Paulino Ungos III

Lawyer | Law Professor | Author

Tag: liberal application

  • A Liberal Interpretation of the Rules Is Primarily Granted for the Employee’s Favor

    Sometime in 2012, several stockholders of the employer bank complained about the discrepancies in the amounts of the purchase price of stock subscriptions appearing in the original receipts as against the duplicate copies issued by the said bank. The anomaly involved several millions of pesos collected from stockholders of the employer bank which, if not corrected, will certainly tarnish the image and integrity of the latter.

    Acting on this anomaly, the employer bank conducted an investigation and confirmed the irregularities. It discovered that in the original receipts given to the stockholders, the stated price of shares ranged from Php250.00 to Php275.00, but in the duplicate copies retained by the employer bank, only Php100.00 was indicated. It also found that the original receipts were signed by the then president of the employer bank, while the duplicate copies were signed either by its then treasury head or branch manager.

    Thus, to comply with regulations mandating the prompt report of anomalies to the Bangko Sentral ng Pilipinas (BSP), the Board of Directors of the employer bank approved a Report on Crimes and Losses and directed Ariel — its Compliance Officer — to certify the same. However, Ariel refused to certify the report, reasoning that no independent investigation was conducted, and that he cannot completely validate the same for lack of material data and evidence. Ariel further remarked that he was being pressured to certify the report.

    Thereafter, Ariel claimed that instead of furnishing him the hard copies of the reports and relevant attachments to enable him to verify and certify the same, the employer bank issued him two show cause orders and put him on preventive suspension for neglect of duty. Meanwhile, the employer bank contended that several administrative hearings were scheduled to hear the side of Ariel, which he ignored.

    On March 25, 2013, Ariel filed a complaint against the employer bank for illegal suspension and money claims. This complaint was subsequently amended to include illegal dismissal, in view of the eventual termination of his employment.

    The employer bank did not file a position paper during the proceedings before the Office of the Labor Arbiter.

    The Office of the Labor Arbiter then ruled that the dismissal of Ariel was without a valid cause and that he was denied due process for having been summarily dismissed.

    The National Labor Relations Commission reversed the ruling of the Office of the Labor Arbiter. It adopted a liberal interpretation of procedural rules, relaxed the same and held that substantial justice must prevail over technicalities. Thus, it allowed the employer bank to submit countervailing evidence even on appeal. On the substantial issue, the National Labor Relations Commission found that Ariel was not illegally dismissed, since the employer bank was able to discharge the burden of proving that it had a just cause to terminate Ariel’s employment.

    The Court of Appeals affirmed the Decision of the National Labor Relations Commission. The said Court found no grave abuse of discretion on the part of the National Labor Relations Commission in relaxing its procedural rules. For the Court of Appeals, the failure of the employer bank to file a Position Paper and submit evidence was justified and satisfactorily explained, since it was neither given summons, nor notified of the scheduled preliminary conference and further hearings after Ariel filed his amended complaint. On the substantive issue, the Court of Appeals ruled that Ariel was validly dismissed for a just and valid cause.

    Ariel elevated his case to the Supreme Court to assail the decision of the Court of Appeals.

    Ariel asserted that the Court of Appeals abused its discretion amounting to lack or excess of jurisdiction:

    • in upholding the National Labor Relation Commission’s liberal application of the procedural rules in favor of the employer bank; and
    • in ruling that he was validly dismissed from employment.

    Was the liberal application of the procedural rules in favor of the employer bank warranted?

    Apart from its finding that Ariel was illegally dismissed from employment, the Supreme Court ruled that the the National Labor Relations Commission and the Court of Appeals erred in allowing the employer bank to present evidence on appeal.

    The Supreme Court reiterated established principles from jurisprudence and experts by stating that due process is a malleable concept anchored on fairness and equity. At its core is simply the reasonable opportunity for every party to be heard. What is required is not actual hearing but a real opportunity to be heard. Thus, one who refuses to appear at a hearing is not thereby denied due process if a decision is reached without waiting for him. Likewise, the requirement of due process can be satisfied by subsequent due hearing.

    In the present case, the Supreme Court ruled that the employer bank had been accorded ample opportunity to present its side during the proceedings before the Office of the Labor Arbiter based on the following findings:

    • The employer bank unjustifiably missed at least two hearing dates: that on June 4, 2013, and that on June 19, 2013. With regard to the hearing on June 19, 2013, the Supreme Court stated that the employer bank missed the hearing despite having been directed to attend by the Office of the Labor Arbiter;
    • The employer bank, at this point, had already obtained a copy of the amended complaint which would have enabled it to intelligently respond. According to the Court, the issuance of the summons would have been a mere superfluity;
    • The employer bank’s absences were unexplained; and
    • If the employer bank truly held sacred its right to due process, it should have wasted no time nor missed no opportunity to assert such right as early as during the initial stages of the proceedings. It should have at least pleaded for the Office of the Labor Arbiter to reopen the proceedings and admit its position paper, if there ever was one. At the very least, the employer bank was well-aware that a complaint was filed against it and failed to be proactive in the proceedings. The Court sensed employer bank’s cavalier attitude and remarked that it reeked of negligence and disrespect to duly instituted authorities and rules of procedures, which it could never tolerate.

    While commending the National Labor Relations Commission and the Court of Appeals in upholding substantial justice, the Supreme Court reminded them such principle must always be balanced with respect and honest efforts to comply with procedural rules.

    The Court stated that it cannot always be about substantial justice, especially to the point of disrespect and utter disregard to procedural rules. Imperative justice requires correct observance of indispensable technicalities precisely designed to ensure its proper dispensation. It cannot be overemphasized that procedural rules have their own wholesome rationale in the orderly administration of justice. Justice has to be administered according to the Rules in order to obviate arbitrariness, caprice, or whimsicality. It must never be forgotten that, generally, the application of the rules must be upheld, and the suspension or even mere relaxation of its application, is the exception.

    In this regard, the Court emphasized the policy that although in labor cases, strict adherence to the technical rules of procedure is not required, this liberal policy should still be subject to rules of reason and fairplay. The liberality of procedural rules is qualified by two requirements:

    • a party should adequately explain any delay in the submission of evidence; and
    • a party should sufficiently prove the allegations sought to be proven.

    The reason for these requirements, said the Court, is that the liberal application of the rules before quasi-judicial agencies cannot be used to perpetuate injustice and hamper the just resolution of the case. Neither is the rule on liberal construction a license to disregard the rules of procedure.

    In the present case, the Court highlighted the fact the employer bank failed to adequately explain and justify their non-participation in the proceedings before the Office of the Labor Arbiter.

    For the Court, the application of a more liberal policy was unwarranted, contrary to the rulings of the National Labor Relations Commission and the Court of Appeals.

    At any rate, the Court maintained that the employer bank in the present case is not entitled to be accorded a liberal interpretation of the rules; the same being primarily granted for the employee’s favor, and not the employer.

    The Court explained that the principles embodied by all prevailing labor rules, legislations, and regulations are derived from the Constitution, which intensely protects the working individual and deeply promotes social justice.1Article II, Section 18 of the 1987 Constitution provides: “SECTION 18. The State affirms labor as a primary social economic force. It shall protect the rights of workers and promote their welfare.” Meanwhile, Article XIII, Section 3 states: “SECTION 3. 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.” Lastly, Article 4 of PD 442 or the Labor Code, provides: Article 4. Construction in favor of labor. — All doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.” The measures embedded in our legal system which accord specific protection to labor stems from the reality that normally, the laborer stands on unequal footing as opposed to an employer. Indeed, the labor force is a special class that is constitutionally protected because of the inequality between capital and labor. In fact, labor proceedings are so informally and, as much as possible, amicably conducted and without a real need for counsel, perhaps in recognition of the sad fact that a common employee does not or have extremely limited means to secure legal services nor the mettle to endure the extremely antagonizing and adversarial atmosphere of a formal legal battle. Thus, in the common scenario of an unaided worker, who does not possess the necessary knowledge to protect his rights, pitted against his employer in a labor proceeding, the former cannot be expected to be perfectly compliant at all times with every single twist and turn of legal technicality. The same, however, cannot be said for the latter, who more often than not, has the capacity to hire the services of a counsel. As an additional aid therefore, a liberal interpretation of the technical rules of procedure may be allowed if only to further bridge the gap between an employee and an employer.

    The Court clarified that it is not saying that the rules may never be relaxed in favor of the employer, and that every labor dispute will be automatically decided in favor of labor. In certain cases, of course, a liberal approach to the rules may be had even if it favors the employer. Such allowance, however, must be measured against standards stricter than that imposed against the worker, and only in compelling and justified cases where the employer will definitely suffer injustice should such liberal interpretation be disallowed. The Supreme Court stated that such was not the situation of the employer bank in the present case.

    Further reading:

    • Reyes v. Rural Bank of San Rafael (Bulacan), Inc., G.R. No. 230597, March 23, 2022.

  • Judicious Admission of Evidence on Appeal

    Sheila was a sales clerk at Marivin’s Boutique and Merchandise outlet in La Union.

    Sheila claimed that on February 6, 2007, she was summarily dismissed from employment without just cause and due process. Hence, she filed a complaint for illegal dismissal against Marivin.

    Marivin denied illegally dismissing Sheila. She contended that despite infractions amounting to breach of trust and confidence, Sheila was never terminated from the service and had instead abandoned her work.

    The Office of the Executive Labor Arbiter declared that Sheila was illegally dismissed from employment and that she did not abandon her work since she even reported for work on February 6, 2007 despite the fact that her notice of termination was already posted in the premises of the outlet. Said Office also found that Sheila was not accorded procedural due process, as Marivin did not conduct any notice or investigation and did not allow her to explain her side. Thus, the Office of the Executive Labor Arbiter awarded Sheila backwages and separation pay.

    Marivin appealed to the National Labor Relations Commission and mentioned the following infractions committed by Sheila:

    • Failure to issue receipts for payments made by the clients of the boutique;
    • Listing of certain fully-paid customers as having uncollected payments;
    • Borrowing of money from business clients and offsetting her loan against the receivables of the business from said clients;
    • Failure to reflect in the inventory a total of 3,945 items amounting to P396,728.00;
    • Failure to remit cash paid by customers totalling P62,875.00; and
    • Failure to explain missing items amounting to P224,699.00.

    Marivin added that Sheila simply left the key to the outlet and never came back.

    Marivin stated that she initiated a complaint with the local police authorities wherein Sheila was invited to explain. Sheila appeared but failed to identify the customers whom she reported to have availed of items on credit.

    Marivin contended that there was no illegal dismissal to speak of. Marivin argued that there was sufficient evidence that Sheila committed serious misconduct resulting in loss of trust and confidence. According to Marivin, the Office of the Executive Labor Arbiter failed to appreciate affidavits of customers, Sheila’s promissory note, and inventory ledgers duly signed by Sheila, which all established her serious misconduct warranting her dismissal from employment on the ground of loss of trust and confidence.

    The National Labor Relations Commission dismissed Marivin’s appeal for lack of merit.

    The Commission pointed out that it could not entertain Marivin’s allegations that Sheila committed acts of serious misconduct since Marivin was not allowed to change her theory on appeal, i.e., from abandonment of work to a valid dismissal.

    The Commission noted that no inventory ledgers allegedly signed by Sheila were presented for the Office of the Executive Labor Arbiter’s consideration. Also, the Commission found no proof that Sheila was responsible for the missing stocks.

    The Commission also noted discrepancies between the alleged amount lost as presented by Marivin. It even found that Sheila was on leave during the period when Marivin supposedly incurred losses, which cast doubt on the veracity of the audit report.

    In addition, the Commission noticed that the copies of order receipts allegedly issued by Sheila to fictitious persons did not bear her signature while some bore only her printed name.

    Finally, the Commission disregarded the itemized list of lost stocks with the first page bearing Sheila’s signature because it was belatedly submitted only in Marivin’s motion for reconsideration.

    The Court of Appeals ruled that Marivin did not change her theory on appeal and that the allegation of “loss of trust and confidence” as a ground for Sheila’s termination was raised as an issue before the Office of the Executive Labor Arbiter.

    The Court of Appeals found that in Marivin’s Position Paper, the theory of “loss of trust and confidence” was alluded to when Marivin presented the inventory conducted by the bookkeeper showing that various stocks were missing under Sheila’s custody. The Court of Appeals further found that Marivin did not confine her arguments to “abandonment” and that she emphasized Sheila’s violation of business policies.

    Moreover, the Court of Appeals held that the National Labor Relations Commission is not precluded from receiving evidence on appeal as technical rules of evidence are not binding in labor cases. Thus, the Court of Appeals stated that even if the evidence was not submitted before the Office of the Executive Labor Arbiter, due introduction of evidence before the Commission should merit its admission in keeping with fairness and equity.

    The Court of Appeals then ruled that there was just cause for Sheila’s dismissal, i.e., loss of trust and confidence. It noted that Marivin established by substantial evidence the following infractions committed by Sheila:

    • appropriation for her personal use daily sales amounting to P6,025.00;
    • losing various stocks under her care; and
    • issuing items to fictitious customers.

    The Court of Appeals explained that as a sales clerk, Sheila occupied a position of trust and confidence since she was tasked to handle the stocks/inventory and funds of the business.

    Nonetheless, the Court of Appeals highlighted the failure of Marivin to notify Sheila of her infractions and give her a chance to explain. Sheila was awarded nominal damages in the amount of P30,000.00.

    Incidentally, record showed that Sheila died during the pendency of the case and was substituted by her parents, Florentino R. Maynes, Sr. and Shirley M. Maynes (Spouses Maynes) when the case reached the Supreme Court.

    Was Sheila validly dismissed from employment?

    The Supreme Court ruled in the affirmative.

    The Court began by recognizing that the validity of Sheila’s dismissal from employment entailed a determination of whether Marivin’s evidence submitted before the National Labor Relations Commission should be considered.

    The Court highlighted the well-settled rule that the National Labor Relations Commission is not precluded from receiving evidence, even for the first time on appeal, because technical rules of procedure are not binding in labor cases. The Court stated that labor officials are mandated by the Labor Code of the Philippines to use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process. The Court added that even if the evidence was not submitted to the Office of the Labor Arbiter, the fact that it was duly introduced on appeal to the National Labor Relations Commission is enough basis for the latter to be more judicious in admitting the same, instead of falling back on the mere technicality that said evidence can no longer be considered on appeal. Certainly, the Court said, the first course of action would be more consistent with equity and the basic notions of fairness.

    Here, the Court held that Marivin could present evidence during the proceedings before the National Labor Relations Commission. It clarified that Sheila was likewise allowed to present controverting evidence thereto. However, the Court found that Sheila did not do so.

    The Court stressed that the pieces of documentary evidence submitted by Marivin before the National Labor Relations Commission are material to establish her contention that Sheila committed infractions which led to the loss of trust and confidence reposed upon her. The Court specifically considered the signatures or handwritten notations of Sheila in certain documents as relevant since these rebutted Sheila’s denial. In fine, the Court stated that justice and equity calls for the admission and appreciation of such evidence.

    The Supreme Court then agreed with the pronouncement of the Court of Appeals that Marivin did not change her theory on appeal. The Supreme Court found that in her Position Paper, Marivin already put forth the argument of breach of trust being a ground for Sheila’s dismissal from employment and was able to attach affidavits and copies of the inventory in order to substantiate her claim of loss of trust and confidence. Although the Court noticed that Marivin was unable to adequately discuss the reasons for the loss of trust and confidence, the fact remained that she argued her position before the Office of the Executive Labor Arbiter and elaborated the same on appeal with the National Labor Relations Commission by appending additional relevant documents.

    With regard to employment termination, the Supreme Court mentioned the settled rule that two requisites must concur to constitute a valid dismissal from employment:

    • the dismissal must be for any of the causes expressed in Article 297 of the Labor Code of the Philippines; and
    • the employee must be given an opportunity to be heard and to defend himself.

    On valid causes for dismissal, the Court centered on Article 297 (c) of the Labor Code of the Philippines, which refers to “fraud or willful breach by the employee of the trust reposed in [him/her] by [his/her] employer” or simply termed as “loss of trust and confidence.”

    According to the Court, 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; and
    • there must be an act that would justify the loss of trust and confidence.

    In addition to these requisites, such loss of trust relates to the employee’s performance of duties.

    In the present case, the Court found that the position of Sheila was clearly imbued with trust and confidence in that she was tasked to:

    • perform overall supervision and control of the outlet including receipt of different items from the main office of the business;
    • safekeep and remit daily sales of the business;
    • prepare inventory;
    • record items released on credit and issue receipts for payments made;
    • give items on account or credit to recognized local dealers; and
    • exercise discretion on the quantity and manner of payment of items released on credit to local dealers or retailers.

    On the other hand, the Court found that Marivin submitted certain documents:

    • a “Stocks Lost List” which bore Sheila’s signature and indicated that certain stocks were lost while Sheila was the sales clerk managing the outlet;
    • a list signed by Shiela relating to lost payments or products (totalling P88,423.00) which she could not locate or explain; and
    • inventory/ledgers and order slips which contained fictitious or non-existent customers.

    The Court noted that Sheila neither offered any justification for the uncovered anomalies nor denied the authenticity of her signature in a promissory note wherein she acknowledged taking cash for certain sales and losing stocks.

    The Court reiterated that Article 297 of the Labor Code of the Philippines lists loss of trust and confidence in an employee, who is entrusted with fiducial matters, or with the custody, handling, or care and protection of the employer’s property, as a just cause for an employee’s dismissal. The right to terminate employment based on just and authorized causes stems from a similarly protected constitutional guarantee to employers of reasonable return on investments.

    Based on the circumstances, the Court concluded that Marivin dismissed Sheila with just cause.

    However, the Court discovered that Sheila was denied procedural due process.

    The Court explained that procedural due process consists of the twin requirements of notice and hearing. The employer must furnish the employee with two (2) written notices before the termination of employment can be effected:

    • the first apprises the employee of the particular acts or omissions for which his dismissal is sought; and
    • the second informs the employee of the employer’s decision to dismiss him.

    In the present case, the Court found no evidence that Sheila was given any notice to explain or the opportunity to be heard before her dismissal. On the other hand, the Court found that Sheila only learned about her dismissal from service when notices stating her termination from work were posted in the premises of the outlet.

    The Court accordingly affirmed the award of nominal damages in Sheila’s favor.

    The Court clarified that where the dismissal is for a just cause, 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. The indemnity to be imposed should be stiffer to discourage the abhorrent practice of “dismiss now, pay later.” 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.

    Further reading:

    • Spouses Maynes v. Oreiro, G.R. No. 206109, November 25, 2020.