G.R. No.

117040 January 27, 2000

RUBEN SERRANO, petitioner,

vs.
NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT
STORE, respondents.

FACTS:

Ruben Serrano was the head of the security checkers section of Isetann Department Store. He
was charged with the task of supervising security checkers in their jobs (apprehending shoplifters
and preventing pilfirege of merchandise). On October 11, 1991, the management sent him a letter
immediately terminating his services as security section head, effective on the same day. The
reason given by the management was “retrenchment”; they had opted to hire an independent
security agency as a cost-cutting measure. Serrano filed a complaint for ID, illegal layoff, ULP,
underpayment of wages and nonpayment of salary and OT pay with the LA.

The LA rendered a decision in favor of Serrano. It stated that Isetann failed to establish that it
had retrenched its security division, that the petitioner was not accorded due process, etc. and
even stated that the day after Serrano’s dismissal, Isetann employed a safety and security
supervisor with similar duties to that of the former.

The NLRC on the other hand reversed the LA but ordered Isetann to pay separation pay
equivalent to one month per year of service, unpaid salary, et al. It held that the phase-out of the
security section was a valid exercise of management prerogative on the part of Isetann, for which
the NLRC cannot substitute its judgment in the absence of bad faith or abuse of discretion on the
part of the latter; and that the security and safety supervisor’s position was long in place prior to
Serrano’s separation from the company, or the phase-out of the Security Section.

ISSUE:

Whether the petitioner’s dismissal was illegal.

HELD:

NO.

The Court held that the dismissal was due to an authorized cause under Art. 283 of the Labor
Code, i.e. redundancy. However, while an authorized cause exists, Isetann failed to follow the
procedural requirement provided by Art. 283 of LC. For termination due to authorized causes,
the employer must give a written notice of termination to the employee concerned and to the
DOLE at least 30 days prior to its effectivity. This Isetann failed to do.
The question now arises as to whether the failure of Isetann to comply with the procedural
requirements renders the dismissal invalid, or, in the event that it is valid, what the appropriate
sanction or penalty must be meted out.
Prior to the doctrine laid down in the decision rendered in Wenphil Corp. NLRC in 1989, the
termination of an employee, even for just cause but without following the requisite procedure,
renders such dismissal illegal, and therefore null and void.

In the Wenphil doctrine, this was reversed; the said rule was unjust to employers. Instead, the
dismissal was held to be still valid but the employer was sanctioned by way of the payment of
indemnity (damages) – in that case, P1,000. The amount of indemnity will be depended on the
circumstances of each case, taking into account the gravity of the offense committed by the
employer.

Now, the Court once again examines the Wenphil doctrine. Puno says that the effect of the
Wenphil doctrine was such that there has been a “dismiss now, pay later” policy where the
employers were able to circumvent the procedural requisites of termination, which is more
convenient than the compliance with the 30-day notice. Panganiban said that the monetary
sanctions were too insignificant, niggardly, sometimes even late. Both justices are of the opinion
that the deprivation of due process which must be accorded to the employee renders the
dismissal illegal. Puno quoted that Legislative, Executive and Judicial proceedings that deny due
process do so under the pain of nullity. Panganiban stated that such denial of due process renders
decisions and proceedings void for lack of jurisdiction.

The present ruling of the Court held that the dismissal of the employee is merely ineffectual, not
void. The dismissal was upheld but it is ineffectual.

The sanction provided was the payment of backwages from the time of dismissal up to the
decision of the court finding just or authorized cause. This was thought to balance the interests of
both parties, recognizing the employee’s right to notice and at the same time the right of the
employer to dismiss for any of the just and authorized causes.

The Court also responded to the arguments of Justices Puno and Panganiban by stating that the
violation in the procedural requirement of termination is not a denial of the fundamental right to
due process. This is because of the ff reasons:

1) The due process clause is a limitation on governmental powers, inapplicable to the

exercise of private power, such as in this case. The provision “No person shall be
deprived of life, liberty and property without due process of law” pertains only to the
State, as only it has the authority to do the same.

2) The purpose of the notice and hearing under the Due process clause is to provide an
opportunity for the employee to be heard before the power of the organized society is
brought upon the individual. Under Art. 283, however, the purpose is to give him time
to prepare for the eventual loss of his job and for DOLE to determine whether economic
causes exist to justify termination. It is not to give opportunity to be heard – there is no
charge against the employee under Art. 283
 3) The employer cannot be expected to be an impartial judge of his own cause.

4) Not all notice requirements are requisites of due process. Some are simply a part of a
procedure to be followed before a right granted to party can be exercised; others are an
application of the Justinian precept. Such is the case here. The failure of the employer to
observe a procedure for the termination of employment which makes the termination of
employment merely ineffectual.

5) Art. 279 of the LC provides that only dismissal without just or authorized cause renders
such dismissal illegal. To consider termination without observing procedural reqt’s as
also ID is to add another ground for ID, thereby amending Art. 279.; Further, there is a
disparity in legal treatment, as employees who resign without giving due notice are only
liable for damages; it does not make their resignation void.

In this case, the separation pay was a distinct award from the payment of backwages as a way of
penalty.