G.R. No.

158693 November 17, 2004

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

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

DECISION

YNARES-SANTIAGO, J.:

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

Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental and
construction materials. It employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on
January 2, 19922 until February 23, 1999 when they were dismissed for abandonment of work.

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

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

1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93

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

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

SO ORDERED.4

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work, and were not
entitled to backwages and separation pay. The other money claims awarded by the Labor Arbiter were also denied for lack of
evidence.5
Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals.

The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned their
employment but ordered the payment of money claims. The dispositive portion of the decision reads:

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

SO ORDERED.6

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

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

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

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

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

To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the employer to give
the employee the opportunity to be heard and to defend himself.13 Article 282 of the Labor Code enumerates the just causes for
termination by the employer: (a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer
or the latter's representative in connection with the employee's work; (b) gross and habitual neglect by the employee of his
duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or his duly authorized
representative; (d) commission of a crime or offense by the employee against the person of his employer or any immediate
member of his family or his duly authorized representative; and (e) other causes analogous to the foregoing.

Abandonment is the deliberate and unjustified refusal of an employee to resume his employment.14 It is a form of neglect of duty,
hence, a just cause for termination of employment by the employer.15 For a valid finding of abandonment, these two factors should
be present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever
employer-employee relationship, with the second as the more determinative factor which is manifested by overt acts from which it
may be deduced that the employees has no more intention to work. The intent to discontinue the employment must be shown by
clear proof that it was deliberate and unjustified.16
In February 1999, petitioners were frequently absent having subcontracted for an installation work for another company.
Subcontracting for another company clearly showed the intention to sever the employer-employee relationship with private
respondent. This was not the first time they did this. In January 1996, they did not report for work because they were working for
another company. Private respondent at that time warned petitioners that they would be dismissed if this happened again.
Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee relationship. The record of
an employee is a relevant consideration in determining the penalty that should be meted out to him.17

In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented from work without leave or permission from
his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his job. We should apply that rule
with more reason here where petitioners were absent because they were already working in another company.

The law imposes many obligations on the employer such as providing just compensation to workers, observance of the
procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also recognizes the
right of the employer to expect from its workers not only good performance, adequate work and diligence, but also good conduct19
and loyalty. The employer may not be compelled to continue to employ such persons whose continuance in the service will
patently be inimical to his interests.20

After establishing that the terminations were for a just and valid cause, we now determine if the procedures for dismissal were
observed.

The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the
Labor Code:

Standards of due process: requirements of notice. – In all cases of termination of employment, the following
standards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said
employee reasonable opportunity within which to explain his side;

(b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee
so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented
against him; and

(c) A written notice of termination served on the employee indicating that upon due consideration of all the
circumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employee's last known address.

Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals based on
authorized causes involve grounds under the Labor Code which allow the employer to terminate employees. A termination for an
authorized cause requires payment of separation pay. When the termination of employment is declared illegal, reinstatement and
full backwages are mandated under Article 279. If reinstatement is no longer possible where the dismissal was unjust, separation
pay may be granted.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written
notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice
specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to
be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284,
the employer must give the employee and the Department of Labor and Employment written notices 30 days prior to the
effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282 of the
Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process was observed;
(2) the dismissal is without just or authorized cause but due process was observed; (3) the dismissal is without just or authorized
cause and there was no due process; and (4) the dismissal is for just or authorized cause but due process was not observed.

In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability.

In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is entitled to
reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits
or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the
dismissal. However, the employer should be held liable for non-compliance with the procedural requirements of due process.

The present case squarely falls under the fourth situation. The dismissal should be upheld because it was established that the
petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the notice
requirements and instead argued that sending notices to the last known addresses would have been useless because they did
not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse because the law mandates the twin
notice requirements to the employee's last known address.21 Thus, it should be held liable for non-compliance with the procedural
requirements of due process.

A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings on employment
termination in the light of Serrano v. National Labor Relations Commission.22

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the 1989 case of
Wenphil Corp. v. National Labor Relations Commission,23 we reversed this long-standing rule and held that the dismissed
employee, although not given any notice and hearing, was not entitled to reinstatement and backwages because the dismissal
was for grave misconduct and insubordination, a just ground for termination under Article 282. The employee had a violent
temper and caused trouble during office hours, defying superiors who tried to pacify him. We concluded that reinstating the
employee and awarding backwages "may encourage him to do even worse and will render a mockery of the rules of discipline
that employees are required to observe."24 We further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has no
right to return to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right
to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an
employee must be for just or authorized cause and after due process. Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an
investigation as required by law before dismissing petitioner from employment. Considering the circumstances of
this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award
depends on the facts of each case and the gravity of the omission committed by the employer.25

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due process
requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the employee. This became
known as the Wenphil or Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the violation by the employer
of the notice requirement in termination for just or authorized causes was not a denial of due process that will nullify the
termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is
judicially declared that the dismissal was for a just or authorized cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases involving dismissals
without requisite notices. We concluded that the imposition of penalty by way of damages for violation of the notice requirement
was not serving as a deterrent. Hence, we now required payment of full backwages from the time of dismissal until the time the
Court finds the dismissal was for a just or authorized cause.

Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code which states:

ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate the services of
an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full
backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the
time his compensation was withheld from him up to the time of his actual reinstatement.

This means that the termination is illegal only if it is not for any of the justified or authorized causes provided by law. Payment of
backwages and other benefits, including reinstatement, is justified only if the employee was unjustly dismissed.

The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted us to revisit the
doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based on moral
principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a civilized society as
conceived by our entire history. Due process is that which comports with the deepest notions of what is fair and right and just.26 It
is a constitutional restraint on the legislative as well as on the executive and judicial powers of the government provided by the
Bill of Rights.

Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid and authorized
causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal. Procedural due process
requirements for dismissal are found in the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of
the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order Nos. 9 and 10.27 Breaches of these due process
requirements violate the Labor Code. Therefore statutory due process should be differentiated from failure to comply with
constitutional due process.

Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil or
administrative proceedings; while statutory due process found in the Labor Code and Implementing Rules protects employees
from being unjustly terminated without just cause after notice and hearing.

In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just and valid cause but the employee was not
accorded due process. The dismissal was upheld by the Court but the employer was sanctioned. The sanction should be in the
nature of indemnification or penalty, and depends on the facts of each case and the gravity of the omission committed by the
employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee was not given due process, the failure
did not operate to eradicate the just causes for dismissal. The dismissal being for just cause, albeit without due process, did not
entitle the employee to reinstatement, backwages, damages and attorney's fees.

Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National Labor Relations Commission,30 which
opinion he reiterated in Serrano, stated:

C. Where there is just cause for dismissal but due process has not been properly observed by an employer, it
would not be right to order either the reinstatement of the dismissed employee or the payment of backwages to
him. In failing, however, to comply with the procedure prescribed by law in terminating the services of the
employee, the employer must be deemed to have opted or, in any case, should be made liable, for the payment
of separation pay. It might be pointed out that the notice to be given and the hearing to be conducted generally
constitute the two-part due process requirement of law to be accorded to the employee by the employer.
Nevertheless, peculiar circumstances might obtain in certain situations where to undertake the above steps would
be no more than a useless formality and where, accordingly, it would not be imprudent to apply the res ipsa
loquitur rule and award, in lieu of separation pay, nominal damages to the employee. x x x.31

After carefully analyzing the consequences of the divergent doctrines in the law on employment termination, we believe that in
cases involving dismissals for cause but without observance of the twin requirements of notice and hearing, the better rule is to
abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on
the employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be able to
achieve a fair result by dispensing justice not just to employees, but to employers as well.

The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due
process may have far-reaching consequences.

This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due
process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity
invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-
employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that
operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage
investments that can generate employment in the local economy.

The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. The commitment of
this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right, as in this case.32
Certainly, an employer should not be compelled to pay employees for work not actually performed and in fact abandoned.

The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or malfeasance
and whose continued employment is patently inimical to the employer. The law protecting the rights of the laborer authorizes
neither oppression nor self-destruction of the employer.33

It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if the
requirements of due process were complied with, would undoubtedly result in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice Clause of the
Constitution. Social justice, as the term suggests, should be used only to correct an injustice. As the eminent Justice Jose P.
Laurel observed, social justice must be founded on the recognition of the necessity of interdependence among diverse units of a
society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of
all persons, and of bringing about "the greatest good to the greatest number."34
This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases. Social justice is
not based on rigid formulas set in stone. It has to allow for changing times and circumstances.

Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-management relations and dispense justice
with an even hand in every case:

We have repeatedly stressed that social justice – or any justice for that matter – is for the deserving, whether he
be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt
the balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. But
never is it justified to give preference to the poor simply because they are poor, or reject the rich simply because
they are rich, for justice must always be served for the poor and the rich alike, according to the mandate of the
law.35

Justice in every case should only be for the deserving party. It should not be presumed that every case of illegal dismissal would
automatically be decided in favor of labor, as management has rights that should be fully respected and enforced by this Court.
As interdependent and indispensable partners in nation-building, labor and management need each other to foster productivity
and economic growth; hence, the need to weigh and balance the rights and welfare of both the employee and employer.

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal,
or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights, as
ruled in Reta v. National Labor Relations Commission.36 The indemnity to be imposed should be stiffer to discourage the
abhorrent practice of "dismiss now, pay later," which we sought to deter in the Serrano ruling. The sanction should be in the
nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of
the due process violation of the employer.

Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or invaded by
the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by
him.37

As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an employer is liable to pay indemnity in the
form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the employer fails to comply
with the requirements of due process. The Court, after considering the circumstances therein, fixed the indemnity at P2,590.50,
which was equivalent to the employee's one month salary. This indemnity is intended not to penalize the employer but to
vindicate or recognize the employee's right to statutory due process which was violated by the employer.39

The violation of the petitioners' right to statutory due process by the private respondent warrants the payment of indemnity in the
form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account
the relevant circumstances.40 Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve to deter employers from future violations of the statutory due process
rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under
the Labor Code and its Implementing Rules.

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

We are not persuaded.

We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for petitioners' holiday pay,
service incentive leave pay and 13th month pay without deductions.
As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege non-payment,
the general rule is that the burden rests on the employer to prove payment, rather than on the employee to prove non-payment.
The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents – which
will show that overtime, differentials, service incentive leave and other claims of workers have been paid – are not in the
possession of the worker but in the custody and absolute control of the employer.41

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

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

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

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

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

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

No costs.

SO ORDERED.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-Martinez, Corona, Carpio-Morales,
Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia, JJ., concur.
 Republic of the Philippines
SUPREME COURT

EN BANC

G.R. No. 151378. March 28, 2005

JAKA FOOD PROCESSING CORPORATION, Petitioners,

vs.
DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL
LESCANO and JONATHAN CAGABCAB, Respondents.

DECISION

GARCIA, J.:

Assailed and sought to be set aside in this appeal by way of a petition for review on certiorari under
rule 45 of the Rules of Court are the following issuances of the Court of Appeals in CA-G.R. SP. No.
59847, to wit:

1. Decision dated 16 November 2001,1 reversing and setting aside an earlier decision of the
National Labor Relations Commission (NLRC); and

2. Resolution dated 8 January 2002,2 denying petitioner’s motion for reconsideration.

The material facts may be briefly stated, as follows:

Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and
Jonathan Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA, for
short) until the latter terminated their employment on August 29, 1997 because the corporation was
"in dire financial straits". It is not disputed, however, that the termination was effected without JAKA
complying with the requirement under Article 283 of the Labor Code regarding the service of a
written notice upon the employees and the Department of Labor and Employment at least one (1)
month before the intended date of termination.

In time, respondents separately filed with the regional Arbitration Branch of the National Labor
Relations Commission (NLRC) complaints for illegal dismissal, underpayment of wages and
nonpayment of service incentive leave and 13th month pay against JAKA and its HRD Manager,
Rosana Castelo.

After due proceedings, the Labor Arbiter rendered a decision3 declaring the termination illegal and
ordering JAKA and its HRD Manager to reinstate respondents with full backwages, and separation
pay if reinstatement is not possible. More specifically the decision dispositively reads:

WHEREFORE, judgment is hereby rendered declaring as illegal the termination of complainants and
ordering respondents to reinstate them to their positions with full backwages which as of July 30,
1998 have already amounted to P339,768.00. Respondents are also ordered to pay complainants
the amount of P2,775.00 representing the unpaid service incentive leave pay of Parohinog, Lescano
and Cagabcab and the amount of P19,239.96 as payment for 1997 13th month pay as alluded in the
above computation.

If complainants could not be reinstated, respondents are ordered to pay them separation pay
equivalent to one month salary for very (sic) year of service.

SO ORDERED.

Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30,
1999,4 affirmed in toto that of the Labor Arbiter.

JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another decision
dated January 28, 2000,5 this time modifying its earlier decision, thus:

WHEREFORE, premises considered, the instant motion for reconsideration is hereby GRANTED
and the challenged decision of this Commission [dated] 30 August 1999 and the decision of the
Labor Arbiter xxx are hereby modified by reversing an setting aside the awards of backwages,
service incentive leave pay. Each of the complainants-appellees shall be entitled to a separation pay
equivalent to one month. In addition, respondents-appellants is (sic) ordered to pay each of the
complainants-appellees the sum of P2,000.00 as indemnification for its failure to observe due
process in effecting the retrenchment.

SO ORDERED.

Their motion for reconsideration having been denied by the NLRC in its resolution of April 28,
2000,6 respondents went to the Court of Appeals via a petition for certiorari, thereat docketed as CA-
G.R. SP No. 59847.

As stated at the outset hereof, the Court of Appeals, in a decision dated November 16, 2000,
applying the doctrine laid down by this Court in Serrano vs. NLRC,7 reversed and set aside the
NLRC’s decision of January 28, 2000, thus:

WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations Commission
is REVERSEDand SET ASIDE and another one entered ordering respondent JAKA Foods
Processing Corporation to pay petitioners separation pay equivalent to one (1) month salary, the
proportionate 13th month pay and, in addition, full backwages from the time their employment was
terminated on August 29, 1997 up to the time the Decision herein becomes final.

SO ORDERED.

This time, JAKA moved for a reconsideration but its motion was denied by the appellate court in its
resolution of January 8, 2002.

Hence, JAKA’s present recourse, submitting, for our consideration, the following issues:

"I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED ‘FULL

BACKWAGES’ TO RESPONDENTS.

II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY
TO RESPONDENTS".
As we see it, there is only one question that requires resolution, i.e. what are the legal implications of
a situation where an employee is dismissed for cause but such dismissal was effected without the
employer’s compliance with the notice requirement under the Labor Code.

This, certainly, is not a case of first impression. In the very recent case of Agabon vs. NLRC,8 we
had the opportunity to resolve a similar question. Therein, we found that the employees committed a
grave offense, i.e., abandonment, which is a form of a neglect of duty which, in turn, is one of the
just causes enumerated under Article 282 of the Labor Code. In said case, we upheld the validity of
the dismissal despite non-compliance with the notice requirement of the Labor Code. However, we
required the employer to pay the dismissed employees the amount of P30,000.00, representing
nominal damages for non-compliance with statutory due process, thus:

"Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process
should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should
indemnify the employee for the violation of his statutory rights, as ruled in Reta vs. National Labor
Relations Commission. The indemnity to be imposed should be stiffer to discourage the abhorrent
practice of ‘dismiss now, pay later,’ which we sought to deter in the Serrano ruling. The sanction
should be in the nature of indemnification or penalty and should depend on the facts of each case,
taking into special consideration the gravity of the due process violation of the employer.

xxx xxx xxx

The violation of petitioners’ right to statutory due process by the private respondent warrants the
payment of indemnity in the form of nominal damages. The amount of such damages is addressed
to the sound discretion of the court, taking into account the relevant circumstances. Considering
the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We
believe this form of damages would serve to deter employers from future violations of the statutory
due process rights of employees. At the very least, it provides a vindication or recognition of this
fundamental right granted to the latter under the Labor Code and its Implementing Rules,"
(Emphasis supplied).

The difference between Agabon and the instant case is that in the former, the dismissal was based
on a just cause under Article 282 of the Labor Code while in the present case, respondents were
dismissed due to retrenchment, which is one of the authorized causes under Article 283 of the same
Code.

At this point, we note that there are divergent implications of a dismissal for just cause under Article
282, on one hand, and a dismissal for authorized cause under Article 283, on the other.

A dismissal for just cause under Article 282 implies that the employee concerned has committed, or
is guilty of, some violation against the employer, i.e. the employee has committed some serious
misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his
duties. Thus, it can be said that the employee himself initiated the dismissal process.

On another breath, a dismissal for an authorized cause under Article 283 does not necessarily
imply delinquency or culpability on the part of the employee. Instead, the dismissal process is
initiated by the employer’s exercise of his management prerogative, i.e. when the employer opts to
install labor saving devices, when he decides to cease business operations or when, as in this case,
he undertakes to implement a retrenchment program.

The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal for
authorized cause under Article 283 is further reinforced by the fact that in the first, payment of
separation pay, as a rule, is not required, while in the second, the law requires payment of
separation pay.9

For these reasons, there ought to be a difference in treatment when the ground for dismissal is one
of the just causes under Article 282, and when based on one of the authorized causes under Article
283.

Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but
the employer failed to comply with the notice requirement, the sanction to be imposed upon him
should be tempered because the dismissal process was, in effect, initiated by an act imputable to
the employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the
employer failed to comply with the notice requirement, the sanction should be stiffer because the
dismissal process was initiated by the employer’s exercise of his management prerogative.

The records before us reveal that, indeed, JAKA was suffering from serious business losses at the
time it terminated respondents’ employment. As aptly found by the NLRC:

"A careful study of the evidence presented by the respondent-appellant corporation shows that the
audited Financial Statement of the corporation for the periods 1996, 1997 and 1998 were submitted
by the respondent-appellant corporation, The Statement of Income and Deficit found in the Audited
Financial Statement of the respondent-appellant corporation clearly shows the following in 1996, the
deficit of the respondent-appellant corporation was P188,218,419.00 or 94.11% of the stockholder’s
[sic] equity which amounts to P200,000,000.00. In 1997 when the retrenchment program of
respondent-appellant corporation was undertaken, the deficit ballooned to P247,222,569.00 or
123.61% of the stockholders’ equity, thus a capital deficiency or impairment of equity ensued. In
1998, the deficit grew to P355,794,897.00 or 177% of the stockholders’ equity. From 1996 to 1997,
the deficit grew by more that (sic) 31% while in 1998 the deficit grew by more than 47%.

The Statement of Income and Deficit of the respondent-appellant corporation to prove its alleged
losses was prepared by an independent auditor, SGV & Co. It convincingly showed that the
respondent-appellant corporation was in dire financial straits, which the complainants-appellees
failed to dispute. The losses incurred by the respondent-appellant corporation are clearly substantial
and sufficiently proven with clear and satisfactory evidence. Losses incurred were adequately shown
with respondent-appellant’s audited financial statement. Having established the loss incurred by the
respondent-appellant corporation, it necessarily necessarily (sic) follows that the ground in support
of retrenchment existed at the time the complainants-appellees were terminated. We cannot
therefore sustain the findings of the Labor Arbiter that the alleged losses of the respondent-appellant
was [sic] not well substantiated by substantial proofs. It is therefore logical for the corporation to
implement a retrenchment program to prevent further losses."10

Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing finding of the
NLRC which, incidentally, was also affirmed by the Court of Appeals.

It is, therefore, established that there was ground for respondents’ dismissal, i.e., retrenchment,
which is one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it
is established that JAKA failed to comply with the notice requirement under the same Article.
Considering the factual circumstances in the instant case and the above ratiocination, we, therefore,
deem it proper to fix the indemnity at P50,000.00.

We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay
respondents separation pay equivalent to one (1) month salary for every year of service. This is
because in Reahs Corporation vs. NLRC,11we made the following declaration:
"The rule, therefore, is that in all cases of business closure or cessation of operation or undertaking
of the employer, the affected employee is entitled to separation pay. This is consistent with the state
policy of treating labor as a primary social economic force, affording full protection to its rights as
well as its welfare. The exception is when the closure of business or cessation of operations is
due to serious business losses or financial reverses; duly proved, in which case, the right of
affected employees to separation pay is lost for obvious reasons.xxx". (Emphasis supplied)

WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution
of the Court of Appeals respectively dated November 16, 2001 and January 8, 2002 are hereby SET
ASIDE and a new one entered upholding the legality of the dismissal but ordering petitioner to pay
each of the respondents the amount of P50,000.00, representing nominal damages for non-
compliance with statutory due process.

SO ORDERED.

Davide, Jr., C.J., Quisumbing, Ynares-Santiago, Sandoval-Gutierrez, Carpio, Austria-Martinez,

Corona, Carpio-Morales, Callejo, Sr., Azcuna, and Chico-Nazario, JJ., concur.

Puno, J., reiterate dissent in Agaban & Serrano.

Panganiban, J., reiterate dissent in Agaban v. NLRC, GR 158693, Nov. 17, 2004, and Serrano v.
NLRC, 380 Phil. 416, Jan. 27, 2000.

Tinga, J., only in the result. See separate opinion.

 Republic of the Philippines
SUPREME COURT
Manila

EN BANC

G.R. No. 192571 July 23, 2013

ABBOTT LABORATORIES, PHILIPPINES, CECILLE A. TERRIBLE, EDWIN D. FEIST, MARIA

OLIVIA T. YABUTMISA, TERESITA C. BERNARDO, AND ALLAN G. ALMAZAR, Petitioners,
vs.
PEARLIE ANN F. ALCARAZ, Respondent.

DECISION

PERLAS-BERNABE, J.:

Assailed in this petition for review on certiorari1 are the Decision2 dated December 10,2009 and
Resolution3 dated June 9, 2010 of the Court of Appeals (CA) in CA-G.R. SP No. 101045 which
pronounced that the National Labor Relations Commission (NLRC) did not gravely abuse its
discretion when it ruled that respondent Pearlie Ann F. Alcaraz (Alcaraz) was illegally dismissed
from her employment.

The Facts

On June 27, 2004, petitioner Abbott Laboratories, Philippines (Abbott) caused the publication in a
major broadsheet newspaper of its need for a Medical and Regulatory Affairs Manager (Regulatory
Affairs Manager) who would: (a) be responsible for drug safety surveillance operations, staffing, and
budget; (b) lead the development and implementation of standard operating procedures/policies for
drug safety surveillance and vigilance; and (c) act as the primary interface with internal and external
customers regarding safety operations and queries.4 Alcaraz - who was then a Regulatory Affairs
and Information Manager at Aventis Pasteur Philippines, Incorporated (another pharmaceutical
company like Abbott) – showed interest and submitted her application on October 4, 2004.5

On December 7, 2004, Abbott formally offered Alcaraz the abovementioned position which was an
item under the company’s Hospira Affiliate Local Surveillance Unit (ALSU) department.6 In Abbott’s
offer sheet.7 it was stated that Alcaraz was to be employed on a probationary basis.8 Later that day,
she accepted the said offer and received an electronic mail (e-mail) from Abbott’s Recruitment
Officer, petitioner Teresita C. Bernardo (Bernardo), confirming the same. Attached to Bernardo’s e-
mail were Abbott’s organizational chart and a job description of Alcaraz’s work.9

On February 12, 2005, Alcaraz signed an employment contract which stated, inter alia, that she was
to be placed on probation for a period of six (6) months beginning February 15, 2005 to August 14,
2005. The said contract was also signed by Abbott’s General Manager, petitioner Edwin Feist
(Feist):10

PROBATIONARY EMPLOYMENT

Dear Pearl,
After having successfully passed the pre-employment requirements, you are hereby appointed as
follows:

Position Title : Regulatory Affairs Manager

Department : Hospira

The terms of your employment are:

Nature of Employment : Probationary

Effectivity : February 15, 2005 to August 14, 2005

Basic Salary : ₱110,000.00/ month

It is understood that you agree to abide by all existing policies, rules and regulations of the company,
as well as those, which may be hereinafter promulgated.

Unless renewed, probationary appointment expires on the date indicated subject to earlier
termination by the Company for any justifiable reason.

If you agree to the terms and conditions of your employment, please signify your conformity below
and return a copy to HRD.

Welcome to Abbott!

Very truly yours,

Sgd.
EDWIN D. FEIST
General Manager

CONFORME:

Sgd.
PEARLIE ANN FERRER-ALCARAZ

During Alcaraz’s pre-employment orientation, petitioner Allan G. Almazar (Almazar), Hospira’s

Country Transition Manager, briefed her on her duties and responsibilities as Regulatory Affairs
Manager, stating that: (a) she will handle the staff of Hospira ALSU and will directly report to
Almazar on matters regarding Hopira’s local operations, operational budget, and performance
evaluation of the Hospira ALSU Staff who are on probationary status; (b) she must implement
Abbott’s Code of Good Corporate Conduct (Code of Conduct), office policies on human resources
and finance, and ensure that Abbott will hire people who are fit in the organizational discipline; (c)
petitioner Kelly Walsh (Walsh), Manager of the Literature Drug Surveillance Drug Safety of Hospira,
will be her immediate supervisor; (d) she should always coordinate with Abbott’s human resource
officers in the management and discipline of the staff; (e) Hospira ALSU will spin off from Abbott in
early 2006 and will be officially incorporated and known as Hospira, Philippines. In the interim,
Hospira ALSU operations will still be under Abbott’s management, excluding the technical aspects of
the operations which is under the control and supervision of Walsh; and (f) the processing of
information and/or raw material data subject of Hospira ALSU operations will be strictly confined and
controlled under the computer system and network being maintained and operated from the United
States. For this purpose, all those involved in Hospira ALSU are required to use two identification
cards: one, to identify them as Abbott’s employees and another, to identify them as Hospira
employees.11

On March 3, 2005, petitioner Maria Olivia T. Yabut-Misa (Misa), Abbott’s Human Resources (HR)
Director, sent Alcaraz an e-mail which contained an explanation of the procedure for evaluating the
performance of probationary employees and further indicated that Abbott had only one evaluation
system for all of its employees. Alcaraz was also given copies of Abbott’s Code of Conduct and
Probationary Performance Standards and Evaluation (PPSE) and Performance Excellence
Orientation Modules (Performance Modules) which she had to apply in line with her task of
evaluating the Hospira ALSU staff.12

Abbott’s PPSE procedure mandates that the job performance of a probationary employee should be
formally reviewed and discussed with the employee at least twice: first on the third month and
second on the fifth month from the date of employment. The necessary Performance Improvement
Plan should also be made during the third-month review in case of a gap between the employee’s
performance and the standards set. These performance standards should be discussed in detail with
the employee within the first two (2) weeks on the job. It was equally required that a signed copy of
the PPSE form must be submitted to Abbott’s Human Resources Department (HRD) and shall serve
as documentation of the employee’s performance during his/her probationary period. This shall form
the basis for recommending the confirmation or termination of the probationary employment.13

During the course of her employment, Alcaraz noticed that some of the staff had disciplinary
problems. Thus, she would reprimand them for their unprofessional behavior such as non-
observance of the dress code, moonlighting, and disrespect of Abbott officers. However, Alcaraz’s
method of management was considered by Walsh to be "too strict."14 Alcaraz approached Misa to
discuss these concerns and was told to "lie low" and let Walsh handle the matter. Misa even assured
her that Abbott’s HRD would support her in all her management decisions.15

On April 12, 2005, Alcaraz received an e-mail from Misa requesting immediate action on the staff’s
performance evaluation as their probationary periods were about to end. This Alcaraz eventually
submitted.16

On April 20, 2005, Alcaraz had a meeting with petitioner Cecille Terrible (Terrible), Abbott’s former
HR Director, to discuss certain issues regarding staff performance standards. In the course thereof,
Alcaraz accidentally saw a printed copy of an e-mail sent by Walsh to some staff members which
essentially contained queries regarding the former’s job performance. Alcaraz asked if Walsh’s
action was the normal process of evaluation. Terrible said that it was not.17

On May 16, 2005, Alcaraz was called to a meeting with Walsh and Terrible where she was informed
that she failed to meet the regularization standards for the position of Regulatory Affairs
Manager.18 Thereafter, Walsh and Terrible requested Alcaraz to tender her resignation, else they be
forced to terminate her services. She was also told that, regardless of her choice, she should no
longer report for work and was asked to surrender her office identification cards. She requested to
be given one week to decide on the same, but to no avail.19

On May 17, 2005, Alcaraz told her administrative assistant, Claude Gonzales (Gonzales), that she
would be on leave for that day. However, Gonzales told her that Walsh and Terrible already
announced to the whole Hospira ALSU staff that Alcaraz already resigned due to health reasons.20
On May 23, 2005, Walsh, Almazar, and Bernardo personally handed to Alcaraz a letter stating that
her services had been terminated effective May 19, 2005.21 The letter detailed the reasons for
Alcaraz’s termination – particularly, that Alcaraz: (a) did not manage her time effectively; (b) failed to
gain the trust of her staff and to build an effective rapport with them; (c) failed to train her staff
effectively; and (d) was not able to obtain the knowledge and ability to make sound judgments on
case processing and article review which were necessary for the proper performance of her
duties.22 On May 27, 2005, Alcaraz received another copy of the said termination letter via registered
mail.23

Alcaraz felt that she was unjustly terminated from her employment and thus, filed a complaint for
illegal dismissal and damages against Abbott and its officers, namely, Misa, Bernardo, Almazar,
Walsh, Terrible, and Feist.24 She claimed that she should have already been considered as a regular
and not a probationary employee given Abbott’s failure to inform her of the reasonable standards for
her regularization upon her engagement as required under Article 29525 of the Labor Code. In this
relation, she contended that while her employment contract stated that she was to be engaged on a
probationary status, the same did not indicate the standards on which her regularization would be
based.26 She further averred that the individual petitioners maliciously connived to illegally dismiss
her when: (a) they threatened her with termination; (b) she was ordered not to enter company
premises even if she was still an employee thereof; and (c) they publicly announced that she already
resigned in order to humiliate her.27

On the contrary, petitioners maintained that Alcaraz was validly terminated from her probationary
employment given her failure to satisfy the prescribed standards for her regularization which were
made known to her at the time of her engagement.28

The LA Ruling

In a Decision dated March 30, 2006,29 the LA dismissed Alcaraz’s complaint for lack of merit.

The LA rejected Alcaraz’s argument that she was not informed of the reasonable standards to
qualify as a regular employee considering her admissions that she was briefed by Almazar on her
work during her pre-employment orientation meeting30 and that she received copies of Abbott’s Code
of Conduct and Performance Modules which were used for evaluating all types of Abbott
employees.31 As Alcaraz was unable to meet the standards set by Abbott as per her performance
evaluation, the LA ruled that the termination of her probationary employment was justified.32 Lastly,
the LA found that there was no evidence to conclude that Abbott’s officers and employees acted in
bad faith in terminating Alcaraz’s employment.33

Displeased with the LA’s ruling, Alcaraz filed an appeal with the National Labor Relations
Commission (NLRC).

The NLRC Ruling

On September 15, 2006, the NLRC rendered a Decision,34 annulling and setting aside the LA’s
ruling, the dispositive portion of which reads:

WHEREFORE, the Decision of the Labor Arbiter dated 31 March 2006 [sic] is hereby reversed,
annulled and set aside and judgment is hereby rendered:

1. Finding respondents Abbot [sic] and individual respondents to have committed illegal
dismissal;
 2. Respondents are ordered to immediately reinstate complainant to her former position
without loss of seniority rights immediately upon receipt hereof;

3. To jointly and severally pay complainant backwages computed from 16 May 2005 until
finality of this decision. As of the date hereof the backwages is computed at

a. Backwages for 15 months - PhP 1,650,000.00

b. 13th month pay - 110,000.00

TOTAL PhP 1,760,000.00

4. Respondents are ordered to pay complainant moral damages of ₱50,000.00 and

exemplary damages of ₱50,000.00.

5. Respondents are also ordered to pay attorney’s fees of 10% of the total award.

6. All other claims are dismissed for lack of merit.

SO ORDERED.35

The NLRC reversed the findings of the LA and ruled that there was no evidence showing that
Alcaraz had been apprised of her probationary status and the requirements which she should have
complied with in order to be a regular employee.36 It held that Alcaraz’s receipt of her job description
and Abbott’s Code of Conduct and Performance Modules was not equivalent to her being actually
informed of the performance standards upon which she should have been evaluated on.37 It further
observed that Abbott did not comply with its own standard operating procedure in evaluating
probationary employees.38 The NLRC was also not convinced that Alcaraz was terminated for a valid
cause given that petitioners’ allegation of Alcaraz’s "poor performance" remained unsubstantiated.39

Petitioners filed a motion for reconsideration which was denied by the NLRC in a Resolution dated
July 31, 2007.40

Aggrieved, petitioners filed with the CA a Petition for Certiorari with Prayer for Issuance of a
Temporary Restraining Order and/or Writ of Preliminary Injunction, docketed as CA G.R. SP No.
101045 (First CA Petition), alleging grave abuse of discretion on the part of NLRC when it ruled that
Alcaraz was illegally dismissed.41

Pending resolution of the First CA Petition, Alcaraz moved for the execution of the NLRC’s Decision
before the LA, which petitioners strongly opposed. The LA denied the said motion in an Order dated
July 8, 2008 which was, however, eventually reversed on appeal by the NLRC.42 Due to the
foregoing, petitioners filed another Petition for Certiorari with the CA, docketed as CA G.R. SP No.
111318 (Second CA Petition), assailing the propriety of the execution of the NLRC decision.43

The CA Ruling

With regard to the First CA Petition, the CA, in a Decision44 dated December 10, 2009, affirmed the
ruling of the NLRC and held that the latter did not commit any grave abuse of discretion in finding
that Alcaraz was illegally dismissed.
It observed that Alcaraz was not apprised at the start of her employment of the reasonable
standards under which she could qualify as a regular employee.45 This was based on its examination
of the employment contract which showed that the same did not contain any standard of
performance or any stipulation that Alcaraz shall undergo a performance evaluation before she could
qualify as a regular employee.46 It also found that Abbott was unable to prove that there was any
reasonable ground to terminate Alcaraz’s employment.47 Abbott moved for the reconsideration of the
aforementioned ruling which was, however, denied by the CA in a Resolution48 dated June 9, 2010.

The CA likewise denied the Second CA Petition in a Resolution dated May 18, 2010 (May 18, 2010
Resolution) and ruled that the NLRC was correct in upholding the execution of the NLRC
Decision.49 Thus, petitioners filed a motion for reconsideration.

While the petitioners’ motion for reconsideration of the CA’s May 18, 2010 Resolution was pending,
Alcaraz again moved for the issuance of a writ of execution before the LA. On June 7, 2010,
petitioners received the LA’s order granting Alcaraz’s motion for execution which they in turn
appealed to the NLRC – through a Memorandum of Appeal dated June 16, 2010 (June 16, 2010
Memorandum of Appeal ) – on the ground that the implementation of the LA’s order would render its
motion for reconsideration moot and academic.50

Meanwhile, petitioners’ motion for reconsideration of the CA’s May 18, 2010 Resolution in the
Second CA Petition was denied via a Resolution dated October 4, 2010.51 This attained finality on
January 10, 2011 for petitioners’ failure to timely appeal the same.52 Hence, as it stands, only the
issues in the First CA petition are left to be resolved.

Incidentally, in her Comment dated November 15, 2010, Alcaraz also alleges that petitioners were
guilty of forum shopping when they filed the Second CA Petition pending the resolution of their
motion for reconsideration of the CA’s December 10, 2009 Decision i.e., the decision in the First CA
Petition.53 She also contends that petitioners have not complied with the certification requirement
under Section 5, Rule 7 of the Rules of Court when they failed to disclose in the instant petition the
filing of the June 16, 2010 Memorandum of Appeal filed before the NLRC.54

The Issues Before the Court

The following issues have been raised for the Court’s resolution: (a) whether or not petitioners are
guilty of forum shopping and have violated the certification requirement under Section 5, Rule 7 of
the Rules of Court; (b) whether or not Alcaraz was sufficiently informed of the reasonable standards
to qualify her as a regular employee; (c) whether or not Alcaraz was validly terminated from her
employment; and (d) whether or not the individual petitioners herein are liable.

The Court’s Ruling

A. Forum Shopping and

Violation of Section 5, Rule 7
of the Rules of Court.

At the outset, it is noteworthy to mention that the prohibition against forum shopping is different from
a violation of the certification requirement under Section 5, Rule 7 of the Rules of Court. In Sps. Ong
v. CA,55 the Court explained that:

x x x The distinction between the prohibition against forum shopping and the certification
requirement should by now be too elementary to be misunderstood. To reiterate, compliance with
the certification against forum shopping is separate from and independent of the avoidance of the
act of forum shopping itself. There is a difference in the treatment between failure to comply with the
certification requirement and violation of the prohibition against forum shopping not only in terms of
imposable sanctions but also in the manner of enforcing them. The former constitutes sufficient
cause for the dismissal without prejudice to the filing of the complaint or initiatory pleading upon
motion and after hearing, while the latter is a ground for summary dismissal thereof and for direct
contempt. x x x. 56

As to the first, forum shopping takes place when a litigant files multiple suits involving the same
parties, either simultaneously or successively, to secure a favorable judgment. It exists where the
elements of litis pendentia are present, namely: (a) identity of parties, or at least such parties who
represent the same interests in both actions; (b) identity of rights asserted and relief prayed for, the
relief being founded on the same facts; and (c) the identity with respect to the two preceding
particulars in the two (2) cases is such that any judgment that may be rendered in the pending case,
regardless of which party is successful, would amount to res judicata in the other case.57

In this case, records show that, except for the element of identity of parties, the elements of forum
shopping do not exist. Evidently, the First CA Petition was instituted to question the ruling of the
NLRC that Alcaraz was illegally dismissed. On the other hand, the Second CA Petition pertains to
the propriety of the enforcement of the judgment award pending the resolution of the First CA
Petition and the finality of the decision in the labor dispute between Alcaraz and the petitioners.
Based on the foregoing, a judgment in the Second CA Petition will not constitute res judicata insofar
as the First CA Petition is concerned. Thus, considering that the two petitions clearly cover different
subject matters and causes of action, there exists no forum shopping.

As to the second, Alcaraz further imputes that the petitioners violated the certification requirement
under Section 5, Rule 7 of the Rules of Court58 by not disclosing the fact that it filed the June 16,
2010 Memorandum of Appeal before the NLRC in the instant petition.

In this regard, Section 5(b), Rule 7 of the Rules of Court requires that a plaintiff who files a case
should provide a complete statement of the present status of any pending case if the latter involves
the same issues as the one that was filed. If there is no such similar pending case, Section 5(a) of
the same rule provides that the plaintiff is obliged to declare under oath that to the best of his
knowledge, no such other action or claim is pending.

Records show that the issues raised in the instant petition and those in the June 16, 2010
Memorandum of Appeal filed with the NLRC likewise cover different subject matters and causes of
action. In this case, the validity of Alcaraz’s dismissal is at issue whereas in the said Memorandum
of Appeal, the propriety of the issuance of a writ of execution was in question.

Thus, given the dissimilar issues, petitioners did not have to disclose in the present petition the filing
of their June 16, 2010 Memorandum of Appeal with the NLRC. In any event, considering that the
issue on the propriety of the issuance of a writ of execution had been resolved in the Second CA
Petition – which in fact had already attained finality – the matter of disclosing the June 16, 2010
Memorandum of Appeal is now moot and academic.

Having settled the foregoing procedural matter, the Court now proceeds to resolve the substantive
issues.

B. Probationary employment;
grounds for termination.
A probationary employee, like a regular employee, enjoys security of tenure. However, in cases of
probationary employment, aside from just or authorized causes of termination, an additional ground
is provided under Article 295 of the Labor Code, i.e., the probationary employee may also be
terminated for failure to qualify as a regular employee in accordance with the reasonable standards
made known by the employer to the employee at the time of the engagement.59 Thus, the services of
an employee who has been engaged on probationary basis may be terminated for any of the
following: (a) a just or (b) an authorized cause; and (c) when he fails to qualify as a regular employee
in accordance with reasonable standards prescribed by the employer.60

Corollary thereto, Section 6(d), Rule I, Book VI of the Implementing Rules of the Labor Code
provides that if the employer fails to inform the probationary employee of the reasonable standards
upon which the regularization would be based on at the time of the engagement, then the said
employee shall be deemed a regular employee, viz.:

(d) In all cases of probationary employment, the employer shall make known to the employee the
standards under which he will qualify as a regular employee at the time of his engagement. Where
no standards are made known to the employee at that time, he shall be deemed a regular employee.

In other words, the employer is made to comply with two (2) requirements when dealing with a
probationary employee: first, the employer must communicate the regularization standards to the
probationary employee; and second, the employer must make such communication at the time of the
probationary employee’s engagement. If the employer fails to comply with either, the employee is
deemed as a regular and not a probationary employee.

Keeping with these rules, an employer is deemed to have made known the standards that would
qualify a probationary employee to be a regular employee when it has exerted reasonable efforts to
apprise the employee of what he is expected to do or accomplish during the trial period of probation.
This goes without saying that the employee is sufficiently made aware of his probationary status as
well as the length of time of the probation.

The exception to the foregoing is when the job is self-descriptive in nature, for instance, in the case
of maids, cooks, drivers, or messengers.61 Also, in Aberdeen Court, Inc. v. Agustin,62 it has been held
that the rule on notifying a probationary employee of the standards of regularization should not be
used to exculpate an employee who acts in a manner contrary to basic knowledge and common
sense in regard to which there is no need to spell out a policy or standard to be met. In the same
light, an employee’s failure to perform the duties and responsibilities which have been clearly made
known to him constitutes a justifiable basis for a probationary employee’s non-regularization.

In this case, petitioners contend that Alcaraz was terminated because she failed to qualify as a
regular employee according to Abbott’s standards which were made known to her at the time of her
engagement. Contrarily, Alcaraz claims that Abbott never apprised her of these standards and thus,
maintains that she is a regular and not a mere probationary employee.

The Court finds petitioners’ assertions to be well-taken.

A punctilious examination of the records reveals that Abbott had indeed complied with the above-
stated requirements. This conclusion is largely impelled by the fact that Abbott clearly conveyed to
Alcaraz her duties and responsibilities as Regulatory Affairs Manager prior to, during the time of her
engagement, and the incipient stages of her employment. On this score, the Court finds it apt to
detail not only the incidents which point out to the efforts made by Abbott but also those
circumstances which would show that Alcaraz was well-apprised of her employer’s expectations that
would, in turn, determine her regularization:
 (a) On June 27, 2004, Abbott caused the publication in a major broadsheet newspaper of its
need for a Regulatory Affairs Manager, indicating therein the job description for as well as
the duties and responsibilities attendant to the aforesaid position; this prompted Alcaraz to
submit her application to Abbott on October 4, 2004;

(b) In Abbott’s December 7, 2004 offer sheet, it was stated that Alcaraz was to be employed
on a probationary status;

(c) On February 12, 2005, Alcaraz signed an employment contract which specifically stated,
inter alia, that she was to be placed on probation for a period of six (6) months beginning
February 15, 2005 to August 14, 2005;

(d) On the day Alcaraz accepted Abbott’s employment offer, Bernardo sent her copies of
Abbott’s organizational structure and her job description through e-mail;

(e) Alcaraz was made to undergo a pre-employment orientation where Almazar informed her
that she had to implement Abbott’s Code of Conduct and office policies on human resources
and finance and that she would be reporting directly to Walsh;

(f) Alcaraz was also required to undergo a training program as part of her orientation;

(g) Alcaraz received copies of Abbott’s Code of Conduct and Performance Modules from
Misa who explained to her the procedure for evaluating the performance of probationary
employees; she was further notified that Abbott had only one evaluation system for all of its
employees; and

(h) Moreover, Alcaraz had previously worked for another pharmaceutical company and had
admitted to have an "extensive training and background" to acquire the necessary skills for
her job.63

Considering the totality of the above-stated circumstances, it cannot, therefore, be doubted that
Alcaraz was well-aware that her regularization would depend on her ability and capacity to fulfill the
requirements of her position as Regulatory Affairs Manager and that her failure to perform such
would give Abbott a valid cause to terminate her probationary employment.

Verily, basic knowledge and common sense dictate that the adequate performance of one’s duties
is, by and of itself, an inherent and implied standard for a probationary employee to be regularized;
such is a regularization standard which need not be literally spelled out or mapped into technical
indicators in every case. In this regard, it must be observed that the assessment of adequate duty
performance is in the nature of a management prerogative which when reasonably exercised – as
Abbott did in this case – should be respected. This is especially true of a managerial employee like
Alcaraz who was tasked with the vital responsibility of handling the personnel and important matters
of her department.

In fine, the Court rules that Alcaraz’s status as a probationary employee and her consequent
dismissal must stand. Consequently, in holding that Alcaraz was illegally dismissed due to her status
as a regular and not a probationary employee, the Court finds that the NLRC committed a grave
abuse of discretion.

To elucidate, records show that the NLRC based its decision on the premise that Alcaraz’s receipt of
her job description and Abbott’s Code of Conduct and Performance Modules was not equivalent to
being actually informed of the performance standards upon which she should have been evaluated
on.64 It, however, overlooked the legal implication of the other attendant circumstances as detailed
herein which should have warranted a contrary finding that Alcaraz was indeed a probationary and
not a regular employee – more particularly the fact that she was well-aware of her duties and
responsibilities and that her failure to adequately perform the same would lead to her non-
regularization and eventually, her termination.

Accordingly, by affirming the NLRC’s pronouncement which is tainted with grave abuse of discretion,
the CA committed a reversible error which, perforce, necessitates the reversal of its decision.

C. Probationary employment;
termination procedure.

A different procedure is applied when terminating a probationary employee; the usual two-notice rule
does not govern.65 Section 2, Rule I, Book VI of the Implementing Rules of the Labor Code states
that "if the termination is brought about by the x x x failure of an employee to meet the standards of
the employer in case of probationary employment, it shall be sufficient that a written notice is served
the employee, within a reasonable time from the effective date of termination."

As the records show, Alcaraz's dismissal was effected through a letter dated May 19, 2005 which
she received on May 23, 2005 and again on May 27, 2005. Stated therein were the reasons for her
termination, i.e., that after proper evaluation, Abbott determined that she failed to meet the
reasonable standards for her regularization considering her lack of time and people management
and decision-making skills, which are necessary in the performance of her functions as Regulatory
Affairs Manager.66 Undeniably, this written notice sufficiently meets the criteria set forth above,
thereby legitimizing the cause and manner of Alcaraz’s dismissal as a probationary employee under
the parameters set by the Labor Code.67

D. Employer’s violation of
company policy and
procedure.

Nonetheless, despite the existence of a sufficient ground to terminate Alcaraz’s employment and
Abbott’s compliance with the Labor Code termination procedure, it is readily apparent that Abbott
breached its contractual obligation to Alcaraz when it failed to abide by its own procedure in
evaluating the performance of a probationary employee.

Veritably, a company policy partakes of the nature of an implied contract between the employer and
employee. In Parts Depot, Inc. v. Beiswenger,68 it has been held that:

Employer statements of policy . . . can give rise to contractual rights in employees without evidence
that the parties mutually agreed that the policy statements would create contractual rights in the
employee, and, hence, although the statement of policy is signed by neither party, can be unilaterally
amended by the employer without notice to the employee, and contains no reference to a specific
employee, his job description or compensation, and although no reference was made to the policy
statement in pre-employment interviews and the employee does not learn of its existence until after
his hiring. Toussaint, 292 N.W .2d at 892. The principle is akin to estoppel. Once an employer
establishes an express personnel policy and the employee continues to work while the policy
remains in effect, the policy is deemed an implied contract for so long as it remains in effect. If the
employer unilaterally changes the policy, the terms of the implied contract are also thereby
changed. (Emphasis and underscoring supplied.)
1âwphi1
Hence, given such nature, company personnel policies create an obligation on the part of both the
employee and the employer to abide by the same.

Records show that Abbott’s PPSE procedure mandates, inter alia, that the job performance of a
probationary employee should be formally reviewed and discussed with the employee at least twice:
first on the third month and second on the fifth month from the date of employment. Abbott is also
required to come up with a Performance Improvement Plan during the third month review to bridge
the gap between the employee’s performance and the standards set, if any.69 In addition, a signed
copy of the PPSE form should be submitted to Abbott’s HRD as the same would serve as basis for
recommending the confirmation or termination of the probationary employment.70

In this case, it is apparent that Abbott failed to follow the above-stated procedure in evaluating
Alcaraz. For one, there lies a hiatus of evidence that a signed copy of Alcaraz’s PPSE form was
submitted to the HRD. It was not even shown that a PPSE form was completed to formally assess
her performance. Neither was the performance evaluation discussed with her during the third and
fifth months of her employment. Nor did Abbott come up with the necessary Performance
Improvement Plan to properly gauge Alcaraz’s performance with the set company standards.

While it is Abbott’s management prerogative to promulgate its own company rules and even
subsequently amend them, this right equally demands that when it does create its own policies and
thereafter notify its employee of the same, it accords upon itself the obligation to faithfully implement
them. Indeed, a contrary interpretation would entail a disharmonious relationship in the work place
for the laborer should never be mired by the uncertainty of flimsy rules in which the latter’s labor
rights and duties would, to some extent, depend.

In this light, while there lies due cause to terminate Alcaraz’s probationary employment for her failure
to meet the standards required for her regularization, and while it must be further pointed out that
Abbott had satisfied its statutory duty to serve a written notice of termination, the fact that it violated
its own company procedure renders the termination of Alcaraz’s employment procedurally infirm,
warranting the payment of nominal damages. A further exposition is apropos.

Case law has settled that an employer who terminates an employee for a valid cause but does so
through invalid procedure is liable to pay the latter nominal damages.

In Agabon v. NLRC (Agabon),71 the Court pronounced 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.72 Thus, in Agabon, the employer was ordered to pay the employee nominal damages in the
amount of ₱30,000.00.73

Proceeding from the same ratio, the Court modified Agabon in the case of Jaka Food Processing
Corporation v. Pacot (Jaka)74 where it created a distinction between procedurally defective
dismissals due to a just cause, on one hand, and those due to an authorized cause, on the other.

It was explained that if the dismissal is based on a just cause under Article 282 of the Labor Code
(now Article 296) but the employer failed to comply with the notice requirement, the sanction to be
imposed upon him should be tempered because the dismissal process was, in effect, initiated by an
act imputable to the employee; if the dismissal is based on an authorized cause under Article 283
(now Article 297) but the employer failed to comply with the notice requirement, the sanction should
be stiffer because the dismissal process was initiated by the employer’s exercise of his management
prerogative.75 Hence, in Jaka, where the employee was dismissed for an authorized cause of
retrenchment76 – as contradistinguished from the employee in Agabon who was dismissed for a just
cause of neglect of duty77 – the Court ordered the employer to pay the employee nominal damages
at the higher amount of ₱50,000.00.

Evidently, the sanctions imposed in both Agabon and Jaka proceed from the necessity to deter
employers from future violations of the statutory due process rights of employees.78 In similar regard,
the Court deems it proper to apply the same principle to the case at bar for the reason that an
employer’s contractual breach of its own company procedure – albeit not statutory in source – has
the parallel effect of violating the laborer’s rights. Suffice it to state, the contract is the law between
the parties and thus, breaches of the same impel recompense to vindicate a right that has been
violated. Consequently, while the Court is wont to uphold the dismissal of Alcaraz because a valid
cause exists, the payment of nominal damages on account of Abbott’s contractual breach is
warranted in accordance with Article 2221 of the Civil Code.79

Anent the proper amount of damages to be awarded, the Court observes that Alcaraz’s dismissal
proceeded from her failure to comply with the standards required for her regularization. As such, it is
undeniable that the dismissal process was, in effect, initiated by an act imputable to the employee,
akin to dismissals due to just causes under Article 296 of the Labor Code. Therefore, the Court
deems it appropriate to fix the amount of nominal damages at the amount of ₱30,000.00, consistent
with its rulings in both Agabon and Jaka.

E. Liability of individual
petitioners as corporate
officers.

It is hornbook principle that personal liability of corporate directors, trustees or officers attaches only
when: (a) they assent to a patently unlawful act of the corporation, or when they are guilty of bad
faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in
damages to the corporation, its stockholders or other persons; (b) they consent to the issuance of
watered down stocks or when, having knowledge of such issuance, do not forthwith file with the
corporate secretary their written objection; (c) they agree to hold themselves personally and
solidarily liable with the corporation; or (d) they are made by specific provision of law personally
answerable for their corporate action.80

In this case, Alcaraz alleges that the individual petitioners acted in bad faith with regard to the
supposed crude manner by which her probationary employment was terminated and thus, should be
held liable together with Abbott. In the same vein, she further attributes the loss of some of her
remaining belongings to them.81

Alcaraz’s contention fails to persuade.

A judicious perusal of the records show that other than her unfounded assertions on the matter,
there is no evidence to support the fact that the individual petitioners herein, in their capacity as
Abbott’s officers and employees, acted in bad faith or were motivated by ill will in terminating

Alcaraz’s services. The fact that Alcaraz was made to resign and not allowed to enter the workplace
does not necessarily indicate bad faith on Abbott’s part since a sufficient ground existed for the latter
to actually proceed with her termination. On the alleged loss of her personal belongings, records are
bereft of any showing that the same could be attributed to Abbott or any of its officers. It is a well-
settled rule that bad faith cannot be presumed and he who alleges bad faith has the onus of proving
it. All told, since Alcaraz failed to prove any malicious act on the part of Abbott or any of its officers,
the Court finds the award of moral or exemplary damages unwarranted.
WHEREFORE, the petition is GRANTED. The Decision dated December 10, 2009 and Resolution
dated June 9, 2010 of the Court of Appeals in CA-G.R. SP No. 101045 are hereby REVERSED and
SET ASIDE. Accordingly, the Decision dated March 30, 2006 of the Labor Arbiter is REINSTATED
with the MODIFICATION that petitioner Abbott Laboratories, Philippines be ORDERED to pay
respondent Pearlie Ann F. Alcaraz nominal damages in the amount of ₱30,000.00 on account of its
breach of its own company procedure.

SO ORDERED.

ESTELA M. PERLAS-BERNABE
Associate Justice