not escape NLRCs
attention were that petitioner George L. Go, the banks president, had enjoined private respondent to attend a bank-
sponsored symposium on Japanese investment on 08 September 1989 at the Hotel Intercontinental; that in petitioners
letter of 31 August 1989, private respondent was referred to as an employee; that in another letter, dated 24
November 1989, petitioner admitted having terminated private respondents employment and requested the return of
the 1988 Mitsubishi Galant 1800 which he had acquired through the banks car plan; and that, through a
communication of 02 January 1990 of the Personnel and HRD Department, the bank announced that private
respondents employment had been terminated effective 21 November 1989.
Turning to the issue of whether or not the employment of private respondent was terminated for cause, the NLRC
held that because he had not been afforded a hearing in accordance with law, there was no factual basis to support
the allegation of loss of confidence made by petitioners who, instead, had relied on the doctrine of res ipsa loquitor.
The NLRC ruled that private respondent was denied the right to due process with the banks failure to observe
the twin requirements of notice and hearing. The 10th August 1989 memorandum could not have been a substitute
for notice because it did not manifest petitioners intention to dismiss him from employment, and neither the meeting
between private respondent and the complaining lawyers nor those held between private respondent and petitioner
Banico could be considered the investigations which private respondent had consistently sought.
For having been made to undergo unnecessary embarrassment by being stripped of his functions and made to
undergo the sad and painful experience of reporting to office every day doing nothing, the NLRC, citing Sibal vs.
Notre Dame of Greater Manila,[27] awarded damages.
The NLRC, thereby concluded:

"WHEREFORE, in view of all the foregoing considerations, let the Decision of October 2, 1990 be, as it is hereby,
SET ASIDE and a new one ENTERED declaring the dismissal of the complainant as illegal, and consequently ordering
the respondents jointly and severally to reinstate him to his former position as bank Vice-President and General
Counsel without loss of seniority rights and other privileges, and to pay him full backwages and other benefits from
the time his compensation was withheld to his actual reinstatement, as well as moral damages of P100,000.00,
exemplary damages of P50,000.00, and attorney's fees equivalent to Ten Percent (10%) of the monetary award.
Should reinstatement be no longer possible due to strained relations, the respondents are ordered likewise jointly and
severally to grant separation pay at one (1) month per year of service in the total sum of P293,650.00 with backwages
and other benefits from November 16, 1989 to September 15, 1991 (cut-off date subject to adjustment) computed
at P1,055,740.48, plus damages of P100,000.00 (moral damages), P50,000.00 (exemplary damages) and attorney's
fees equal to Ten Percent (10%) of all the monetary award, or a grand total of P1,649,329.53.

SO ORDERED."[28]

Petitioners filed a motion,[29] opposed by private respondent,[30] for a reconsideration of the resolution.
The motion for reconsideration was still pending when private respondent, following an exchange of yet additional
pleadings, filed an urgent ex-parte motion for immediate reinstatement grounded on Article 223 of the Labor
Code.[31] On 07 November 1991, NLRC Executive Clerk Pascual Y. Reyes addressed a communication, with the
letterhead of the First Division of the NLRC, to Attys. Vicente Abad Santos and William R. Veto, counsel for petitioners,
which read:

"G R E E T I N G S :

Consistent with the NLRC New Rules and Procedure on Appeal under Republic Act 6715, amending Article 223 of
the Labor Code, RESPONDENT(s) is/are hereby directed within ten (10) calendar days from receipt of this Order:

To immediately reinstate complainant under the same terms and conditions prevailing prior to his dismissal or
separation or, at RESPONDENT(s) option to reinstate him in the payroll, and to submit proof of compliance thereof,
otherwise, a Writ of Execution shall issue."[32]

Petitioners filed a motion to quash the "untitled document" which was claimed to be "highly irregular." Private
respondent countered, on the strength of the ruling in Aris (Phil.) Inc. vs. NLRC,[33] that even before its amendment
by Section 12 of R.A. 6715, Article 223 of the Labor Code already allowed execution of decisions of the NLRC pending
their appeal to the Secretary of Labor and Employment, and that, under Section 2, Rule XII, of the New Rules of
Procedure of the NLRC, Executive Clerk Reyes could be said to be performing a function similar or equivalent to that
discharged by the Clerk of Court of the Court of Appeals.
Petitioners, on their part filed an urgent motion for immediate resolution of their motion for reconsideration,[34] on
account of what was felt to be the "dubious legality" of the directive for reinstatement.
Pending the above incidents, particularly the motion for reconsideration of NLRCs resolution that has reversed
the Labor Arbiters decision, petitioners have filed the instant petition for certiorari, with prayer for the issuance of a
writ of preliminary injunction, before this Court. The petition questions the resolution of the NLRC finding that an
employer-employee relationship existed between petitioner bank and private respondent invoking the rulings in Besa
vs. PNB[35] and Asis vs. Minister of Labor and Employment,[36] against that of Hydro Resources Contractors vs.
Pagalilauan;[37] that the facts on record do support valid grounds for terminating the employment of private
respondent; and that due process has been duly observed. The petition likewise assails the NLRC for its monetary
awards and in omitting to resolve the allegation of forum-shopping committed by private respondent.
 This Court required petitioners to post a cash bond in the amount of P500,000.00 for the issuance of a temporary
restraining order.[38]
Prefatorily, the Court must state that the filing of a motion for reconsideration of a decision of the NLRC is
prerequisite to the elevation of the case to this Court on a petition for certiorari. The rule is aimed at enabling
the commission to look into and correct its error or mistake, if any has been committed, without the precipitate
intervention of this Court.[39] The failure to allow that opportunity for whatever reason is ordinarily a fatal procedural
defect that could warrant the dismissal of the petition.[40]
In this case, petitioners, instead of waiting for the resolution by the NLRC of their motion for reconsideration,
posthaste filed the instant petition. Its prematurity notwithstanding, the instant petition for certiorari was given due
course in order not to unduly delay the final disposition of the case considering that the issues involved [41] have
heretofore been ventilated practically to the limit by the parties.
While the Court agrees with private respondent that execution pending appeal may be ordered by the NLRC,[42] it
is equally true, however, that where the dismissed employee's reinstatement would lead to a strained relation between
the employer and the employee or to an atmosphere of antipathy and antagonism, the exception to the twin remedies
of reinstatement and payment of backwages can be invoked and reinstatement, which might become anathema to
industrial peace, could be held back pending appeal.[43] Nevertheless, the Court is not prepared to preempt the NLRC
and conclude that the directive for reinstatement is of dubious character.[44]It can be assumed that had petitioners
waited for NLRCs resolution on the motion for reconsideration, the question on the regularity in the issuance of the
directive for reinstatement could have perhaps properly been delved into.
The existence of an employer-employee relationship is, itself, a factual question[45] well within the province of the
NLRC. Considering, nevertheless, that its findings are at odds with the Labor Arbiter, the Court sees it fit to dwell a bit
into the issue.[46]
In determining the existence of an employer-employee relationship, the following elements are considered: (1)
the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal, and (4) the
power to control the employee's conduct, with the control test generally assuming primacy in the overall consideration.
The power of control refers to the existence of the power and not necessarily to the actual exercise thereof. It is not
essential, in other words, for the employer to actually supervise the performance of duties of the employee; it is enough
that the former has the right to wield the power.[47]
The NLRC, in the instant case, based its finding that there existed an employer-employee relationship between
petitioner bank and private respondent on these factual settings:

"It was complainant's understanding with respondent Morales that he would be appointed and assigned to the Legal
Department as vice President with the same salary, privileges and benefits granted by the respondent bank to its
ranking senior officers. He was not hired as lawyer on a retainership basis but as an officer of the bank.

Thus, the complainant was given an appointment as Vice President, Legal Department, effective August 1, 1981, with
a monthly salary of P8,000.00, monthly allowance of P4,500.00, and the usual two months Christmas bonus based
on basic salary likewise enjoyed by the other officers of the bank.

Then, as part of the ongoing organization of the Legal Department, the position of General Counsel of the bank was
created and extended to the complainant. In addition to his duties as Vice President of the bank, the complainant's
duties and responsibilities were so defined as to prove that he was a bank officer working under the supervision of
the President and the Board of Directors of the respondent bank.

In his more than eight years employment with the respondent bank, the complainant was given the usual payslips to
evidence his monthly gross compensation. The respondent bank, as employer, withheld taxes due to the Bureau of
Internal Revenue from the complainant's salary as employee. Moreover, the bank enrolled the complainant as its
employee under the Social Security System and Medicare programs. The complainant contributed to the bank
Employees' Provident Fund.

When the respondent bank changed its payroll accounting system in September 1988 by appointing SGV & Co. to
handle it and Far East Bank & Trust Company to pay the salaries and other benefits of Equitable Banking Corporation
officers, the complainant was included as one of corporate officers. Specifically, that there were eleven Far East Bank
and Trust Company credit memos starting October 13, 1988 up to September 13, 1989 received by the complainant
from FBTC crediting his salary and Christmas bonus to his account with FBTC per instruction of the respondent bank.

In as much as the complainant and the lawyers in the Legal Department were receiving salaries and other benefits as
other bank officers and employees, the attorney's fees, documentary and notarial fees earned in the exercise of their
profession as in-house lawyers were not given to or even shared with them, instead all were credited to the income
of the bank. In 1987 and 1988, the complainant and his subordinate lawyers were able to generate by way of attorney's
fees, documentary and notarial fees a total income of P973,028.00 for the bank('s) benefit. In turn, the respondent
bank shouldered the professional tax and Integrated Bar of the Philippines dues of the complainant and his
subordinate lawyers. Further proofs that there existed employer-employee relationship between the respondent bank
and the complainant are the following, to wit:
(1) Complainant's monthly attendance, like those of other bank officers, was recorded by the Chief Security Officer
and reported to the Office of the President with copy of the report furnished to the bank Personnel and HRD
Department.

(2) Complainant was authorized by the President to sign for and in behalf of the bank contracts covering legal services
of lawyers to be retained by the respondent bank for its branches on periodical retainership basis.

(3) Complainant participated as part of management in annual Management Planning Conferences which started in
1986 on objective-setting and long-range planning in response to the requirement of the rapidly changing environment.

(4) Respondent bank extended to complainant the benefit (of) a car plan like any other qualified senior officer of the
bank.

(5) Respondent bank since 1982 continuously reported and included the complainant as one of its senior officers in
its statements of financial condition holding the position of Vice President. These bank statements have been
distributed and circularized to the public, including bank clients and government entities.

(6) Complainant, like other bank officers, prepared his biographical data for submission to the Central Bank after his
assumption of duties in 1981. Thereafter, and pursuant to the regulations of the Central Bank, he has been required
to update annually his biographical data."[48]

It would virtually be foolhardy to so challenge the NLRC as having committed grave abuse of discretion in coming
up with its above findings. Just to the contrary, NLRC appears to have been rather exhaustive in its examination of
this particular question (existence or absence of an employer-employee relationship between the parties). Substantial
evidence, which is the quantum of evidence required to establish a fact in cases before administrative and quasi-
judicial bodies, connotes merely that amount of relevant evidence which a reasonable mind might accept to be
adequate in justifying a conclusion.[49]
The rulings in Besa and Asis, cited by petitioners, could not be all that controlling in this instance. In both cases,
the question of whether or not the parties had an employer-employee relationship was not the focal point of
controversy. In Besa, the Court said:

Petitioners reliance on the constitutional provision against removal without cause is misplaced. It is appropriate to
invoke it when an officer or employee in the civil service enjoying a fixed term is made to lose his position without
warrant or justification. It certainly finds no application when the duration of ones term depends on the will of the
appointing power. That is so where the position held is highly confidential in character. Such is the case of the Chief
Legal Counsel of respondent Philippine National Bank. That is our answer to the specific question before us. Our
decision is limited to the validity of the action taken by respondent Bank. We do not by any means intimate an opinion
as to the legal consequences attaching to an action similar in character taken by any other office or agency of the
government concerning a lawyer in its staff, especially one who was not employed precisely because of the marked
degree of confidence reposed in him, but rather because of his technical competence.

As far as the petitioner is concerned, however, it is our conclusion that he could not plausibly contend that there was
a removal in the constitutional sense as what did take place was a termination of official relation. Accepting as he did
the position of chief legal adviser, the essence of which is the utmost degree of confidence involving such `close
intimacy which insures freedom of intercourse without embarrassment or freedom from misgivings of betrayals
whether of personal trust or official matters, he could not have been unaware that his term could be cut short any time
without giving rise to any alleged infringement of the above constitutional safeguard. There was no removal which
according to such a mandate is only allowable for cause. Hence the lack of persuasive character of petitioners plea.[50]

And in Asis, the Court held:

The Deputy Minister found that the evidence satisfactorily established that the Centrals suspension of the petitioners
and others monthly ration of gasoline and LPG, had been caused by unavoidable financial constraints; that such a
suspension, in line with its conservation and cost-saving policy, did not in truth effect any significant diminution of said
benefits, since the petitioner was nevertheless entitled to reimbursement of the actual amount of gas consumed; that
petitioner had encouraged his co-employees to file complaints against the Central over the rations issue, and this, as
well as his institution of his own actions, had created an atmosphere of enmity in the Central, and caused the loss by
the Central of that trust and confidence in him so essential in a lawyer-client relationship as that theretofore existing
between them; and that under the circumstances, petitioners discharge as the Centrals Legal Counsel and Head of
the Manpower & Services Department was justified. The Deputy Ministers order of dismissal was however
subsequently modified, at the petitioners instance, by decreeing the payment to the latter of separation pay equivalent
to one months salary for every year of service rendered.[51]

It was, in fact, Hydro Resources which directly confronted the issue; there, the Court ruled:

"A lawyer, like any other professional, may very well be an employee of a private corporation or even of the
government. It is not unusual for a big corporation to hire a staff of lawyers as its in-house counsel, pay them regular
salaries, rank them in its table of organization, and otherwise treat them like its other officers and employees. At the
same time, it may also contract with a law firm to act as outside counsel on a retainer basis. The two classes of
lawyers often work closely together but one group is made up of employees while the other is not. A similar
arrangement may exist as to doctors, nurses, dentists, public relations practitioners, and other professionals."[52]

The existence of an employer-employee relationship, between the bank and private respondent brings the case
within the coverage of the Labor Code. Under the Code, an employee may be validly dismissed if these requisites are
attendant: (1) the dismissal is grounded on any of the causes stated in Article 282 of the Labor Code, and (2) the
employee has been notified in writing and given the opportunity to be heard and to defend himself as so required by
Section 2 and Section 5, Rule XIV, Book V, of the Implementing Rules of the Labor Code.[53]
Article 282(c) of the Labor Code provides that "willful breach by the employee of the trust reposed in him by his
employer" is a cause for the termination of employment by an employer. Ordinary breach of trust will not suffice, it
must be willful and without justifiable excuse.[54] This ground must be founded on facts established by the employer
who must clearly and convincingly prove by substantial evidence[55] the facts and incidents upon which loss of
confidence in the employee may fairly be made to rest; otherwise, the dismissal will be rendered illegal.[56]
Petitioners' stated loss of trust and confidence on private respondent was spawned by the complaints leveled
against him by the lawyers in his department. The letter-complaint signed by the nine lawyers read:

June 26, 1989

Mr. Manuel L. Morales

Chairman, Board of Directors
Equitable Banking Corporation

Sir:

With utmost respect, we have taken the liberty of seeking your intercession on the problems besetting the Legal
Department.

For a long time, we have kept silent, containing within us the abusive conduct and inefficiency of our department head,
Atty. Ricardo L. Sadac, if only to preserve cohesion among us. But we have reached the breaking point where we
could endure no more except to speak out. We realize the gravity of our action and its possible repercussions but we
only have ourselves to blame if we remained silent.

Atty. Sadac's insults to the lawyers which are totally uncalled for and made even in the presence of clients are simply
too much for a fellow lawyer. His outburst of temper on inconsequential matters have now become commonplace in
the department. His mismanagement, ineffectiveness as a head and indecisiveness on basic legal questions have
adversely affected the smooth operation of the department and the output of the lawyers. He berates rather than
inspires, delays rather than facilitates. Each lawyer's complaint are (sic) attached hereto attached (sic) as Annexes
`A', `A-1' to `A-8'.

At present, we are disgruntled on how he runs the department and our morale is at its ebb. While our only desire is to
work under an auspicious environment and under an effective head, we could not do so because of the General
Counsel.

We, therefore, respectfully pray for an immediate change in the department leadership in order to pave the way for a
more effective system, a new image for the department, and restore professionalism and the dignity of the lawyers.

Please accept our assurances that the interest of the bank is primordial to us as we pledge our total commitment and
unflinching loyalty to this institution.

Thank you."[57]

Concededly, a wide latitude of discretion is given an employer in terminating the employment of managerial
employees on the ground of breach of trust and confidence.[58] In order to constitute a just cause for dismissal,
however, the act complained of must be related to the performance of the duties of the employee such as would show
him to be thereby unfit to continue working for the employer.[59] Here, the grievances of the lawyers, in main, refer to
what are perceived to be certain objectionable character traits of private respondent. Although petitioners have
charged private respondent with allegedly mishandling two cases in his long service with the bank, it is quite apparent
that private respondent would not have been asked to resign had it not been for the letter-complaint of his associates
in the Legal Department.
Confident that no employer-employee existed between the bank and private respondent, petitioners have put
aside the procedural requirements for terminating ones employment, i.e., (a) a notice apprising the employee of the
particular acts or omissions for which his dismissal is sought, and (b) another notice informing the employee of the
employer's decision to dismiss him.[60] Failure to comply with these requirements taints the dismissal with illegality.
This procedure is mandatory, any judgment reached by management without that compliance can be considered void
and inexistent.[61] While it is true that the essence of due process is simply an opportunity to be heard or, as applied
in administrative proceedings, an opportunity to explain one's side,[62] meetings in the nature of consultation and
conferences such as the case here, however, may not be valid substitutes for the proper observance of notice and
hearing.[63]
Moral damages are recoverable when the dismissal of an employee is attended by bad faith or fraud or constitutes
an act oppressive to labor, or is done in a manner contrary to good morals, good customs or public policy. Exemplary
damages may be awarded if the dismissal is effected in a wanton, oppressive or malevolent manner.[64]
The Court has deliberated closely on this case and, after reviewing all the facts and circumstances heretofore
described, it is its considered view that petitioners have not been motivated by malice or bad faith nor have they acted
in wanton, oppressive or malevolent manner such as to warrant a judgment against them for moral and exemplary
damages. Malice or bad faith, the lesser evil of the two, the Court has once said, implies a conscious and intentional
design to do a wrongful act for a dishonest purpose or moral obliquity; it is different from the negative idea of
negligence in that malice or bad faith contemplates a state of mind affirmatively operating with furtive design or ill
will.[65]
It, too, then follows that the individual petitioners may not be held solidarily liable with the bank. In Santos vs.
NLRC,[66] the Court has explained the rule quite elaborately; thus:

"A corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf
and, in general, from the people comprising it. The rule is that obligations incurred by the corporation, acting through
its directors, officers and employees, are its sole liabilities. Nevertheless, being a mere fiction of law, peculiar situations
or valid grounds can exist to warrant, albeit done sparingly, the disregard of its independent being and the lifting of
the corporate veil. As a rule, this situation might arise when a corporation is used to evade a just and due obligation
or to justify a wrong, to shield or perpetrate fraud, to carry out similar other unjustifiable aims or intentions, or as a
subterfuge to commit injustice and so circumvent the law. In Tramat Mercantile, Inc., vs. Court of Appeals [238 SCRA
14, 19], the Court has collated the settled instances when, without necessarily piercing the veil of corporate fiction,
personal civil liability can also be said to lawfully attach to a corporate director, trustee or officer; to wit: When -

"`(1) He assents (a) to a patently unlawful act of the corporation, or (b) for bad faith or gross negligence in directing
its affairs, or (c) for conflict of interest, resulting in damages to the corporation, its stockholders or other persons;

"`(2) He consents to the issuance of watered stocks or who, having knowledge thereof, does not forthwith file with
the corporate secretary his written objection thereto;

"`(3) He agrees to hold himself personally and solidarily liable with the corporation; or

"`(4) He is made, by a specific provision of law, to personally answer for his corporate action.

The case of petitioner is way off these exceptional instances. It is not even shown that petitioner has had a direct
hand in the dismissal of private respondent enough to attribute to him (petitioner) a patently unlawful act while acting
for the corporation. Neither can Article 289 of the Labor Code be applied since this law specifically refers only to the
imposition of penalties under the Code. x x x.

It is true, there were various cases when corporate officers were themselves held by the Court to be personally
accountable for the payment of wages and money claims to its employees. In A.C. Ransom Labor Union-
CCLU vs. NLRC [142 SCRA 269], for instance, the Court ruled that under the Minimum Wage Law, the responsible
officer of an employer corporation could be held personally liable for nonpayment of backwages for (i)f the policy of
the law were otherwise, the corporation employer (would) have devious ways for evading payment of back wages." In
the absence of a clear identification of the officer directly responsible for failure to pay the backwages, the Court
considered the President of the corporation as such officer. The case was cited in Chua vs. NLRC [182 SCRA 353]
in holding personally liable the vice-president of the company, being the highest and most ranking official of the
corporation next to the President who was dismissed, for the latter's claim for unpaid wages.

A review of the above exceptional cases would readily disclose the attendance of facts and circumstances that could
rightly sanction personal liability on the part of the company officer. In A.C. Ransom, the corporate entity was a family
corporation and execution against it could not be implemented because of the disposition posthaste of its leviable
assets evidently in order to evade its just and due obligations. The doctrine of piercing the veil of corporate fiction was
thus clearly appropriate. Chua likewise involved another family corporation, and this time the conflict was between
two brothers occupying the highest ranking positions in the company. There were incontrovertible facts which pointed
to extreme personal animosity that resulted, evidently in bad faith, in the easing out from the company of one of the
brothers by the other.

The basic rule is still that which can be deduced from the Courts pronouncement in Sunio vs. National Labor
Relations Commission [127 SCRA 390]; thus:

`We come now to the personal liability of petitioner, Sunio, who was made jointly and severally responsible with
petitioner company and CIPI for the payment of the backwages of private respondents. This is reversible error. The
Assistant Regional Directors Decision failed to disclose the reason why he was made personally liable. Respondents,
however, alleged as grounds thereof, his the being owner of one-half (1/2) interest of said corporation, and his alleged
arbitrary dismissal of private respondents.
`Petitioner Sunio was impleaded in the Complaint in his capacity as General Manager of petitioner corporation. There
appears to be no evidence on record that he acted maliciously or in bad faith in terminating the services of private
respondents. His act, therefore, was within the scope of his authority and was a corporate act.

`It is basic that a corporation is invested by law with a personality separate and distinct from those of the persons
composing it as well as from that of any other legal entity to which it may be related. Mere ownership by a single
stockholder or by another corporation of all or nearly all of the capital stock of a corporation is not of itself sufficient
ground for disregarding the separate corporate personality. Petitioner Sunio, therefore, should not have been made
personally answerable for the payment of private respondents back salaries.

The Court, to be sure, did appear to have deviated somewhat in Gudez vs. NLRC [183 SCRA 644]; however, it should
be clear from our recent pronouncement in Mam Realty Development Corporation and Manuel Centeno vs.
NLRC [244 SCRA 797] that the Sunio doctrine still prevails.[67]

For having violated private respondents right to due process private respondent shall, considering the attendant
circumstances particularly his repeated, but unheeded, request for a hearing, be entitled to an amount ofP5,000.00.
The allegation that private respondent was guilty of forum-shopping deserves scant consideration. Suffice it said
that, for forum-shopping to exist, both actions should involve a common transaction with essentially the same facts
and circumstances and raise identical causes of action, subject matter and issues.[68] Certainly, the filing by private
respondent of a criminal action for libel during the pendency of this illegal dismissal case could not constitute forum-
shopping.
The controversy spawning this case has generated not too little personal animosities.[69] Reinstatement, which is
the consequence of illegal dismissal, has markedly been rendered undesirable. Private respondent shall, instead, be
entitled to backwages from the time of his dismissal until reaching sixty (60) years of age (1995)[70] and, thereupon, to
retirement benefits in accordance with Article 287 of the Labor Code and Section 14,[71] Rule 1, Book VI, of the
Implementing Rules of the Labor Code.[72]
WHEREFORE, the herein questioned Resolution of the NLRC is AFFIRMED with the following
MODIFICATIONS: That private respondent shall be entitled to backwages from termination of employment until
turning sixty (60) years of age (in 1995) and, thereupon, to retirement benefits in accordance with law; that private
respondent shall be paid an additional amount of P5,000.00; that the award of moral and exemplary damages
are deleted; and that the liability herein pronounced shall be due from petitioner bank alone, the other petitioners
being absolved from solidary liability. No costs.
SO ORDERED.
 FIRST DIVISION

[G.R. No. 118506. April 18, 1997]

NORMA MABEZA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, PETER NG/HOTEL
SUPREME, respondents.

DECISION
KAPUNAN, J.:

This petition seeking the nullification of a resolution of public respondent National Labor Relations Commission
dated April 28, 1994 vividly illustrates why courts should be ever vigilant in the preservation of the constitutionally
enshrined rights of the working class. Without the protection accorded by our laws and the tempering of courts, the
natural and historical inclination of capital to ride roughshod over the rights of labor would run unabated.
The facts of the case at bar, culled from the conflicting versions of petitioner and private respondent, are
illustrative.
Petitioner Norma Mabeza contends that around the first week of May, 1991, she and her co-employees at the
Hotel Supreme in Baguio City were asked by the hotel's management to sign an instrument attesting to the latter's
compliance with minimum wage and other labor standard provisions of law.[1] The instrument provides:[2]

JOINT AFFIDAVIT

We, SYLVIA IGANA, HERMINIGILDO AQUINO, EVELYN OGOY, MACARIA JUGUETA, ADELAIDA
NONOG, NORMA MABEZA, JONATHAN PICART and JOSE DIZON, all of legal ages (sic), Filipinos and
residents of Baguio City, under oath, depose and say:

1. That we are employees of Mr. Peter L. Ng of his Hotel Supreme situated at No. 416 Magsaysay Ave., Baguio
City;

2. That the said Hotel is separately operated from the Ivy's Grill and Restaurant;

3. That we are all (8) employees in the hotel and assigned in each respective shifts;

4. That we have no complaints against the management of the Hotel Supreme as we are paid accordingly and that
we are treated well.

5. That we are executing this affidavit voluntarily without any force or intimidation and for the purpose of informing
the authorities concerned and to dispute the alleged report of the Labor Inspector of the Department of Labor and
Employment conducted on the said establishment on February 2, 1991.

IN WITNESS WHEREOF, we have hereunto set our hands this 7th day of May, 1991 at Baguio City,
Philippines.
(Sgd.) (Sgd.) (Sgd.)
SYLVIA IGAMA HERMINIGILDO AQUINO EVELYN OGOY
(Sgd) (Sgd.) (Sgd.)
MACARIA JUGUETA ADELAIDA NONOG NORMA MABEZA
(Sgd) (Sgd.)
JONATHAN PICART JOSE DIZON
SUBSCRIBED AND SWORN to before me this 7th day of May, 1991, at Baguio City, Philippines.

Asst. City Prosecutor

Petitioner signed the affidavit but refused to go to the City Prosecutor's Office to swear to the veracity and contents
of the affidavit as instructed by management. The affidavit was nevertheless submitted on the same day to the
Regional Office of the Department of Labor and Employment in Baguio City.
As gleaned from the affidavit, the same was drawn by management for the sole purpose of refuting findings of
the Labor Inspector of DOLE (in an inspection of respondent's establishment on February 2, 1991) apparently adverse
to the private respondent.[3]
After she refused to proceed to the City Prosecutor's Office - on the same day the affidavit was submitted to the
Cordillera Regional Office of DOLE - petitioner avers that she was ordered by the hotel management to turn over the
keys to her living quarters and to remove her belongings from the hotel premises.[4] According to her, respondent
strongly chided her for refusing to proceed to the City Prosecutor's Office to attest to the affidavit.[5] She thereafter
reluctantly filed a leave of absence from her job which was denied by management. When she attempted to return to
work on May 10, 1991, the hotel's cashier, Margarita Choy, informed her that she should not report to work and,
instead, continue with her unofficial leave of absence. Consequently, on May 13, 1991, three days after her attempt
to return to work, petitioner filed a complaint for illegal dismissal before the Arbitration Branch of the National Labor
Relations Commission - CAR Baguio City. In addition to her complaint for illegal dismissal, she alleged underpayment
of wages, non-payment of holiday pay, service incentive leave pay, 13th month pay, night differential and other
benefits. The complaint was docketed as NLRC Case No. RAB-CAR-05-0198-91 and assigned to Labor Arbiter Felipe
P. Pati.
Responding to the allegations made in support of petitioner's complaint for illegal dismissal, private respondent
Peter Ng alleged before Labor Arbiter Pati that petitioner "surreptitiously left (her job) without notice to the
management"[6] and that she actually abandoned her work. He maintained that there was no basis for the money
claims for underpayment and other benefits as these were paid in the form of facilities to petitioner and the hotel's
other employees.[7] Pointing to the Affidavit of May 7, 1991, the private respondent asserted that his employees
actually have no problems with management. In a supplemental answer submitted eleven (11) months after the
original complaint for illegal dismissal was filed, private respondent raised a new ground, loss of confidence, which
was supported by a criminal complaint for Qualified Theft he filed before the prosecutor's office of the City of Baguio
against petitioner on July 4, 1991.[8]
On May 14, 1993, Labor Arbiter Pati rendered a decision dismissing petitioner's complaint on the ground of loss
of confidence. His disquisitions in support of his conclusion read as follows:
It appears from the evidence of respondent that complainant carted away or stole one (1) blanket, 1 piece
bedsheet, 1 piece thermos, 2 pieces towel (Exhibits '9', '9-A,' '9-B,' '9-C' and '10' pages 12-14 TSN,
December 1, 1992).
In fact, this was the reason why respondent Peter Ng lodged a criminal complaint against complainant for
qualified theft and perjury. The fiscal's office finding a prima facie evidence that complainant committed the
crime of qualified theft issued a resolution for its filing in court but dismissing the charge of perjury (Exhibit
'4' for respondent and Exhibit 'B-7' for complainant). As a consequence, complainant was charged in court
for the said crime (Exhibit '5' for respondent and Exhibit 'B-6' for the complainant).
With these pieces of evidence, complainant committed serious misconduct against her employer which is
one of the just and valid grounds for an employer to terminate an employee (Article 282 of the Labor Code
as amended).[9]
On April 28, 1994, respondent NLRC promulgated its assailed Resolution[10] affirming the Labor Arbiter's decision.
The resolution substantially incorporated the findings of the Labor Arbiter.[11] Unsatisfied, petitioner instituted the
instant special civil action for certiorari under Rule 65 of the Rules of Court on the following grounds:[12]
1. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ITS FAILURE TO CONSIDER THAT THE ALLEGED LOSS OF CONFIDENCE
IS A FALSE CAUSE AND AN AFTERTHOUGHT ON THE PART OF THE RESPONDENT-
EMPLOYER TO JUSTIFY, ALBEIT ILLEGALLY, THE DISMISSAL OF THE COMPLAINANT
FROM HER EMPLOYMENT;
2. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN ADOPTING THE RULING OF THE LABOR ARBITER THAT THERE WAS NO
UNDERPAYMENT OF WAGES AND BENEFITS ON THE BASIS OF EXHIBIT "8" (AN
UNDATED SUMMARY OF COMPUTATION PREPARED BY ALLEGEDLY BY RESPONDENT'S
EXTERNAL ACCOUNTANT) WHICH IS TOTALLY INADMISSIBLE AS AN EVIDENCE TO
PROVE PAYMENT OF WAGES AND BENEFITS;
3. WITH ALL DUE RESPECT, THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION
COMMITTED A PATENT AND PALPABLE ERROR AMOUNTING TO GRAVE ABUSE OF
DISCRETION IN FAILING TO CONSIDER THE EVIDENCE ADDUCED BEFORE THE LABOR
ARBITER AS CONSTITUTING UNFAIR LABOR PRACTICE COMMITTED BY THE
RESPONDENT.
The Solicitor General, in a Manifestation in lieu of Comment dated August 8, 1995 rejects private respondent's
principal claims and defenses and urges this Court to set aside the public respondent's assailed resolution.[13]
We agree.
It is settled that in termination cases the employer bears the burden of proof to show that the dismissal is for just
cause, the failure of which would mean that the dismissal is not justified and the employee is entitled to
reinstatement.[14]
In the case at bar, the private respondent initially claimed that petitioner abandoned her job when she failed to
return to work on May 8, 1991. Additionally, in order to strengthen his contention that there existed sufficient cause
for the termination of petitioner, he belatedly included a complaint for loss of confidence, supporting this with charges
that petitioner had stolen a blanket, a bedsheet and two towels from the hotel.[15]Appended to his last complaint was
a suit for qualified theft filed with the Baguio City prosecutor's office.
From the evidence on record, it is crystal clear that the circumstances upon which private respondent anchored
his claim that petitioner "abandoned" her job were not enough to constitute just cause to sanction the termination of
her services under Article 283 of the Labor Code. For abandonment to arise, there must be concurrence of two things:
1) lack of intention to work;[16] and 2) the presence of overt acts signifying the employee's intention not to work.[17]
In the instant case, respondent does not dispute the fact that petitioner tried to file a leave of absence when she
learned that the hotel management was displeased with her refusal to attest to the affidavit. The fact that she made
this attempt clearly indicates not an intention to abandon but an intention to return to work after the period of her leave
of absence, had it been granted, shall have expired.
Furthermore, while absence from work for a prolonged period may suggest abandonment in certain instances,
mere absence of one or two days would not be enough to sustain such a claim. The overt act (absence) ought to
unerringly point to the fact that the employee has no intention to return to work,[18] which is patently not the case
here. In fact, several days after she had been advised to take an informal leave, petitioner tried to resume working
with the hotel, to no avail. It was only after she had been repeatedly rebuffed that she filed a case for illegal
dismissal. These acts militate against the private respondent's claim that petitioner abandoned her job. As the Solicitor
General in his manifestation observed:
Petitioner's absence on that day should not be construed as abandonment of her job. She did not report
because the cashier told her not to report anymore, and that private respondent Ng did not want to see her
in the hotel premises. But two days later or on the 10th of May, after realizing that she had to clarify her
employment status, she again reported for work. However, she was prevented from working by private
respondents.[19]
We now come to the second cause raised by private respondent to support his contention that petitioner was
validly dismissed from her job.
Loss of confidence as a just cause for dismissal was never intended to provide employers with a blank check for
terminating their employees. Such a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given the
seal of approval by this Court, could readily reduce to barren form the words of the constitutional guarantee of security
of tenure. Having this in mind, loss of confidence should ideally apply only to cases involving employees occupying
positions of trust and confidence or to those situations where the employee is routinely charged with the care and
custody of the employer's money or property. To the first class belong managerial employees, i.e., those vested with
the powers or prerogatives to lay down management policies and/or to hire, transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or effectively recommend such managerial actions; and to the second class
belong cashiers, auditors, property custodians, etc., or those who, in the normal and routine exercise of their functions,
regularly handle significant amounts of money or property. Evidently, an ordinary chambermaid who has to sign out
for linen and other hotel property from the property custodian each day and who has to account for each and every
towel or bedsheet utilized by the hotel's guests at the end of her shift would not fall under any of these two classes of
employees for which loss of confidence, if ably supported by evidence, would normally apply. Illustrating this
distinction, this Court, in Marina Port Services, Inc. vs. NLRC,[20] has stated that:
To be sure, every employee must enjoy some degree of trust and confidence from the employer as that is
one reason why he was employed in the first place. One certainly does not employ a person he
distrusts. Indeed, even the lowly janitor must enjoy that trust and confidence in some measure if only
because he is the one who opens the office in the morning and closes it at night and in this sense is
entrusted with the care or protection of the employer's property. The keys he holds are the symbol of that
trust and confidence.
By the same token, the security guard must also be considered as enjoying the trust and confidence of his
employer, whose property he is safeguarding. Like the janitor, he has access to this property. He too, is
charged with its care and protection.
Notably, however, and like the janitor again, he is entrusted only with the physical task of protecting that
property. The employer's trust and confidence in him is limited to that ministerial function. He is not
entrusted, in the Labor Arbiter's words, 'with the duties of safekeeping and safeguarding company policies,
management instructions, and company secrets such as operation devices.' He is not privy to these
confidential matters, which are shared only in the higher echelons of management. It is the persons on
such levels who, because they discharge these sensitive duties, may be considered holding positions of
trust and confidence. The security guard does not belong in such category.[21]
More importantly, we have repeatedly held that loss of confidence should not be simulated in order to justify what
would otherwise be, under the provisions of law, an illegal dismissal. "It should not be used as a subterfuge for causes
which are illegal, improper and unjustified. It must be genuine, not a mere afterthought to justify an earlier action taken
in bad faith."[22]
In the case at bar, the suspicious delay in private respondent's filing of qualified theft charges against petitioner
long after the latter exposed the hotel's scheme (to avoid its obligations as employer under the Labor Code) by her
act of filing illegal dismissal charges against the private respondent would hardly warrant serious consideration of loss
of confidence as a valid ground for dismissal. Notably, the Solicitor General has himself taken a position opposite the
public respondent and has observed that:
 If petitioner had really committed the acts charged against her by private respondents (stealing supplies of
respondent hotel), private respondents should have confronted her before dismissing her on that
ground. Private respondents did not do so. In fact, private respondent Ng did not raise the matter when
petitioner went to see him on May 9, 1991, and handed him her application for leave. It took private
respondents 52 days or up to July 4, 1991 before finally deciding to file a criminal complaint against
petitioner, in an obvious attempt to build a case against her.
The manipulations of private respondents should not be countenanced.[23]
Clearly, the efforts to justify petitioner's dismissal - on top of the private respondent's scheme of inducing his
employees to sign an affidavit absolving him from possible violations of the Labor Code - taints with evident bad faith
and deliberate malice petitioner's summary termination from employment.
Having said this, we turn to the important question of whether or not the dismissal by the private respondent of
petitioner constitutes an unfair labor practice.
The answer in this case must inevitably be in the affirmative.
The pivotal question in any case where unfair labor practice on the part of the employer is alleged is whether or
not the employer has exerted pressure, in the form of restraint, interference or coercion, against his employee's right
to institute concerted action for better terms and conditions of employment. Without doubt, the act of compelling
employees to sign an instrument indicating that the employer observed labor standards provisions of law when he
might have not, together with the act of terminating or coercing those who refuse to cooperate with the employer's
scheme constitutes unfair labor practice. The first act clearly preempts the right of the hotel's workers to seek better
terms and conditions of employment through concerted action.
We agree with the Solicitor General's observation in his manifestation that "[t]his actuation... is analogous to the
situation envisaged in paragraph (f) of Article 248 of the Labor Code"[24] which distinctly makes it an unfair labor
practice "to dismiss, discharge or otherwise prejudice or discriminate against an employee for having given or being
about to give testimony"[25] under the Labor Code. For in not giving positive testimony in favor of her employer,
petitioner had reserved not only her right to dispute the claim and proffer evidence in support thereof but also to work
for better terms and conditions of employment.
For refusing to cooperate with the private respondent's scheme, petitioner was obviously held up as an example
to all of the hotel's employees, that they could only cause trouble to management at great personal
inconvenience. Implicit in the act of petitioner's termination and the subsequent filing of charges against her was the
warning that they would not only be deprived of their means of livelihood, but also possibly, their personal liberty.
This Court does not normally overturn findings and conclusions of quasi-judicial agencies when the same are
ably supported by the evidence on record. However, where such conclusions are based on a misperception of facts
or where they patently fly in the face of reason and logic, we will not hesitate to set aside those conclusions. Going
into the issue of petitioner's money claims, we find one more salient reason in this case to set things right: the labor
arbiter's evaluation of the money claims in this case incredibly ignores existing law and jurisprudence on the matter. Its
blatant one-sidedness simply raises the suspicion that something more than the facts, the law and jurisprudence may
have influenced the decision at the level of the Arbiter.
Labor Arbiter Pati accepted hook, line and sinker the private respondent's bare claim that the reason the monetary
benefits received by petitioner between 1981 to 1987 were less than minimum wage was because petitioner did not
factor in the meals, lodging, electric consumption and water she received during the period in her
computations.[26] Granting that meals and lodging were provided and indeed constituted facilities, such facilities could
not be deducted without the employer complying first with certain legal requirements. Without satisfying these
requirements, the employer simply cannot deduct the value from the employee's wages. First, proof must be shown
that such facilities are customarily furnished by the trade. Second, the provision of deductible facilities must be
voluntarily accepted in writing by the employee. Finally, facilities must be charged at fair and reasonable value.[27]
These requirements were not met in the instant case. Private respondent "failed to present any company policy
or guideline to show that the meal and lodging . . . (are) part of the salary;"[28] he failed to provide proof of the
employee's written authorization; and, he failed to show how he arrived at the valuations.[29]
Curiously, in the case at bench, the only valuations relied upon by the labor arbiter in his decision were figures
furnished by the private respondent's own accountant, without corroborative evidence. On the pretext that records
prior to the July 16, 1990 earthquake were lost or destroyed, respondent failed to produce payroll records, receipts
and other relevant documents, where he could have, as has been pointed out in the Solicitor General's manifestation,
"secured certified copies thereof from the nearest regional office of the Department of Labor, the SSS or the BIR."[30]
More significantly, the food and lodging, or the electricity and water consumed by the petitioner were not facilities
but supplements. A benefit or privilege granted to an employee for the convenience of the employer is not a
facility. The criterion in making a distinction between the two not so much lies in the kind (food, lodging) but the
purpose.[31] Considering, therefore, that hotel workers are required to work different shifts and are expected to be
available at various odd hours, their ready availability is a necessary matter in the operations of a small hotel, such
as the private respondent's hotel.
It is therefore evident that petitioner is entitled to the payment of the deficiency in her wages equivalent to
the full wage applicable from May 13, 1988 up to the date of her illegal dismissal.
 Additionally, petitioner is entitled to payment of service incentive leave pay, emergency cost of living allowance,
night differential pay, and 13th month pay for the periods alleged by the petitioner as the private respondent has never
been able to adduce proof that petitioner was paid the aforestated benefits.
However, the claims covering the period of October 1987 up to the time of filing the case on May 13, 1988 are
barred by prescription as P.D. 442 (as amended) and its implementing rules limit all money claims arising out of
employer-employee relationship to three (3) years from the time the cause of action accrues.[32]
We depart from the settled rule that an employee who is unjustly dismissed from work normally should be
reinstated without loss of seniority rights and other privileges. Owing to the strained relations between petitioner and
private respondent, allowing the former to return to her job would only subject her to possible harassment and future
embarrassment. In the instant case, separation pay equivalent to one month's salary for every year of continuous
service with the private respondent would be proper, starting with her job at the Belfront Hotel.
In addition to separation pay, backwages are in order. Pursuant to R.A. 6715 and our decision in Osmalik
Bustamante, et al. vs. National Labor Relations Commission,[33] petitioner is entitled to full backwages from the time
of her illegal dismissal up to the date of promulgation of this decision without qualification or deduction.
Finally, in dismissal cases, the law requires that the employer must furnish the employee sought to be terminated
from employment with two written notices before the same may be legally effected. The first is a written notice
containing a statement of the cause(s) for dismissal; the second is a notice informing the employee of the employer's
decision to terminate him stating the basis of the dismissal. During the process leading to the second notice, the
employer must give the employee ample opportunity to be heard and defend himself, with the assistance of counsel
if he so desires.
Given the seriousness of the second cause (qualified theft) of the petitioner's dismissal, it is noteworthy that the
private respondent never even bothered to inform petitioner of the charges against her. Neither was petitioner given
the opportunity to explain the loss of the articles. It was only almost two months after petitioner had filed a complaint
for illegal dismissal, as an afterthought, that the loss was reported to the police and added as a supplemental answer
to petitioner's complaint. Clearly, the dismissal of petitioner without the benefit of notice and hearing prior to her
termination violated her constitutional right to due process. Under the circumstances, an award of One Thousand
Pesos (P1,000.00) on top of payment of the deficiency in wages and benefits for the period aforestated would be
proper.
WHEREFORE, premises considered, the RESOLUTION of the National Labor Relations Commission dated April
24, 1994 is REVERSED and SET ASIDE, with costs. For clarity, the economic benefits due the petitioner are hereby
summarized as follows:
1) Deficiency wages and the applicable ECOLA from May 13, 1988 up to the date of petitioner's illegal
dismissal;
2) Service incentive leave pay; night differential pay and 13th month pay for the same period;
3) Separation pay equal to one month's salary for every year of petitioner's continuous service with the
private respondent starting with her job at the Belfront Hotel;
4) Full backwages, without qualification or deduction, from the date of petitioner's illegal dismissal up to the
date of promulgation of this decision pursuant to our ruling in Bustamante vs. NLRC.[34]
5) P1.000.00.
SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 178236 June 27, 2008

OLIGARIO SALAS, petitioner,

vs.
ABOITIZ ONE, INC., and SABIN ABOITIZ, respondents.

DECISION

NACHURA, J.:

Petitioner Oligario Salas (Salas) appeals by certiorari the January 31, 2007 Decision1 of the Court of Appeals (CA) in
CA-G.R. SP No. 93947 and CA-G.R. SP No. 94145, and its June 13, 2007 Resolution2 denying his motion for
reconsideration.

Salas was hired as assistant utility man by respondent Aboitiz One, Inc. (Aboitiz) on May 11, 1993, and was initially
assigned at the Maintenance Department-Manila Office. He rose from the ranks and became material controller on
February 22, 2000 under the Materials Management & Operations Team. As material controller, Salas was tasked
with monitoring and maintaining the availability and supply of Quickbox needed by Aboitiz in its day-to-day operations.

On June 4, 2003, Salas had run out of Large Quickbox, hampering Aboitiz’s business operation. The following day,
June 5, 2003, Aboitiz wrote Salas a memorandum requiring the latter to explain in writing within seventy-two (72)
hours why he should not be disciplinarily dealt with for his (i) failure to monitor the stock level of Large Quickbox which
led to inventory stock out; and (ii) failure to report to [his] immediate superior the Large Quickbox problem when the
stock level was already critical, when the Large Quickbox level was near stock out, and the stock level had a stock
out.3

On June 10, 2003, an administrative hearing was conducted to give Salas ample opportunity to explain his side. Salas’
explanation, however, was not convincing because on July 2, 2003, Aboitiz sent him a decision notice4 which reads:

Dear Mr. Salas:

In connection with the administrative investigation conducted on June 10, 2003 related to your alleged gross
negligence of duties and responsibilities, the following are the findings during the said investigation:

1. Although you repeatedly made follow-up to the [supplier], you failed to elevate the critical situation
to the attention of your leaders resulting to the stock out of a critical stock;

2. Your case was aggravated by your tampering of the Bin Card by changing the date of stock from
May 31 to June 2, 2003 to cover up your negligence and mislead the investigating team;

3. The stock out incident had a negative impact to the company in terms of revenue and goodwill to
clients.

Your position as Warehouseman is vested with trust and confidence by the company for the reason that you
are in-charge of safekeeping and monitoring of the company’s operational supplies and ensuring that these
are available anytime.

In consideration of the results of the investigation you are hereby terminated from the company for loss of trust
and confidence effective July 15, 2003.

Accordingly, you are hereby directed to report to the Human Resource Office for your final clearance of money
and property accountabilities, and obligations.

For your information and compliance.

Sincerely yours

(Signed)

PAUL HAMOY
Team Leader, Purchasing
Aboitiz One, Inc.
Salas thereafter sent a letter to Mr. Hamoy requesting reconsideration of the management’s decision stating:

Sir,

I would like to appeal for humanitarian reason on the decision of the management terminating me from service.

1. I would like to ask if I could avail of the early retirement plan since I was able to work for the company for
10 years, it is very hard for me that I be terminated after working for that long years in A1, the money I will get
from retirement plan will be use[d] for my family expenses for at least a couple of months until I got a new job,
pls. spare my family.

2. If you can’t grant #1 appeal can you please allow me to tender my resignation instead of being terminated
by the company;

3. If I can stay up to July 31, 2003, so I can have enough time to look for another job and I can earn enough
money to support my family [for] at least another month in our everyday expenses.

thanks, ohlee salas.5

Mr. Hamoy replied via electronic mail (e-mail) denying Salas’ request to avail himself of the retirement plan or tender
his resignation. He reasoned that the company’s table of discipline provides the penalty of dismissal for the offenses
he committed. Salas was, however, granted an extension of one (1) month or until August 15, 2003 to work with the
company, if he so desired.6

Claiming termination without cause, Salas filed with the Labor Arbiter a complaint against Aboitiz and its president
Sabin Aboitiz for illegal dismissal with prayer for reinstatement, and for payment of full backwages, moral and
exemplary damages, as well as attorney’s fees.

Aboitiz responded that there was valid termination. It asserted that Salas was dismissed for just cause and with due
process. It claimed Salas willfully breached his duty when Aboitiz ran out of Large Quickbox, justifying the termination
of his employment.7

On February 19, 2004, the Labor Arbiter rendered a Decision8 sustaining the validity of Salas’ dismissal. The Arbiter
agreed with Aboitiz that Salas had been remiss in his duty as material controller when he ran out of Large Quickboxon
June 4, 2003. The Arbiter further declared that Aboitiz was justified in imposing the ultimate penalty of dismissal,
considering Salas’ previous infractions.

On appeal, the National Labor Relations Commission (NLRC) reversed the Labor Arbiter. But noting that Salas was
not entirely faultless, the NLRC denied his prayer for backwages, and ordered the payment of separation pay instead
of reinstatement. The NLRC ratiocinated, thus:

Under the Labor Code, gross negligence is a valid ground for an employer to terminate an employee. Gross
negligence characterized by want of even slight care acting or omitting to act in a situation where there is a
duty to act, not inadvertently but willfully and intentionally with a conscious indifference to consequence insofar
as other persons may be affected (Tres Reyes vs. Maxim’s Tea House, 398 SCRA 288). It is for this reason
that We disagree with the finding of the Labor Arbiter that [Salas] is guilty of gross negligence because [Salas]
did his duty to make proper requisition in advance. If there is anyone to blame for failure to deliver to the
requisitioner [Salas], the requisitioned items, it should be the purchasing officer who should have made the
corresponding explanation, and to bear the consequences if his explanation is implausible. If ever [Salas]
failed to follow-up, it does not follow that he is remiss in his duty, as the duty to deliver the requisitioned items
is already on the purchasing officer. Moreover, [Salas] explained during the hearing that he made follow-ups.
What puzzles Us is, why did not the management require the Circle Team and the Purchasing Officer to
explain. Such omission, to Our mind, indicates discrimination against [Salas].

Past infractions of the same nature can be used to evaluate the sufficiency of the last offense for termination
of employment. Considering that We see no gross negligence on [Salas] for which his employment was
terminated, consideration of past infractions become immaterial. Moreover, with his ten years of service in the
company, he was charged twice, about the alleged sale of used eight units of air conditioner and refusal to
assist in the loading at the fuel depot of refueler truck, for which he was penalized by suspension x x x. These
past offenses are not of the same nature as the alleged gross negligence that prompted [Aboitiz] to dismiss
[Salas] and, therefore, cannot be used as additional justification with the last offense.

However, We find [Salas] guilty of negligence, not because the quick box ran out of stock as of 02 June 2003
but because he failed to monitor and properly document, the stocks in his custody. As he admitted during the
administrative hearing, there were those which are even missing. Worst, he tampered the records to show
that the stock on 31 May 2003 is for 02 June 2003. While there is no intention to defraud the company, that
indicates an act that deserve (sic) disciplinary sanction.
 Dismissal is too harsh a penalty for his negligence and act of tampering. This is especially true because he
readily admitted the same during the administrative hearing. Considering his length of service, and adhering
to the compassionate justice observed in labor cases, deletion of backwages, but with reinstatement, is
sufficient penalty. Nonetheless, it appears that strained relations has (sic) already set between the parties that
precludes harmonious working relationship. In such case, jurisprudence has laid out the solution by ordering
payment of separation pay at one (1) month for every year of service in lieu of reinstatement.

The alleged failure of [Salas] to account for alleged unused accountable forms in the amount of P57,850.00
cannot be used as justification for [Salas’] dismissal. This charge came out after Salas’ dismissal for which
[Salas] was not surely given an opportunity to be heard. Additionally, [no] substantial evidence was presented
to establish such charge. by mere certification of Pablo Osit (sic). How Mr. Osit arrived at such figure is not
even explained.9

Aboitiz filed a motion for reconsideration, while Salas sought partial reconsideration of the decision, both of which
were denied by the NLRC on January 24, 2006.

Salas and Aboitiz thereupon filed their respective petitions for certiorari with the Court of Appeals (CA), docketed as
CA-G.R. SP No. 93947 and CA-G.R. SP No. 94145, respectively. Salas questioned the denial of his prayer for
backwages and other monetary benefits, and the order directing payment of separation pay instead of reinstatement.
Upon the other hand, Aboitiz faulted the NLRC for not sustaining the validity of Salas’ dismissal.

By decision of January 31, 2007, the CA, which priorly consolidated the petitions of both parties, sustained Salas’
dismissal. Reversing the NLRC, it held that:

[t]hree valid grounds attended the dismissal of Salas: (1) Serious misconduct under Art. 282 (a), Labor
Code, for his tamper(ing) the records to show that the stock on 31 May 2003 is for 02 June 2003" even if he
is to be considered as an ordinary employee; (2) Gross and habitual neglect under Art. 282 (b), Labor Code,
as the NLRC no less admits that "for the nth time" Salas repeatedly "demonstrated laxity in the performance
of his duty"; and (3) willful breach by Salas of the trust reposed on him by Aboitiz, under Art. 282 (c) of
the Labor Code, because as "warehouseman", and therefore a confidential employee, Salas concededly
tampered company records to hide his gross and habitual neglect [of duty] and worse, unauthorizedly sold the
company’s eight units of used airconditioners. There, thus, is no basis here for an award of reinstatement and
full backwages under Art. 279 of the Labor Code, nor of any financial assistance due to strained relation
between the parties.10

The CA disposed, thus:

WHEREFORE, the petition of Aboitiz One, Inc. is GRANTED. The NLRC’s decision dated September 21,
2005 and resolution dated January 24, 2006, are SET ASIDE and the complaint below is DISMISSED for
being without merit.

SO ORDERED.11

Salas filed a motion for reconsideration, but the CA denied it on June 13, 2007.

Aggrieved by the resolutions of the CA, Salas comes to this Court positing that:

THE HON. COURT OF APPEALS SERIOUSLY ERRED IN LAW AND COMMITTED MISAPPREHENSION
OF FACTS IN REVERSING THE NLRC DECISION INSTEAD OF MODIFYING IT TO INCLUDE
BACKWAGES ON MERE GROUND OF A SINGLE AND SIMPLE NEGLIGENCE WHICH IS NOT A GROUND
FOR DISMISSAL. SIMILARLY, THIS CANNOT BE THE BASIS OF DISMISSAL ON GROUND OF LOSS OF
TRUST AND CONFIDENCE.12

The Court shall deal first with the procedural issue.

Commenting on the petition, Aboitiz argues that the petition suffers from procedural infirmities which warrant its
dismissal. It asserts that no duplicate original or certified true copy of the assailed decision and resolution, and material
portions of the record were appended to the petition. It also alleged that the petition did not indicate the material dates
to show that it was filed on time. Finally, it argues that the certification of non-forum shopping is defective.

Contrary to Aboitiz’s assertion, the petition substantially complies with the requirements set forth by the Rules of Court.
Salas submitted a duplicate original of the assailed Decision 13 and Resolution14 of the CA, as well as copies of the
material portions of the record referred to in the petition.15

Likewise, he indicated in his petition the material dates showing that the petition was filed on time. He alleged that he
received the assailed CA Decision on February 9, 2007 and filed a motion for reconsideration on February 19, 2007,
which was denied by the CA in its June 13, 2007 Resolution. The Resolution denying his motion for reconsideration
was received on June 15, 2007.16
There is also no dispute that Salas had complied with the requirement of the rules on the certification of non-forum
shopping. Salas certifies that he did not commence any case based on similar cause of action before any Court,
quasi-judicial body or tribunal. He also averred that:

[t]here is no pending case similar to this case before the Supreme Court, the Court of Appeals (or any of its
Division) quasi-judicial bodies or any tribunal, and should I thereafter learn, that the same or similar action or
claim has been filed or is pending, I shall report that fact within five (5) days therefrom to this Hon. Court of
Appeals wherein this initiatory pleading has been filed pursuant to Section 5, Rule 7 paragraph (c) of the
Revised Rules of Court.17

Obviously, Salas committed a typographical error in stating "this Hon. Court of Appeals" instead of "this Honorable
Court where this initiatory pleading (petition) has been filed." This innocuous oversight did not render the certification
defective, and thus, would not warrant the outright dismissal of the petition.

Besides, it has been our consistent holding that the ends of justice are better served when cases are determined on
the merits - after all, parties are given full opportunity to ventilate their causes and defenses - rather than on technicality
or some procedural imperfections.18 Aboitiz’s plea for the outright dismissal of the petition cannot, therefore, be
sustained.

Having resolved the procedural issue, we proceed to the merits of the case.

As stated in the decision notice,19 Salas was terminated for neglect of duty and willful breach of trust. Gross negligence
connotes want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a
thoughtless disregard of consequences without exerting any effort to avoid them. To warrant removal from service,
the negligence should not merely be gross, but also habitual.20

Undoubtedly, it was Salas’ duty, as material controller, to monitor and maintain the availability and supply of Quickbox
needed by Aboitiz in its day-to-day operations, and on June 4, 2003, Aboitiz had run out of Large Quickbox. However,
records show that Salas made a requisition for Quickbox as early as May 21, 2003; that he made several follow-ups
with Eric Saclamitao regarding the request; and that he even talked to the supplier to facilitate the immediate delivery
of the Quickbox.21 It cannot be gainsaid that Salas exerted efforts to avoid a stock out of Quickbox. Accordingly, he
cannot be held liable for gross negligence.

If there is anything that Salas can be faulted for, it is his failure to promptly inform his immediate supervisor, Mr. Ed
Dumago, of the non-delivery of the requisitioned items. Nevertheless, such failure did not amount to gross neglect of
duty or to willful breach of trust, which would justify his dismissal from service.

The CA also justified Salas’ dismissal on ground of willful breach of trust. It lent credence to Aboitiz’s posture that
Salas was a warehouseman holding a position of trust and confidence, and that he tampered with the bin card to
cover up [his] negligence and [to] mislead the investigating team.

We disagree.

A position of trust and confidence was explained in Panday v. NLRC,22 viz.:

The case of Lepanto Consolidated Mining Co. v. Court of Appeals 1 SCRA 1251 (1961), provides us with a
definition of a "position of trust and confidence." It is one where a person is "entrusted with confidence on
delicate matters," or with the custody, handling, or care and protection of the employer’s property.

A few examples were given by the Court in the case of Globe-Mackay Cable and Radio Corporation v. National
Labor Relations Commission and Imelda Salazar, G.R. No. 82511, March 3, 1992, to illustrate the principle:

x x x where the employee is a Vice-President for Marketing and as such, enjoys the full trust and
confidence of top management (Asiaworld Publishing House, Inc. v. Ople, 152 SCRA 219 [1987]); or
is the Officer-In-Charge of the extension office of the bank where he works (Citytrust Finance Corp. v.
NLRC, 157 SCRA 87 [1988]); or is an organizer of a union who was in a position to sabotage the
union's efforts to organize the workers in commercial and industrial establishments (Bautista v.
Inciong, 158 SCRA 665 [1988]); or is a warehouseman of a non-profit organization whose primary
purpose is to facilitate and maximize voluntary gifts by foreign individuals and organizations to the
Philippines (Esmalin v. NLRC, 177 SCRA 537 [1989]); or is a manager of its Energy Equipment Sales
(Maglutac v. NLRC, 189 SCRA 767 [1990])."

In fact, the classification of a Credit and Collection Supervisor by management as

managerial/supervisory was sustained by this Court in the case of Tabacalera Insurance Co. v.
National Labor Relations Commission, 152 SCRA 667 [1987]. The reasons for a similar ruling apply
to the position of branch accountant which the petitioner was then holding.
Evidently, Salas as material controller was tasked with monitoring and maintaining the availability and supply of
Quickbox. There appears nothing to suggest that Salas’ position was a highly or even primarily confidential position,
so that he can be removed for loss of trust and confidence by the employer.

Notably, in Manila Memorial Park Cemetery, Inc. v. Panado,23 we held that:

[T]he term "trust and confidence" is restricted to managerial employees or those who are vested with powers
or prerogatives to lay down and execute management policies and/or to hire transfer, suspend, lay-off, recall,
discharge, assign or discipline employees or to effectively recommend such managerial actions.

Besides, as we review the records before us, we do not see any semblance of willful breach of trust on the part of
Salas. It is true that there was erasure or alteration on the bin card. Aboitiz, however, failed to demonstrate that it was
done to cover up Salas’ alleged negligence. Other than the bin card and Aboitiz’s barefaced assertion, no other
evidence was offered to prove the alleged cover-up. Neither was there any showing that Salas attempted to mislead
the investigating team. The CA, therefore, erred in adopting Aboitiz’s unsubstantiated assertion to justify Salas’
dismissal.

Indeed, an employer has the right, under the law, to dismiss an employee based on fraud or willful breach of the trust
bestowed upon him by his employer or the latter’s authorized representative. However, the loss of trust must be based
not on ordinary breach but, in the language of Article 282(c) of the Labor Code, on willful breach. A breach is willful if
it is done intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and not on the employer’s
arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the mercy of the
employer. It should be genuine and not simulated; nor should it appear as a mere afterthought to justify an earlier
action taken in bad faith or a subterfuge for causes which are improper, illegal or unjustified. It has never been intended
to afford an occasion for abuse because of its subjective nature. There must, therefore, be an actual breach of duty
committed by the employee which must be established by substantial evidence.24 In this case, Aboitiz utterly failed to
establish the requirements prescribed by law and jurisprudence for a valid dismissal on the ground of breach of trust
and confidence.

Neither can Aboitiz validate Salas’ dismissal on the ground of serious misconduct for his alleged failure to account for
unused accountable forms amounting to P57,850.00.

As aptly found by the NLRC, the charge came only after Salas’ dismissal. We also note that the subject accountable
forms were issued to Salas in 2001. Inexplicably, this alleged infraction was never included as ground in the notice of
termination. It was only on November 23, 2003 or three (3) months after the filing of the complaint for illegal dismissal
that Aboitiz asserted that Salas failed to account for these unused accountable forms amounting to P57,850.00. It is
clear that such assertion of serious misconduct was a mere afterthought to justify the illegal dismissal.

Similarly, before the Labor Arbiter, NLRC, and CA, Aboitiz’s arguments zeroed in on Salas’ alleged neglect of duty
and breach of trust. It was, therefore, error for the CA to include serious misconduct, which had never been raised in
the proceedings below, as ground to sustain the legality of Salas’ dismissal.

The CA also cited another infraction allegedly committed by Salas as additional ground for his dismissal. It declared
that Salas unauthorizedly sold the company’s eight units of used air-conditioners. Yet, we note that Salas had never
been charged or suspended for this alleged unauthorized sale of used air-conditioners during his employment with
Aboitiz. The infraction for which Salas had been penalized by suspension of five (5) days was his failure to meet the
security requirements of the company.25 Accordingly, there is no basis for the CA to include unauthorized sale of used
air-conditioners as ground to sustain Salas’ dismissal.

Aboitiz’s reliance on the past offenses of Salas for his eventual dismissal is likewise unavailing. The correct rule has
always been that such previous offenses may be used as valid justification for dismissal from work only if the
infractions are related to the subsequent offense upon which the basis of termination is decreed.26 While it is true that
Salas had been suspended on June 1, 2000 for failure to meet the security requirements of the company,27 and then
on July 20, 2001 for his failure to assist in the loading at the fuel depot,28 these offenses are not related to Salas’ latest
infraction, hence, cannot be used as added justification for the dismissal.

Furthermore, Salas had already suffered the corresponding penalties for these prior infractions. Thus, to consider
these offenses as justification for his dismissal would be penalizing Salas twice for the same offense. As the Court
ruled in Pepsi-Cola Distributors of the Philippines, Inc. v. National Labor Relations Commission,29 and recently in
Coca-Cola Bottlers, Philippines, Inc. v. Kapisanan ng Malayang Manggagawa sa Coca Cola-FFW:30

Moreover, private respondent was already penalized with suspensions in some of the infractions imputed to
him in this case, like sleeping while on route rides, incomplete accomplishment of sales report and his failure
to achieve sales commitments. He cannot again be penalized for those misconduct. The foregoing acts cannot
be added to support the imposition of the ultimate penalty of dismissal which must be based on clear and not
on ambiguous and ambivalent ground.
Undoubtedly, no just cause exists to warrant Salas’ dismissal. Consequently, he is entitled to reinstatement to his
former position without loss of seniority rights, and to payment of backwages.31

However, we limit the award of backwages because we find that Salas was not entirely faultless. As earlier adverted
to, Salas failed to promptly inform his immediate superior of the non-delivery of the requisitioned items. Had Salas
promptly informed Ed Dumago of the non-delivery, the incident complained of would have been avoided. Although
such negligence would not justify Salas’ termination from employment in view of the stringent condition imposed by
the Labor Code on termination of employment due to gross and habitual neglect, the same cannot be condoned, much
less tolerated.

In PLDT v. National Labor Relations Commission,32 this Court sustained the award of backwages in favor of an
employee who was found not to be entirely faultless, but only from the date of the NLRC’s promulgation of the decision.

WHEREFORE, the petition is GRANTED. The Decision and Resolution of the Court of Appeals in CA-G.R. SP No.
93947 and CA-G.R. SP No. 94145, are REVERSED and SET ASIDE. Aboitiz One, Inc. is ordered to REINSTATE
Oligario Salas to his former position without loss of seniority rights, with payment of backwages computed from
September 21, 2005, up to the time of reinstatement.

No pronouncement as to costs.

SO ORDERED.
 EN BANC

G.R. No. 117040 January 27, 2000

RUBEN SERRANO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT STORE, respondents.

MENDOZA, J.:

This is a Petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of the National Labor
Relations Commission (NLRC) which reversed the decision of the Labor Arbiter and dismissed petitioner Ruben
Serrano's complaint for illegal dismissal and denied his motion for reconsideration. The facts are as follows:

Petitioner was hired by private respondent Isetann Department Store as a security checker to apprehend shoplifters
and prevent pilferage of merchandise.1 Initially hired on October 4, 1984 on contractual basis, petitioner eventually
became a regular employee on April 4, 1985. In 1988, he became head of the Security Checkers Section of private
respondent.2

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire security section and
engage the services of an independent security agency. For this reason, it wrote petitioner the following
memorandum:3

October 11, 1991

MR. RUBEN SERRANO

PRESENT

Dear Mr. Seranno,

In view of the retrenchment program of the company, we hereby reiterate our verbal notice to you of your
termination as Security Section Head effective October 11, 1991.

Please secure your clearance from this office.

Very truly yours,

[Sgd.] TERESITA A. VILLANUEVA

Human Resources Division Manager

The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal dismissal,
illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of salary and overtime pay.4

The parties were required to submit their position papers, on the basis of which the Labor Arbiter defined the
issues as follows:5

Whether or not there is a valid ground for the dismissal of the complainant.

Whether or not complainant is entitled to his monetary claims for underpayment of wages, nonpayment of
salaries, 13th month pay for 1991 and overtime pay.

Whether or not Respondent is guilty of unfair labor practice.

Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding petitioner to have
been illegally dismissed. He ruled that private respondent failed to establish that it had retrenched its security section
to prevent or minimize losses to its business; that private respondent failed to accord due process to petitioner; that
private respondent failed to use reasonable standards in selecting employees whose employment would be
terminated; that private respondent had not shown that petitioner and other employees in the security section were
so inefficient so as to justify their replacement by a security agency, or that "cost-saving devices [such as] secret video
cameras (to monitor and prevent shoplifting) and secret code tags on the merchandise" could not have been
employed; instead, the day after petitioner's dismissal, private respondent employed a safety and security supervisor
with duties and functions similar to those of petitioner.1âwphi1.nêt

Accordingly, the Labor Arbiter ordered:6

WHEREFORE, above premises considered, judgment is hereby decreed:

(a) Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is ordered to pay
complainant full backwages without qualification or deduction in the amount of P74,740.00 from the time of
his dismissal until reinstatement. (computed till promulgation only) based on his monthly salary of
P4,040.00/month at the time of his termination but limited to (3) three years;

(b) Ordering the Respondent to immediately reinstate the complainant to his former position as security section
head or to a reasonably equivalent supervisorial position in charges of security without loss of seniority rights,
privileges and benefits. This order is immediately executory even pending appeal;

(c) Ordering the Respondent to pay complainant unpaid wages in the amount of P2,020.73 and proportionate
13th month pay in the amount of P3,198.30;

(d) Ordering the Respondent to pay complainant the amount of P7,995.91, representing 10% attorney's fees
based on the total judgment award of P79,959.12.

All other claims of the complainant whether monetary or otherwise is hereby dismissed for lack of merit.

SO ORDERED.

Private respondent appealed to the NLRC which, in its resolution of March 30, 1994; reversed the decision of the
Labor Arbiter and ordered petitioner to be given separation pay equivalent to one month pay for every year of service,
unpaid salary, and proportionate 13th month pay. Petitioner filed a motion for reconsideration, but his motion was
denied.

The NLRC held that the phase-out of private respondent's security section and the hiring of an independent security
agency constituted an exercise by private respondent of "[a] legitimate business decision whose wisdom we do not
intend to inquire into and for which we cannot substitute our judgment"; that the distinction made by the Labor Arbiter
between "retrenchment" and the employment of cost-saving devices" under Art. 283 of the Labor Code was
insignificant because the company official who wrote the dismissal letter apparently used the term "retrenchment" in
its "plain and ordinary sense: to layoff or remove from one's job, regardless of the reason therefor"; that the rule of
"reasonable criteria" in the selection of the employees to be retrenched did not apply because all positions in the
security section had been abolished; and that the appointment of a safety and security supervisor referred to by
petitioner to prove bad faith on private respondent's part was of no moment because the position had long been in
existence and was separate from petitioner's position as head of the Security Checkers Section.

Hence this petition. Petitioner raises the following issue:

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT TO

REPLACE ITS CURRENT SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF THE
EMPLOYEES CLASSED UNDER THE LATTER?7

Petitioner contends that abolition of private respondent's Security Checkers Section and the employment of an
independent security agency do not fall under any of the authorized causes for dismissal under Art. 283 of the Labor
Code.

Petitioner Laid Off for Cause

Petitioner's contention has no merit. Art. 283 provides:

Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any
employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing
or cessation of operations of the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the, workers and the Department of Labor and Employment
at least one (1) month before the intended date thereof. In case of termination due to the 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 or 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.
In De Ocampo v. National Labor Relations Commission,8 this Court upheld the termination of employment of three
mechanics in a transportation company and their replacement by a company rendering maintenance and repair
services. It held:

In contracting the services of Gemac Machineries, as part of the company's cost-saving program, the services
rendered by the mechanics became redundant and superfluous, and therefore properly terminable. The
company merely exercised its business judgment or management prerogative. And in the absence of any
proof that the management abused its discretion or acted in a malicious or arbitrary manner, the court will not
interfere with the exercise of such prerogative.9

In Asian Alcohol Corporation v. National Labor Relations Commission,10 the Court likewise upheld the termination of
employment of water pump tenders and their replacement by independent contractors. It ruled that an employer's
good faith in implementing a redundancy program is not necessarily put in doubt by the availment of the services of
an independent contractor to replace the services of the terminated employees to promote economy and efficiency.

Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the faculty of promoting
efficiency and attaining economy by a study of what units are essential for its operation. To it belongs the ultimate
determination of whether services should be performed by its personnel or contracted to outside agencies . . . [While
there] should be mutual consultation, eventually deference is to be paid to what management
decides."11Consequently, absent proof that management acted in a malicious or arbitrary manner, the Court will not
interfere with the exercise of judgment by an employer.12

In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section, private
respondent's real purpose was to avoid payment to the security checkers of the wage increases provided in the
collective bargaining agreement approved in 1990.13 Such an assertion is not sufficient basis for concluding that the
termination of petitioner's employment was not a bona fide decision of management to obtain reasonable return from
its investment, which is a right guaranteed to employers under the Constitution.14 Indeed, that the phase-out of the
security section constituted a "legitimate business decision" is a factual finding of an administrative agency which
must be accorded respect and even finality by this Court since nothing can be found in the record which fairly detracts
from such finding.15

Accordingly, we hold that the termination of petitioner's services was for an authorized cause, i.e., redundancy. Hence,
pursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at the rate of one month pay for
every year of service.

Sanctions for Violations of the Notice Requirement

Art. 283 also provides that to terminate the employment of an employee for any of the authorized causes the employer
must serve "a written notice on the workers and the Department of Labor and Employment at least one (1) month
before the intended date thereof." In the case at bar, petitioner was given a notice of termination on October 11, 1991.
On the same day, his services were terminated. He was thus denied his right to be given written notice before the
termination of his employment, and the question is the appropriate sanction for the violation of petitioner's right.

To be sure, this is not the first time this question has arisen. In Subuguero v. NLRC,16 workers in a garment factory
were temporarily laid off due to the cancellation of orders and a garment embargo. The Labor Arbiter found that the
workers had been illegally dismissed and ordered the company to pay separation pay and backwages. The NLRC,
on the other hand, found that this was a case of retrenchment due to business losses and ordered the payment of
separation pay without backwages. This Court sustained the NLRC's finding. However, as the company did not comply
with the 30-day written notice in Art. 283 of the Labor Code, the Court ordered the employer to pay the workers
P2,000.00 each as indemnity.

The decision followed the ruling in several cases involving dismissals which, although based on any of the just causes
under Art. 282,17 were effected without notice and hearing to the employee as required by the implementing rules.18 As
this Court said: "It is now settled that where the dismissal of one employee is in fact for a just and valid cause and is
so proven to be but he is not accorded his right to due process, i.e., he was not furnished the twin requirements of
notice and opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-
compliance with the requirements of, or for failure to observe, due process."19

The rule reversed a long standing policy theretofore followed that even though the dismissal is based on a just cause
or the termination of employment is for an authorized cause, the dismissal or termination is illegal if effected without
notice to the employee. The shift in doctrine took place in 1989 in Wenphil Corp. v. NLRC.20 In announcing the change,
this Court said:21

The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of
seniority and the payment of his wages during the period of his separation until his actual reinstatement but
not exceeding three (3) years without qualification or deduction, when it appears he was not afforded due
process, although his dismissal was found to be for just and authorized cause in an appropriate proceeding in
the Ministry of Labor and Employment, should be re-examined. It will be highly prejudicial to the interests of
the employer to impose on him the services of an employee who has been shown to be guilty of the charges
 that warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving,
if not undesirable, remains in the service.

xxx xxx xxx

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 fines imposed for violations of the notice requirement have varied from P1,000.00 22 to P2,000.0023 to
P5,000.0024 to P10,000.00.25

Need for Reexamining the Wenphil Doctrine

Today, we once again consider the question of appropriate sanctions for violations of the notice experience during
the last decade or so with the Wenphil doctrine. The number of cases involving dismissals without the requisite notice
to the employee, although effected for just or authorized causes, suggest that the imposition of fine for violation of the
notice requirement has not been effective in deterring violations of the notice requirement. Justice Panganiban finds
the monetary sanctions "too insignificant, too niggardly, and sometimes even too late." On the other hand, Justice
Puno says there has in effect been fostered a policy of "dismiss now; pay later" which moneyed employers find more
convenient to comply with than the requirement to serve a 30-day written notice (in the case of termination of
employment for an authorized cause under Arts. 283-284) or to give notice and hearing (in the case of dismissals for
just causes under Art. 282).

For this reason, they regard any dismissal or layoff without the requisite notice to be null and void even though there
are just or authorized cause for such dismissal or layoff. Consequently, in their view, the employee concerned should
be reinstated and paid backwages.

Validity of Petitioner's Layoff Not Affected by Lack of Notice

We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the sanction of fine
for an employer's disregard of the notice requirement. We do not agree, however, that disregard of this requirement
by an employer renders the dismissal or termination of employment null and void. Such a stance is actually a reversion
to the discredited pre-Wenphil rule of ordering an employee to be reinstated and paid backwages when it is shown
that he has not been given notice and hearing although his dismissal or layoff is later found to be for a just or authorized
cause. Such rule was abandoned in Wenphil because it is really unjust to require an employer to keep in his service
one who is guilty, for example, of an attempt on the life of the employer or the latter's family, or when the employer is
precisely retrenching in order to prevent losses.

The need is for a rule which, while recognizing the employee's right to notice before he is dismissed or laid off, at the
same time acknowledges the right of the employer to dismiss for any of the just causes enumerated in Art. 282 or to
terminate employment for any of the authorized causes mentioned in Arts. 283-284. If the Wenphil rule imposing a
fine on an employer who is found to have dismissed an employee for cause without prior notice is deemed ineffective
in deterring employer violations of the notice requirement, the remedy is not to declare the dismissal void if there are
just or valid grounds for such dismissal or if the termination is for an authorized cause. That would be to uphold the
right of the employee but deny the right of the employer to dismiss for cause. Rather, the remedy is to order the
payment to the employee of full backwages from the time of his dismissal until the court finds that the dismissal was
for a just cause. But, otherwise, his dismissal must be upheld and he should not be reinstated. This is because his
dismissal is ineffectual.

For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of a labor-saving
device, but the employer did not give him and the DOLE a 30-day written notice of termination in advance, then the
termination of his employment should be considered ineffectual and he should be paid backwages. However, the
termination of his employment should not be considered void but he should simply be paid separation pay as provided
in Art. 283 in addition to backwages.

Justice Puno argues that an employer's failure to comply with the notice requirement constitutes a denial of the
employee's right to due process. Prescinding from this premise, he quotes the statement of Chief Justice
Concepcion Vda. de Cuaycong v. Vda. de Sengbengco26 that "acts of Congress, as well as of the Executive, can deny
due process only under the pain of nullity, and judicial proceedings suffering from the same flaw are subject to the
same sanction, any statutory provision to the contrary notwithstanding." Justice Puno concludes that the dismissal of
an employee without notice and hearing, even if for a just cause, as provided in Art. 282, or for an authorized cause,
as provided in Arts. 283-284, is a nullity. Hence, even if just or authorized cause exist, the employee should be
reinstated with full back pay. On the other hand, Justice Panganiban quotes from the statement in People v.
Bocar27 that "[w]here the denial of the fundamental right of due process is apparent, a decision rendered in disregard
of that right is void for lack of jurisdiction."

Violation of Notice Requirement Not a Denial of Due Process

The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by the State,
which is not the case here. There are three reasons why, on the other hand, violation by the employer of the notice
requirement cannot be considered a denial of due process resulting in the nullity of the employee's dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It does not apply
to the exercise of private power, such as the termination of employment under the Labor Code. This is plain from the
text of Art. III, §1 of the Constitution, viz.: "No person shall be deprived of life, liberty, or property without due process
of law. . . ." The reason is simple: Only the State has authority to take the life, liberty, or property of the individual. The
purpose of the Due Process Clause is to ensure that the exercise of this power is consistent with what are considered
civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before the power of
organized society are brought to bear upon the individual. This is obviously not the case of termination of employment
under Art. 283. Here the employee is not faced with an aspect of the adversary system. The purpose for requiring a
30-day written notice before an employee is laid off is not to afford him an opportunity to be heard on any charge
against him, for there is none. The purpose rather is to give him time to prepare for the eventual loss of his job and
the DOLE an opportunity to determine whether economic causes do exist justifying the termination of his employment.

Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to comply with
Due Process Clause of the Constitution. The time for notice and hearing is at the trial stage. Then that is the time we
speak of notice and hearing as the essence of procedural due process. Thus, compliance by the employer with the
notice requirement before he dismisses an employee does not foreclose the right of the latter to question the legality
of his dismissal. As Art. 277(b) provides, "Any decision taken by the employer shall be without prejudice to the right
of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the
National Labor Relations Commission."

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook the fact
that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave either party to the
employer-employee relationship the right to terminate their relationship by giving notice to the other one month in
advance. In lieu of notice, an employee could be laid off by paying him a mesada equivalent to his salary for one
month.28 This provision was repealed by Art. 2270 of the Civil Code, which took effect on August 30, 1950. But on
June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay Law, was enacted reviving the mesada. On
June 21, 1957, the law was amended by R.A. No. 1787 providing for the giving of advance notice or the payment of
compensation at the rate of one-half month for every year of service.29

The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of which was
to give the employer the opportunity to find a replacement or substitute, and the employee the equal opportunity to
look for another job or source of employment. Where the termination of employment was for a just cause, no notice
was required to be given to the, employee.30 It was only on September 4, 1981 that notice was required to be given
even where the dismissal or termination of an employee was for cause. This was made in the rules issued by the then
Minister of Labor and Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much
later when the notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A. No. 6715 on
March 2, 1989. It cannot be that the former regime denied due process to the employee. Otherwise, there should now
likewise be a rule that, in case an employee leaves his job without cause and without prior notice to his employer, his
act should be void instead of simply making him liable for damages.

The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due Process
Clause is that the employer cannot really be expected to be entirely an impartial judge of his own cause. This is also
the case in termination of employment for a just cause under Art. 282 (i.e., serious misconduct or willful disobedience
by the employee of the lawful orders of the employer, gross and habitual neglect of duties, fraud or willful breach of
trust of the employer, commission of crime against the employer or the latter's immediate family or duly authorized
representatives, or other analogous cases).

Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been won by
employees before the grievance committees manned by impartial judges of the company." The grievance machinery
is, however, different because it is established by agreement of the employer and the employees and composed of
representatives from both sides. That is why, in Batangas Laguna Tayabas Bus Co. ·v. Court of Appeals,31 which
Justice Puno cites, it was held that "Since the right of [an employee] to his labor is in itself a property and that the
labor agreement between him and [his employer] is the law between the parties, his summary and arbitrary dismissal
amounted to deprivation of his property without due process of law." But here we are dealing with dismissals and
layoffs by employers alone, without the intervention of any grievance machinery. Accordingly in Montemayor v.
Araneta University Foundation,32 although a professor was dismissed without a hearing by his university, his dismissal
for having made homosexual advances on a student was sustained, it appearing that in the NLRC, the employee was
fully heard in his defense.
Lack of Notice Only Makes Termination Ineffectual

Not all notice requirements are requirements of due process. Some are simply part of a procedure to be followed
before a right granted to a party can be exercised. Others are simply an application of the Justinian precept, embodied
in the Civil Code,33 to act with justice, give everyone his due, and observe honesty and good faith toward one's
fellowmen. Such is the notice requirement in Arts. 282-283. The consequence of the failure either of the employer or
the employee to live up to this precept is to make him liable in damages, not to render his act (dismissal or resignation,
as the case may be) void. The measure of damages is the amount of wages the employee should have received were
it not for the termination of his employment without prior notice. If warranted, nominal and moral damages may also
be awarded.

We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer's failure to comply with the notice
requirement does not constitute a denial of due process but a mere failure to observe a procedure for the termination
of employment which makes the termination of employment merely ineffectual. It is similar to the failure to observe
the provisions of Art. 1592, in relation to Art. 1191, of the Civil Code34 in rescinding a contract for the sale of immovable
property. Under these provisions, while the power of a party to rescind a contract is implied in reciprocal obligations,
nonetheless, in cases involving the sale of immovable property, the vendor cannot exercise this power even though
the vendee defaults in the payment of the price, except by bringing an action in court or giving notice of rescission by
means of a notarial demand.35 Consequently, a notice of rescission given in the letter of an attorney has no legal
effect, and the vendee can make payment even after the due date since no valid notice of rescission has been given.36

Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can make the
dismissal of an employee illegal. This is clear from Art. 279 which provides:

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 dismissedfrom
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.37

Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and, therefore, the
employee should be reinstated and paid backwages. To contend, as Justices Puno and Panganiban do, that even if
the termination is for a just or authorized cause the employee concerned should be reinstated and paid backwages
would be to amend Art. 279 by adding another ground for considering a dismissal illegal. What is more, it would ignore
the fact that under Art. 285, if it is the employee who fails to give a written notice to the employer that he is leaving the
service of the latter, at least one month in advance, his failure to comply with the legal requirement does not result in
making his resignation void but only in making him liable for damages.38 This disparity in legal treatment, which would
result from the adoption of the theory of the minority cannot simply be explained by invoking resident Ramon
Magsaysay's motto that "he who has less in life should have more in law." That would be a misapplication of this noble
phrase originally from Professor Thomas Reed Powell of the Harvard Law School.

Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in support of his view that an illegal dismissal results not
only from want of legal cause but also from the failure to observe "due process." The Pepsi-Cola case actually involved
a dismissal for an alleged loss of trust and confidence which, as found by the Court, was not proven. The dismissal
was, therefore, illegal, not because there was a denial of due process, but because the dismissal was without cause.
The statement that the failure of management to comply with the notice requirement "taints the dismissal with illegality"
was merely a dictum thrown in as additional grounds for holding the dismissal to be illegal.

Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is the payment of
backwages for the period when the employee is considered not to have been effectively dismissed or his employment
terminated. The sanction is not the payment alone of nominal damages as Justice Vitug contends.

Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal

The refusal to look beyond the validity of the initial action taken by the employer to terminate employment either for
an authorized or just cause can result in an injustice to the employer. For not giving notice and hearing before
dismissing an employee, who is otherwise guilty of, say, theft, or even of an attempt against the life of the employer,
an employer will be forced to keep in his employ such guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force."40 But so does it declare that it "recognizes
the indispensable role of the private sector, encourages private enterprise, and provides incentives to needed
investment."41 The Constitution bids the State to "afford full protection to labor."42 But it is equally true that "the law, in
protecting the right's of the laborer, authorizes neither oppression nor self-destruction of the employer."43And it is
oppression to compel the employer to continue in employment one who is guilty or to force the employer to remain in
operation when it is not economically in his interest to do so.

In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the termination of employment
was due to an authorized cause, then the employee concerned should not be ordered reinstated even though there
is failure to comply with the 30-day notice requirement. Instead, he must be granted separation pay in accordance
with Art. 283, to wit:

In case of termination due to the installation of labor-saving devices or redundancy, the worker affected
thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one
month for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases
of closures or cessation of operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to 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 months shall be considered one (1)
whole year.

If the employee's separation is without cause, instead of being given separation pay, he should be reinstated. In either
case, whether he is reinstated or only granted separation pay, he should be paid full backwages if he has been laid
off without written notice at least 30 days in advance.

On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed
for any of the just causes mentioned in said Art. 282, then, in accordance with that article, he should not be reinstated.
However, he must be paid backwages from the time his employment was terminated until it is determined that the
termination of employment is for a just cause because the failure to hear him before he is dismissed renders the
termination of his employment without legal effect.

WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is MODIFIED
by ordering private respondent Isetann Department Store, Inc. to pay petitioner separation pay equivalent to one (1)
month pay for every year of service, his unpaid salary, and his proportionate 13th month pay and, in addition, full
backwages from the time his employment was terminated on October 11, 1991 up to the time the decision herein
becomes final. For this purpose, this case is REMANDED to the Labor Arbiter for computation of the separation pay,
backwages, and other monetary awards to petitioner.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. Nos. 75700-01 August 30, 1990

LOPEZ SUGAR CORPORATION, petitioner,

vs.
FEDERATION OF FREE WORKERS, PHILIPPINE LABOR UNION ASSOCIATION (PLUA-NACUSIP) and
NATIONAL LABOR RELATIONS COMMISSION, respondents.

Sicangco, Diaz, Ortiz and Lapak for petitioner.

Reynaldo J. Gulmatico for private respondents.

FELICIANO, J.:

In this Petition, petitioner Lopez Sugar Corporation seeks reversal of the Decision dated 2 July 1986 of public
respondent National labor Relations Commission ("NLRC") which affirmed the decision of the Labor Arbiter dated 30
September 1983. The Labor Arbiter (a) had denied petitioner's application to retrench some of its employees and (b)
had ordered the reinstatement of twenty-seven (27) employees and to pay them full backwages from the time of
termination until actual reinstatement.

Petitioner, allegedly to prevent losses due to major economic problems, and exercising its privilege under Article XI,
Section 2 of its 1975-1977 Collective Bargaining Agreement ("CBA") entered into between petitioner and private
respondent Philippine Labor Union Association ("PLUA-NACUSIP"), caused the retrenchment and retirement of a
number of its employees.

Thus, on 3 January 1980, petitioner filed with the Bacolod District Office of the then Ministry of Labor and Employment
("MOLE") a combined report on retirement and application for clearance to retrench, dated 28 December
1979, 1 affecting eighty six (86) of its employees. This was docketed as NLRC Case Ne. A-217-80. Of these eighty-
six (86) employees, fifty-nine (59) were retired effective 1 January 1980 and twenty-eight (27) were to be retrenched
effective 16 January 1980 "in order to prevent losses."

Also, on 3 January 1980, private respondent Federation of Free Workers ("FFW"), as the certified bargaining agent
of the rank-and-file employees of petitioner, filed with the Bacolod District Office of the MOLE a complaint dated 27
December 1979 for unfair labor practices and recovery of union dues docketed as NLRC Case No. A-198-80. In said
complainant, FFW claimed that the terminations undertaken by petitioner were violative of the security of tenure of its
members and were intended to "bust" the union and hence constituted an unfair labor practice. FFW claimed that
after the termination of the services of its members, petitioner advised 110 casuals to report to its personnel office.
FFW further argued that to justify retrenchment, serious business reverses must be "actual, real and amply supported
by sufficient and convincing evidence." FFW prayed for reinstatement of its members who had been retired or
retrenched.

Petitioner denied having hired casuals to replace those it had retired or retrenched. It explained that the announcement
calling for 110 workers to report to its personnel office was only for the purpose of organizing a pool of extra workers
which could be tapped whenever there were temporary vacancies by reason of leaves of absence of regular workers.

On 22 January 1980, another report on retirement affecting an additional twenty-five (25) employees effective 1
February 1980 was filed by petitioner. 2

On 3 March 1980, petitioner filed its Position Paper in NLRC Case No. A-217-80 contending that certain economic
factors jeopardizing its very existence rendered the dismissals necessary. Petitioner explained:

As a business firm, the Applicant must earn [a] fair return of (sic) its investment. Its income is generated
from the sales of the Central's shares of sugar and molasses production. It has however no control of
the selling price of both products. It is of common knowledge that for the past years the price of sugar
has been very low. In order to survive, the Applicant has effected several forms of cost reduction. Now
that there is hope in the price of sugar the applicant is again faced with two major economic problems,
i.e., the stoppage of its railway operation and the spiralling cost of production.

The Applicant was forced to stop its railway operation because the owners of the land upon which the
Applicant's railway lines traverse are no longer willing to allow the Applicant to make further use of
portions of their lands. . . .
 The other economic problem that confronted the Applicant is the rising cost of labor, materials,
supplies, equipment, etc. These two major economic problems the rising cost of production and the
stoppage of its railway facilities, put together pose a very serious threat against the economic survival
of the Applicant. In view of this, the Applicant was constrained to touch on the last phase of its cost
reduction program which is the reduction of its workforce.

xxx xxx xxx

The Applicant as a business proposition must be allowed to earn income in order to survive. This is
the essence of private enterprise. Being plagued with two major economic problems, the applicant is
not expected to remain immobile. It has to react accordingly. As many other business firms have
resorted to reduction of force in view of the present economic crisis obtaining here and abroad, the
applicant was likewise compelled to do the same as a last alternative remedy for survival. 3

In a decision dated 30 September 1983, 4 the Labor Arbiter denied petitioner's application for clearance to retrench
its employees on the ground that for retrenchment to be valid, the employer's losses must be serious, actual and real
and must be amply supported by sufficient and convincing evidence. The application to retire was also denied on the
ground that petitioner's prerogative to so retire its employees was granted by the 1975-77 collective bargaining
agreement which agreement had long ago expired. Petitioner was, therefore, ordered to reinstate twenty-seven retired
or retrenched employees represented by private respondent Philippine Labor Union Association ("PLUA") and FFW
and to pay them full backwages from the time of termination until actual reinstatement.

Both dissatisfied with the Labor Arbiter's decision, petitioner and respondent FFW appealed the case to public
respondent NLRC. On appeal, the NLRC, finding no justifiable reason for disturbing the decision of the Labor Arbiter,
affirmed that decision on 2 July 1986. 5

Hence, this Petition for certiorari making the following arguments:

1. That portions of the decision of public respondent NLRC dated July 2, 1986 affirming the decision
of Labor Arbiter Ethelwoldo Ovejera dated September 30, 1983 are contrary to law and jurisprudence;

2. That said decision subject of this petition are in some respects not supported by evidence and self-
contradictory;

3. That said decision subject of this petition were rendered with grave abuse of discretion and in excess
of jurisdiction;

4. That the dismissals at bar are valid and based on justifiable

grounds. 6

Petitioner contends that the NLRC acted with grave abuse of discretion in denying its combined report on retirement
and application for clearance to retrench. Petitioner argues that under the law, it has the right to reduce its workforce
if made necessary by economic factors which would endanger its existence, and that for retrenchment to be valid, it
is not necessary that losses be actually sustained. The existence of valid grounds to anticipate or expect losses would
be sufficient justification to enable the employer to take the necessary actions to prevent any threat to its survival.

Upon the other hand the Solicitor General argued that the Decision rendered by the Labor Arbiter and affirmed by the
NLRC is supported by substantial evidence on record; that, therefore, no grave abuse of discretion was committed by
public respondent NLRC when it rendered that Decision.

Article 283 of the Labor Code provides:

Article 283. Closure of establishment and reduction of personnel. — The employer may also terminate
the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or undertaking unless the closing is for the purpose of cricumventing the provisions of
this Title, by serving a written notice on the workers and the Ministry of Labor and Employer at least
one (1) month before the intended date thereof. In case of termination due to the installation of labor
saving devices or redundancy, the worker affected thereby shall be entitled to a se pay equivalent to
at least his one (1) month pay or 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 closures or cessation of operations
of establishment or undertaking not due to serious business losses or financial reverses, the
separation pay shall be equivalent to 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 one (1)
whole year. (Emphasis supplied)

In ts ordinary connotation, he phrase "to revent losses" means hat retrenchment or termination of the services of some
employees is authorized to be undertaken by the employer sometime before the losses anticipated are actually
sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to stay his hand
and keep all his employees until sometime after losses shall have in fact materialized ; 7 if such an intent were
expressly written into the law, that law may well be vulnerable to constitutional attack as taking property from one man
to give to another. This is simple enough.

At the other end of the spectrum, it seems equally clear that not every asserted possibility of loss is sufficient legal
warrant for reduction of personnel. In the nature of things, the possibility of incurring losses is constantly present, in
greater or lesser degree, in the carrying on of business operations, since some, indeed many, of the factors which
impact upon the profitability or viability of such operations may be substantially outside the control of the employer.
Thus, the difficult question is determination of when, or under what circumstances, the employer becomes legally
privileged to retrench and reduce the number of his employees.

We consider it may be useful to sketch the general standards in terms of which the acts of petitioner employer must
be appraised. Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss
purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in
character, the bona fide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial
loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith
by the employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all
a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid-off. Because
of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent
the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall
losses, i.e., cut other costs than labor costs. An employer who, for instance, lays off substantial numbers of workers
while continuing to dispense fat executive bonuses and perquisites or so-called "golden parachutes", can scarcely
claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional policy of
providing "full protection" to labor, the employer's prerogative to bring down labor costs by retrenching must be
exercised essentially as a measure of last resort, after less drastic means — e.g., reduction of both management and
rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of
marketing and advertising costs, etc. — have been tried and found wanting.

Lastly, but certainly not the least important, alleged if already realized, and the expected imminent losses sought to
be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof
is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for termination
of services of employees. In Garcia v. National Labor Relations Commissions, 8 the Court said:

. . . But it is essentially required that the alleged losses in business operations must be prove[n] (National Federation
of Labor Unions [NAFLU] vs. Ople, 143 SCRA 124 [1986]). Otherwise, said ground for termination would be
susceptible to abuse by scheming employers who might be merely feigning business losses or reverses in their
business ventures in order to ease out employees. (Emphasis supplied) 9

Whether or not an employer would imminently suffer serious or substantial losses for economic reasons is essentially
a question of fact for the Labor Arbiter and the NLRC to determine. In the instant case, the Labor Arbiter found no
sufficient and convincing evidence to sustain petitioner's essential contention that it was acting in order to prevent
substantial and serious losses. The Labor Arbiter said:

There is no question that an employer may reduce its work force to prevent losses, however, these
losses must be serious, actual and real. In the instant case, even assuming arguendo that applicant
company was, in fact, surrounded by the major economic problems stated earlier, the question may
be asked — will it suffer serious losses as a result of the said economic problems? We find the answer
to be negative. We have scanned the records but failed to find evidence submitted to show that
applicant company would suffer serious business losses or reverses as a consequence of the alleged
major economic problems. In fact, applicant company asseverated that these problems
only threatens its survival, hence, it had to reduce its work force. Another thing, while applicant
company was retrenching its regular employees, it also hired the services of casuals. This militated its
claim to reduce its work force to set up cost reduction. It must be stated that settled is the rule that
serious business losses or reverses must be actual, real and amply supported by sufficient and
convincing evidence. 10 (Emphasis supplied)

We are in principle bound by such findings in accordance with well-established jurisprudence that the factual
findings of labor administrative officials, if supported by substantial evidence, are entitled not only to great
respect but even to finality, 11 unless, indeed, petitioner is able to show that the Labor Arbiter and the NLRC
simply and arbitrarily disregarded evidence before them or had misapprehended evidence of such a nature
as to compel a contrary conclusion if properly appreciated.

The submissions made by petitioner in this respect are basically that from the crop year 1975-1976 to the crop year
1980-981, the amount of cane deliveries made to petitioner Central was declining and that the degree of utilization of
the mill's capacity and the sugar recovery from the cane actually processed, were similarly declining. 12 Petitioner also
argued that the competition among the existing sugar mills for the limited supply of sugar cane was lively and that
such competition resulted in petitioner having to close approximately — thirty-eight (38) of its railroad lines by the end
of 1979. 13According to the petitioner, the cost of producing one (1) picul of sugar during the same period (i.e., from
crop year 1976-1977 to crop year 1979-1980) increased from P69.97 to P93.11.
The principal difficulty with petitioner's case as above presented was that no proof of actual declining gross and net
revenues was submitted. No audited financial statements showing the financial condition of petitioner corporation
during the above mentioned crop years were submitted. Since financial statements audited by independent external
auditors constitute the normal method of proof of the profit and loss performance of a company, it is not easy to
understand why petitioner should have failed to submit such financial statements.

Moreover, while petitioner made passing reference to cost reduction measures it had allegedly undertaken, it was,
once more, a fairly conspicuous failure to specify the cost-reduction measures actually undertaken in good faith before
resorting to retrenchment. Upon the other hand, it appears from the record that petitioner, after reducing its work force,
advised 110 casual workers to register with the company personnel officer as extra workers. Petitioner, as earlier
noted, argued that it did not actually hire casual workers but that it merely organize(d] a pool of "extra workers" from
which workers could be drawn whenever vacancies occurred by reason of regular workers going on leave of absence.
Both the Labor Arbiter and the NLRC did not accord much credit to petitioner's explanation but petitioner has not
shown that the Labor Arbiter and the NLRC were merely being arbitrary and capricious in their evaluation. We note
also that petitioner did not claim that the retrenched and retired employees were brought into the "pool of extra
workers" rather than new casual workers.

Petitioner next contends that the NLRC committed grave abuse of discretion in affirming the ruling of the Labor Arbiter
that the retirements effected by petitioner were na valid since the basis therefor, i.e. Article XI Section 2 of the 1975-
1977 CBA, had by then already expired and was thus no longer enforceable or operative. 14 Article XI, 2 of the CBA
provides:

2. Section 2. — Any employee may apply for after having rendered the of at least eighteen (18) year
of service to the COMPANY. The COMPANY, as a right , may retire any employee who has rendered
twenty (20) years of service, or has reached the age of sixty (60) years. Employees who are physically
incapacitated to continue to work in the COMPANY upon certification of the COMPANY Physician,
shall be entitled to a separation pay equivalent to the retirement benefits herein provided for that may
have accrued. The heirs or surviving legally married spouse of the deceased employee shall be
granted by the COMPANY the amount equivalent to the accrued retirement benefit of the deceased
employee at the time of his death." 15 (Emphasis supplied)

Petitioner argues that the CBA was "extended" not merely by implication, but by reciprocal acts — in the sense that
even after the CBA had expired, petitioner continued to give, and the workers continued to receive, the benefits and
exercise the prerogatives provided therein. Under these circumstances, petitioner urges, the employees are estopped
from denying the extended effectivity of the CBA.

The Solicitor General, as well as private respondents, argue basically that petitioner's right to retire its employees was
coterminous with the life of the CBA.

On this point, we must find for petitioner. Although the CBA expired on 31 December 1977, it continued to have legal
effects as between the parties until a new CBA had been negotiated and entered into. This proposition finds legal
support in Article 253 of the Labor Code, which provides:

Article 253 — Duty to bargain collectively when there exists a collective bargaining agreement. —
When there is a collective bargaining agreement, the duty to bargain collectively shall also mean that
neither party shall terminate nor modify such agreement during its lifetime. However, either party can
serve a written notice to terminate or modify the agreement at least sixty (60) days prior to its expiration
date. It shall be the duty of both parties to keep the status quo and to continue in full force and effect
the terms and conditions of the existing agreement during the 60-day period and/or until a new
agreement is reached by the parties. (Emphasis supplied)

Accordingly, in the instant case, despite the lapse of the formal effectivity of the CBA by virtue of its own provisions,
the law considered the same as continuing in force and effect until a new CBA shall have been validly executed.
Hence, petitioner acted within legal bounds when it decided to retire several employees in accordance with the CBA.
That the employees themselves similarly acted in accordance with the CBA is plain from the record. Even after the
expiration of the CBA, petitioner's employees continued to receive the benefits and enjoy the privileges granted
therein. They continued to avail of vacation and sick leaves as computed in accordance with Articles VII and VIII of
the CBA. They also continued to avail of medical and dental aid under Article IX, death aid and bereavement leave
under Articles X and XIV, insurance coverage under Article XVI and housing allowance under Article XVIII. Seventeen
(17) employees even availed of Section XI (dealing with retirement) when they voluntarily retired between 1 January
1978 and 31 December 1980 and received retirement pay computed on the basis of Section 3 of the same article. If
the workers chose to avail of the CBA despite its expiration, equity — if not the law-dictates that the employer should
likewise be able to invoke the CBA.

The fact that several workers signed quitclaims will not by itself bar them from joining in the complaint. Quitclaims
executed by laborers are commonly frowned upon as contrary to public policy and ineffective to bar claims for the full
measure of the worker's legal rights. In AFP Mutual Benefit Association, Inc. v. AFP-MBAI-EU, 16 the Court held:
 In labor jurisprudence, it is well establish that quitclaims and/or complete releases executed by the
employees do not estop them from pursuing their claims arising from the unfair labor practice of the
employer. The basic reason for this is that such quitclaimants and/or complete releases are against
public policy and, therefore, null and void. The acceptance of termination pay does not divest a laborer
of the right to prosecute his employer for unfair labor practice acts. (Cariño vs. ACCFA, L-19808,
September 29, 1966, 18 SCRA 183; Philippine Sugar Institute vs. CIR, L-13475, September 29, 1960,
109 Phil. 452; Mercury Drug Co. vs. CIR, L-23357, April 30, 1974, 56 SCRA 694, 704)

In the Cariño case, supra, the Supreme Court, speaking thru Justice Sanchez, said:

Acceptance of those benefits would not amount to estoppel. The reason is plain.
Employer and employee, obviously, do not stand on the same footing The employer
drove the employee to the wall. The latter must have to get hold of money. Because,
out of job, he had to face the harsh necessities of life. He thus found himself in no
position to resist money proffered. His, then, is a case of adherence, not of choice.
One thing sure, however, is that petitioners did not relent their claim. They pressed it.
They are deemed not to have waived any of their rights. Renuntiatio non
praesumitur (Emphasis supplied)

We conclude that because the attempted retrenchment on the part of the petitioner was legally ineffective, all
retrenched employees should be reinstated and backwages paid them corresponding to a period of three (3) years
without qualification or deduction, in accordance with the three-year rule laid down in a long line of cases. 17 In the
case of employees who had received payments for which they had executed quitclaims, the amount of such payments
shall be deducted from the backwages due to them. Where reinstatement is no longer possible because the positions
they had previously filled are no longer in existence, petitioner shall pay backwages plus, in lieu of reinstatement,
separation pay in the amount of one-month's pay for every year of service including the three (3) year-period of
putative service for which backwages will be paid. Upon the other hand, we find valid the retirement of those
employees who were retired by petitioner pursuant to the applicable provisions of the CBA.

WHEREFORE, the Petition for Certiorari is partially GRANTED due course and the Decision dated 2 July 1986 of the
public respondent NLRC is hereby MODIFIED to the extent that it had affirmed that portion of the Decision of the
Labor Arbiter dated 30 September 1983 ordering the reinstatement judgment of employees who had been retired by
petitioner under the applicable provisions of the CBA. Except as so modified, the Decision of the NLRC is hereby
AFFIRMED. No pronouncement as to costs.

SO ORDERED.
 FIRST DIVISION

G.R. No. 154689 November 25, 2004

UNICORN SAFETY GLASS, INC., LILY YULO and HILARIO YULO, petitioners,
vs.
RODRIGO BASARTE, JAIMELITO FLORES, TEODOLFO LOR, RONNIE DECIO, ELMER SULTORA and
JOSELITO DECIO, respondents.

DECISION

YNARES-SANTIAGO, J.:

This is a Petition for Review on Certiorari seeking to set aside the Decision 1 of the Court of Appeals dated October
18, 2001 and its subsequent Resolution dated August 7, 2002, which reversed the decisions of the Labor Arbiter and
the National Labor Relations Commission (NLRC).

Respondents were regular employees of petitioner Unicorn Safety Glass Incorporated, a company engaged in the
business of glass manufacturing. Respondents normally worked six (6) times a week, from Monday to Saturday, and
were paid on a weekly basis. They were likewise officers of the organized union in petitioner company, owned and
managed by the Spouses Lily and Hilario Yulo.

On March 2, 1998, Hilario Yulo, as general manager of Unicorn, issued a Memorandum 2 informing respondents that
effective April 13, 1998, their workdays shall be reduced due to economic considerations. Yulo cited several factors
such as decrease in sales, increase in the cost of production, devaluation of the peso and increase in minimum wage,
which contributed to the current economic state of the company. In a letter dated March 12, 1998, respondents
registered their protest to the proposed reduction of working days and expressed doubts on the reasons offered by
the company.3 Respondents also surmised that the management was merely getting back at them for forming a union
especially since only the union officers were affected by the work reduction.

On April 6, 1998, Hilario Yulo issued another Memorandum 4 announcing the implementation of a work rotation
schedule to take effect from April 13, 1998 to April 30, 1998, which will effectively reduce respondents' workdays to
merely three days a week. A copy of the planned rotation scheme was sent to the Department of Labor and
Employment. Respondents wrote another letter of protest dated April 7, 19985 expressing their frustrations at the
apparent lack of willingness on the part of petitioner company's management to address their concerns and objections.
On the same day, respondents met with the Spouses Yulo and inquired as to the reasons for the imposition of the
reduced workweek. They were told that it was management's prerogative to do so.6

On April 13, 1998, instead of reporting for work, respondents filed a complaint against petitioner company with the
National Labor Relations Commission, docketed as NLRC Case No. NCR-00-04-03277-98, for constructive dismissal
and unfair labor practice, i.e., union busting, non-payment of five days service incentive leave pay and payment of
moral and exemplary damages as well as attorney's fees. Respondents prayed for reinstatement and payment of full
backwages.

Meanwhile, since respondents failed to report for work, petitioners sent each of them a telegram directing them to do
so. On April 18, 1998, respondents sent Yulo a letter informing him that, in view of the management's apparent
indifference to their plight and blatant violation of their rights, a complaint was lodged against petitioner company for
constructive dismissal. Moreover, given the working environment they were subjected to, they decided not to report
for work at all.7 Petitioner company replied by asking them to explain why they have not been reporting for work.
However, respondents neither reported for work nor replied to petitioner company's telegrams.

On January 26, 1999, Labor Arbiter Felipe Pati rendered judgment finding that respondents were not constructively
terminated by petitioner company. Thus:

Complainants claim that they were constructively terminated. However, evidence extant do not support this
contention. What we see on records are the telegrams, letters and memoranda sent by respondents to
complainants ordering the latter to report for work. Despite due receipt by the complainants of these
communications, they simply ignored respondents' plea. Complainants deliberate refusal to report for work is
very much evident from the number of letters they received from respondents which were all ignored.
 It is true that complainants have sent to respondent a joint letter-reply dated April 18, 1998 (Annexes 35,
Respondents Position Paper). However, said joint letter reinforces the fact that complainants were not
terminated by respondents. In fact complainants admitted in this joint letter-reply that they have decided not
to report for work because they did not agree with the report rotation adopted by respondents. From this
admission and statement of complainant, we feel that the charge of illegal dismissal they filed against
respondents is misplaced. If complainants strongly opposed the rotation adopted by respondents, they could
have initiated an illegal rotation and not illegal dismissal case against respondents. As "good soldiers"
complainants could initiate this case while they are reporting for work based on the adopted work rotation and
let the Court decides whether or not this rotation is valid and legal. Certainly refusal to report for work is not a
proper remedy.8

The Labor Arbiter likewise dismissed the charge of unfair labor practice for lack of legal and factual basis. Nonetheless,
the Labor Arbiter ordered petitioner company to pay the respondents' claim for unpaid service incentive leave pay.
The Labor Arbiter disposed of the case, thus:

WHEREFORE, the instant case is hereby dismissed for lack of merit. Respondents however, are ordered to
pay complainants the total amount of P5,110.00 for unpaid service incentive leave pay as alluded in the above
computation.

On the grounds of amicable settlement and subsequent withdrawals of their complaints, the cases of
PAQUITO MANONGSONG and ELMER SULTORA are hereby dismissed with prejudice.

SO ORDERED.9

The case was appealed to the NLRC. During the pendency of the appeal, however, petitioner company filed a Motion
to Dismiss alleging that respondents Basarte, Flores, Decio and Lor entered into amicable settlements and executed
a "Waiver, Release & Quitclaim."10 Respondents' representative filed an Opposition thereto alleging that the "Waiver,
Release & Quitclaim" executed by respondents were entered into without his knowledge and not in the presence of
the Labor Arbiter; and that the amounts received by respondents were unconscionably inadequate.

In a decision dated October 31, 2000, the NLRC sustained the findings of the Labor Arbiter. On the issue of the
amicable settlements, the NLRC stated:

We are not convinced that the amicable settlement entered into by complainants were involuntary and that
the consideration thereof are unconscionable.

It is to be stressed that the complainants were the ones who went to the office of respondent for settlement.
They acknowledged having signed the "Waiver, Release and Quitclaim" and brought the same before a Notary
Public…. Given these factual circumstances, it is hard to believe that there was involuntariness on the part of
the complainant when they settled their claims with respondent. In fact, almost a year have already lapsed
since then. It is only now that complainants are claiming that their settlement was involuntary.

Anent complainants' claim that the consideration of settlement is unconscionable suffice it to state that the
amount granted by way of settlement to complainants Rodrigo Basarte, Jaimelito Flores, Joselito Decio
including that of complainant Teodolfo Lor (Records, p. 179) are more than the judgment award.11

The dispositive portion of the NLRC's decision states:

PREMISES CONSIDERED, the appeal from the Decision dated January 26, 1999 is hereby DISMISSED for
lack of merit and the Decision is AFFIRMED.

Further, the motions to dismiss filed by respondents with respect to complainants Rodrigo Basarte, Jaimelito
Flores, Joselito Decio and Teodolfo Lor are hereby GRANTED. Thus, insofar as said complainants are
concerned their cases are dismissed with prejudice, as prayed for by respondents.

SO ORDERED.12

Unrelenting, the respondents filed a petition for certiorari with the Court of Appeals, which found respondents' case
partly meritorious.

However, it declined to make a contrary finding on the charge of unfair labor practice for lack of clear-cut and
convincing evidence. The dispositive portion of the Court of Appeals' decision is as follows:

UPON THE VIEW WE TAKE OF THIS CASE, THUS, the petition is substantially GRANTED. Private
respondents are hereby ordered to reinstate to their former positions Rodrigo Basarte, Jaimelito Flores and
Ronnie Decio, without loss of seniority rights and privileges, and to pay these three their full backwages from
April 13, 1998 until their reinstatement. Or, to award them separation pay, in case reinstatement is no longer
feasible or possible. Private respondents are further sentenced to pay the aforenamed petitioners ten per cent
(10%) of the total awards by way of attorney's fees. Costs shall also be taxed against private respondents.
 SO ORDERED.13

Its Motion for Reconsideration having been denied, petitioners are before us on Petition for Review on Certiorari,
raising the following assignment of errors:

I.

THE HONORABLE COURT OF APPEALS ERRED IN REVERSING THE RULING OF THE LABOR ARBITER
A QUO WHICH WAS AFFIRMED BY THE NLRC HOLDING THAT PRIVATE RESPONDENTS WERE NOT
ILLEGALLY DISMISSED FROM THEIR EMPLOYMENT.

II.

THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT THE RELEASE, WAIVER AND
QUITCLAIMS EXECUTED BY PRIVATE RESPONDENTS RODRIGO BASARTE AND JAIMELITO FLORES
NULL AND VOID.14

The petition lacks merit.

Constructive dismissal or a constructive discharge has been defined as quitting because continued employment is
rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in
pay.15Constructive dismissal, however, does not always take the form of a diminution. In several cases, we have ruled
that an act of clear discrimination, insensibility, or disdain by an employer may become so unbearable on the part of
the employee so as to foreclose any choice on his part except to resign from such employment. This constitutes
constructive dismissal.16

In the case at bar, we agree with the Court of Appeals that petitioners' bare assertions on the alleged reason for the
rotation plan as well as its failure to refute respondents' contention that they were targeted due to their union activities,
merit the reversal of the Labor Arbiter's decision. It was incumbent upon petitioners to prove that the rotation scheme
was a genuine business necessity and not meant to subdue the organized union. The reasons enumerated by
petitioners in their Memoranda dated March 2, 1998 were factors too general to actually substantiate the need for the
scheme. Petitioners cite the reduction in their electric consumption as proof of an economic slump. This may be true
to an extent. But it does not, by itself, prove that the rotation scheme was the most reasonable alternative to remedy
the company's problems.

The petitioners' unbending stance on the implementation of the rotation scheme was an indication that the rotation
plan was being implemented for reasons other than business necessity. It appears that respondents attempted on
more than one occasion to have a dialogue with petitioner Hilario Yulo to discuss the work reduction. Good faith should
have prompted Yulo to hear the side of the respondents, to come up with a scheme amenable to both parties or
attempt to convince the employees concerned that there was no other viable option. However, petitioners ignored the
letters sent by respondents, which compelled the latter to seek redress with the Labor Arbiter.

We are mindful that every business strives to keep afloat during these times when prevailing economic situations
turns such endeavor into a near struggle. With as much latitude as our laws would allow, the Court has always
respected a company's exercise of its prerogative to devise means to improve its operations. Thus, we have held that
management is free to regulate, according to its own discretion and judgment, all aspects of employment, including
hiring, work assignments, working methods, time, place and manner of work, processes to be followed, supervision
of workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline, dismissal
and recall of workers.17 Further, management retains the prerogative, whenever exigencies of the service so require,
to change the working hours of its employees.18

However, the exercise of management prerogative is not absolute. By its very nature, encompassing as it could be,
management prerogative must be exercised in good faith and with due regard to the rights of labor—verily, with the
principles of fair play at heart and justice in mind. While we concede that management would best know its operational
needs, the exercise of management prerogative cannot be utilized as an implement to circumvent our laws and
oppress employees. The prerogative accorded management cannot defeat the very purpose for which our labor laws
exist: to balance the conflicting interests of labor and management, not to tilt the scale in favor of one over the other,
but to guaranty that labor and management stand on equal footing when bargaining in good faith with each other.19

In the case at bar, the manner by which petitioners exercised their management prerogative appears to be an
underhanded circumvention of the law. Petitioners were keen on summarily implementing the rotation plan, obviously
singling out respondents who were all union officers. The management's apparent lack of interest to hear what the
respondents had to say, created an uncertain situation where reporting for work was tantamount to an acquiescence
in an unjust situation.

Petitioners argued that they "exerted diligent and massive efforts" to make respondents return to work, highlighting
the telegrams and memoranda sent to respondents.20 It is well established that to constitute abandonment, two
elements must concur: (1) the failure to report for work or absence without valid or justifiable reason, and (2) a clear
intention to sever the employer-employee relationship, with the second element as the more determinative factor and
being manifested by some overt acts. Abandoning one's job means the deliberate, unjustified refusal of the employee
to resume his employment and the burden of proof is on the employer to show a clear and deliberate intent on the
part of the employee to discontinue employment.21

However, petitioners' charge of abandonment of work by respondents does not hold water when taken in light of the
complaint for constructive dismissal. We have held that a charge of abandonment is totally inconsistent with the filing
of a complaint for constructive dismissal— and with reason.22 Respondents cannot be said to have abandoned their
jobs when precisely, the root cause of their protest is their demand to maintain their regular work hours. What is more,
respondents even prayed for reinstatement and backwages. Clearly, these are incompatible with the proposition that
respondents sought to abandon their work.

Anent the issue of the validity of the waivers and quitclaims executed by some of the respondents, petitioners argue
that while admittedly, the amounts indicated therein were not substantial, it does not necessarily follow that these
were executed under duress. Moreover, the waivers and quitclaims were executed when the complaint for illegal
dismissal was already dismissed by the Labor Arbiter. Thus, the waivers and quitclaims were executed under valid
circumstances.

We do not agree. To be sure, the law looks with disfavor upon quitclaims and releases by employees who are inveigled
or pressured into signing them by unscrupulous employers seeking to evade their legal responsibilities. We have
clarified the standards for determining the validity of quitclaim or waiver in the case of Periquet v. National Labor
Relations Commission,23 to wit:

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.

In the instant case, while it is true that the complaint for illegal dismissal filed by respondents with the Labor Arbiter
has been dismissed, their appeal before the NLRC was still pending. In fact, petitioners even filed a Motion to Dismiss
with the NLRC on the very ground that the respondents, or at least most of them, have executed said "Waivers,
Releases and Quitclaims." Petitioners cannot therefore deny that it was in their interest to have respondents execute
the quitclaims.

Furthermore, the considerations received by respondents Basarte and Flores were grossly inadequate considering
the length of time that they were employed in petitioner company. As correctly pointed out by the Court of Appeals,
Basarte worked for petitioner company for 21 years, that is, from 1976 to 1998, while Flores worked from 1991 to
1998. Basarte and Flores only received P10,000.00 and P3,000.00, respectively. In contrast, Manongsong and
Soltura, two workers who opted to settle their respective cases earlier on, both started in 1993 only, but were able to
take home P16,434.00 each after executing their waivers.

Article 279 of the Labor Code provides that an employee who is unjustly dismissed from work is entitled to
reinstatement without loss of seniority rights and other privileges, and to his full backwages, inclusive of allowances,
and to the other benefits or their monetary equivalent computed from the time of his actual reinstatement. However,
if reinstatement is no longer possible, the employer has the alternative of paying the employee his separation pay in
lieu of reinstatement.

WHEREFORE, the instant petition is DENIED, and the decision of the Court of Appeals of October 18, 2001 in CA-
G.R. SP No. 63577 is AFFIRMED in toto. Costs against petitioners.

SO ORDERED.
 THIRD DIVISION

G.R. No. 156292 January 11, 2005

ME-SHURN CORPORATION AND SAMMY CHOU, petitioners,

vs.
ME-SHURN WORKERS UNION-FSM AND ROSALINA* CRUZ, respondents.

DECISION

PANGANIBAN, J.:

To justify the closure of a business and the termination of the services of the concerned employees, the law requires
the employer to prove that it suffered substantial actual losses. The cessation of a company’s operations shortly after
the organization of a labor union, as well as the resumption of business barely a month after, gives credence to the
employees’ claim that the closure was meant to discourage union membership and to interfere in union activities.
These acts constitute unfair labor practices.

The Case

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to annul the November 29, 2002
Decision2 of the Court of Appeals (CA) in CA-GR SP No. 69675, the decretal portion of which reads:

"UPON THE VIEW WE TAKE OF THIS CASE, THUS, the judgment must be, as it hereby is, AFFIRMED, and the
present petition DISMISSED for lack of merit. Costs shall be taxed against petitioners."3

The affirmed November 29, 2001 Decision4 of the National Labor Relations Commission (NLRC), Third Division,
disposed as follows:

"WHEREFORE, the decision appealed from is hereby SET ASIDE, and respondent Me-Shurn Corp. is hereby ordered
to pay the complainants who appeared in the proceedings conducted by the Labor Arbiter their full backwages from
the date their wages were withheld from them to the date of the finality of this decision."5

The Facts

On June 7, 1998, the regular rank and file employees of Me-Shurn Corporation organized Me-Shurn Workers Union-
FSM, an affiliate of the February Six Movement (FSM).6 Respondent union had a pending application for registration
with the Bureau of Labor Relations (BLR) through a letter dated June 11, 1998.7

Ten days later, or on June 17, 1998, petitioner corporation started placing on forced leave all the rank and file
employees who were members of the union’s bargaining unit.8

On June 23, 1998, respondent union filed a Petition for Certification Election with the Med-Arbitration Unit of the
Department of Labor and Employment (DOLE), Regional Office No. 3.9

Instead of filing an answer to the Petition, the corporation filed on July 27, 1998, a comment stating that it would
temporarily lay off employees and cease operations, on account of its alleged inability to meet the export quota
required by the Board of Investment.10

While the Petition was pending, 184 union members allegedly submitted a retraction/withdrawal thereof on July 14,
1998. As a consequence, the med-arbiter dismissed the Petition. On May 7, 1999, Department of Labor and
Employment (DOLE) Undersecretary Rosalinda Dimapilis-Baldoz granted the union’s appeal and ordered the holding
of a certification election among the rank and file employees of the corporation.11

Meanwhile, on August 4, 1998, respondent union filed a Notice of Strike against petitioner corporation on the ground
of unfair labor practice (illegal lockout and union busting). This matter was docketed as Case No. NCMB-RO3-BEZ-
NZ-08-42-98.12
On August 31, 1998, Chou Fang Kuen (alias Sammy Chou, the other petitioner herein) and Raquel Lamayra (the
Filipino administrative manager of the corporation) imposed a precondition for the resumption of operation and the
rehiring of laid off workers. He allegedly required the remaining union officers to sign an Agreement containing a
guarantee that upon their return to work, no union or labor organization would be organized. Instead, the union officers
were to serve as mediators between labor and management.13 After the signing of the Agreement, the operations of
the corporation resumed in September 1998.14

On November 5, 1998, the union reorganized and elected a new set of officers. Respondent Rosalina Cruz was
elected president.15 Thereafter, it filed two Complaints docketed as NLRC Case Nos. RAB-III-11-9586-98 and RAB-
III-09-0322-99. These cases were consolidated and assigned to Labor Arbiter Henry Isorena for compulsory
arbitration. Respondents charged petitioner corporation with unfair labor practice, illegal dismissal, underpayment of
wages and deficiency in separation pay, for which they prayed for damages and attorney’s fees.

The corporation countered that because of economic reversals, it was compelled to close and cease its operations to
prevent serious business losses; that under Article 283 of the Labor Code, it had the right to do so; that in August
1998, it had paid its 342 laid off employees separation pay and benefits in the total amount of ₱1,682,863.88; and that
by virtue of these payments, the cases had already become moot and academic. It also averred that its resumption
of operations in September 1998 had been announced and posted at the Bataan Export Processing Zone, and that
some of the former employees had reapplied.

Petitioner corporation questioned the legality of the representation of respondent union. Allegedly, it was not the latter,
but the Me-Shurn Independent Employees’ Union -- with Christopher Malit as president -- that was recognized as the
existing exclusive bargaining agent of the rank and file employees and as the one that had concluded a Collective
Bargaining Agreement (CBA) with the corporation on May 19, 1999.16 Hence, the corporation asserted that
Undersecretary Dimapilis-Baldoz’s Decision ordering the holding of a certification election had become moot and
academic.

On the other hand, respondents contested the legality of the formation of the Me-Shurn Independent Employees’
Union and petitioners’ recognition of it as the exclusive bargaining agent of the employees. Respondents argued that
the pendency of the representation issue before the DOLE had barred the alleged recognition of the aforementioned
union.

Labor Arbiter Isorena dismissed the Complaints for lack of merit. He ruled that (1) actual and expected losses justified
the closure of petitioner corporation and its dismissal of its employees; (2) the voluntary acceptance of separation pay
by the workers precluded them from questioning the validity of their dismissal; and (3) the claim for separation pay
lacked factual basis.171a\^/phi1.net

On appeal, the NLRC reversed the Decision of Labor Arbiter Isorena. Finding petitioners guilty of unfair labor practice,
the Commission ruled that the closure of the corporation shortly after respondent union had been organized, as well
as the dismissal of the employees, had been effected under false pretenses. The true reason therefor was allegedly
to bar the formation of the union. Accordingly, the NLRC held that the illegally dismissed employees were entitled to
back wages.18

After the denial of their Motion for Reconsideration,19 petitioners elevated the cases to the CA via a Petition for
Certiorari under Rule 65.20 They maintained that the NLRC had committed grave abuse of discretion and serious
errors of fact and law in reversing the Decision of the labor arbiter and in finding that the corporation’s cessation of
operations in August 1998 had been tainted with unfair labor practice.

Petitioners added that respondent union’s personality to represent the affected employees had already been
repudiated by the workers themselves in the certification election conducted by the DOLE. Pursuant to the Decision
of Undersecretary Dimapilis-Baldoz in Case No. RO3 00 9806 RU 001, a certification election was held on September
7, 2000, at the premises of petitioner corporation under the supervision of the DOLE. The election had the following
results:

"Me Shurn Workers Union-FSM – 1

No Union – 135

Spoiled – 2

Challenged – 52

Total Votes Cast – 190"21

Ruling of the Court of Appeals

The CA dismissed the Petition because of the failure of petitioners to submit sufficient proof of business losses. It
found that they had wanted merely to abort or frustrate the formation of respondent union. The burden of proving that
the dismissal of the employees was for a valid or authorized cause rested on the employer.
The appellate court further affirmed the union’s legal personality to represent the employees. It held that (1) registration
was not a prerequisite to the right of a labor organization to litigate; and (2) the cases may be treated as representative
suits, with respondent union acting for the benefit of all its members.

Hence, this Petition.22

Issues

In their Supplemental Memorandum, petitioners submit the following issues for our consideration:

"(1) Whether the dismissal of the employees of petitioner Meshurn Corporation is for an authorized cause, and

(2) Whether respondents can maintain a suit against petitioners."23

The Court’s Ruling

The Petition lacks merit.

First Issue:

Validity of the Dismissal

The reason invoked by petitioners to justify the cessation of corporate operations was alleged business losses. Yet,
other than generally referring to the financial crisis in 1998 and to their supposed difficulty in obtaining an export quota,
interestingly, they never presented any report on the financial operations of the corporation during the period before
its shutdown. Neither did they submit any credible evidence to substantiate their allegation of business losses.

Basic is the rule in termination cases that the employer bears the burden of showing that the dismissal was for a just
or authorized cause. Otherwise, the dismissal is deemed unjustified. Apropos this responsibility, petitioner corporation
should have presented clear and convincing evidence24 of imminent economic or business reversals as a form of
affirmative defense in the proceedings before the labor arbiter or, under justifiable circumstances, even on appeal with
the NLRC.

However, as previously stated, in all the proceedings before the two quasi-judicial bodies and even before the CA, no
evidence was submitted to show the corporation’s alleged business losses. It is only now that petitioners have
belatedly submitted the corporation’s income tax returns from 1996 to 1999 as proof of alleged continued losses during
those years.1awphi1.nét

Again, elementary is the principle barring a party from introducing fresh defenses and facts at the appellate
stage.25This Court has ruled that matters regarding the financial condition of a company -- those that justify the closing
of its business and show the losses in its operations -- are questions of fact that must be proven below.26 Petitioners
must bear the consequence of their neglect. Indeed, their unexplained failure to present convincing evidence of losses
at the early stages of the case clearly belies the credibility of their present claim.27

Obviously, on the basis of the evidence -- or the lack thereof -- the appellate court cannot be faulted for ruling that the
NLRC did not gravely abuse its discretion in finding that the closure of petitioner corporation was not due to alleged
financial losses.

At any rate, even if we admit these additional pieces of evidence, the circumstances surrounding the cessation of
operations of the corporation reveal the doubtful character of its supposed financial reason.

First, the claim of petitioners that they were compelled to close down the company to prevent further losses is belied
by their resumption of operations barely a month after the corporation supposedly folded up.

Moreover, petitioners attribute their loss mainly to their failure to obtain an export quota from the Garments and Textile
Export Board (GTEB). Yet, as pointed out by respondents, the corporation resumed its business without first obtaining
an export quota from the GTEB. Besides, these export quotas pertain only to business with companies in the United
States and do not preclude the corporation from exporting its products to other countries. In other words, the business
that petitioner corporation engaged in did not depend entirely on exports to the United States.

If it were true that these export quotas constituted the determining and immediate cause of the closure of the
corporation, then why did it reopen for business barely a month after the alleged cessation of its operations?

Second, the Statements of Income and Deficit for the years 1996 and 1997 show that at the beginning of 1996, the
corporation had a deficit of ₱2,474,505. Yet, the closure was effected only after more than a year from such year-end
deficit; that is, in the middle of 1998, shortly after the formation of the union.
On the other hand, the Statement of Income and Deficit for the year 1998 does not reflect the extent of the losses that
petitioner corporation allegedly suffered in the months prior to its closure in July/August 1998. This document is not
an adequate and competent proof of the alleged losses, considering that it resumed operations in the succeeding
month of September.

Upon careful study of the evidence, it is clear that the corporation was more profitable in 1997 than in 1996. By the
end of 1997, it had a net income of ₱1,816,397.

If petitioners were seriously desirous of averting losses, why did the corporation not close in 1996 or earlier, when it
began incurring deficits? They have not satisfactorily explained why the workers’ dismissal was effected only after the
formation of respondent union in September 1998.

We also take note of the allegation that after several years of attempting to organize a union, the employees finally
succeeded on June 7, 1998. Ten days later, without any valid notice, all of them were placed on forced leave, allegedly
because of lack of quota.

All these considerations give credence to their claim that the closure of the corporation was a mere subterfuge, "a
systematic approach intended to dampen the enthusiasm of the union members."28

Third, as a condition for the rehiring of the employees, the union officers were made to sign an agreement that
they would not form any union upon their return to work. This move was contrary to law.

Fourth, notwithstanding the Petition for Certification Election filed by respondents and despite knowledge of
the pendency thereof, petitioners recognized a newly formed union and hastily signed with it an alleged
Collective Bargaining Agreement. Their preference for the new union was at the expense of respondent
union. Moncada Bijon Factory v. CIR29 held that an employer could be held guilty of discrimination, even if the
preferred union was not company-dominated.

Fifth, petitioners were not able to prove their allegation that some of the employees’ contracts had expired
even before the cessation of operations. We find this claim inconsistent with their position that all 342
employees of the corporation were paid their separation pay plus accrued benefits in August 1998.

Sixth, proper written notices of the closure were not sent to the DOLE and the employees at least one month
before the effectivity date of the termination, as required under the Labor Code. Notice to the DOLE is
mandatory to enable the proper authorities to ascertain whether the closure and/or dismissals were being
done in good faith and not just as a pretext for evading compliance with the employer’s just obligations to the
affected employees.30 This requirement is intended to protect the workers’ right to security of tenure. The
absence of such requirement taints the dismissal.

All these factors strongly give credence to the contention of respondents that the real reason behind the shutdown of
the corporation was the formation of their union. Note that, to constitute an unfair labor practice, the dismissal need
not entirely and exclusively be motivated by the union’s activities or affiliations. It is enough that the discrimination
was a contributing factor.31 If the basic inspiration for the act of the employer is derived from the affiliation or activities
of the union, the former’s assignment of another reason, no matter how seemingly valid, is unavailing.32

Concededly, the determination to cease operations is a management prerogative that the State does not usually
interfere in. Indeed, no business can be required to continue operating at a loss, simply to maintain the workers in
employment. That would be a taking of property without due process of law.l^vvphi1.net But where it is manifest that
the closure is motivated not by a desire to avoid further losses, but to discourage the workers from organizing
themselves into a union for more effective negotiations with management, the State is bound to intervene.33

Second Issue:

Legal Personality of Respondent Union

Neither are we prepared to believe petitioners’ argument that respondent union was not legitimate. It should be pointed
out that on June 29, 1998, it filed a Petition for Certification Election. While this Petition was initially dismissed by the
med-arbiter on the basis of a supposed retraction, note that the appeal was granted and that Undersecretary Dimapilis-
Baldoz ordered the holding of a certification election.

The DOLE would not have entertained the Petition if the union were not a legitimate labor organization within the
meaning of the Labor Code. Under this Code, in an unorganized establishment, only a legitimate union may file a
petition for certification election.34 Hence, while it is not clear from the record whether respondent union is a legitimate
organization, we are not readily inclined to believe otherwise, especially in the light of the pro-labor policies enshrined
in the Constitution and the Labor Code.35

Verily, the union has the requisite personality to sue in its own name in order to challenge the unfair labor practice
committed by petitioners against it and its members.36 "It would be an unwarranted impairment of the right to self-
organization through formation of labor associations if thereafter such collective entities would be barred from
instituting action in their representative capacity."37

Finally, in view of the discriminatory acts committed by petitioners against respondent union prior to the holding of the
certification election on September 27, 2000 -- acts that included their immediate grant of exclusive recognition to
another union as a bargaining agent despite the pending Petition for certification election -- the results of that election
cannot be said to constitute a repudiation by the affected employees of the union’s right to represent them in the
present case.

WHEREFORE, the Petition is DENIED, and the assailed Decision AFFIRMED. Costs against the petitioners.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

FIRST DIVISION

G.R. No. 82135 August 20, 1990

BANCO FILIPINO SAVINGS AND MORTGAGE BANK (Represented by its liquidator, MS. CARLOTA P.
VALENZUELA), petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, Labor Arbiter EVANGELINE LUBATON and FORTUNATO
DIZON, JR., respondents.

Sycip Salazar Hernandez & Gamaitan for petitioner.

Atienza, Tabora, Del Rosario & Castillo for private respondent.

MEDIALDEA, J.:

After BANCO FILIPINO SAVINGS AND MORTGAGE BANK was placed under receivership, and later ordered
liquidated by the Monetary Board of the Central Bank, FORTUNATO M. DIZON. Jr., who was then holding the position
of Executive Vice President and Chief Operating Officer of the bank, received a letter from the Central Bank appointed
liquidator, MS. CARLOTA P. VALENZUELA, informing him that all management authority in the bank had been
assumed by the Central Bank appointed liquidators and that his employment is being terminated.

Mr. Dizon filed with the liquidator a request for the payment to him of the cash equivalent of his vacation and sick
leave credits and unexpended/unused reimbursable allowance. His claims were not paid by the liquidator upon
counsel's advice that Dizon's claim should be treated as a claim of a creditor and should therefore be processed
pursuant to the liquidation plan as approved by the Monetary Board. Subsequent demands for payment having been
denied, Dizon filed on March 31, 1986 a complaint with the labor arbiter against the bank for recovery of unpaid salary,
the cash equivalent of his accumulated vacation and sick leaves, termination pay under Article 283 of the Labor Code
and moral damages and attorney's fees.

Representing the bank, the liquidator moved for the dismissal of the complaint refuting the legal and factual bases
thereof as well as the jurisdiction of the labor arbiter to entertain Dizon's money claims because such pertains to the
Regional Trial Court of Makati, Branch 146, acting as the liquidation court.

On November 14, 1986, the labor arbiter upheld her jurisdiction and promulgated a decision in favor of Dizon but
withheld his demand for payment of moral damages and attorney's fees. Both parties appealed to the National Labor
Relations Commission which increased the award due Dizon and further ordered payment of actual and moral
damages and attorney's fees. The award of moral damages was later deleted in the resolution of February 24, 1988
of the Commission.

In this petition, the liquidator assails the foregoing decisions and resolution and prays that they be declared null and
void on the following grounds: Firstly, she maintains that "[a]ll disputed claims against banks under liquidation pertain
to the exclusive jurisdiction of the liquidation court (pursuant to section 29 of the Central Bank Act) and may not be
adjudicated by the Labor Arbiters and the NLRC under Article 217 of the Labor Code," and cites the case of Hernandez
v. Rural Bank of Lucena, Inc., No. L-29791, January 10, 1978, 81 SCRA 75. She argues that "[t]he general
provisions of Article 217 conferring upon respondents Labor Arbiter and the NLRC jurisdiction over claims arising from
an employment relationship cannot prevail over the explicit provisions of Section 29 of the Central Bank Act, which is
a special law specifically vesting upon the liquidation court jurisdiction over all claims against liquidated banks."
Secondly, the liquidator points out that "[t]he assailed decisions directing the payment of the claims outside of the
liquidation process amount to an undue preference in favor of a particular creditor." She submits that "the statutory
status of employees as preferred creditors with respect to 'wages due them for services rendered during the period
prior to the bankruptcy or liquidation' does not in itself entitle them to advance payment outside of the liquidation
proceedings and while said proceedings are in progress. The provision [Art. 110, Labor Code] entitles them only to
preferential treatment over other creditors in the same liquidation proceedings to the proceeds of the assets of the
employer after the distributable assets shall have been determined therein," and cites the case of Republic v. Peralta,
No. 56568, May 20, 1987, 150 SCRA 37. She further argues that an action could not be maintained against an
insolvent bank after it had been ordered liquidated citing Central Bank v. Morfe No. L-38427, March 12, 1975, 63
SCRA 114 and Central Bank, v. Court of Appeals, No. L-37859, July 26, 1988,163 SCRA 482.

It is common knowledge that the taking over of the management and assets of Banco Filipino by the Monetary Board
of the Central Bank is being contested by some stockholders of the bank who insist that the bank is solvent and in
sound financial condition and that its closure was illegal. The controversy has generated quite a number of cases in
this Court and in one of them, G.R. No. 70054, entitled Banco Filipino Savings and Mortgage Bank v. The Monetary
Board, et al., We adopted a resolution, dated August 29, 1985, enjoining the Monetary Board, its officers, and the
Central Bank appointed receivers "from executing further acts of liquidation of a bank "save"acts such as receiving
collectibles and receivables or paying off creditors claims and other transactions pertaining to normal operations of a
bank," and later, further ordered that a hearing be conducted by the Regional Trial Court of Makati, Branch 146 to
afford the former management/stockholders of the bank an opportunity to prove that the bank's closure was illegal.
The temporary restraining order still stands and it appears that a report and recommendation on the hearing has yet
to be filed. For the moment, therefore, the bank is not being liquidated and the possibility lurks that it might not be at
all. Respondent Dizon, cognizant of these, argues that it is the labor arbiter and the NLRC which has jurisdiction over
his money claims since there is no liquidation court to speak of.

We are of the opinion that it is the NLRC which has jurisdiction over Dizon's money claims. Section 29 of the Central
Bank Act (Republic Act No. 265) before its amendment by Executive Order No. 289 (September, 1987,) reads, to wit:

Sec. 29. Proceedings upon insolvency. — ... If the Monetary Board shall determine and confirm within
the said period that the bank or non-bank financial intermediary performing quasi-banking functions is
insolvent or cannot resume business with safety to its depositors, creditors and the general public, it
shall, if the public interest requires, order its liquidation, indicate the manner of its liquidation and
approve a liquidation plan. The Central Bank shall, by the Solicitor General, file a petition in the Court
of First Instance reciting the proceedings which have been taken and praying the assistance of the
court in the liquidation of such institution. The court shall have jurisdiction in the same proceedings to
adjudicate disputed claims against the bank or non-bank financial intermediary performing
quasibanking function and enforce individual liabilities of the stockholders. and do all that is necessary
to preserve the assets of such institution and to implement the liquidation plan approved by the
Monetary Board. ... The liquidator shall with all convenient speed, convert the assets of the banking
institution or non-bank financial intermediary performing quasi-banking functions to money or sell,
assign or otherwise dispose of the same to creditors and other parties for the purpose of paying the
debts of such institution and he may, in the name of the bank or non-bank financial intermediary
performing quasi-banking functions, institute such actions as may be necessary in the appropriate
court to collect and recover accounts and assets of such institution. [Emphasis supplied]

There is nothing in Section 29 which suggests that the jurisdiction of the liquidation court to adjudicate claims against
the insolvent bank is exclusive. On the other hand, Article 217 of the Labor Code explicitly provides that labor arbiters
have original and exclusive jurisdiction, over money claims of an employee against his employer, thus:

ART. 217. Jurisdiction of the Labor Arbiter and the Commission. (a) The Labor Arbiter shall have the
original and exclusive jurisdiction to hear and decide ... the following cases involving all workers,...:

xxx xxx xxx

3. All money claims of workers, including those based on non-payment or underpayment of wages,
overtime compensation, separation pay and other benefits provided by law or appropriate agreement,
except claims for employee's compensation, social security, medicare and maternity benefits.
[Emphasis supplied]

We do not think that this jurisdiction would be lost simply because a former employer had been placed under
liquidation. The legislature deemed it wise to confer jurisdiction over labor disputes to a body exclusively of others and
We are not prepared to divest such authority from the labor arbiter and the NLRC absent any clear provision of law to
that effect.

The liquidator cites the case of Hernandez v. Rural Bank of Lucena, supra, where this Court, commenting on the
original section 29 as embodied in R.A. No. 265, held that:

The fact that the insolvent bank is forbidden to do business, that its assets are turned over to the
Superintendent of Banks, as a receiver, for conversion into cash, and that its liquidation is undertaken
with judicial intervention means that, as far as lawful and practicable, all claims against the insolvent
bank should be filed in the liquidation proceeding.

The judicial liquidation is intended to prevent multiplicity of actions against the insolvent bank. The
lawmaking body contemplated that for convenience only one court, if possible, should pass upon the
claims against the insolvent bank and that the liquidation court should assist the Superintendent or
Banks and control his operations.

In the course of the liquidation, contentious cases might arise wherein a full-dress hearing would be
required and legal issues would have to be resolved. Hence, it would be necessary in justice to all
concerned that a Court of First Instance should assist and supervise the liquidation and should act as
umpire and arbitrator in the allowance and disallowance of claims.
 The judicial liquidation is a pragmatic arrangement designed to establish due process and orderliness
in the liquidation of the bank to obviate the proliferation of litigations and to avoid injustice and
arbitrariness. (Hernandez v. Rural Bank of Lucena, Inc. supra, pp. 87-88) [Emphasis supplied]

But it will be noted that even in the quoted opinion, consideration was given of the possibility or practicality of certain
claims being adjudicated by other tribunals besides the liquidation court. Thus, in the later case of Carandang v. Court
of Appeals, No. L-44932, April 15, 1988, 160 SCRA 266, We upheld the jurisdiction of the then Court of First Instance
of Laguna over that of the liquidation court, the Court of First Instance of Manila, considering that the cause of action
of therein plaintiff was already fully litigated in the former court and to re-litigate would "mean more inconvenience to
the parties, entailing waste of money and precious time." In other words, it is not a legal aberration that certain
claims against an insolvent bank be litigated in another court where to do so would be more practical; and more so in
this case where it is not legally possible to litigate Dizon's claims other than with the Labor Arbiter and the NLRC
because of the express provision of the Labor Code.

Neither do We subscribe to the interpretation given by the bank in the case of Central Bank v. Morfe supra, which
purportedly prohibits the filing of cases against a bank after it has been declared insolvent. That case simply ruled
that judgments from suits filed after a bank has been declared insolvent "cannot be considered preferred and that
Article 2244 (14) (b) [of the Civil Code] does not apply to judgments for the payment of the deposits in an insolvent
savings bank which were obtained after the declaration of insolvency." Moreover, as in the other cited case ofCentral
Bank v. Court of Appeals, supra, the case involves recovery of deposits.

Under normal circumstances the decision of the NLRC is immediately executory (See Article 223, Labor Code). The
bank's liquidator, however, resists immediate payment to Dizon of his adjudicated money claims on the ground that it
would amount to undue preference of credit. Dizon countered that under Article 110 of the Labor Code unpaid wages
of laborers are indeed preferred. Moreover, Dizon reminded, this Court had temporarily enjoined the liquidation of the
bank and, therefore, there is no liquidation proceeding where his claims may be paid.

Article 110 of the Labor Code before its amendment by Republic Act No. 6715 (March 2, 1989) reads as follows:

ART. 110. Worker Preference in case of Bankruptcy — In the event of bankruptcy or liquidation of an
employer's business, his workers shall enjoy first preference as regards wages due them for services
rendered during the period prior to the bankruptcy or liquidation, any provision of law to the contrary
notwithstanding. Unpaid wages shall be paid in full before other creditors may establish any claim to
a share in the assets of the employer.

In Republic v. Peralta, supra the majority of this Court was of the opinion that the above quoted provision did not
upgrade the worker's claim as absolutely preferred credit. There We explained that the provision did not alter Articles
2241 and 2242 of the Civil Code so much so that creditors with liens over a certain property are still given special
preference over the proceeds of that property. And it is only after these specially preferred credits are satisfied may
the ordinary preferred credits enumerated in Article 2244 of the Civil Code be paid according to their order of priority.
The significance of Article 110 in the scheme of concurrence and preference of credit is to raise the worker's money
claim into first priority under Article 2244. (See also Development Bank of the Philippines v. NLRC, G.R. Nos. 82763-
64, March 19, 1990).

Not being an absolutely preferred credit, as taxes are under Articles 2241 (1) and 2242 (1), Dizon's claims cannot be
paid ahead of other credits and outside of the liquidation proceeding because the "free property" or the property left
after the creditors mentioned in Articles 2241 and 2242 are paid has not yet been determined (See Barreto v.
Villanueva, No. L-14938, December 29, 1962, 6 SCRA 928). In the words of Lipana v. Development Bank of Rizal,
No. '73884, September 24, 1987, 154 SCRA 257, 261, "to execute the judgment would unduly deplete the assets of
respondent bank to the obvious prejudice of other [depositors and] creditors."

Thus, Dizon's adjudicated claims should be submitted to the liquidators for processing. If, of course, it is later
determined that Banco Filipino's liquidation is improper then the NLRC'S decision may be executed under normal
procedure. If the contrary is proven, however, and the bank's liquidation should proceed, Dizon's established claims
should be treated as an ordinary preferred credit enjoying first preference under Art. 2244 of the Civil Code.

In its petition, the bank did not raise any argument against the merit of Dizon's money claims. Thus, the comments of
the public and private respondents thereto were directed on what was so far discussed. It would seem unfair, therefore,
that the bank would subsequently assail the merits of the award in its memorandum leaving the respondents off-guard.
In any event, We do not find the bank's foray on Dizon's money claims meritorious.

The bank argues that Dizon is not entitled to separation pay citing Article 283 of the Labor Code which reads to wit:

... In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business loses or financial reverses, the separation
pay shall be equivalent to 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 one (1) whole
year.
It is the banks interpretation of the law that when an institution is closed due to serious business losses or financial
reverses its workers are not entitled to separation pay. We disagree. We instead quote with approval the opinion of
respondent Labor Arbiter, thus:

Article 283 (Art. 282) of the Labor Code enumerated the just causes for an employer to terminate an
employee. If an employee is dismissed for just cause, he is not entitled to termination pay. However,
in Article 284 (Art. 283), in case of closure of establishment, the employee is always given termination
pay. The reason for the closure is taken into consideration only to determine whether to give one
month or one-half month pay for every year of service. This provision is based on social justice and
equity... (p. 41, Rollo)

Such was Our ruling in International Hardware, Inc. v. NLRC, G.R. No. 80770, August 10, 1989. As regards the
commutation to cash of Dizon's accumulated vacation and sick leaves, both the Labor Arbiter and the NLRC found
that this was authorized by the Collective Bargaining Agreement then existing before the bank's closure and which
CBA the liquidators manifested to honor. This is a factual issue which We are not inclined to disturb. Also, since Dizon
was forced to litigate, he is entitled to attorney's fees.

ACCORDINGLY, the decision under review is AFFIRMED save that the money due the private respondent should be
presented to the liquidators for processing.

SO ORDERED.
 THIRD DIVISION

G.R. No. 138956 August 7, 2003

LOADSTAR SHIPPING CO., INC. and TEODORO G. BERNARDINO, petitioners,

vs.
ROMEO MESANO, respondent.

DECISION

SANDOVAL-GUTIERREZ, J.:

Employers should respect and protect the rights of their employees, which include the right to labor. 1 Towards this
end, due process must be observed in dismissing an employee because it affects not only his position but also his
means of livelihood.2

At bar is a petition for review on certiorari seeking to nullify the Decision3 dated March 11, 1999 and Resolution4dated
June 4, 1999 of the Court of Appeals which set aside the decision dated November 11, 1996 of the National Labor
Relations Commission (NLRC) and ordered petitioner Loadstar Shipping Company, Inc. to pay private respondent
Romeo Mesano his separation pay (in lieu of reinstatement), full backwages and other monetary benefits.

The facts as borne by the records are:

Loadstar Shipping Co., Inc., petitioner, is a domestic corporation engaged in the operation of shipping vessels, which
included the M/V Beaver.

On November 4, 1980, Romeo R. Mesano, respondent, was employed by petitioner as a seaman. Subsequently, he
occupied the position of bosun/boatswin in charge of the care and custody of the entire vessel as well as its
accessories and cargo.

On January 22, 1995, respondent brought out from the vessel M/V Beaver a colored television set and a telescope.
This incident prompted petitioner company to conduct an investigation.

Immediately, respondent voluntarily submitted his written explanation asking for forgiveness. He explained that he
intended to have the television repaired. However, when it could not be done, he returned the unit to the vessel.

On February 24, 1995, respondent asked from petitioner a disembarking clearance from his accountabilities. But what
petitioner handed to respondent was a disembarkation order dated March 1, 1995 terminating his services effective
February 28, 1995.

Feeling aggrieved, respondent filed with the Labor Arbiter a complaint for illegal dismissal against petitioner and
Teodoro G. Bernardino, its president and/or general manager.

On April 23, 1996, the Labor Arbiter rendered a decision dismissing respondent’s complaint for lack of merit.

On appeal, the NLRC affirmed the Arbiter’s decision.

Consequently, on February 17, 1997, respondent filed with this Court a petition for certiorari under Rule 65 of the
1997 Rules of Procedure, as amended. In a Resolution dated November 25, 1998, this Court referred the petition to
the Court of Appeals.

In due course, the Court of Appeals issued the assailed Decision5 dated March 11, 1999, setting aside the decision of
the NLRC, thus:

"We find the Petition replete with merits.

"Section 1 of Rule XIV of the Implementation Regulations provides that no worker shall be dismissed except for a just
or authorized cause provided by law and after due process.
"The two facets of this legal provision are: (a) the legality of the act of dismissal, that is dismissal under the grounds
provided for under Article 283 (now 282) of the New Labor Code; and (b) legality in manner of dismissal (Shoemart
Inc. vs. NLRC, G.R. No. 74225, August 11, 1989).

"Anent the first issue, the law requires that the employer must furnish the worker sought to be dismissed with two
written notices before termination of employment can be legally effected: (1) notice which apprises the employee of
the particular acts or omissions for which his dismissal is sought; and (2) the subsequent notice which informs the
employee of the employer’s decision to dismiss him. (Section 13, BP 130; Section 2, Rule XIV, Book V, Rules and
Regulations of the Labor Code, as amended). Failure to comply with the requirements taints the dismissal with
illegality. This procedure is mandatory, in the absence of which any judgment reached by management is void and
inexistent.

"In the instant case, no written charge prior to the dismissal was ever furnished the petitioner. Respondent Loadstar
tries to answer this by reasoning that, considering that petitioner submitted to respondent his handwritten explanation
in which he categorically admitted his bringing down of the subject television set without prior permission from the
company, then no notice was required.

"We cannot accept this contention. The law is clear. The High Court has repeatedly held that the two notice-
requirement is mandatory. Moreover, the twin requirements of notice and hearing constitute essential elements of due
process in cases of employee dismissal (Century Textile Mills, Inc., et al. vs. NLRC, G.R. No. 77859, May 25, 1988).

"In the present case, there is no showing that petitioner was ever given ample opportunity to be heard between the
time after his handwritten explanation dated February 15, 1995 was submitted and his disembarkation order dated
March 1, 1995. Respondent Loadstar insists that petitioner’s handwritten explanation is a categorical admission of his
guilt. We are not persuaded. A cursory reading of the said letter would show that, petitioner was merely explaining his
actions, but did not categorically admit having stolen the item. In any case, the fact remains that no hearing was made
to hear petitioner’s side. Respondent Loadstar virtually made an assumption on the basis of petitioner’s letter alone
that considering the time and the manner in which the taking was made, then petitioner is guilty of stealing and,
therefore, should be dismissed. No notice was ever given to inform petitioner that his dismissal is being sought and
by which he could be apprised on the full consequence of his acts. And neither was a hearing conducted, in order that
he be given an opportunity to refute the accusations leveled against him. ‘Ample opportunity’ is meant every kind of
assistance that management must accord to the employee to enable him to prepare adequately for his defense
(Diosdado Duffy vs. NLRC and Central Azucarera, G.R. No. 84193, February 15, 1990).

"In this case, although the interregnum between the date of the notice of dismissal and the date of effectivity ostensibly
provided the petitioner time within which to defend himself, there really was no hearing conducted, and hence no
opportunity to defend himself.

"In a long line of decisions, the Supreme Court has ruled that not even consultations or conferences can be substituted
for the actual observance of notice and hearing and neither is a notice of preventive suspension and investigation in
relation thereto (Pepsi Cola Bottling Co. vs. NLRC, supra; Norman de Vera vs. NLRC and Bank of the Philippine
Islands, Inc., G.R. No. 93070, August 9, 1991).

"With more reason then must we condemn its virtual absence in the case at bar.

"Anent the second issue, private respondent Loadstar posits that petitioner’s act of taking the television without
permission constitutes gross misconduct and a breach of trust of the confidence reposed on him which justified his
dismissal.

"x x x xxx xxx

"In the case at bar, we note that the intention of the employee to steal the item has not been fully established
considering the absence of any investigation and hearing conducted. Hence, considering that petitioner had no
derogatory record in the 15 years he was in service with respondent Loadstar, it is therefore arbitrary to make an
immediate conclusion on his guilt. More importantly, we agree with petitioner that the penalty of dismissal was too
harsh. In Gold City Integrated Port Services, Inc. vs. NLRC, G.R. No. 86000, September 21, 1990, it was ruled that
there must be reasonable proportionality between the offense and the penalty imposed therefor.

"Considering that the television, a minimal item at that, was immediately restored and that petitioner immediately
forwarded his letter of apology with explanation, and considering further that it was his first time to commit the charge
leveled against him, a penalty of suspension could have just sufficed.

"Viewing from the foregoing, the dismissal of the employee was clearly illegal.

"With the finding that the petitioner was illegally dismissed, the order for reinstatement with full backwages should
follow as a matter of right. In this case, however, considering the strained relations between the parties, the Court
deemed it best to award separation pay in lieu of reinstatement. Other monetary claims, rights and benefits, as prayed
for and as granted by law and the shipping company, should also be awarded.
 "x x x xxx xxx

"WHEREFORE, the decision of public respondent National Labor Relations Commission is hereby SET ASIDE.
Private respondent Loadstar Shipping Co. is hereby ordered to pay petitioner separation pay in lieu of reinstatement,
as well as full backwages from the time his compensation was withheld from him up to the finality of this decision, plus
other monetary benefits which may be due petitioner.

"SO ORDERED."

On April 5, 1999, petitioner filed a motion for reconsideration but was denied.

In this petition for review on certiorari, petitioner alleged that respondent was not deprived of his right to due process
considering that he was given the opportunity to present his side through his written explanation wherein he admitted
his guilt and pleaded for forgiveness. Petitioner further claimed that respondent failed to live up to the standard of
responsibility and honesty called for by his position. Thus, gauged by any moral standard, his dismissal is not tainted
with illegality.

A rule deeply embedded in our jurisprudence is that "(i)n order to constitute a valid dismissal, two requisites must
concur: (a) the dismissal must be for any of the causes expressed in Art. 282 of the Labor Code; and (b) the employee
must be accorded due process, basic of which is the opportunity to be heard and to defend himself.6

Simply put, the twin requirements of due process, substantive and procedural, must be complied with before a
dismissal can be considered valid.

In Cruz vs. NLRC,7 we held:

"The law requires that an employee sought to be dismissed must be served two written notices before termination of
his employment. The first notice is to apprise the employee of the particular acts or omissions by reason of which his
dismissal has been decided upon; and the second notice is to inform the employee of the employer's decision to
dismiss him. Failure to comply with the requirement of two notices makes the dismissal illegal. The procedure is
mandatory. Non-observance thereof renders the dismissal of an employee illegal and void."

The mandatory first notice is undeniably absent in the case at bar. Prior to respondent's termination from the service,
he was neither apprised of the particular acts for which his dismissal is sought, nor was he directed to explain why he
should not be dismissed for taking out from the vessel company property.

While it is true that respondent voluntarily submitted his written explanation, nonetheless, he did not expressly
acknowledge that he committed any offense. In fact, being in charge of the company’s vessel and its accessories and
cargo, his intention in taking out the TV set was to have it repaired.1âwphi1

Even granting that by submitting his written explanation, he was considered to have been notified of the charge, still
there was no investigation or hearing conducted wherein he could have presented evidence and adequately defended
himself.

As gleaned from the foregoing circumstances, the Court of Appeals correctly ruled that respondent was deprived of
his right to due process and, therefore, his termination from the service is illegal.

WHEREFORE, the petition is DENIED. The Decision dated March 11, 1999 and Resolution dated June 4, 1999 of the
Court of Appeals are hereby AFFIRMED.

SO ORDERED.
 SECOND DIVISION

G.R. No. 141947 July 5, 2001

ISMAEL V. SANTOS, ALFREDO G. ARCE and HILARIO M. PASTRANA, petitioners,

vs.
COURT OF APPEALS, PEPSI COLA PRODUCTS PHILS., INC., LUIS P. LORENZO, JR. and FREDERICK
DAEL, respondents.

BELLOSILLO, J.:

This petition for review seeks to annul the Resolution1 of the Court of Appeals in CA-G.R. SP No. 54853 dated 28
September 1999 which summarily dismissed petitioners' special civil action for certiorari for failing to execute properly
the required verification and certification against forum shopping and to specify the material dates from which the
timeliness of the petition may be determined.

Private respondent Pepsi Cola Products Phils., Inc. (PEPSI) is a domestic corporation engaged in the production,
distribution and sale of beverages. At the time of their termination, petitioners Ismael V. Santos and Alfredo G. Arce
were employed by PEPSI as Complimentary Distribution Specialists (CDS) with a monthly salary of P 7,500.00 and
P10,000.00, respectively, while Hilario M. Pastrana was employed as Route Manager with a monthly salary of P 7
,500.00.

In a letter dated 26 December 1994,2 PEPSI informed its employees that due to poor performance of its Metro Manila
Sales Operations it would restructure and streamline certain physical and sales distribution systems to improve its
warehousing efficiency. Certain positions, including that of petitioners, were declared redundant and abolished.
Consequently, employees with affected positions were terminated.

On 15 January 1995 petitioners left their respective positions, accepted their separation pays and executed the
corresponding releases and quitclaims. However, before the end of the year, petitioners learned that PEPSI created
new positions called Account Development Managers (ADM) with substantially the same duties and responsibilities
as the CDS. Aggrieved, on 15 Apri1 1996, petitioners filled a complaint with the Labor Arbiter for illegal dismissal with
a prayer for reinstatement, back wages, moral and exemplary damages and attorney's fees.

In their complaint, petitioners alleged that the creation of the new positions belied PEPSI's claim of redundancy. They
further alleged that the qualifications for both the CDS and ADM positions were similar and that the employees hired
for the latter positions were even less qualified than they were.3 Likewise taking note of possible procedural errors,
they claimed that while they were notified of their termination, PEPSI had not shown that the Department of Labor and
Employment (DOLE) was also notified as mandated by Art. 283 of the Labor Code which states-

Art. 283. Closure of Establishment and Reduction of Personnel. The employer may also terminate the
employment of any employee due to the installation of labor-saying devices, redundancy, retrenchment to
prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing
is for the purpose of circumventing the provisions of this title, by serving a written notice on the worker and
the Ministry of Labor and Employment: at least one (1) month before the intended date thereof xxxx (italic
supplied).

PEPSI, on the other hand, maintained that termination due to redundancy was a management prerogative the wisdom
and soundness of which were beyond the discretionary review of the courts. Thus, it had the right to manage its affairs
and decide which position was no longer needed for its operations. It further maintained that the redundancy program
was made in good faith and was not implemented to purposely force certain employees out of their employment. It
also claimed that a close perusal of the job descriptions of both the CDS and ADM positions would show that the two
(2) were very different in terms of the nature of their functions, areas of concerns, responsibilities and qualifications.4

On 18 June 1997, Labor Arbiter Romulus S. Protacio dismissed the complaint for lack of merit. Furthermore, he ruled
that the one (1)-month written notice prior to termination required by Art. 283 was complied with.

On appeal, the National Labor Relations Commission (NLRC) affirmed the ruling of the Labor Arbiter. However, in its
Decision5 dated 5 March 1999 it found that the Establishment Termination Report was submitted to the DOLE only on
5 April 1995 or two "(2) months after the termination had already taken place6 and thus effectively reversing the finding
of the Labor Arbiter that the required one (1)-month notice prior to termination was complied with. Nonetheless, the
NLRC dismissed the appeal, citing International Hardware, Inc. v. NLRC,7 which held -

x x x x if an employee consented to his retrenchment or voluntarily applied for retrenchment with the employer
due to the installation of labor-saving devices, redundancy, closure or cessation of operation or to prevent
financial losses to the business of the employer, the required previous notice to the DOLE is not necessary
as the employee thereby acknowledged the existence of a valid cause for termination of his employment x x
x x (italics supplied).

On 10 September 1999, petitioners filed a special civil action for certiorari with the Court of Appeals.8 The Court of
Appeals in the assailed Resolution dismissed the petition outright for failure to comply with a number of requirements
mandated by Sec. 3, Rule 46, in relation to Sec. 1, Rule 65, of the 1997 Rules of Civil Procedure. Respondent appellate
court found that the verification and certification against forum shopping were executed merely by petitioners' counsel
and not by petitioners. The petition also failed to specify the dates of receipt of the NLRC Decision as well as the filing
of the motion for reconsideration.9 Under the aforecited Rules, failure of petitioners to comply with any of the
requirements was sufficient ground for the dismissal of the petition.

Petitioners now present the sole issue of whether there was failure to comply with the requirements of the Rules in
filing their petition for certiorari.

We find no manifest error on the part of the Court of Appeals; hence we affirm.

It is true that insofar as verification is concerned, we have held that there is substantial compliance if the same is
executed by an attorney it being presumed that facts alleged by him are true to his knowledge and belief. 10However
the same does not apply as regards the requirement of a certification against forum shopping. Section 3, Rule 46 of
the 1997 Rules of Civil Procedure explicitly requires -

x x x x The petitioner shall also submit together with the petition a sworn certification that he has not theretofore
commenced any other action involving the same issues in the Supreme Court, the Court of Appeals or different
divisions thereof, or any other tribunal or agency; if there is such other action or proceeding he must state the
status of the same; and if he should thereafter learn that a similar action or proceeding has been filed or is
pending before the Supreme Court, the Court of Appeals, or different divisions thereof, or any other tribunal
or agency, he undertakes to promptly inform the aforesaid courts and other tribunal or agency thereof within
five (5) days therefrom x x x x

It is clear from the above-quoted provision that the certification must be made by petitioner himself and not by
counsel since it is petitioner who is in the best position to know whether he has previously commenced any similar
action involving the same issues in any other tribunal or agency.11

Petitioners argue that while it may be true that they are in the best position to know whether they have commenced
an action or not this information may be divulged to their attorney and there is nothing anomalous or bizarre about
this disclosure.12 They further maintain that they executed a Special Power of Attorney specifically to authorize their
counsel to execute the certification on their behalf.

We are aware of our ruling in BA Savings Bank v. Sia13 that a certification against forum shopping may be signed by
an authorized lawyers who has personal knowledge of the facts required to be disclosed in such document.
However, BA Savings Bank must be distinguished from the case at bar because in the former, the complainant was
a corporation, and hence, a juridical person. Therefore, that case made an exception to the general rule that the
certification must be made by the petitioner himself since a corporation can only act through natural persons. In fact,
physical actions, e.g., signing and delivery of documents, may be performed on behalf of the corporate entity only by
specifically authorized individuals. In the instant case, petitioners, are all natural persons and there is no showing of
any reasonable cause to justify their failure to personally sign the certification.14 It is noteworthy that PEPSI in its
Comment stated that it was petitioners themselves who executed the verification and certification requirements in all
their previous pleadings. Counsel for petitioners argues that as a matter of policy, a Special Power of Attorney is
executed to promptly and effectively meet any contingency relative to the handling of a case. This argument only
weakens their position since it is clear that at the outset no justifiable reason yet existed for counsel to substitute
petitioners in signing the certification. In fact, in the case of natural persons, this policy serves no legal purpose.
Convenience cannot be made the basis for a circumvention of the Rules.

Neither are we convinced that the out-right dismissal of the petition would defeat the administration of justice.
Petitioners argue that there are very important issues such as their livelihood and the well being and future of their
families.15 Every petition filed with a judicial tribunal is sure to affect, even tangentially, either the well being and future
of petitioner himself or that of his family. Unfortunately, this does not warrant disregarding the Rules.

Moreover, the petition failed to indicate the material dates that would show the timeliness of the filing thereof with the
Court of Appeals. There are three (3) essential dates that must be stated in a petition for certiorari brought under Rule
65. First, the date when notice of the judgment or final order or Resolution was received; second, when a motion for
new trial or reconsideration was filed; and third, when notice of the denial thereof was received. Petitioners failed to
show the first and second dates, namely, the date of receipt of the impugned NLRC Decision as well as the date of
filing of their motion for reconsideration. Petitioners counter by stating that in the body of the petition for certiorari filed
in the Court of Appeals, it was explicitly stated that the, NLRC Resolution dated 11 May 1999 was received by
petitioners through counsel on 30 July 1999. They even reiterate this contention in their Reply.

The requirement of setting forth the, three(3) dates in a petition for certiorari under Rule 65 is for the purpose of
determining its timeliness. Such a petition is required to be filed not later than sixty (60) days from notice of the
judgment, order or Resolution sought to be assailed.16 Therefore, that the petition for certiorari was filed forty-one (41)
days from receipt of the denial of the motion for reconsideration is hardly relevant. The Court of Appeals was not in
any position to determine when this period commenced to run and whether the motion for reconsideration itself was
filed on time since the material dates were not stated. It should not be assumed that in no event would the motion be
filed later than fifteen (15) days. Technical rules of procedure are not designed to frustrate the ends of justice. These
are provided to effect the proper and orderly disposition of cases and thus effectively prevent the clogging of court
dockets. Utter disregard of the Rules cannot justly be rationalized by harking on the policy of liberal construction. 17

But even if these procedural lapses are dispensed with, the instant petition, on the merits, must still fail. Petitioners
impute grave abuse of discretion on the part of the NLRC for holding that the CDS and ADM positions were dissimilar,
and for concluding that the redundancy program of PEPSI was undertaken in good faith and that the case
of International Hardware v. NLRC18 was applicable.

This Court is not a trier of facts. The question of whether the duties and responsibilities of the CDS and ADM positions
are similar is a question properly belonging to both the Labor Arbiter and the NLRC. In fact, the NLRC merely affirmed
the finding of the Labor Arbiter on this point and further elaborated on the differences between the two (2). Thus it
ruled -

x x x x We cannot subscribe to the complainants' assertions that the positions have similar job descriptions.
First CDS report to a CD Manager, whereas the ADMs do not report to the CD Manager, leading us to believe
that the organizational setup of the sales department has been changed.

Second, CDS are filed personnel who drive assigned vehicles and deliver stocks to "dealers" who, under the
job description are those who sell and deliver the same stocks to smaller retail outlets in their assigned areas.
The ADMs are not required to drive trucks and they do not physically deliver stocks to wholesale dealers.
Instead, they help "dealers" market the stocks through retail. This conclusion is borne out by the fact (that)
ADMs are tasked to ensure that the stocks are displayed in the best possible locations in the dealer's store,
that they have more shelf space and that dealers participate in promotional activities in order to sell more
products.

It is clear to us that while CDS are required to physically deliver, sell and collect payments for softdrinks, they
do so not primarily to retail outlets but to wholesale dealers who have retail customers of their own. They are
not required to assist the dealers they deliver to in selling the softdrinks more effectively whereas ADMs sell
softdrinks to big retail outlets (groceries and malls who have shelves and display cases and who require
coolers and other paraphernalia). They do not only sell but they have to effectively market the products or put
them in the best and most advantageous light so that the dealers who sell the softdrinks retails can sell more
softdrinks. The main thrust of the ADMs job is to ensure that the softdrinks products ordered from them are
marketed in a certain manner ("Pepsi-Way standards") in keeping with the promotional thrust of the company.

Factual findings of the NLRC, particularly when they coincide with those of the Labor Arbiter, are accorded respect,
even finality, and will not be disturbed for as long as such findings are supported by substantial evidence,19 defined
as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.20 In this case,
there is no doubt that the findings of the NLRC are supported by substantial evidence. The job descriptions submitted
by PEPSI are replete with information and is an adequate basis to compare and contrast the two (2) positions.

Therefore, the two (2) positions being different, it follows that the redundancy program instituted by PEPSI was
undertaken in good faith. Petitioners have not established that the title Account Development Manager was created
in order to maliciously terminate their employment. Nor have they shown that PEPSI had any ill motive against them.
It is therefore apparent that the restructuring and streamlining of PEPSI's distribution and sales systems were an
honest effort to make the company more efficient.

Redundancy exists when the service capability of the work force is in excess of what is reasonably needed to meet
the demands of the enterprise.21 A redundant position is one rendered superfluous by a number of factors, such as
overhiring of workers, decreased volume of business, dropping of a particular product line previously manufactured
by the company or phasing out of a service previously undertaken by the business.22

Based on the fact that PEPSI's Metro Manila Sales Operations were not meeting its sales targets, 23 and on the fact
that new positions were subsequently created, it is evident that PEPSI wanted to restructure its organization in order
to include more complex positions that would either absorb or render completely unnecessary the positions it had
previously declared redundant. The soundness of this business judgment of PEPSI has been assailed by petitioners,
arguing that it is more logical to implement new procedures in physical distribution, sales quotas, and other policies
aimed at improving the performance of the division rather than to reduce the number of employees and create new
positions.24
This argument cannot be accepted. While it is true that management may not, under the guise of invoking its
prerogative, ease out employees and defeat their constitutional right to security of tenure, the same must be respected
if clearly undertaken in good faith and if no arbitrary or malicious action is shown.

Similarly, in Wiltshire File Co., Inc. v. NLRC25 petitioner company effected some changes in its organization by
abolishing the position of Sales Manager and simply adding the duties previously discharged by it to the duties of the
General Manager to whom the Sales Manager used to report. In that case, we held that the characterization of private
respondent's services as no longer necessary or sustainable, and therefore properly terminable, was an exercise of
business judgment on the part of petitioner company. The wisdom or soundness of such characterization or decision
is not subject to discretionary review on the part of the Labor Arbiter or of the NLRC so long as no violation of law or
arbitrary and malicious action is indicated.

In the case at bar, no such violation or arbitrary action was established by petitioners. The subject matter being well
beyond the discretionary review allowed by law, it behooves this Court to steer clear of the realm properly belonging
to the business experts.

We agree with the NLRC in its application of International Hardware v. NLRC that the mandate one (1) month notice
prior to termination given to the worker and the DOLE is rendered unnecessary by the consent of the worker himself.
Petitioners assail the voluntariness of their consent by stating that had they known of PEPSI's bad, faith they would
not have agreed to their termination, nor would they have signed the corresponding releases and quitclaims.26 Having
established private respondent's good faith in undertaking the assailed redundancy program, there is no need to rule
on this contention.

Finally, in a last ditch effort to plead their case, petitioners would want us to believe that their termination was illegal
since PEPSI did not employ fair and reasonable criteria in implementing its redundancy program. This issue was not
raised before the Labor Arbiter nor with the NLRC. As it would be offensive to the basic rules of fair play and justice
to allow a party to raise a question which has not been passed upon by both administrative tribunals,27 it is now too
late to entertain it.1âwphi1.nêt

WHEREFORE, in the absence of any reversible error on the part of the Court of Appeals, the petition is DENIED. The
assailed Resolution dated 28 September 1999 which summarily dismissed petitioner's special civil action for certiorari
for non-compliance with Sec. 13, Rule 46, in relation to Sec. 1, Rule 65, of the 1997 Rules of Civil Procedure
is AFFIRMED.

SO ORDERED.
 THIRD DIVISION

G.R. No. 159354 April 7, 2006

EASTERN SHIPPING LINES, INC., and/or ERWIN L. CHIONGBIAN, Petitioners,

vs.
DIOSCORO D. SEDAN, Respondent.

DECISION

QUISUMBING, J.:

For review on certiorari are the Decision1 and Resolution,2 dated February 14, 2003 and August 7, 2003, respectively,
of the Court of Appeals in CA-G.R. SP No. 70836, which reversed the October 4, 20013 Resolution of the National
Labor Relations Commission affirming the Labor Arbiter’s Decision of June 15, 2000.4

The antecedent facts, as culled from the records, are as follows:

On December 30, 1973, petitioners hired on a per-voyage basis private respondent Dioscoro5 Sedan as 3rd marine
engineer and oiler in one of the vessels owned by petitioners. His last voyage was on July 27, 1997 on board the
vessel M/V Eastern Universe. His monthly pay was P22,000.6 Additionally, after each voyage his earned leave credits
are monetized and paid in cash. He said he was disembarking because he was going to take the board examinations
for marine engineers.

Two months later, on September 27, 1997, Sedan sent a letter to petitioners applying for optional retirement, citing as
reason the death of his only daughter, hence the retirement benefits he would receive would ease his financial burden.
However, petitioners deferred action on his application for optional retirement since his services on board ship were
still needed. Nonetheless, according to petitioners, the company expressed intention to extend him a loan in order to
defray the costs incurred for the burial and funeral expenses of his daughter.

On October 28, 1997, Sedan sent petitioners another letter7 insisting on the release of half of his optional retirement
benefits. Later, he said that he no longer wanted to continue working on board a vessel for reasons of health.8

On December 1, 1997, Sedan sent another letter to petitioners threatening to file a complaint if his application was
not granted. In reply, according to petitioners, the company management sent a telegram on December 9, 1997
informing Sedan that his services were needed on board a vessel and that he should report immediately for work as
there was no available replacement. Sedan claims he did not receive the telegram, nor was this fact proved by the
company before the Labor Arbiter or the NLRC.

Sedan proceeded to file a complaint with the Labor Arbiter against petitioners, docketed as NLRC-NCR CASE NO.
00-12-08578-97, demanding payment of his retirement benefits, leave pay, 13th month pay and attorney’s fees. The
Labor Arbiter ruled in favor of Sedan, as follows:

WHEREFORE, premises all considered, judgment is hereby rendered as follows:

1. Ordering respondents to pay complainant retirement gratuity/separation pay of P253,000.00 (23 yrs. x
P22,000.00 at ½ month for every year of service).

2. Ordering respondents to pay complainant 10% of the total monetary award by way of attorney’s fees.

All other claims are dismissed for lack of merit.

SO ORDERED.9

Petitioners appealed the said decision to the National Labor Relations Commission. However, the NLRC found the
factual findings of the Labor Arbiter consistent with the evidence on record. Hence, the NLRC dismissed the appeal
for lack of merit. Petitioners’ motion for reconsideration was likewise denied.
Dissatisfied, petitioners filed a special civil action for certiorari with the Court of Appeals anchored on the following
grounds:

1. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK

OR EXCESS OF JURISDICTION IN AWARDING RETIREMENT GRATUITY/SEPARATION PAY TO THE
PRIVATE RESPONDENT BY HOLDING THAT THERE WAS NO EVIDENCE TO SHOW THAT PRIVATE
RESPONDENT WAS INFORMED/NOTIFIED OF PETITIONERS’ NEED FOR HIS SERVICES OR
DIRECTING HIM TO REPORT FOR WORK, INCLUDING [ACTION] ON HIS APPLICATION FOR OPTIONAL
RETIREMENT.

2. PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK

OR EXCESS OF JURISDICTION IN AWARDING ATTORNEY’S FEES TO THE PRIVATE RESPONDENT
CONSIDERING THAT PETITIONERS ACTED IN GOOD FAITH IN REFUSING THE SUBJECT CLAIM.10

The Court of Appeals granted the petition and ruled that the retirement gratuity and attorney’s fees awarded by the
Labor Arbiter and the NLRC had no basis in fact or law since pursuant to the Agreement between the company and
the employees, the granting of optional retirement is the exclusive prerogative of the employer, herein petitioners.
Unless such prerogative was exercised arbitrarily or capriciously, private respondent cannot demand it as a right.
Nonetheless, the Court of Appeals ordered petitioners to pay private respondent P200,000 as financial assistance, to
wit:

WHEREFORE, FOREGOING PREMISES CONSIDERED, this petition is GRANTED. The assailed Decision dated
October 4, 2001 and the Resolution dated April 22, 2002 of public respondent National Labor Relations Commission
in NLRC NCR Case No. 00-12-08578-97/NLRC CA No. 026697-00 entitled, "Dioscoro D. Sedan, complainant-
appellee vs. Eastern Shipping Lines, Inc. and/or Erwin L. Chiongbian, respondents-appellants" are
hereby reversedand set aside for having been rendered/issued with grave abuse of discretion amounting to lack or in
excess of jurisdiction and, in lieu thereof, petitioners are hereby ordered to pay respondent Dioscoro D. Sedan the
amount of Two Hundred Thousand (P200,000.00) Pesos as financial assistance.

SO ORDERED.11

Petitioners filed a motion for reconsideration, but it was denied by the Court of Appeals.

Hence, the instant petition raising as sole issue:

WHETHER OR NOT THE COURT OF APPEALS ERRED IN GIVING THE RESPONDENT PHP200,000.00 AS
FINANCIAL ASSISTANCE WHEN IN FACT IT WAS THE RESPONDENT WHO REFUSED TO REPORT FOR
WORK.12

Petitioners contend that by refusing to report for work and insisting on applying for optional retirement, private
respondent wrongly assumed that he was justified in abandoning his job. Petitioners maintain that private respondent’s
refusal to report back to work, despite being duly notified of the need for his service, is tantamount to voluntary
resignation. Therefore, petitioners contend, the respondent should not be entitled to any financial assistance.

Moreover, granting arguendo that private respondent was entitled to financial assistance, petitioners protest the
amount of the financial assistance awarded by the Court of Appeals for being disproportionately excessive. Petitioners
cite Manggagawa ng Komunikasyon sa Pilipinas v. NLRC,13 where the employee was given only P10,000 as financial
assistance.

In his Comment, private respondent argues that the Court of Appeals awarded him P200,000 for equity consideration.
Private respondent claims that the retirement policy of the company, which states that "[i]t will be the exclusive
prerogative and sole option of this company to retire any covered employee,"14 must be interpreted in favor of the
working class. Otherwise, private respondent laments, he will be placed at the mercy of the company, contrary to the
constitutional mandate to afford full protection to labor.

At the outset, we rule for petitioners on the matter of optional retirement benefits.

Private respondent is not entitled to retirement benefits. The pertinent law governing retirement is found in the Labor
Code, which provides:

ART. 287. Retirement. – Any employee may be retired upon reaching the retirement age established in the collective
bargaining agreement or other applicable employment contract.

In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under
existing laws and any collective bargaining agreement and other agreements: Provided, however, That an employee’s
retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein.

In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment,
an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby
declared the compulsory retirement age, who has served at least five (5) years in the said establishment may retire
and shall be entitled to retirement pay equivalent to at least one half (1/2) month salary for every year of service, a
fraction of at least six (6) months being considered as one whole year.

xxx

The age of retirement is primarily determined by the existing agreement between the employer and the employees.
However, in the absence of such agreement, the retirement age shall be fixed by law. Under the aforecited article of
the Labor Code, the legally mandated age for compulsory retirement is 65 years, while the set minimum age for
optional retirement is 60 years.

In the instant case, there is an agreement15 between petitioner shipping company and its employees. The agreement
states:

xxx

B. Retirement under the Labor Code:

Any employee whether land-based office personnel or shipboard employee who shall reach the age of sixty (60) while
in active employment with this company may retire from the service upon his written request in accordance with the
provisions of Art. 277 of the Labor Code and its Implementing Rules, Book 6, Rule 1, Sec. 13 and he shall be paid
termination pay equivalent to fifteen (15) days pay for every year of service as stated in said Labor Code and its
Implementing Rules. However, the company may at its own volition grant him a higher benefit which shall not exceed
the benefits provided for in the Retirement Gratuity table mentioned elsewhere in this policy.

C. Optional Retirement:

It will be the exclusive prerogative and sole option of this company to retire any covered employee who shall have
rendered at least fifteen (15) years of credited service for land based employees and 3,650 days actually on board
vessel for shipboard personnel. Such employee shall be entitled to a Retirement Gratuity which shall be computed in
accordance with the following table:

Monthly Basic Pay

Years of Service
(Percentage)
15 years 55%
16 years 56%
17 years 57%
18 years 58%
19 years 59%
20 years 60%
21 years 63%
22 years 66%
23 years 69%
24 years 72%
25 years 75%
26 years 80%
27 years 85%
28 years 90%
29 years 95%
30 years or above 100%

The computation of the benefit shall be based on the final basic pay, for every year of credited service, a fraction of
at least six (6) months being considered as one whole year but shall be exclusive of fringe benefits and other special
emoluments.16

xxx

Clearly, the eligibility age for optional retirement is set at 60 years.17 However, employees of herein petitioners who
are under the age of 60 years, but have rendered at least 3650 days (10 years) on board ship or fifteen (15) years of
service for land-based employees may also avail of optional retirement, subject to the exclusive prerogative and sole
option of petitioner company.18

Records show that private respondent was only 48 years old19 when he applied for optional retirement. Thus he cannot
claim optional retirement benefits as a matter of right. His application for optional retirement was subject to the
exclusive prerogative and sole option of the shipping company pursuant to the abovecited agreement between the
workers and the company. In this regard, no error was committed by the appellate court when it set aside the ruling
of the Labor Arbiter and the NLRC granting herein private respondent P253,000 retirement gratuity/separation pay.
So now we come to the grant of financial assistance by the appellate court. We are not unmindful of the rule that
financial assistance is allowed only in instances where the employee is validly dismissed for causes other than serious
misconduct or those reflecting on his moral character.20 Neither are we unmindful of this Court’s pronouncements
in Arc- Corporation v. NLRC,21 Lemery Savings and Loan Bank v. NLRC,22 where the Court ruled that when there is
no dismissal to speak of, an award of financial assistance is not in order.

But we must stress that this Court did allow, in several instances, the grant of financial assistance. 23 In the words of
Justice Sabino de Leon, Jr., now deceased, financial assistance may be allowed as a measure of social justice and
exceptional circumstances, and as an equitable concession.24 The instant case equally calls for balancing the interests
of the employer with those of the worker, if only to approximate what Justice Laurel calls justice in its secular sense.25

In this instance, our attention has been called to the following circumstances: that private respondent joined the
company when he was a young man of 25 years and stayed on until he was 48 years old; that he had given to the
company the best years of his youth, working on board ship for almost 24 years; that in those years there was not a
single report of him transgressing any of the company rules and regulations; that he applied for optional retirement
under the company’s non-contributory plan when his daughter died and for his own health reasons; and that it would
appear that he had served the company well, since even the company said that the reason it refused his application
for optional retirement was that it still needed his services; that he denies receiving the telegram asking him to report
back to work; but that considering his age and health, he preferred to stay home rather than risk further working in a
ship at sea.

In our view, with these special circumstances, we can call upon the same "social and compassionate justice" cited in
several cases26 allowing financial assistance. These circumstances indubitably merit equitable concessions, via the
principle of "compassionate justice" for the working class. Thus, we agree with the Court of Appeals to grant financial
assistance to private respondent. The only catch is whether, as the shipping company alleges, the amount
of P200,000 that the Court of Appeals granted him is "arbitrary and excessive".

The propriety of awarding financial assistance has long been tackled by this Court. In Philippine Long Distance
Telephone Co. v. NLRC,27 we laid down the rule that henceforth separation pay shall be allowed as a measure of
social justice only in the instances where the employee is validly dismissed for causes other than serious misconduct
or those reflecting on his moral character. A contrary rule, we said would have the effect of rewarding rather than
punishing an erring employee.

Subsequent to PLDT, in the 2004 case of Piñero v. NLRC,28 Piñero who was dismissed for an illegal strike was
granted one-half (½) month’s pay for the 29 years of his service. His infraction was deemed not so reprehensible nor
unscrupulous as to warrant complete disregard of his long years of service with no derogatory record. In Aparente,
Sr. v. NLRC,29 for blatant disobedience of company rules, one-half (½) month’s pay for every year of service was also
deemed equitable. In the 1998 case of Salavarria v. NLRC,30 for the teacher who had previously been meted with a
two week suspension for the same offense, illegally soliciting contributions from students, the Court granted one
month’s salary for every year of service because, said the Court, she never took custody of the illegally solicited funds.

Considering the doctrine in the abovecited NLRC cases and taking into account equitable results in those cases, we
find the grant of two hundred thousand pesos (P200,000) by the Court of Appeals, neither arbitrary nor excessive.
Private respondent who has no derogatory record in his 23 years of service should be granted equitable assistance
equal to one-half month’s pay for each of his 23 years of service.1avvphil.net

To conclude, in the instant case, private respondent has no claim against petitioners for retirement benefits. We agree
with the appellate court, however, that financial assistance could be awarded him but only as an equitable concession
under the special circumstances of this case.

WHEREFORE, the petition is DENIED. The decision of the Court of Appeals granting assistance to private respondent
in the amount of two hundred thousand pesos (P200,000) is AFFIRMED. No pronouncement as to cost.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 80587 February 8, 1989

WENPHIL CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION AND ROBERTO MALLARE, respondents.

Renato B. Valdecantos & Associates for petitioner.

The Solicitor General for public respondent.

Diego O. Untalan for private respondent.

GANCAYCO, J.:

Once again the dismissal of an employee without affording him due process is brought to the attention of this Court
by this petition.

Private respondent was hired by petitioner on January 18, 1984 as a crew member at its Cubao Branch. He thereafter
became the assistant head of the Backroom department of the same branch. At about 2:30 P.M. on May 20, 1985
private respondent had an altercation with a co-employee, Job Barrameda, as a result of which he and Barrameda
were suspended on the following morning and in the afternoon of the same day a memorandum was issued by the
Operations Manager advising private respondent of his dismissal from the service in accordance with their Personnel
Manual. The notice of dismissal was served on private respondent on May 25, 1985.

Thus private respondent filed a complaint against petitioner for unfair labor practice, illegal suspension and illegal
dismissal. After submitting their respective position papers to the Labor Arbiter and as the hearing could not be
conducted due to repeated absence of counsel for respondent, the case was submitted for resolution. Thereafter a
decision was rendered by the Labor Arbiter on December 3, 1986 dismissing the complaint for lack of merit.

Private respondent appealed to the National Labor Relations Commission (NLRC) wherein in due course a decision
was rendered on October 16, 1987 setting aside the appealed decision and ordering the reinstatement of private
respondent to his former position without loss of seniority and other related benefits and one (1) year backwages
without qualification and deduction.

Hence the herein petition for certiorari with preliminary injunction and/or restraining order wherein petitioner alleges
that the public respondent NLRC committed a grave abuse of discretion in rendering its decision contrary to the
evidence on record.

On December 2, 1987, the court issued a restraining order as prayed for in the petition enjoining the enforcement of
the decision dated October 16, 1987 of public respondent NLRC upon petitioner posting a bond of P20,000.00.

The theory of the petitioner is that on the aforesaid date, May 20, 1985, when private respondent and Barrameda had
a misunderstanding about tending the Salad Bar, private respondent slapped Barrameda's cap, stepped on his foot
and picked up the ice scooper and brandished it against the latter. Marijo B. Kolimlim who was a management trainee
tried to pacify private respondent but he defied her so Kolimlim reported the incident to the assistant manager, Delilah
C. Hermosura, who immediately asked private respondent to see her. Private respondent refused to see Hermosura
and it took the security guard to bring him to her. Private respondent then shouted and uttered profane words instead
of making an explanation before her. He stated the matter should be settled only by him and Barrameda. The following
day Kolimlim and Hermosura submitted a report on the incident and recommended the imposition of the appropriate
penalties on both. It was the store manager who issued a report meting out the penalty of suspension on the two until
further notice in the following morning. Later that day the Operations Manager issued a memorandum advising
Barrameda of one (1) week suspension and the dismissal of private respondent from the service.

The main thrust of the petition is that under the Personnel Manual of petitioner which had been read and understood
by private respondent, private respondent waived his right to the investigation. It is provided therein that -

INVESTIGATION

If the offense is punishable with a penalty higher than suspension for fifteen (15) days, upon the
request of the erring employee, there shall be convened an investigation board composed of the
following
 1. The Parlor Manager or Supervisor on duty when the incident occurred.

2. The General Manager or the Assistant Manager.

The investigation board shall discuss the merits of the case and shall issue a ruling, which shall be
final and conclusive. (p. 3, Personnel Manual: Emphasis supplied).

From the foregoing it appears that an investigation shall only be conducted if the offense committed by the employee
is punishable with the penalty higher than suspension of fifteen (15) days and the erring employee requests for an
investigation of the incident. Petitioner alleges that private respondent not having asked for an investigation he is thus
deemed to have waived his right to the same. Petitioner avers that immediately after the incident when private
respondent was asked to see Hermosura, he was defiant and showed that he was not interested to avail of an
investigation.

The contention of petitioner is untenable. The incident happened on May 20, 1985 and right then and there as afore
repeated on the following day private respondent was suspended in the morning and was dismissed from the service
in the afternoon. He received an official notice of his termination four (4) days later.

The defiant attitude of private respondent immediately after the incident amounted to insubordination. Nevertheless
his refusal to explain his side under the circumstances cannot be considered as a waiver of his right to an investigation.

Although in the Personnel Manual of the petitioner, it states that an erring employee must request for an investigation
it does not thereby mean that petitioner is thereby relieved of the duty to conduct an investigation before dismissing
private respondent. Indeed said provision of the Personnel Manual of petitioner which may effectively deprive its
employees of the right to due process is clearly against the law and hence null and void. The security of tenure of a
laborer or employee is enshrined in the Constitution, the Labor Code and other related laws. 1

Under Section 1, Rule XIV of the Implementing Regulations of the Labor Code, it is provided that "No worker shall be
dismissed except for just or authorized cause provided by law and after due process." Sections 2, 5, 6, and 7 of the
same rules require that before an employer may dismiss an employee the latter must be given a written notice stating
the particular act or omission constituting the grounds thereof; that the employee may answer the allegations within a
reasonable period; that the employer shall afford him ample opportunity to be heard and to defend himself with the
assistance of his representative, if he so desires; and that it is only then that the employer may dismiss the employee
by notifying him of the decision in writing stating clearly the reasons therefor. Such dismissal is without prejudice to
the right of the employee to contest its validity in the Regional Branch of the NLRC.

Petitioner insists that private respondent was afforded due process but he refused to avail of his right to the same;
that when the matter was brought to the labor arbiter he was able to submit his position papers although the hearing
cannot proceed due to the non-appearance of his counsel; and that the private respondent is guilty of serious
misconduct in threatening or coercing a co-employee which is a ground for dismissal under Article 283 of the Labor
Code.

The failure of petitioner to give private respondent the benefit of a hearing before he was dismissed constitutes an
infringement of his constitutional right to due process of law and equal protection of the laws. 2 The standards of due
process in judicial as well as administrative proceedings have long been established. In its bare minimum due process
of law simply means giving notice and opportunity to be heard before judgment is rendered. 3

The claim of petitioner that a formal investigation was not necessary because the incident which gave rise to the
termination of private respondent was witnessed by his co- employees and supervisors is without merit. The basic
requirement of due process is that which hears before it condemns, which proceeds upon inquiry and renders
judgment only after trial. 4

However, it is a matter of fact that when the private respondent filed a complaint against petitioner he was afforded
the right to an investigation by the labor arbiter. He presented his position paper as did the petitioner. If no hearing
was had, it was the fault of private respondent as his counsel failed to appear at the scheduled hearings. The labor
arbiter concluded that the dismissal of private respondent was for just cause. He was found guilty of grave misconduct
and insubordination. This is borne by the sworn statements of witnesses. The Court is bound by this finding of the
labor arbiter.

By the same token, the conclusion of the public respondent NLRC on appeal that private respondent was not afforded
due process before he was dismissed is binding on this Court. Indeed, it is well taken and supported by the records.
However, it can not justify a ruling that private respondent should be reinstated with back wages as the public
respondent NLRC so decreed. Although belatedly, private respondent was afforded due process before the labor
arbiter wherein the just cause of his dismissal bad been established. With such finding, it would be arbitrary and unfair
to order his reinstatement with back wages.

The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of seniority
and the payment of his wages during the period of his separation until his actual reinstatement but not exceeding
three (3) years without qualification or deduction, when it appears he was not afforded due process, although his
dismissal was found to be for just and authorized cause in an appropriate proceeding in the Ministry of Labor and
Employment, should be re-examined. It will be highly prejudicial to the interests of the employer to impose on him the
services of an employee who has been shown to be guilty of the charges that warranted his dismissal from
employment. Indeed, it will demoralize the rank and file if the undeserving, if not undesirable, remains in the service.

Thus in the present case, where the private respondent, who appears to be of violent temper, caused trouble during
office hours and even defied his superiors as they tried to pacify him, should not be rewarded with re-employment and
back wages. It may encourage him to do even worse and will render a mockery of the rules of discipline that employees
are required to observe. Under the circumstances the dismissal of the private respondent for just cause should be
maintained. He has no right to return to his former employer.

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. 5 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.

WHEREFORE, the petition is GRANTED. The questioned decision of the public respondent NLRC dated October 16,
1987 for the reinstatement with back wages of private respondent is REVERSED AND SET ASIDE, and the decision
of the labor arbiter dated December 3, 1986 dismissing the complaint is revived and affirmed, but with the modification
that petitioner is ordered to indemnify private respondent in the amount of P1,000.00. The restraining order issued by
this Court on December 2, 1987 is hereby made permanent and the bond posted by petitioner is cancelled. This
decision is immediately executory.

SO ORDERED.
 EN BANC

G.R. No. 158693 November 17, 2004

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,

vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE
ANGELES, respondents.

DECISION

YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision1 of the Court of Appeals dated January 23, 2003, in CA-G.R. SP
No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-
00.

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, 19922 until February 23, 1999 when they were dismissed for abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money claims3 and on December 28, 1999, the
Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the monetary
claims. The dispositive portion of the decision states:

WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly,
respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of:

1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93

and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from
date of hiring up to November 29, 1999.

Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for
the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio Agabon's
13th month pay differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or
the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT &
93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT
HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation
of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR.

SO ORDERED.4

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.5

Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals.

The Court of Appeals 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. The dispositive portion of the decision reads:

WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it
dismissed petitioner's money claims. Private respondents are ordered to pay petitioners holiday pay for four
(4) regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said years, and
to pay the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the amount of P2,150.00.
 SO ORDERED.6

Hence, this petition for review on the sole issue of whether petitioners were illegally dismissed.7

Petitioners assert that they were dismissed because the private respondent refused to give them assignments unless
they agreed to work on a "pakyaw" basis when they reported for duty on February 23, 1999. They did not agree on
this arrangement because it would mean losing benefits as Social Security System (SSS) members. Petitioners also
claim that private respondent did not comply with the twin requirements of notice and hearing.8

Private respondent, on the other hand, maintained that petitioners were not dismissed but had abandoned their
work.9 In fact, private respondent sent two letters to the last known addresses of the petitioners advising them to report
for work. Private respondent's manager even talked to petitioner Virgilio Agabon by telephone sometime in June 1999
to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice installation
work. However, petitioners did not report for work because they had subcontracted to perform installation work for
another company. Petitioners also demanded for an increase in their wage to P280.00 per day. When this was not
granted, petitioners stopped reporting for work and filed the illegal dismissal case.10

It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but even
finality if the findings are supported by substantial evidence. This is especially so when such findings were affirmed
by the Court of Appeals.11 However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this
case, the reviewing court may delve into the records and examine for itself the questioned findings.12

Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal was for a just
cause. They had abandoned their employment and were already working for another employer.

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.13 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.14 It is a form of
neglect of duty, hence, a just cause for termination of employment by the employer. 15 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.16

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.17

In Sandoval Shipyard v. Clave,18 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 conduct19 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.21 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.25

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 10.27 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,28 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,29 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, albeitwithout
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,30 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.31

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.32 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.33

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.35

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.36 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.37

As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 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.39

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.40 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.

Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners' holiday pay, service
incentive leave pay and 13th month pay.

We are not persuaded.

We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for petitioners'
holiday pay, service incentive leave pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege non-
payment, the general rule is that the burden rests on the employer to prove payment, rather than on the employee to
prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and
other similar documents – which will show that overtime, differentials, service incentive leave and other claims of
workers have been paid – are not in the possession of the worker but in the custody and absolute control of the
employer.41

In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave pay, it could
have easily presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it
did not, except with respect to the 13th month pay wherein it presented cash vouchers showing payments of the
benefit in the years disputed.42 Allegations by private respondent that it does not operate during holidays and that it
allows its employees 10 days leave with pay, other than being self-serving, do not constitute proof of payment.
Consequently, it failed to discharge the onus probandi thereby making it liable for such claims to the petitioners.

Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay, we find
the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional income in
the form of the 13th month pay to employees not already receiving the same43 so as "to further protect the level of real
wages from the ravages of world-wide inflation."44 Clearly, as additional income, the 13th month pay is included in the
definition of wage under Article 97(f) of the Labor Code, to wit:

(f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of
being expressed in terms of money whether fixed or ascertained on a time, task, piece , or commission basis,
or other method of calculating the same, which is payable by an employer to an employee under a written or
unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and
includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other
facilities customarily furnished by the employer to the employee…"

from which an employer is prohibited under Article 11345 of the same Code from making any deductions without the
employee's knowledge and consent. In the instant case, private respondent failed to show that the deduction of the
SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay was authorized by the latter.
The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as one
of his money claims against private respondent.

The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the private
respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of
P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio
Agabon's thirteenth month pay for 1998 in the amount of P2,150.00.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated January
23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and Virgilio Agabon abandoned their work, and
ordering private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in
the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance
of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 is AFFIRMED with
the MODIFICATION that private respondent Riviera Home Improvements, Inc. is further ORDERED to pay each of
the petitioners the amount of P30,000.00 as nominal damages for non-compliance with statutory due process.

No costs.

SO ORDERED.
 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 82511 March 3, 1992

GLOBE-MACKAY CABLE AND RADIO CORPORATION, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and IMELDA SALAZAR, respondents.

Castillo, Laman, Tan & Pantaleon for petitioner.

Gerardo S. Alansalon for private respondent.

ROMERO, J.:

For private respondent Imelda L. Salazar, it would seem that her close association with Delfin Saldivar would mean
the loss of her job. In May 1982, private respondent was employed by Globe-Mackay Cable and Radio Corporation
(GMCR) as general systems analyst. Also employed by petitioner as manager for technical operations' support was
Delfin Saldivar with whom private respondent was allegedly very close.

Sometime in 1984, petitioner GMCR, prompted by reports that company equipment and spare parts worth thousands
of dollars under the custody of Saldivar were missing, caused the investigation of the latter's activities. The report
dated September 25, 1984 prepared by the company's internal auditor, Mr. Agustin Maramara, indicated that Saldivar
had entered into a partnership styled Concave Commercial and Industrial Company with Richard A. Yambao, owner
and manager of Elecon Engineering Services (Elecon), a supplier of petitioner often recommended by Saldivar. The
report also disclosed that Saldivar had taken petitioner's missing Fedders airconditioning unit for his own personal
use without authorization and also connived with Yambao to defraud petitioner of its property. The airconditioner was
recovered only after petitioner GMCR filed an action for replevin against Saldivar.1

It likewise appeared in the course of Maramara's investigation that Imelda Salazar violated company reglations by
involving herself in transactions conflicting with the company's interests. Evidence showed that she signed as a
witness to the articles of partnership between Yambao and Saldivar. It also appeared that she had full knowledge of
the loss and whereabouts of the Fedders airconditioner but failed to inform her employer.

Consequently, in a letter dated October 8, 1984, petitioner company placed private respondent Salazar under
preventive suspension for one (1) month, effective October 9, 1984, thus giving her thirty (30) days within which to,
explain her side. But instead of submitting an explanations three (3) days later or on October 12, 1984 private
respondent filed a complaint against petitioner for illegal suspension, which she subsequently amended to include
illegal dismissal, vacation and sick leave benefits, 13th month pay and damages, after petitioner notified her in writing
that effective November 8, 1984, she was considered dismissed "in view of (her) inability to refute and disprove these
findings. 2

After due hearing, the Labor Arbiter in a decision dated July 16, 1985, ordered petitioner company to reinstate private
respondent to her former or equivalent position and to pay her full backwages and other benefits she would have
received were it not for the illegal dismissal. Petitioner was also ordered to pay private respondent moral damages of
P50,000.00. 3

On appeal, public respondent National Labor Relations, Commission in the questioned resolution dated December
29, 1987 affirmed the aforesaid decision with respect to the reinstatement of private respondent but limited the
backwages to a period of two (2) years and deleted the award for moral damages. 4

Hence, this petition assailing the Labor Tribunal for having committed grave abuse of discretion in holding that the
suspension and subsequent dismissal of private respondent were illegal and in ordering her reinstatement with two
(2) years' backwages.

On the matter of preventive suspension, we find for petitioner GMCR.

The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's acts in conflict with his position as
technical operations manager, necessitated immediate and decisive action on any employee closely, associated with
Saldivar. The suspension of Salazar was further impelled by th.e discovery of the missing Fedders airconditioning unit
inside the apartment private respondent shared with Saldivar. Under such circumstances, preventive suspension was
the proper remedial recourse available to the company pending Salazar's investigation. By itself, preventive
suspension does, not signify that the company has adjudged the employee guilty of the charges she was asked to
answer and explain. Such disciplinary measure is resorted to for the protection of the company's property pending
investigation any alleged malfeasance or misfeasance committed by the employee.5

Thus, it is not correct to conclude that petitioner GMCR had violated Salazar's right to due process when she was
promptly suspended. If at all, the fault, lay with private respondent when she ignored petitioner's memorandum of
October 8, 1984 "giving her ample opportunity to present (her) side to the Management." Instead, she went directly to
the Labor Department and filed her complaint for illegal suspension without giving her employer a chance to evaluate
her side of the controversy.

But while we agree with the propriety of Salazar's preventive suspension, we hold that her eventual separation from
employment was not for cause.

What is the remedy in law to rectify an unlawful dismissal so as to "make whole" the victim who has not merely lost
her job which, under settled Jurisprudence, is a property right of which a person is not to be deprived without due
process, but also the compensation that should have accrued to her during the period when she was unemployed?

Art. 279 of the Labor Code, as amended, provides:

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. 6 (Emphasis supplied)

Corollary thereto are the following provisions of the Implementing Rules and Regulations of the Labor Code:

Sec. 2. Security of Tenure. — In cases of regular employments, the employer shall not terminate the
services of an employee except for a just cause as provided in the Labor Code or when authorized by
existing laws.

Sec. 3. Reinstatement. — An employee who is unjustly dismissed from work shall by entitled to
reinstatement without loss of seniority rights and to backwages."7 (Emphasis supplied)

Before proceeding any furthers, it needs must be recalled that the present Constitution has gone further than the 1973
Charter in guaranteeing vital social and economic rights to marginalized groups of society, including labor. Given the
pro-poor orientation of several articulate Commissioners of the Constitutional Commission of 1986, it was not
surprising that a whole new Article emerged on Social Justice and Human Rights designed, among other things, to
"protect and enhance the right of all the people to human dignity, reduce social, economic and political inequalities,
and remove cultural inequities by equitably diffusing wealth and political power for the common good." 8 Proof of the
priority accorded to labor is that it leads the other areas of concern in the Article on Social Justice, viz., Labor ranks
ahead of such topics as Agrarian and Natural Resources Reform, Urban Land Roform and Housing, Health, Women,
Role and Rights of Poople's Organizations and Human Rights.9

The opening paragraphs on Labor states

The State shall afford full protection to labor, local and overseas, organized and unorganized, and
promote full employment and equality of employment opportunities for all.

It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate
in policy and decision-making processes affecting their rights and benefits is may be provided by
law.10(Emphasis supplied)

Compare this with the sole.provision on Labor in the 1973 Constitution under the Article an Declaration of Principles
and State Policies that provides:

Sec. 9. The state shall afford protection to labor, promote full employment and equality in employment,
ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between
workers and employers. The State shall ensure the rights of workers to self-organization, collective
baegaining, security of tenure, and just and humane conditions of work. The State may provide for
compulsory arbitration. 11

To be sure, both Charters recognize "security of tenure" as one of the rights of labor which the State is mandated to
protect. But there is no gainsaying the fact that the intent of the framers of the present Constitution was to give primacy
to the rights of labor and afford the sector "full protection," at least greater protection than heretofore accorded them,
regardless of the geographical location of the workers and whether they are organized or not.

It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who substantially contributed to the present
formulation of the protection to labor provision and proposed that the same be incorporated in the Article on Social
Justice and not just in the Article on Declaration of Principles and State Policies "in the light of the special importance
that we are giving now to social justice and the necessity of emphasizing the scope and role of social justice in national
development." 12

If we have taken pains to delve into the background of the labor provisions in our Constitution and the Labor Code, it
is but to stress that the right of an employee not to be dismissed from his job except for a just or authorized cause
provided by law has assumed greater importance under the 1987 Constitution with the singular prominence labor
enjoys under the article on Social Justice. And this transcendent policy has been translated into law in the Labor Code.
Under its terms, where a case of unlawful or unauthorized dismissal has been proved by the aggrieved employee, or
on the other hand, the employer whose duty it is to prove the lawfulness or justness of his act of dismissal has failed
to do so, then the remedies provided in Article 279 should find, application. Consonant with this liberalized stance vis-
a-vis labor, the legislature even went further by enacting Republic Act No. 6715 which took effect on March 2, 1989
that amended said Article to remove any possible ambiguity that jurisprudence may have generated which watered
down the constitutional intent to grant to labor "full protection." 13

To go back to the instant case, there being no evidence to show an authorized, much less a legal, cause for the
dismissal of private respondent, she had every right, not only to be entitled to reinstatement, but ay well, to full
backwages." 14

The intendment of the law in prescribing the twin remedies of reinstatement and payment of backwages is, in the
former, to restore the dismissed employee to her status before she lost her job, for the dictionary meaning of the word
"reinstate" is "to restore to a state, conditione positions etc. from which one had been removed"15 and in the latter, to
give her back the income lost during the period of unemployment. Both remedies, looking to the past, would perforce
make her "whole."

Sadly, the avowed intent of the law has at times been thwarted when reinstatement has not been forthcoming and the
hapless dismissed employee finds himself on the outside looking in.

Over time, the following reasons have been advanced by the Court for denying reinstatement under the facts of the
case and the law applicable thereto; that reinstatement can no longer be effected in view of the long passage of time
(22 years of litigation) or because of the realities of the situation; 16 or that it would be "inimical to the employer's
interest; " 17 or that reinstatement may no longer be feasible; 18 or, that it will not serve the best interests of the parties
involved; 19 or that the company would be prejudiced by the workers' continued employment; 20 or that it will not serve
any prudent purpose as when supervening facts have transpired which make execution on that score unjust or
inequitable 21 or, to an increasing extent, due to the resultant atmosphere of "antipathy and antagonism" or "strained
relations" or "irretrievable estrangement" between the employer and the employee. 22

In lieu of reinstatement, the Court has variously ordered the payment of backwages and separation pay 23 or solely
separation pay. 24

In the case at bar, the law is on the side of private respondent. In the first place the wording of the Labor Code is clear
and unambiguous: "An employee who is unjustly dismissed from work shall be entitled to reinstatement. . . . and to
his full backwages. . . ." 25 Under the principlesof statutory construction, if a statute is clears plain and free from
ambiguity, it must be given its literal meaning and applied without attempted interpretation. This plain-meaning rule
or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid
presumption that the words employed by, the legislature in a statute correctly express its intent or will and preclude
the court from construing it differently. 26 The legislature is presumed to know the meaning of the words, to:have used
words advisedly, and to have expressed its intent by the use of such words as are found in the statute.27 Verba legis
non est recedendum, or from the words of a statute there should be no departure. Neither does the provision admit of
any qualification. If in the wisdom of the Court, there may be a ground or grounds for non-application of the above-
cited provision, this should be by way of exception, such as when the reinstatement may be inadmissible due to
ensuing strained relations between the employer and the employee.

In such cases, it should be proved that the employee concerned occupies a position where he enjoys the trust and
confidence of his employer; and that it is likely that if reinstated, an atmosphere of antipathy and antagonism may be
generated as to adversely affect the efficiency and productivity of the employee concerned.

A few examples, will suffice to illustrate the Court's application of the above principles: where the employee is a Vice-
President for Marketing and as such, enjoys the full trust and confidence of top management; 28 or is the Officer-In-
Charge of the extension office of the bank where he works; 29 or is an organizer of a union who was in a position to
sabotage the union's efforts to organize the workers in commercial and industrial establishments; 30 or is a
warehouseman of a non-profit organization whose primary purpose is to facilitate and maximize voluntary gifts. by
foreign individuals and organizations to the Philippines; 31 or is a manager of its Energy Equipment Sales. 32
Obviously, the principle of "strained relations" cannot be applied indiscriminately. Otherwisey reinstatement can never
be possible simply because some hostility is invariably engendered between the parties as a result of litigation. That
is human nature. 33

Besides, no strained relations should arise from a valid and legal act of asserting one's right; otherwise an employee
who shall assert his right could be easily separated from the service, by merely paying his separation pay on the
pretext that his relationship with his employer had already become strained. 34

Here, it has not been proved that the position of private respondent as systems analyst is one that may be
characterized as a position of trust and confidence such that if reinstated, it may well lead to strained relations between
employer and employee. Hence, this does not constitute an exception to the general rule mandating reinstatement for
an employee who has been unlawfully dismissed.

On the other hand, has she betrayed any confidence reposed in her by engaging in transactions that may have created
conflict of interest situations? Petitioner GMCR points out that as a matter of company policy, it prohibits its employees
from involving themselves with any company that has business dealings with GMCR. Consequently, when private
respondent Salazar signed as a witness to the partnership papers of Concave (a supplier of Ultra which in turn is also
a supplier of GMCR), she was deemed to have placed. herself in an untenable position as far as petitioner was
concerned.

However, on close scrutiny, we agree with public respondent that such a circumstance did not create a conflict of
interests situation. As a systems analyst, Salazar was very far removed from operations involving the procurement of
supplies. Salazar's duties revolved around the development of systems and analysis of designs on a continuing basis.
In other words, Salazar did not occupy a position of trust relative to the approval and purchase of supplies and
company assets.

In the instant case, petitioner has predicated its dismissal of Salazar on loss of confidence. As we have held countless
times, while loss of confidence or breach of trust is a valid ground for terminations it must rest an some basis which
must be convincingly established. 35 An employee who not be dismissed on mere presumptions and suppositions.
Petitioner's allegation that since Salazar and Saldivar lived together in the same apartment, it "presumed reasonably
that complainant's sympathy would be with Saldivar" and its averment that Saldivar's investigation although unverified,
was probably true, do not pass this Court's test. 36 While we should not condone the acts of disloyalty of an employee,
neither should we dismiss him on the basis of suspicion derived from speculative inferences.

To rely on the Maramara report as a basis for Salazar's dismissal would be most inequitous because the bulk of the
findings centered principally oh her friend's alleged thievery and anomalous transactions as technical operations'
support manager. Said report merely insinuated that in view of Salazar's special relationship with Saldivar, Salazar
might have had direct knowledge of Saldivar's questionable activities. Direct evidence implicating private respondent
is wanting from the records.

It is also worth emphasizing that the Maramara report came out after Saldivar had already resigned from GMCR on
May 31, 1984. Since Saldivar did not have the opportunity to refute management's findings, the report remained
obviously one-sided. Since the main evidence obtained by petitioner dealt principally on the alleged culpability of
Saldivar, without his having had a chance to voice his side in view of his prior resignation, stringent examination should
have been carried out to ascertain whether or not there existed independent legal grounds to hold Salatar answerable
as well and, thereby, justify her dismissal. Finding none, from the records, we find her to have been unlawfully
dismissed.

WHEREFORE, the assailed resolution of public respondent National Labor Relations Commission dated December
29, 1987 is hereby AFFIRMED. Petitioner GMCR is ordered to REINSTATE private respondent Imelda Salazar and
to pay her backwages equivalent to her salary for a period of two (2) years only.

This decision is immediately executory.

SO ORDERED.
 THIRD DIVISION

G.R. No. 152329 April 22, 2003

ALEJANDRO ROQUERO, petitioner,

vs.
PHILIPPINE AIRLINES, INC., respondent.

PUNO, J.:

Brought up on this Petition for Review is the decision of the Court of Appeals dismissing Alejandro Roquero as an
employee of the respondent Philippine Airlines, Inc.

Roquero, along with Rene Pabayo, were ground equipment mechanics of respondent Philippine Airlines, Inc. (PAL
for brevity). From the evidence on record, it appears that Roquero and Pabayo were caught red-handed possessing
and using Methampethamine Hydrochloride or shabu in a raid conducted by PAL security officers and NARCOM
personnel.

The two alleged that they did not voluntarily indulge in the said act but were instigated by a certain Jojie Alipato who
was introduced to them by Joseph Ocul, Manager of the Airport Maintenance Division of PAL. Pabayo alleged that
Alipato often bragged about the drugs he could smuggle inside the company premises and invited other employees
to take the prohibited drugs. Alipato was unsuccessful, until one day, he was able to persuade Pabayo to join him in
taking the drugs. They met Roquero along the way and he agreed to join them. Inside the company premises, they
locked the door and Alipato lost no time in preparing the drugs to be used. When they started the procedure of taking
the drugs, armed men entered the room, arrested Roquero and Pabayo and seized the drugs and the paraphernalia
used.1 Roquero and Pabayo were subjected to a physical examination where the results showed that they were
positive of drugs. They were also brought to the security office of PAL where they executed written confessions without
the benefit of counsel.2

On March 30, 1994, Roquero and Pabayo received a "notice of administrative charge"3 for violating the PAL Code of
Discipline. They were required to answer the charges and were placed under preventive suspension.

Roquero and Pabayo, in their "reply to notice of administrative charge,"4 assailed their arrest and asserted that they
were instigated by PAL to take the drugs. They argued that Alipato was not really a trainee of PAL but was placed in
the premises to instigate the commission of the crime. They based their argument on the fact that Alipato was not
arrested. Moreover, Alipato has no record of employment with PAL.

In a Memorandum dated July 14, 1994, Roquero and Pabayo were dismissed by PAL.5 Thus, they filed a case for
illegal dismissal.6

In the Labor Arbiter's decision, the dismissal of Roquero and Pabayo was upheld. The Labor Arbiter found both parties
at fault — PAL for applying means to entice the complainants into committing the infraction and the complainants for
giving in to the temptation and eventually indulging in the prohibited activity. Nonetheless, the Labor Arbiter awarded
separation pay and attorney's fees to the complainants.7

While the case was on appeal with the National Labor Relations Commission (NLRC), the complainants were
acquitted by the Regional Trial Court (RTC) Branch 114, Pasay City, in the criminal case which charged them with
"conspiracy for possession and use of a regulated drug in violation of Section 16, Article III of Republic Act 6425," on
the ground of instigation.

The NLRC ruled in favor of complainants as it likewise found PAL guilty of instigation. It ordered reinstatement to their
former positions but without backwages.8 Complainants did not appeal from the decision but filed a motion for a writ
of execution of the order of reinstatement. The Labor Arbiter granted the motion but PAL refused to execute the said
order on the ground that they have filed a Petition for Review before this Court.9 In accordance with the case of St.
Martin Funeral Home vs. NLRC and Bienvenido Aricayos,10 PAL's petition was referred to the Court of Appeals.11
During the pendency of the case with the Court of Appeals, PAL, and Pabayo filed a Motion to Withdraw/Dismiss the
case with respect to Pabayo, after they voluntarily entered into a compromise agreement.12 The motion was granted
in a Resolution promulgated by the Former Thirteenth Division of the Court of Appeals on January 29, 2002.13

The Court of Appeals later reversed the decision of the NLRC and reinstated the decision of the Labor Arbiter insofar
as it upheld the dismissal of Roquero. However, it denied the award of separation pay and attorney's fees to Roquero
on the ground that one who has been validly dismissed is not entitled to those benefits.14

The motion for reconsideration by Roquero was denied. In this Petition for Review on Certiorari under Rule 45, he
raises the following issues:

1. Whether or not the instigated employee shall be solely responsible for an action arising from the instigation
perpetrated by the employer;

2. Can the executory nature of the decision, more so the reinstatement aspect of a labor tribunal's order be
halted by a petition having been filed in higher courts without any restraining order or preliminary injunction
having been ordered in the meantime?

3. Would the employer who refused to reinstate an employee despite a writ duly issued be held liable to pay
the salary of the subject employee from the time that he was ordered reinstated up to the time that the reversed
decision was handed down?15

There is no question that petitioner Roquero is guilty of serious misconduct for possessing and using shabu. He
violated Chapter 2, Article VII, section 4 of the PAL Code of Discipline which states:

"Any employee who, while on company premises or on duty, takes or is under the influence of prohibited or
controlled drugs, or hallucinogenic substances or narcotics shall be dismissed."16

Serious misconduct is defined as "the transgression of some established and definite rule of action, a forbidden act,
a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment." 17 For serious
misconduct to warrant the dismissal of an employee, it (1) must be serious; (2) must relate to the performance of the
employee's duty; and (3) must show that the employee has become unit to continue working for the employer.18

It is of public knowledge that drugs can damage the mental faculties of the user. Roquero was tasked with the repair
and maintenance of PAL's airplanes. He cannot discharge that duty if he is a drug user. His failure to do his job can
mean great loss of lives and properties. Hence, even if he was instigated to take drugs he has no right to be reinstated
to his position. He took the drugs fully knowing that he was on duty and more so that it is prohibited by company rules.
Instigation is only a defense against criminal liability. It cannot be used as a shield against dismissal from employment
especially when the position involves the safety of human lives.

Petitioner cannot complain he was denied procedural due process. PAL complied with the twin-notice requirement
before dismissing the petitioner. The twin-notice rule requires (1) the notice which apprises the employee of the
particular acts or omissions for which his dismissal is being sought along with the opportunity for the employee to air
his side, and (2) the subsequent notice of the employer's decision to dismiss him.19 Both were given by respondent
PAL.

II

Article 223 (3rd paragraph) of the Labor Code20 as amended by Section 12 of Republic Act No. 6715,21 and Section
2 of the NLRC Interim Rules on Appeals under RA No. 6715, Amending the Labor Code, 22 provide that an order of
reinstatement by the Labor Arbiter is immediately executory even pending appeal. The rationale of the law has been
explained in Aris (Phil.) Inc. vs. NLRC:23

"In authorizing execution pending appeal of the reinstatement aspect of a decision of the Labor Arbiter
reinstating a dismissed or separated employee, the law itself has laid down a compassionate policy which,
once more, vivifies and enhances the provisions of the 1987 Constitution on labor and the working man.

xxx xxx xxx

These duties and responsibilities of the State are imposed not so much to express sympathy for the
workingman as to forcefully and meaningfully underscore labor as a primary social and economic force, which
the Constitution also expressly affirms with equal intensity. Labor is an indispensable partner for the nation's
progress and stability.

xxx xxx xxx

 . . . In short, with respect to decisions reinstating employees, the law itself has determined a sufficiently
overwhelming reason for its execution pending appeal.

xxx xxx xxx

. . . Then, by and pursuant to the same power (police power), the State may authorize an immediate
implementation, pending appeal, of a decision reinstating a dismissed or separated employee since that
saving act is designed to stop, although temporarily since the appeal may be decided in favor of the appellant,
a continuing threat or danger to the survival or even the life of the dismissed or separated employee and his
family."

The order of reinstatement is immediately executory. The unjustified refusal of the employer to reinstate a dismissed
employee entitles him to payment of his salaries effective from the time the employer failed to reinstate him despite
the issuance of a writ of execution.24 Unless there is a restraining order issued, it is ministerial upon the Labor Arbiter
to implement the order of reinstatement. In the case at bar, no restraining order was granted. Thus, it was mandatory
on PAL to actually reinstate Roquero or reinstate him in the payroll. Having failed to do so, PAL must pay Roquero
the salary he is entitled to, as if he was reinstated, from the time of the decision of the NLRC until the finality of the
decision of this Court.

We reiterate the rule that technicalities have no room in labor cases where the Rules of Court are applied only in a
suppletory manner and only to effectuate the objectives of the Labor Code and not to defeat them.25 Hence, even if
the order of reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer to
reinstate and pay the wages of the dismissed employee during the period of appeal until reversal by the higher court.
On the other hand, if the employee has been reinstated during the appeal period and such reinstatement order is
reversed with finality, the employee is not required to reimburse whatever salary he received for he is entitled to such,
more so if he actually rendered services during the period.

IN VIEW WHEREOF, the dismissal of petitioner Roquero is AFFIRMED, but respondent PAL is ordered to pay the
wages to which Roquero is entitled from the time the reinstatement order was issued until the finality of this decision.

SO ORDERED.