Paulino Ungos III

Lawyer | Law Professor | Author

Tag: management prerogative

  • An Employer’s Last Resort

    In 1990, Cathay Pacific Airways Limited (Cathay) hired Salvacion as cabin crew. On May 19, 2007, Cathay received a report that Salvacion and other crew members were caught in possession of goods, specifically bottled water and magazines, after alighting from the aircraft.

    After receiving a written explanation from Salvacion, Cathay terminated her services effective immediately for committing serious misconduct by removing company property without authorization. According to Cathay, it could no longer repose its trust and confidence on Salvacion considering the seriousness of her violation.

    Hence, Salvacion instituted a complaint for illegal dismissal against Cathay.

    Was Salvacion validly dismissed on the ground of loss of trust and confidence?

    No. The Supreme Court ruled that Salvacion was illegally dismissed from employment.

    The Court explained that Salvacion’s termination was not commensurate to the infraction committed.

    There is loss of trust and confidence when an employee fraudulently and willfully committed acts or omission in breach of the trust reposed in her/him by the employer. Two requisites must be complied with to justify this ground for termination. First, the employee must be holding a position of trust, and second, the employer shall sufficiently establish the employee’s act that would justify loss of trust and confidence. The act must be characterized as real wherein the facts that brought about such act were clearly established, and that the employee committed the same without any justifiable reason.

    Cathay has complied with the two aforementioned requisites for loss of trust and confidence.

    The Court declared that Salvacion’s position was imbued with trust and confidence.

    The Court then found that the nature of Salvacion’s duties and obligations required the highest degree of trust and confidence because she had in her control properties of Cathay. In this regard, the Court held that Salvacion’s position was imbued with trust and confidence. According to the Court, she had in her custody and control company properties which are of significant value, and she also had the responsibility of informing the In-flight Service Manager whether there was defective or missing equipment. Moreover, she had oversight over two to four cabin crew members assigned in her section of the aircraft and rated their performance for promotion purposes. She had been entrusted with the custody and control of valuable company properties in the normal and routine exercise of her duties.

    Likewise, the Court ruled that the airline clearly demonstrated that Salvacion committed an infraction of company policy that breached its trust and confidence on her. Said the Court, pilferage of company property is an act characterized by fraud or dishonesty which may be meted with summary dismissal as specifically provided in Cathay’s Disciplinary & Grievance Policy,

    The Court stated that Cathay attached a confirmation from the bottled water brand that the batch number of the Evian water confiscated from Salvacion belonged to the batch of bottled water that was exclusively shipped to Cathay. This certainly established that the bottle of water confiscated from her was Cathay’s property. Admittedly, Salvacion transgressed Cathay’s Disciplinary and Grievance Policy by taking out the bottle of water without authorization.

    The Court stressed that Salvacion’s infraction was clearly a case of misconduct considering that it is “a 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.” It evidently eroded Cathay’s trust and confidence in her.

    However, the Court also considered that this was Salvacion’s first infraction in her 17 years of service in the airline which involved a mere bottle of water.

    Thus, although Cathay had laid down penalties for violation of its policies, the Court cautioned that all surrounding circumstances must be considered and the penalty must be commensurate to the violation committed by an employee. Termination of the services of an employee should be the employer’s last resort especially when other disciplinary actions may be imposed, considering the employee’s long years of service in the company, devoting time, effort and invaluable service in line with the employer’s goals and mission, as in Salvacion’s case.

    In the present case, the Court found that during Salvacion’s span of employment, she did not commit any infraction or was ever sanctioned except in the incident subject of the present controversy. In this regard, the Court stated that to impose a penalty as grave as dismissal for a first offense and considering the value of the property allegedly taken would be too harsh under the circumstances. The Court accordingly concluded that Salvacion was illegally dismissed from service.

    Further reading:

    • Lamadrid v. Cathay Pacific Airways Limited, G.R. No. 200658, June 23, 2021.

  • Minimum Salary Rates as a Management Prerogative

    An exclusive bargaining representative of the supervisory employees claimed for “accrued differentials and salary adjustments due to underpayment of salary” for its recently regularized members, on the basis of the employer’s Local Policy on minimum salary rates. Record showed that several supervisory employees were regularized by the employer, but the latter provided them with salary rates lower than those prescribed under the Local Policy.

    The employer refused to pay the claims and denied that the Local Policy was binding. It argued that the decision to implement any company policy is a prerogative of management.

    Can the employer refuse to implement its Local Policy relating to the minimum salary rates for regularized employees?

    No.

    The Supreme Court acknowledged that employers enjoy management prerogative when it comes to the formulation of business policies, including those that affect their employees.1Lagatic v. National Labor Relations Commission, G.R. No. 121004, January 28, 1998, 349 PHIL 172-186 and Pantoja v. SCA Hygiene Products Corporation, G.R. No. 163554, April 23, 2010, 633 PHIL 235-243 However, the Court also clarified that company policies resulting from an exercise of management prerogative can implicate the rights and obligations of employees. The Court added that they become part of the employment contract to that extent.2Duncan Association of Detailman-PTGWO v. Glaxo Wellcome Philippines, Inc., G.R. No. 162994, September 17, 2004, 481 PHIL 687-705

    In the present case, the Court interpreted the Local Policy and found that:

    • The employer has the discretion to pay newly-hired employees a salary rate lower than the minimum rate during the probationary period;
    • However, once the probationary period ends and the employee is regularized, the employer must pay the minimum rate.
    • Entitlement to the minimum rate requires mere regularization based solely on performance review, without need of merit promotion.

    The Court ruled that the employer had no discretion over the payment of the minimum rate upon regularization of an employee. Once the employee is regularized, management prerogative must give way and be subject to the limitations composed by law, the collective bargaining agreement and general principles of fair play and justice.

    For the Court, the employer should implement its Local Policy. The employees should accordingly be granted their claim for salary differentials.

    Further reading:

    • Del Monte Fresh Produce (Philippines), Inc. v. Del Monte Fresh Supervisors Union, G.R. No. 225115, January 27, 2020.

  • Considered Neither the Intent Nor the Origin of the Gift

    Alvin claimed that on January 31, 2005, he was hired as a Hotel Personnel Planner for the Crewing Department of respondent Philippine Transmarine Carriers, Inc. (PTC), a manning agency acting as agent for foreign principals and engaged in the business of sending Filipino seafarers. Record established that at the start of his employment, Alvin was given PTC’s old company handbook.

    Alvin’s first few years with PTC went well, and he was promoted to Hotel Personnel Officer in 2008. In December 2010, he was seconded by PTC to its offshore processing unit, where he was given the position of “Scheduler.” During his time with PTC, he received several awards.

    However, in 2010, was given a verbal reprimand for a violation of PTC’s policy against receiving “pasalubong“.

    In 2012, PTC revised its Code of Discipline, which indicated more clearly its prohibition against accepting any gift with collective minimum value of Php500.00 and which punished the same with dismissal from employment. Record established that Alvin was served a copy of the revised Code of Discipline.

    On October 9, 2013, Alvin, along with a co-employee Aaron, was caught on the surveillance camera accepting a brown bag from Fred, another employee. It was soon discovered that the brown bag contained two bottles of Jack Daniel’s Whiskey given by Mustafa, a friend and co-employee of Alvin from a previous employment. Alvin was confronted about the incident and he readily admitted that he and Aaron did accept the gift. However, Alvin insisted that it was not a violation of the company policy for it did not come from a crewmember but from an outsider.

    An administrative hearing was held on November 6, 2013 and attended by Alvin. In said hearing, Aaron testified that Alvin told Fred not to hand the gift as there was a surveillance camera in his office and the handing of the gift might be misinterpreted. Aaron further stated that Alvin then advised Fred to proceed to the rear section of the crewing operations office.

    On November 12, 2013, Mustafa sent an email to PTC stating that he gifted Alvin two bottles of whiskey worth US$36.00 as a gesture of goodwill and token of their friendship. Mustafa also stated that personal favor between Alvin and Fred was not the reason for this gift.

    On November 22, 2013, Alvin received a written resolution from PTC informing him of the termination of his employment. PTC also terminated the employment of Aaron.

    On January 30, 2014, Alvin filed a case for illegal dismissal with the Labor Arbiter.

    Did PTC validly dismiss Alvin from employment?

    The Supreme Court ruled that Alvin was validly dismissed by PTC.

    The Court found that Alvin’s dismissal was anchored on his violation of a specific provision in PTC’s Code of Discipline which punished two separate acts:

    • offering or accepting, whether directly or indirectly, any gift with a collective value of Php500.00 or more, regardless of who it came from; and
    • acceptance by an employee of any gift — regardless of value — from a crew member, ex-crew member, or representative of a crew member.

    The Court noted from the said provision that a violation, even on the first instance, merited the penalty of dismissal from employment.

    In the present case, Alvin admitted to receiving a gift during his tenure with PTC. However, he contended that:

    • he did not violate PTC’s Code of Discipline since he did not receive the gift from a crew member, ex-crew member, or representative of a crew member; and
    • the provision was vague, unreasonable, and unfair.

    Alvin argued that an analysis of the said provision would reveal that the same was utterly vague, without any qualification as to from whom the gift should come from and for what consideration. Alvin pointed out that the governing principles behind the PTC provision did not take into account the intent or the origin of the gift. Alvin concluded that the subject provision should have been declared to be unreasonable and unfair.

    The Court did not agree, for it determined that Alvin’s act clearly fell under the first act punished by the subject provision in PTC’s Code of Discipline. According to the Court, Alvin received a gift with a value of $36.00, which was clearly above the Php500.00 threshold under the PTC provision. The Court further stated that the subject provision in PTC’s Code of Conduct was not vague and unreasonable. Said the Court: The fact that it did not specify the origin of the gift or the purpose for which the gift was given did not automatically mean that the PTC provision was vague. It simply meant that this “no gift” policy of PTC was absolute, that is, the origin or the purpose of the gift was irrelevant. In simple terms, the mere act of offering or receiving a gift constituted a violation.

    Significantly, the Court took into account PTC’s rationale for the subject provision. According to PTC, in view of the Philippine Overseas Employment Administration’s strict requirements and the severity of the corresponding penalty imposed at the first instance, firm implementation of company rules and regulations was indispensable. PTC added that it was only just and reasonable to adopt measures to ensure that any act of its officials, employees, and representatives that would merit the cancellation of its license be imposed the supreme penalty of dismissal.

    The Court stated that company policies and regulations, unless shown to be grossly oppressive or contrary to law, are generally valid and binding on the parties and must be complied with until finally revised or amended.1 Aparente, Sr. v. National Labor Relations Commission, G.R. No. 117652, April 27, 2000. Furthermore, a company’s management prerogatives shall be upheld so long as they are exercised in good faith for the advancement of the employer’s interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements.2 Aparente, Sr. v. National Labor Relations Commission, G.R. No. 117652, April 27, 2000. In this regard, the Court ruled that the dismissal of Alvin which hinged on a provision that prescribed dismissal even on the first instance of violation, should therefore be upheld.

    In this case, the Court ruled that PTC was well within its management prerogative in terminating Alvin’s employment upon a finding of violation of its company rules. The Court stated that Alvin’s actions revealed that he was aware of his violation of PTC’s rule. By his own admission, he instructed Fred to give the gift to Aaron in the far end of the office, as he knew that there was a surveillance camera in their work area. He thus knew that he was at risk of getting caught doing an act he should not do. Despite this, he still received the gift and did not return the same to Mustafa or even turned over the same to the Human Resources Department as instructed by PTC’s Code of Discipline. For the Court, the acts of Alvin revealed willful misconduct or disobedience of company rules that further justified PTC’s decision to terminate his employment.

    Further reading:

    • De Leon v. Philippine Transmarine Carriers, Inc., G.R. No. 232194, June 19, 2019.