Tag: decision

Whole Again

In this case, the Supreme Court noted the illegal dismissal case filed by Moreno, Francisco and Elmo against Lepanto Consolidated Mining Company.

The record showed that the Office of the Labor Arbiter dismissed the complaint for lack of merit.

In its Decision dated August 30, 2002, the National Labor Relations Commission reversed the Office of the Labor Arbiter’s Decision and declared Moreno, Francisco, and Elmo to have been illegally dismissed from employment. The Commission awarded them separation pay and backwages.

The Court of Appeals (in CA-G.R. SP No. 75860) affirmed the Decision of the National Labor Relations Commission through its Decision dated November 7, 2003.

The Supreme Court (in G.R. No. 163210) likewise affirmed the same. The Decision of the Supreme Court became final and executory on November 25, 2008.

Following the finality of the Supreme Court Decision, the Office of the Labor Arbiter issued the corresponding writ of execution in the total amount of P897,412.95 covering the backwages and separation pay of Moreno, Francisco, and Elmo. Furthermore, the Office of the Labor Arbiter granted their motion praying the recomputation of this award, through an Order dated May 27, 2009, which increased the award to P2,602,856.21.

Lepanto moved to quash the writ of execution, insisting that the computation should be reckoned from the date of dismissal up until the National Labor Relations Commission rendered its Decision dated August 30, 2002.

Moreno, Francisco and Elmo soon moved for another recomputation of the monetary award to include the salary increases allegedly granted them per the Collective Bargaining Agreement (CBA) between Lepanto and its employees.

In its Order dated September 2, 2009, the Office of the Labor Arbiter recalled his Order dated May 27, 2009 and further recomputed the award of backwages and separation pay to include the incremental salary increases pursuant to the CBA but only until November 7, 2003, the date when the Court of Appeals issued its Decision in CA-G.R. SP No. 75860.

Moreno, Francisco, and Elmo assailed the Order and asserted that the cut-off date for the computation of the award was November 25, 2008 when the Supreme Court’s Decision became final and executory.

Lepanto likewise assailed the Order and asserted that the cut-off date for the computation of the award was November 7, 2003, or the date of the Decision of the Court of Appeals.

In its Decision dated October 30, 2009, National Labor Relations Commission directed the Labor Arbiter to compute the backwages and separation pay of Moreno, Francisco, and Elmo from the date they were illegally dismissed up to the finality of the Supreme Court’s Decision on November 25, 2008, including therein the mandated CBA salary increases.

The Court of Appeals nullified the Decision of the National Labor Relations Commission and ordered the reinstatement of the Commission’s earlier Decision dated August 30, 2002, as well as the relevant Writ of Execution dated March 16, 2009. For the Court of Appeals, the computation of the National Labor Relations Commission in its earlier Decision became final and executory after the lapse of ten (10) days from the parties’ receipt thereof. The Court of Appeals added that the finality of this computation was not affected by the subsequent proceedings held before it and the Supreme Court and that the delayed enforcement of the Decision of the National Labor Relations Commission dated August 30, 2002 was not only attributable to Lepanto but also to Moreno, Francisco, and Elmo, who themselves appealed the case up to the Supreme Court.

Moreno, Francisco, and Elmo thus elevated their case to the Supreme Court, asserting that the computation of their backwages and separation pay should be reckoned from the date they were illegally terminated until the finality of Supreme Court’s Decision in G.R. No. 163210 on November 25, 2008. They further asserted that the computation should include the salary increases granted under the CBA.

What is the correct formula for computing the award of separation pay and backwages to Moreno, Francisco, and Elmo?

Should these include salary increases granted by the CBA?

The Supreme Court ruled that the award of separation pay and backwages for illegally dismissed employees should be computed from the time they were illegally dismissed until the finality of the decision ordering payment of their separation pay, in lieu of reinstatement.

As to what exactly these awards ought to include, the Court categorized its previous rulings as follows:

The first category delves into the inclusion or non-inclusion in the award of salary increases and benefits, which are contingent on the fulfillment of certain conditions, such as merit increases based on performance, the company’s fiscal position, or management’s benevolent initiative. According to the Court, the ruling in these cases denied the inclusion of contingent salary increases in the computation of backwages for being mere expectancies.

On the other hand, the second category delves into guaranteed salary increases and benefits, which are granted by law, standard company policy, or CBA.

However, the Court noted that those cases falling in the second category had opposing dispositions.

Acknowledging its contradicting rulings in the award of backwages or separation pay owing to illegally dismissed employees and the consequent instability they have caused to labor law jurisprudence, the Court laid down the following rule to settle the matter:

The award of backwages and/or separation pay due to illegally dismissed employees shall include all salary increases and benefits granted under the law and other government issuances, Collective Bargaining Agreements, employment contracts, established company policies and practices, and analogous sources which the employees would have been entitled to had they not been illegally dismissed. On the other hand, salary increases and other benefits which are contingent or dependent on variables such as an employee’s merit increase based on performance or longevity or the company’s financial status shall not be included in the award.

On this point, the Court noted that Article 294 of the Labor Code of the Philippines grants illegally dismissed employees the right to full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time their compensation was withheld up to the time of their actual reinstatement.

Furthermore, the Court equally noted that there is no provision in the Labor Code of the Philippines which mandates the exclusion of salary increases and benefits accruing to the dismissed employee.

In this regard, the Court explained that the overarching purpose of the reliefs granted by law to illegally dismissed employees is to make the latter whole again. For the Court, it should ensure that illegally dismissed employees are whole again by awarding them the benefits to which they would have been entitled if not for the illegal termination of their employment.

The Court stated that the ruling that the employees’ illegal dismissal literally allowed time to stand still for them because of their loss of employment and the resulting uncertainties from such an unfortunate event, does not sanction additionally punishing them for an act they have not been responsible for. The Court stressed that they, in fact, must be accorded justice and relief.

The Court thus ordered Lepanto to pay Moreno, Francisco, and Elmo backwages and separation pay based on their salary rates at the time of their termination, inclusive of guaranteed salary increases and other benefits and bonuses which they were entitled to receive under the law and other government issuances, collective bargaining agreements, employment contracts, established company policies and practices, and analogous sources had they not been illegally dismissed.

The award was computed from September 22, 2000, when they were illegally dismissed, up to November 25, 2008, when the Supreme Court’s Decision dated August 13, 2008 became final and executory.

The Court added that the award shall exclude salary increases and other benefits or bonuses which are contingent or dependent on variables such as an employee’s merit increase based on performance or longevity or the company’s financial status.

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2020 September 15

But “Backwages” Is Awarded Only to an Illegally Dismissed Employee

An electric cooperative holding a franchise for the retail distribution of electricity for the province of Albay had a labor organization, which also served as the collective bargaining agent of the electric cooperative’s employees.

The electric cooperative suffered from financial distress. Thus, efforts were undertaken to rehabilitate it. A strategy that the electric cooperative pushed for was that of Private Sector Participation. Under such strategy, the current employees of the electric cooperative shall be required to tender their courtesy resignation to give flexibility to the incoming private sector concessionaire, but they shall receive separation pay based on the existing collective bargaining agreement with the labor organization and shall have priority in rehiring based on the standards set by the concessionaire.

The labor organization expressed grievance over the conditions set under the Private Sector Participation strategy, which was why it sought preventive mediation for unfair labor practices before the regional branch of the National Conciliation and Mediation Board. The electric cooperative and the labor organization, however, failed to settle their differences, and this constrained the latter to decide to strike.

Subsequently, the Private Sector Participation strategy was eventually chosen as the appropriate rehabilitation measure and a concession was awarded to a certain company.

Still, the labor organization went on strike. Thereafter, notices of retrenchment were served on the labor organization’s employees.

As the labor dispute continued, the electric cooperative and the labor organization formally requested the Secretary of the Department of Labor and Employment to assume jurisdiction over the controversy.

The Secretary of the Department of Labor and Employment assumed jurisdiction on January 10, 2014 and correspondingly issued a Return-to-Work Order of even date.

In a Resolution dated April 29, 2016, the Secretary of the Department of Labor and Employment upheld the validity of the retrenchment of the employees of the electric cooperative and ordered it to pay the retrenched employees their separation benefits in accordance with the collective bargaining agreement. It also ordered the electric cooperative to pay them backwages and other benefits computed from January 10, 2014 until the finality of the said Resolution.

The Court of Appeals modified the said Resolution dated April 29, 2016 and fixed the period for computation of the backwages awarded by the Secretary of the Department of Labor and Employment from the date of the Return-to-Work Order on January 10, 2014 up to the issuance of the Resolution dated April 29, 2016.

The electric cooperative argued before the Supreme Court that the Court of Appeals erred in sustaining the award of backwages because:

it complied with the Assumption Order as early as January 14, 2014;
“backwages” is awarded only to an illegally dismissed employee; and
if backwages were to be awarded, the same should accrue only until February 26, 2014, the date when the returning employees last reported for work, and not until April 29, 2016, or the date of the Secretary of the Department of Labor and Employment’s Resolution.

Was the award of backwages proper?

If proper, was the limit to the period of computing backwages until April 29, 2016 correct?

The Court set forth relevant principles as follows:

The effects of an assumption order issued by the Secretary of the Department of Labor and Employment under Article 278¹ (g) of the Labor Code of the Philippines are two-fold:

it enjoins an impending strike on the part of the employees, and
it orders the employer to maintain the status quo.²

In cases where a strike has already taken place, the assumption order shall have the effect of:

directing all striking workers to immediately return to work; and
mandating the employer to immediately resume operations and readmit all workers under the same terms and conditions prevailing before the strike.

The status quo to be maintained under law refers to that which was prevailing the day before the strike. Furthermore, this obligation on the part of the employer generally requires actual reinstatement.

Jurisprudence³ teaches that the purpose of maintaining the status quo is to avoid any disruption to the economy while the labor dispute is being resolved in the proper forum. The objective is to minimize, if not totally avert, any damage that such labor dispute might cause upon the national interest by occasion of any work stoppage or slow-down. The directive to maintain the status quo extends only until the labor dispute has been resolved.

1)

In the present case, the Supreme Court ruled that the award of backwages was proper.

The Court found that the Secretary of the Department of Labor and Employment assumed jurisdiction over the labor dispute between the parties on January 10, 2014 and issued a return-to-work order on even date under Article 278 (g) of the Labor Code of the Philippines.

Although the electric cooperative claimed that it admitted the striking employees to its premises on January 14, 2014, the Court found that no actual work was given to the said employees. Instead, the Court discovered that the electric cooperative confined these employees in a room for over three weeks.

Furthermore, although the electric cooperative claimed that it tendered the salaries of the employees who actually reported back for work, it also admitted that the employees refused to receive the amounts it supposedly tendered because of disagreement on the figures. The Court took this to mean that the affected employees were still not paid their wages and benefits for the period they were supposed to be reinstated.

The Court thus affirmed the Secretary of the Department of Labor and Employment’s award of backwages.

However, the Court clarified that backwages were not imposed as a penalty for non-compliance with the Assumption Order, but as satisfaction of the electric cooperative’s obligation towards the employees as contemplated under the Assumption Order. In other words, said backwages corresponded to the amount ought to have been received by the affected employees if only they had been reinstated following the Assumption Order.

The Court further stated that an award of backwages outside illegal dismissal cases is not prohibited. According to the Court, even in the absence of illegal dismissal in this case, the Secretary of the Department of Labor and Employment had the authority to award and was not mistaken in awarding backwages.

2)

In this regard, the limitation of the computation of backwages until April 29, 2016 by the Court of Appeals was affirmed. The Supreme Court ruled that the status quo mandated by the Assumption Order extended from the date of its issuance until the Secretary of the Department of Labor and Employment’s resolution of the dispute between the parties on the said date of April 29, 2016.

Admitted the Due Issuance of the Certification

The accused here were charged with one (1) count of violation of the Migrant Workers and Overseas Filipinos Act of 1995, alongside ten (10) counts of estafa. With regard to the charge relating to the Migrant Workers and Overseas Filipinos Act of 1995, they were specifically accused of illegal recruitment in large scale when they conspired to

represent themselves to have the capacity to contract, enlist and transport workers for employment as factory workers in Korea and Italy;
recruit and promise employment/job placement abroad to the complainants in the case; and
accordingly collect and receive money from them without first securing the required license and authority from relevant government authorities.

One of the accused (named Sagisag) countered that he was merely an administrative assistant of the agency, which, in turn, was owned by his co-accused. Sagisag alleged that he met the complainants when they purchased plane tickets for Korea, and he claimed that it was his co-accused who received the payments for the tickets, and that he was merely instructed to issue provisional receipts for the payments. Sagisag further denied conspiring with his co-accused to misrepresent and promise work in South Korea in exchange for money. He said that whenever he accepted money from the complainants, he merely did so in behalf of his co-accused De Guzman, and that in cases when he accepted money on his own behalf, he did so on the understanding that the money was for the payment of the tuition fee for the Korean language classes he conducted.

After trial, the Regional Trial Court found the accused guilty beyond reasonable doubt of the crime of illegal recruitment in large scale, in addition to the finding of guilt beyond reasonable doubt to three (3) counts of estafa. The trial court ruled that the prosecution sufficiently established that the two elements of illegal recruitment concurred, namely:

that Sagisag did not have the required license or authority to engage in the recruitment and placement of workers, and
that Sagisag nevertheless undertook a recruitment and placement activity as defined under Article 13 (b) of the Labor Code of the Philippines, or otherwise any prohibited practice under Article 34 of the same Code.

Specifically, it found that the first element was established by no less than the POEA Certification dated October 7, 2008 that Sagisag and his co-accused were not licensed or otherwise authorized to recruit workers for overseas employment.

This finding was affirmed by the Court of Appeals. Sagisag went to the Supreme Court.

The issue that reached the Court was whether the lower courts erred in convicting Sagisag.

The Court began by stating that an illegal recruiter may be held liable for the crimes of illegal recruitment committed in large scale and estafa without risk of being put in double jeopardy, for as long as the accused has been so charged under separate Informations. Here, record showed that Sagisag was separately charged for illegal recruitment in large scale and estafa. For the Court, Sagisag was properly prosecuted simultaneously for both crimes.

With regard to illegal recruitment, the Court stated that it is committed by a person who: undertakes any recruitment activity defined under Article 13 (b) or any prohibited practice enumerated under Articles 34 and 38 of the Labor Code of the Philippines; and does not have a license or authority to lawfully engage in the recruitment and placement of workers. It is committed in large scale when it is committed against three or more persons individually or as a group.

Together with the Migrant Workers and Overseas Filipinos Act of 1995, the law governing illegal recruitment is the Labor Code of the Philippines which, under Article 13 (b) thereof defines recruitment and placement as “any act of canvassing, enlisting, contracting, transporting, utilizing, hiring or procuring workers, and includes referrals, contract services, promising or advertising for employment, locally or abroad, whether for profit or not x x x.” The same Code also defines and punishes illegal recruitment, under Articles 38 and 39.

According to the Court, to prove illegal recruitment, two elements must be shown, namely:

the person charged with the crime must have undertaken recruitment activities, or any of the activities enumerated in Article 34 of the Labor Code of the Philippines, as amended; and
said person does not have a license or authority to do so.

In this regard, the Court said that it is not the issuance or signing of receipts for the placement fees that makes a case for illegal recruitment, but rather the undertaking of recruitment activities without the necessary license or authority.

The Court then added that to establish that the offense of illegal recruitment was conducted in a large scale, it must be proven that the accused:

engaged in acts of recruitment and placement of workers defined under Article 13 (b) or in any prohibited activities under Article 34 of the Labor Code of the Philippines;
has not complied with the guidelines issued by the Secretary of Labor and Employment, particularly with respect to the securing of a license or an authority to recruit and deploy workers, either locally or overseas; and
commits the unlawful acts against three or more persons, individually or as a group.

The Court mentioned that all three elements have been established beyond reasonable doubt.

In the present case, the Court found that the accused engaged in recruitment and placement activities without the requisite authority, and were therefore properly charged with illegal recruitment.

The Court considered the attack of Sagisag on the admissibility of the POEA Certification which stated that he had no authority or license to recruit for overseas employment, since said document was not authenticated in court by the signatory thereto. However, such attack was not found to be meritorious, for record showed that the parties, which included Sagisag, had stipulated on the veracity and probative import of the POEA Certification. The Court stated that accused Sagisag may not now turn back on the stipulations and then question the admissibility of a crucial document, the due issuance of which he stipulated and agreed on.

The Court also found without merit Sagisag’s reliance on the Equipoise Rule, which provides that where the evidence in a criminal case is evenly balanced, the constitutional presumption of innocence tilts the scales in favor of the accused. The Court pointed out that the rule was inapplicable to the case of Sagisag because, contrary to his submission, the evidence submitted and evaluated by both lower courts mounted high against his denial and ineffective and uncorroborated feigning of innocence. The total evidence presented by both parties, said the Court, was asymmetrical, with the prosecution’s submissions indubitably demonstrating Sagisag’s guilt.

The Court accordingly affirmed the conviction of Sagisag.

To Have Enough of Enough…

In 1997, Home Credit gave its employee her first service vehicle. Later, the employee purchased the vehicle from Home Credit at its depreciated value.

In 2003, Home Credit granted the employee’s request for a second service vehicle. However, Home Credit required the employee to pay for additional equity in excess of the maximum limit of Php660,000.00. In 2008, the employee again purchased the vehicle at its depreciated value.

In 2009, the employee applied for a third service vehicle. This time, Home Credit informed the employee that she must pay the equity more than Php550,000.00. Home Credit likewise adopted a cost sharing scheme where the employer must shoulder 40% of the acquisition price.

Aggrieved, the employee filed a complaint against Home Credit for violation of Article 100 of the Labor Code on non-diminution of benefits.

Was the employee’s benefit diminished?

The Supreme Court ruled that no diminution of benefits occurred.

According to the Court, employees generally have a vested right over existing benefits that the employer voluntarily granted them.¹ These benefits cannot be reduced, diminished, discontinued or eliminated² consistent with the constitutional mandate to protect the rights of workers and promote their welfare.³ Article 100 of the Labor Code of the Philippines, provides:

ART. 100. Prohibition against Elimination or Diminution of Benefits. — Nothing in this Book shall be construed to eliminate or in any way diminish supplements, or other employee benefits being enjoyed at the time of promulgation of this Code. (Emphasis Supplied.)

Jurisprudence⁴ dictates that the principle of non-diminution of benefits is founded on the constitutional mandate to “protect the rights of workers and promote their welfare” and “to afford labor full protection.” The Court clarified that the basis for non-diminution rule is not Article 100 which refers solely to “benefits enjoyed at the time of the promulgation of the Labor Code,” thus:

x x x Article 100 refers solely to the non-diminution of benefits enjoyed at the time of the promulgation of the Labor Code. Employer-employee relationship is contractual and is based on the express terms of the employment contract as well as on its implied terms, among them, those not expressly agreed upon but which the employer has freely, voluntarily and consistently extended to its employees. Under the principle of mutuality of contracts embodied in Article 1308 of the Civil Code, the terms of a contract — both express and implied — cannot be withdrawn except by mutual consent or agreement of the contracting parties.

The Court added that the non-diminution rule applies only if the benefit is based on an express policy, a written contract, or has ripened into a practice.⁵

In the present case, the Court found that the employee’s claim that the car plan was part of her hiring package was unsubstantiated. Record shows that Home Credit had no existing car plan at the time of the employee’s hiring. Her employment contract did not even contain any express provision on her entitlement to a service vehicle at full company cost.

The Court also found that that the car plan had not ripened into a company practice. According to the Court, a “practice” or “custom” is not a source of a legally demandable or enforceable right. In labor cases, however, benefits which were voluntarily given by the employer, and which have ripened into company practice, are considered as rights and are subject to the non-diminution rule.⁶ To be considered a company practice, the benefit must be consistently and deliberately granted by the employer over a long period of time. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employee is not covered by any provision of law or agreement for its payment.⁷ The burden to establish that the benefit has ripened into a company practice rests with the employee.⁸

In the present case, the Court found that Home Credit’s act of giving service vehicles to the employee had been a company practice — but not as to the non-participation aspect. There was no substantial evidence to prove that the car plan at full company cost had ripened into company practice. The Court reiterated that the only time the employee was given a service vehicle fully paid for by the company was for her first car. For the second vehicle, the company already imposed a maximum limit of P660,000.00 but the employee never questioned this. She willingly paid for the equity in excess of said limit. Thus, the elements of consistency and deliberateness were not present.

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2020 August 27

Specified at the Time of Engagement

Respondent RSCI is a construction company engaged in short-term projects such as renovation or construction of bank branches, stores in malls and similar projects with short duration. For its projects, RSCI hired construction workers like masons, carpenters, whose contracts of engagement were indicated to be co-terminous with the projects to which they were assigned.

Sometime in 2005, RSCI hired several employees and were assigned to its various projects.

Sometime in February and May 2016, the RSCI’s foreman twice directed said employees to report for work for another short-term project, but the latter failed to do so. Said employees, nonetheless, filed a complaint for illegal dismissal against RSCI.

RSCI denied that it illegally dismissed the employees. It asserts that they were project employees whose employment was validly terminated after end of each construction project.

Could the employees be considered project employees?

Jurisprudence¹ dictates that a project employee is assigned to a project that starts and ends at a determined or determinable time. The principal test to determine if an employee is a project employee is — whether he or she is assigned to carry out a particular project or undertaking, which duration or scope was specified at the time of engagement.

In the present case, the Court found that at the time of hiring, the employees were not given a notice informing them of their engagement for a specific project. The Court also found that the employees were all continuously engaged by RSCI to render construction services for its short-term projects. Finally, the Court found that RSCI was unable to file any termination report to the DOLE due to alleged project completion or pay the workers any completion bonus supposedly due to project employees following completion of each project.

The Supreme Court thus ruled that the employees were regular employees of RSCI, as they rendered services necessary and desirable to its construction business. As such, the Court stated that they may not be dismissed upon the mere expiration or completion of each project for which they were engaged.

Loss of Trust and Confidence

SMC employed RAG on 16 September 1986 as a researcher in the Security Department and concurrently as Executive Secretary to the Head of the Security Department. Sometime in October 1994, RAG was assigned as coordinator in the Mailing Department of SMC.

Sometime in January 2001, C2K, a corporation engaged in courier and delivery services, entered into business with SMC as the latter’s courier. Although the relationship between the two companies started smoothly, C2K soon encountered difficulty in collecting its service fee from SMC.

Investigation yielded a finding that C2K’s former manager formed another courier services entity, used fake C2K receipts, and collected the C2K fees. C2K claimed that it was through RAG’s intervention that the other courier services group was able to transact business with SMC. RAG was also found to have collected 25% commission from the total payment received by C2K and was allegedly involved in anomalies which caused tremendous losses to SMC.

SMC conducted an administrative investigation and hearing where RAG was able to present her evidence and witnesses to disprove the charges against her. After the investigation, RAG was found guilty of committing fraud against SMC and of receiving commissions in connection with the performance of her function. On 20 December 2002, SMC terminated her services on the ground of willful breach of trust. RAG thus filed a case for illegal dismissal against SMC.

Was RAG’s employment validly terminated on the ground of loss of trust and confidence?

The Supreme Court ruled in the affirmative, as SMC was able to discharge the burden of proving that just cause attended RAG’s dismissal from employment.

Article 297¹ of the Labor Code of the Philippines provides that an employer may terminate the services of its employee for “(f)raud or willful breach x x x of the trust reposed in him by his employer or duly authorized representative.” As a rule, employers have the discretion to manage its own affairs, which includes the imposition of disciplinary measures on its employees.² Thus, “employers are generally given wide latitude in terminating the services of employees who perform functions which by their nature require the employer’s full trust and confidence.”³

Nonetheless, jurisprudence⁴ teaches that “(l)oss of confidence as a ground for dismissal has never been intended to afford an occasion for abuse by the employer of its prerogative, as it can easily be subject to abuse because of its subjective nature.” Furthermore, it dictates that employers may not arbitrarily dismiss their employees by simply invoking Article 297. The loss of confidence must be genuine and cannot be used as a “subterfuge for causes which are improper, illegal or unjustified.”⁵

The Court reiterated the guidelines to determine whether loss of confidence would constitute a valid ground for dismissal:

(T)he language of Article 282(c) of the Labor Code states that the loss of trust and confidence must be based on willful breach of the trust reposed in the employee by his employer. Such 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. Moreover, it must be based on substantial evidence and not on the employer’s whims or caprices or suspicions otherwise, the employee would eternally remain at the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by the employer against a claim that the dismissal of an employee was arbitrary. And, in order to constitute a just cause for dismissal, the act complained of must be work-related and shows that the employee concerned is unfit to continue working for the employer. In addition, loss of confidence as a just cause for termination of employment is premised on the fact that the employee concerned holds a position of responsibility, trust and confidence or that the employee concerned is entrusted with confidence with respect to delicate matters, such as the handling or care and protection of the property and assets of the employer. The betrayal of this trust is the essence of the offense for which an employee is penalized.⁶

Thus, the requisites for dismissal on the ground of loss of trust and confidence are:

The employee concerned must be holding a position of trust and confidence;⁷
There must be an act that would justify the loss of trust and confidence;⁸ and
Such loss of trust relates to the employee’s performance of duties.

In the present case, the Court found:

RAG occupied a position of trust and confidence, since she was entrusted with SMC’s property, in particular its mail matter which included weighing and determining volumes of documents to be shipped. Thus, she was routinely charged with custody of SMC’s mail matter.
RAG willfully, intentionally, knowingly, purposely, and without justifiable excuse disregarded SMC’s rules and regulations in the workplace. It was through RAG’s intervention that the other courier services entity was able to transact business with SMC, wherein such entity used fake receipts and collected the fees pertaining to C2K. The Court stated that RAG, as the coordinator in SMC’s Mailing Department, should have known or noticed said fake receipts since she had previously transacted with C2K.
Moreover, RAG was found to have collected 25% commission from the total payment received by C2K. SMC’s investigation revealed that RAG was guilty of committing fraud against SMC and of receiving bribes through commissions in connection with the performance of her function.

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2020 August 24

Beyond Occasional Discomforts

On 9 June 2006, the respondent group hired the employee as a legal officer. On 23 February 2007, it promoted her to corporate affairs manager and assigned her to head the human resources and legal departments of said respondent.

The employee narrated that a supervisor gave her a new and additional assignment as a customer service representative (CSR). She was told to answer phone calls and jot notes on her communications with clients. Since the CSR task was far from a managerial job, she approached said supervisor to suggest a different procedure. However, the latter negatively reacted and called the employee stupid and incompetent. On 6 and 9 December 2011, the president of the respondent group of companies verbally advised her to resign and remarked that even if the employee stays for 10 years, the respondent group would not spend Php1 million to pay her salary. The employee stated that the various heads of the respondent group then treated her indifferently. She also received emails implying that she was remiss in her duties to make her appear incompetent.

On 29 March 2012, she filed a complaint for constructive dismissal against the respondent group.

The respondent group stated that one of its companies requested the employee to handle complaints from its customers. However, the employee did not address the complaints and instead delegated the task to other personnel. The respondent group thus created a CSR project and designated the employee to man the same. Despite this, the employee still failed to perform her tasks. When asked for her justification, the employee explained that health concerns and stress caused her poor performance. The respondent group then suggested her resignation from employment, where she would receive financial assistance should she resign. However, the employee accused the respondent group not only of forcing her to resign, but also of bribing her with financial assistance. Because of this, the respondent group withheld their offer of financial assistance and just advised the employee to stay in her job, which she did. The respondent group, however, remarked that the employee became difficult to supervise.

Was the employee constructively dismissed from employment?

Jurisprudence¹ dictates:

There is constructive dismissal when an employer’s act of clear discrimination, insensibility or disdain becomes so unbearable on the part of the employee so as to foreclose any choice on his part except to resign from such employment. It exists where there is involuntary resignation because of the harsh, hostile and unfavorable conditions set by the employer. The standard for constructive dismissal is “whether a reasonable person in the employee’s position would have felt compelled to give up his employment under the circumstances.”
The unreasonably harsh conditions that compel resignation on the part of an employee must be way beyond the occasional discomforts brought about by the misunderstandings between the employer and employee. Strong words may sometimes be exchanged as the employer describes her expectations or as the employee narrates the conditions of her work environment and the obstacles she encounters as she accomplishes her assigned tasks. As in every human relationship, there are bound to be disagreements.
However, when these strong words from the employer happen without palpable reason or are expressed only for the purpose of degrading the dignity of the employee, then a hostile work environment will be created. In a sense, the doctrine of constructive dismissal has been a consistent vehicle by this Court to assert the dignity of labor.

In the present case, the Court declared the employee to be constructively dismissed from employment. It found instances of disdainful and hostile acts committed against the employee that degraded her dignity as a person and eventually led her to file her constructive dismissal complaint:

The employee, who already held the position of corporate affairs manager, was made to work as a CSR, a function fit for a rank-and-file employee. The Court viewed this not only as a demotion, but also as an act of disdain and disrespect because she was treated as if she was unworthy of her managerial position.
When the employee suggested a different procedure for the CSR Project, her supervisor reacted negatively and told her she was stupid and incompetent — “No you don’t know anything stupid, stupid, I don’t care about what you say, if you do not accept this project by doing the procedure of answering phone calls from clients and jot down your communication with them and fill in the forms provided then resign, we do not need you here, all you have to do is put in writing that you are not accepting this project and that you are incompetent.” For the Court, these words clearly worsened her already hostile working environment and were plainly demeaning, degrading, and disrespectful to her dignity.
The employee was asked to resign on more than one occasion and was offered financial assistance. According to the Court, this shows that her employer was eager to remove her from its employ.
Although management told the employee to keep her job, it treated her indifferently thereafter.

According to the Court, the employee’s overall experience was mentally, emotionally and psychologically burdensome and made her tenure unbearable. Such experience prompted her to involuntarily give up her employment.

The Court noted that although the respondent group argued that the employee failed to meet the standard performance expected of her, said instance of poor performance was unsubstantiated. Furthermore, the fact that it assigned her to lead the CSR Project was an odd move considering her alleged poor performance. The Court stated that common sense would dictate that the project should have been headed by a competent and efficient employee if the employee’s performance was not satisfactory as the respondent group would claim.

Also, the Court said that the respondent group did not want to retain the employee, for otherwise, it could have asked her to take a medical leave or have her treated and diagnosed by a government physician.

The employee was accordingly awarded separation pay, backwages, and damages.

Takeaway:

Acts of disdain and hostile behavior such as demotion, uttering insulting words, asking for resignation, and apathetic conduct towards an employee constitute constructive illegal dismissal.

Appeal Bonds and Insolvency Proceedings

In March 2004, Miguel commenced his employment with Karj Global Marketing Network, Inc. (Karj Global) as Assistant General Manager. He alleged that Karj Global agreed to grant him 14th month bonus, a vehicle, and vehicle maintenance benefits.

On July 6, 2006, Miguel instituted a complaint before the Office of the Labor Arbiter against Karj Global for non-payment of 14th month pay, refund of his expenditures for vehicle maintenance, damages and attorney’s fees.

Karj Global denied Miguel’s entitlement to said claims. With regard to the claim of 14th month pay, Karj Global asserted that the same was discretionary in nature and that such gratuity was never part of the regular compensation of its employees.

On October 16, 2006, the Office of the Labor Arbiter ruled in favor of Miguel and ordered not only the payment of 14th month pay benefit, but also the refund of car maintenance costs. Karj Global appealed the said decision to the National Labor Relations Commission.

Record showed that prior to the issuance of the Office of the Labor Arbiter’s decision, certain creditors instituted before the Regional Trial Court of Parañaque City a Petition for Involuntary Insolvency against Karj Global. On October 2, 2006, the Regional Trial Court issued an Order enjoining Karj Global from disposing its property and from making any payments outside of necessary or legitimate expenses of its business or industry.

Karj Global filed before the National Labor Relations Commission its Motion to Suspend Proceedings dated November 2, 2006 and alleged therein its receipt of the Office of the Labor Arbiter’s Decision on October 27, 2006, as well as its receipt the Order of the Regional Trial Court on October 9, 2006. Karj Global further stated in the said motion that it informed the Regional Trial Court of the pendency of Miguel’s labor case.

Meanwhile, on November 28, 2008, the National Labor Relations Commission dismissed Karj Global’s appeal for non-perfection as the same was filed without the required bond.

Karj Global filed a petition for certiorari with the Court of Appeals, which dismissed the same and affirmed the decision of the National Labor Relations Commission.

Was the strict adherence to the appeal bond posting requirement correct?

The Supreme Court ruled that the appeal bond requirement should have been liberally applied in the present case and that the National Labor Relations Commission, which was mandated to act with justice, reason and equity, should have allowed the appeal and ruled on the merits considering the circumstances of the case. Specifically, the Court found that the employees of Karj Global (including Miguel) had many layers of protection under law, despite Karj Globa’s insolvency proceedings. This is because the rule on a requirement of an appeal bond cannot operate in a vacuum. Said the Court: “[W]hen the law does not clearly provide a rule or norm for the tribunal to follow in deciding a question submitted, but leaves to the tribunal the discretion to determine the case in one way or another, the judge must decide the question in conformity with justice, reason and equity, in view of the circumstances of the case.”

The Court started by discussing Article 223¹ of the Labor Code of the Philippines which requires the posting of a cash or surety bond when the judgment appealed from involves a monetary award. The Court reiterated prevailing jurisprudence² in that the posting of the bond is an indispensable requisite for the perfection of an appeal by the employer. The mandatory nature of the bond is clearly limned in the provision that an appeal by the employer may be perfected only upon the posting of a cash or surety bond. The Court stressed that the word ‘only’ makes it perfectly clear, that the lawmakers intended the posting of a cash or surety bond by the employer to be the exclusive means by which an employer’s appeal may be perfected.

However, the Court also mentioned the following exceptional circumstances under jurisprudence:³

The Court excused the failure of an appellant to post a bond in view of its counsel’s reliance on the notice of the decision in the case which stated the requirements of an appeal without any mention of the bond requirement. The Court found that the said counsel, as well as the opposing party, apparently had no knowledge of the amendments caused by Republic Act No. 6715 on the bond requirement, including the issuance of the NLRC Interim Rules requiring the posting of a bond on appeal.⁴
An appellant was likewise excused from the requirement, when its failure to post a bond was partly caused by the Office of the Labor Arbiter’s failure to state the exact amount of monetary award due, which would have been the basis of the amount of the bond to be posted.⁵
An appeal was given due course despite the failure of the appellant to post a bond, on account of its insolvency and poverty.⁶
Finally, the appellant was allowed to post a property bond in lieu of a cash or surety bond. The Court found that the assailed judgment involved more than P17 million and its execution could adversely affect the economic survival of the appellant, which was a medical center.⁷

The Court stated that in determining whether to allow a liberal application of the rule on bonds, it is crucial to understand whether employees stand to lose such security provided by the appeal bond, which ensures that when employees prevail, they will receive the money judgment in their favor.

In the present case, the Court deemed the existence of the insolvency proceedings as an exceptional circumstance that warranted the liberal application of the rules requiring an appeal bond. Said the Court: The failure to file an appeal bond did not contradict the need to ensure that the employee, if his claim is deemed valid, will receive the money judgment.

At this point, the Court recognized the seeming absence of a rule or norm to follow on the requirement of an appeal bond when the appealing employer is subject of involuntary liquidation proceedings.

The Court noted that under Article 217⁸ of the Labor Code of the Philippines, money claims arising from an employer-employee relationship may only be filed and ruled upon by the Office of the Labor Arbiter. However, the Court also noted that when an employer is undergoing insolvency proceedings, Article 217 of the Labor Code of the Philippines has to be read together with Section 60⁹ of the Insolvency Law,¹⁰ or the law in effect when the National Labor Relations Commission dismissed the appeal on November 28, 2008, which states that a creditor may be allowed to proceed with the suit to ascertain the amount due to it but the execution of which shall be stayed.

The Court discussed that during the pendency of the insolvency proceedings, employees are afforded a measure of protection by having their claim considered as a contingent claim before the insolvent court following Section 55¹¹ of the Insolvency Act. The Court stated that like any other contingent claim, employees may prosecute their case before the labor tribunals, and exhaust other remedies, until he or she obtains a final and executory judgment. Assuming the employees obtain a favorable money judgment, the execution will be stayed following Section 60 of the Insolvency Act because the insolvency proceedings is where all creditors of the employer may establish their claims.

The Court added that assuming the insolvent corporation undergoes liquidation, the measure of protection given to employees is stated in Article 110¹² of the Labor Code of the Philippines, which prescribes not only the preference for unpaid wages and monetary claims even before the payment of claims of the government and other creditors, but also the only proper venue for the enforcement of such preferential right.¹³ In other words, what Article 110 means in the context of an insolvent employer is “that during bankruptcy, insolvency or liquidation proceedings involving the existing properties of the employer, the employees have the advantage of having their unpaid wages satisfied ahead of certain claims which may be proved therein.”

In sum, the Court ruled that employees of an employer who is undergoing insolvency proceedings has many layers of protection starting from being allowed to prosecute his claim, registering a contingent claim before the insolvency court, and finally, enjoying a preference in case the assets of the corporation are ordered liquidated to pay for its debts.

Here, the Court found that Karj Global informed the National Labor Relations Commission and the Regional Trial Court of the pendency of the insolvency proceedings and of the labor case, respectively. The Court also noted that even as Karj Global wanted a suspension of the proceedings in the labor case, it still filed a Notice of Appeal and Memorandum of Appeal Ad Cautelam. For the Court, the National Labor Relations Commission erred in dismissing the appeal outright especially when the foregoing circumstances reveal that the law itself provides many measures of protection for the employee, such that an appeal before the Commission may be allowed to proceed despite the lack of an appeal bond.

No Alternative But to Implement a Retrenchment Program

In February 1999, the employee was hired to work as a production operator in the hermetic department of the employer corporation. Later, the employee was promoted to the position of quality assurance calibration technician.

On 23 April 2009, the employee filed for and commenced her 60-day maternity leave, which was to end on 21 June 2009. She gave birth on 27 April 2009.

On 8 May 2009, while on her maternity leave, the employee was asked to see the employer’s human resource and administrative manager. During their meeting on 21 May 2009, the employee received a letter informing her of her dismissal from employment, effective on 22 June 2009, or the day after the end of her maternity leave. She was told that she would receive her separation pay on the same date. The employer explained that it had to implement survival measures (such as energy saving programs, forced leaves, and compressed workweek arrangements) in view of the global economic crisis that started in the previous year. The employer added that it also suffered a 30% reduction in business volume resulting to substantial losses that threatened its survival. According to the employer, to minimize continuing losses and to ensure survival of the company, it had no alternative but to implement a retrenchment program.

The employee then went to the Department of Labor and Employment, where she was advised to first accept her separation pay before filing a complaint. Thus, on 8 June 2009, after she had been required to process her clearance and sign several documents, the employee received her separation pay.

On 9 July 2009, the employee lodged her complaint for illegal dismissal against her employer.

Was the dismissal from employment on the ground of retrenchment valid?

In Team Pacific Corp. v. Parente¹, the Supreme Court declared the illegality of the employee’s dismissal from employment.

Under Article 298² of the Labor Code of the Philippines, retrenchment is one of the authorized causes to dismiss an employee. It involves a reduction in the workforce and is resorted to when the employer encounters business reverses, losses, or economic difficulties, such as “recessions, industrial depressions, or seasonal fluctuations.” This is usually done as a last recourse when other methods are found inadequate.³

There is a valid retrenchment if the employer had complied with the procedural and substantive requisites of valid retrenchment.

With regard to the procedural requisites for a valid retrenchment, the employer must:

serve a written notice on the employee and the Department of Labor and Employment one month before the date of the dismissal; and
pay the required amount of separation pay.

As to the substantive requisites, the employer must show that:

the retrenchment was a necessary measure to prevent substantial and serious business losses;
the retrenchment was done in good faith and not to defeat employees’ rights; and
it was fair and reasonable in selecting the employees who will be retrenched.⁴

Absent any of these, the dismissal is illegal.

In the said case, the Court found that the employer failed to comply with all the requisites for a valid retrenchment.

Record revealed that the employer submitted the following documents:

Audited Financial Statements for the years 2006 to 2009, showing its net losses and deficits amounting to millions;
Letter dated 29 April 2008 advising the Department of Labor and Employment of the compressed work week arrangement it will be implementing;
Notice of Retrenchment dated 8 May 2009, served on the Department of Labor and Employment;
Duly accomplished Establishment Employment Report received by the Department of Labor and Employment on 8 May 2009;
List of Affected Workers by Displacements received by the Department of Labor and Employment on 8 May 2009; and
The Decision granting the employer’s Petition for Corporate Rehabilitation.

Although the Court acknowledged that these documents would suffice to show business losses and compliance with notice requirements, it, nonetheless, ruled that the employer failed to establish that the employees chosen for retrenchment were selected through fair and reasonable criteria. According to the Court, the employer failed to prove that it used fair and reasonable criteria in carrying out the retrenchment program. It also failed to justify why it included the employee, who had already been employed for 10 years. The Court thus ordered the employer to reinstate the employee to her former position and pay her backwages.

Did the acts of accepting separation pay from the employer and signing a waiver and quitclaim bar the employee from questioning the illegality of her dismissal?

The Court held that the employee was not barred by estoppel. According to the Court, such acts are generally taken with a grain of salt, considering that employees are usually at an economic disadvantage and are often left with no choice, since they are suddenly faced with the pressure to meet financial burdens. Here, the Court found that the employee was dismissed from employment when she had just given birth. Her dismissal’s effectivity was set on the date she was supposed to return from her maternity leave. For the Court, the employee was at a clear disadvantage, having found herself without a job and a source of income right at a time when finances were crucial. Thus, the employee could not be deemed to have waived her right to file a complaint. She was not estopped from contesting the legality of her dismissal.

Can the officers be held solidarily liable with the employer corporation?

The Supreme Court ruled in the negative in view of the principle that corporate directors and officers are solidarily liable with the corporation for the termination of employees done with malice or bad faith. According to the Court, although the employer was unable to show that it applied fair and reasonable criteria in selecting the employees to be entrenched, it did not mean that the dismissals were automatically done in bad faith or with malice. It may have simply failed to strictly comply or to sufficiently prove compliance with the stringent rules for a valid retrenchment. As such, bad faith or malice must still be proved. Since the employee failed to present clear and convincing evidence that the officers of the employer corporation acted in bad faith or with malice, breached any duty, or were motivated by ill will, the employer corporation’s separate and distinct personality was respected.

Returning to the Same Employer

Z was hired in 1985 by LS, Inc. He filed a case on 4 January 1991 for illegal dismissal and regularization against LS, Inc. and SM Corp. before the National Labor Relations Commission.

In its Decision dated 15 December 1994, the Office of the Labor Arbiter ruled that Z was a regular employee of SM Corp., as LS, Inc. was declared to be a labor-only contractor. It was also ruled that Z was illegally dismissed from employment in 1990. Thus, SM Corp. (the true employer) was ordered to reinstate Z to his former position as regular employee, his regular status “effective as of the date of the Office of the Labor Arbiter’s decision.” Z was also awarded backwages.

Should Z’s employment be reckoned from 15 December 1994 (the date of the Office of the Labor Arbiter’s decision), or should it be reckoned from 1985 (the year when Z was hired to work in SM Corp)?

The Supreme Court ruled that Z’s employment started from 1985. This is because service to an employer is presumed continuous unless there is evidence that employer-employee relations were validly severed in the interim. If an employee returns to work upon an order of reinstatement, he or she is not considered a new hire.

Following this principle, the employment relationship between Z and SM Corp. should have been considered as continuous and not validly severed when Z was illegally dismissed from employment. When Z was returned to work upon an order of reinstatement, Z was not a new hire. Thus, the reckoning point of his length of service must be in 1985, or that date when he first started working in SM Corp.

Paulino Ungos III

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Appeal Bonds and Insolvency Proceedings

Was the strict adherence to the appeal bond posting requirement correct?

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No Alternative But to Implement a Retrenchment Program

Was the dismissal from employment on the ground of retrenchment valid?

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Returning to the Same Employer

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