Paulino Ungos III

Lawyer | Law Professor | Author

Tag: separation pay

  • Employment Status the Day Before the Occurrence of the Strike or Lockout

    The employer here found a need to improve its selling and distribution system if it wanted to remain viable and competitive in the business. Thus, it decided to implement a new cost-effective and simplified scheme of selling and distributing its products, that, in turn, led to a separation of twenty seven (27) rank-and-file, regular employees and union members on the ground of redundancy.

    The employer claimed that prior to the termination of employment, it had made a careful study of how to be more cost effective in operations and competitive in the business. It recognized in the process that its multi-layered selling and distribution system had to be simplified. Thus, it determined that the phasing out of said system was necessary which, however, resulted in the termination of employment of certain employees as their positions have become redundant.

    On May 29, 2009, the employer issued notices of termination to twenty seven (27) rank-and-file, regular employees and members of the union on the ground of redundancy due to the ceding out of its selling and distribution systems to the Market Execution Partners. The termination of their employment was made effective on June 30, 2009, but the union members were no longer required to report for work as they were put on leave of absence with pay until the effectivity date of termination. The union members were also granted individual separation packages, which many of them accepted, but under protest.

    The union asserted that the new selling and distribution system adopted and implemented by the employer would result in the diminution of the union membership amounting to union busting and to a violation of the Collective Bargaining Agreement provision against contracting out of services or outsourcing of regular positions. Thus, they filed a Notice of Strike with the National Conciliation and Mediation Board on June 3, 2009 on the ground of unfair labor practice, among others. On June 11, 2009, the union conducted a strike vote where a majority decided on conducting a strike.

    On June 23, 2009, the Secretary of the Department of Labor and Employment assumed jurisdiction over the labor dispute by certifying for compulsory arbitration to the National Labor Relations Commission the issues raised in the notice of strike. The Secretary also enjoined the parties from committing any act that may further exacerbate the situation.

    At this point, the union asserted that the employer should have enjoined the termination of employment which took effect on July 1, 2009. On the other hand, the employer contended that termination of employment was a certainty, from the time it issued the notices of termination and that the status quo prior to the issuance of the assumption order included the impending termination of the employment of the 27 employees.

    On March 16, 2010, the National Labor Relations Commission ruled that the employer implemented a valid redundancy program and that it did not commit unfair labor practice. The Commission further found no violation in the dismissal of the employees from employment because their respective notices of dismissal were received prior to the assumption order of the Secretary of the Department of Labor and Employment. The Commission found that the employer did not commit an act that exacerbated the dispute.

    The Court of Appeals affirmed the Decision of the National Labor Relations Commission.

    The Supreme Court, in turn, affirmed the validity of the employer’s redundancy program.

    One issue that reached the Supreme Court was whether the employer’s implementation of the redundancy program was an unfair labor practice.

    The other issue resolved by the Court was whether the employer should have enjoined the effectivity of the termination of the employment of the 27 affected union members when the Secretary of the Department of Labor and Employment assumed jurisdiction over their labor dispute.

    The Court reiterated prevailing jurisprudence in that unfair labor practice refers to acts that violate the workers’ right to organize. The Court stated that there should be no dispute that all the prohibited acts constituting unfair labor practice in essence relate to the workers’ right to self-organization. Thus, an employer may only be held liable for unfair labor practice if it can be shown that his acts affect in whatever manner the right of his employees to self-organize. To prove the existence of unfair labor practice, substantial evidence has to be presented.

    In the present case, the Court found that the union failed to substantiate its charge of unfair labor practice against the employer. According to the Court, the consequent termination of employment due to redundancy is not per se an act of unfair labor practice amounting to union busting. For while the number of union membership was diminished due to the termination of the employment of union members, it cannot safely be said that the employer acted in bad faith in terminating their services because the termination was not without a valid reason. There was no showing that the redundancy program was motivated by ill will, bad faith or malice, or that it was conceived for the purpose of interfering with the employees’ right to self-organize.

    The findings of the National Labor Relations Commission and the Court of Appeals on said issue were affirmed.

    However, the Court found that the employer violated the return-to-work order in that the status quo was not maintained after the Secretary of the Department of Labor and Employment had assumed jurisdiction over the dispute on June 23, 2009.

    In this regard, the Court relied on Article 278 [Formerly 263] (g) of the Labor Code of the Philippnines, which provides the conditions for, and the effects of, the assumption of jurisdiction by the Secretary of the Departent of Labor and Employment over a dispute.

    The Court explained that the powers given to the Secretary of the Department of Labor and Employment under Article 278 [Formerly 263] (g) is an exercise of police power with the aim of promoting public good. In fact, the scope of the powers is limited to an industry indispensable to the national interest as determined by the Secretary of the Department of Labor and Employment. Industries that are indispensable to the national interest are those essential industries such as the generation or distribution of energy, or those undertaken by banks, hospitals, and export-oriented industries. And following Article 263 (g), the effects of the assumption of jurisdiction are the following:

    • the enjoining of an impending strike or lockout or its lifting, and
    • an order for the workers to return to work immediately and for the employer to readmit all workers under the same terms and conditions prevailing before the strike or lockout, or the return-to-work order.

    The Court added that when the Secretary of the Department of Labor and Employment exercises these powers, he is granted “great breadth of discretion” in order to find a solution to a labor dispute. The most obvious of these powers is the automatic enjoining of an impending strike or lockout or the lifting thereof if one has already taken place. Assumption of jurisdiction over a labor dispute, or as in this case the certification of the same to the National Labor Relations Commission for compulsory arbitration, always co-exists with an order for workers to return to work immediately and for employers to readmit all workers under the same terms and conditions prevailing before the strike or lockout.

    The Court then highlighted the significance of the return-to-work order, which is interlocutory, and is merely meant to maintain the status quo while the main issue is being threshed out in the proper forum. The Court stressed that the status quo is simply the status of the employment of the employees the day before the occurrence of the strike or lockout.

    According to the Court, from the date the Secretary of the Department of Labor and Employment assumes jurisdiction over a dispute until its resolution, the parties have the obligation to maintain the status quo while the main issue is being threshed out in the proper forum — which could be with Secretary of the Department of Labor and Employment or with the National Labor Relations Commission. This is to avoid any disruption to the economy and to the industry of the employer — as this is the potential effect of a strike or lockout in an industry indispensable to the national interest — while the Secretary of the Department of Labor and Employment or the National Labor Relations Commission is resolving the dispute.

    In the present case, the Court found that since the union voted for the conduct of a strike on June 11, 2009, when the Secretary of the Department of Labor and Employment issued the return-to-work order dated June 23, 2009, this meant that the status quo was the employment status of the employees on June 10, 2009. This status quo should have been maintained until the National Labor Relations Commission resolved the dispute in its Resolution dated March 16, 2010. For the Court, the said Resolution then took the place of the return-to-work order of the Secretary of the Department of Labor and Employment and the employer no longer had the duty to maintain the status quo after March 16, 2010.

    The Court accordingly awarded to the employees backwages and other benefits from July 1, 2009 until March 16, 2010, with a recomputation of their separation pay taking into consideration the termination of their employment beginning March 16, 2010.

    Further reading:

    • San Fernando Coca-Cola Rank-and-File Union v. Coca-Cola Bottlers Philippines, Inc., G.R. No. 200499, October 4, 2017.

  • But the Employee Had No Wrongful Intent

    The employee in this case was declared to have been dismissed for a valid cause. It was found that the said employee not only violated Security Bank Savings Corporation’s Code of Conduct, but also committed gross and habitual neglect of duties when he repeatedly allowed his branch manager to bring outside the bank premises checkbooks and bank forms despite knowledge of the bank’s prohibition on the matter.

    Notwithstanding the foregoing findings, separation pay was awarded the employee for the following reasons:

    • it was a measure of social justice;
    • the employee’s infractions involved violations of company policy and habitual neglect of duties, not serious misconduct;
    • the employee’s dismissal from work was not reflective of his moral character;
    • the employee did not commit a dishonest act since he readily admitted to the bank that he allowed the branch manager to bring out the subject checkbooks; and
    • although the employee acquiesced to the branch manager’s improper marketing strategy, there was no showing that his conduct was perpetrated with self-interest or for an unlawful purpose.

    The Supreme Court, however, ruled that the award of separation pay in the employee’s favor was not proper.

    Rule:

    An employee dismissed for any of the just causes enumerated under Article 2971ARTICLE 297. (Formerly ARTICLE 282) Termination by Employer. — An employer may terminate an employment for any of the following causes:

    (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

    (b) Gross and habitual neglect by the employee of his duties;

    (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

    (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and

    (e) Other causes analogous to the foregoing.     of the Labor Code of the Philippines, being causes attributable to the employee’s fault, is not, as a general rule, entitled to separation pay. According to the Court, the non-grant of such right to separation pay is premised on the reason that an erring employee should not benefit from his wrongful acts.

    Exception:

    As an exception, the grant of separation pay or financial assistance to a legally dismissed employee has been allowed in certain instances as a measure of social justice or on grounds of equity. The Court said:

    There should be no question that where it comes to such valid but not iniquitous causes as failure to comply with work standards, the grant of separation pay to the dismissed employee may be both just and compassionate, particularly if he has worked for some time with the company. It is not the employee’s fault if he does not have the necessary aptitude for his work but on the other hand the company cannot be required to maintain him just the same at the expense of the efficiency of its operations. He too may be validly replaced. Under these and similar circumstances, however, the award to the employee of separation pay would be sustainable under the social justice policy even if the separation is for cause.

    Clarification:

    The Court, nonetheless, stated that the grant of separation pay to such a dismissed employee is primarily determined by the cause of the dismissal.

    Instances excluded from the grant of separation pay based on social justice are those listed under Article 2972ARTICLE 297. (Formerly ARTICLE 282) Termination by Employer. — An employer may terminate an employment for any of the following causes:

    (a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;

    (b) Gross and habitual neglect by the employee of his duties;

    (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

    (d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; x x x

     of the Labor Code of the Philippines, namely, willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission of a crime against the employer or his family.

    However, with respect to analogous causes3ARTICLE 297. (Formerly ARTICLE 282) Termination by Employer. — An employer may terminate an employment for any of the following causes:

    (e) Other causes analogous to the foregoing.     for termination like inefficiency, drug use, and others, the social justice exception could be made to apply depending on certain considerations, such as the length of service of the employee, the amount involved, whether the act is the first offense, the performance of the employee, and the like.

    In the present case, the employee’s valid dismissal on the ground of gross and habitual neglect of duty had already been established, not having been contested on appeal.

    The Court noted that the employee was the custodian of accountable bank forms in his assigned branch and as such, was mandated to strictly comply with the monitoring procedure and disposition thereof as a security measure to avoid the attendant high risk to the bank.

    However, the employee’s repeated act of allowing the branch manager to bring checkbooks and bank forms outside of the bank’s premises violated bank policy, put the bank’s credibility and business at risk, and exposed the bank to regulatory sanction.

    The Court emphasized that the banking industry is imbued with public interest. Banks are required to possess not only ordinary diligence in the conduct of its business but extraordinary diligence in the care of its accounts and the interests of its stakeholders. The banking business is highly sensitive with a fiduciary duty towards its client and the public in general, such that central measures must be strictly observed.

    With regard to the employee’s excuse that the branch manager merely prompted him towards such ineptitude, the Court found no reason to lend credence to the same. The Court found that the employee readily admitted that he violated established company policy against bringing out checkbooks and bank forms, which meant that he was well aware of the fact that the same was prohibited. Nevertheless, he still chose to, regardless of his superior’s influence, disobey the same not only once, but on numerous occasions. All throughout, there was no showing that he questioned the acts of the branch manager; neither did he take it upon himself to report said irregularities to a higher authority.

    The Court maintained that the infractions, while not indicative of wrongful intent on the part of the employee, was, nonetheless, serious in nature when one considered the employee’s functions. The Court accordingly found no reason to award separation pay based on social justice. Said the Court: “A contrary ruling would effectively reward (the employee) for his negligent acts instead of punishing him for his offense, in observation of the principle of equity.”

    Further reading:

    • Security Bank Savings Corp. v. Singson, G.R. No. 214230, February 10, 2016.

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