Portillo v. Rudolph-Lietz Inc. G.R.

196539, Oct 10, 2012

Facts:

Respondent Rudolf Lietz, Inc., hired petitioner Portillo under the agreement containing a “Goodwill
Clause” wherein Portillo will not engage in any other gainful employment by herself or with any other
company.

In her 10th year of employment, Portillo was promoted. Portillo signed another letter agreement
containing a “Goodwill Clause” wherein she agreed that she will not engage as employee manager,
proprietor, or solicitor for in a similar or competitive business or the same character of work which she
was employed for a period of three (3) years.

Three years thereafter, Portillo resigned since she will be engaging in the business of rice wholesale.
However, it was found out that Portillo was employed by Ed Keller Philippines, a competitor of Lietz, Inc.

Meanwhile, Portillo's demands from Lietz, Inc. for the payment of her remaining salaries and
commissions went unheeded. Portillo then filed a complaint with the National Labor Relations
Commission for non-payment of 1 ½ month’s salary, two (2) months’ commission, 13th month pay, plus
moral, exemplary and actual damages and attorney’s fees. Lietz, Inc. admitted liability but raised the
defense of legal compensation by contending that the Portillo’s money claim should be offset by the
alleged breach of the “Goodwill Clause” in the employment contract.

Issue:

Whether or not the money claims of the petitioner can be offset by alleged damages sustained by the employer
due to the petitioner’s breach of contract?

Ruling:

No. Article 217, paragraph 4 of the Labor Code provides that the Labor Arbiter has jurisdiction over claims
for actual, moral, exemplary and other forms of damages arising from the employer-employee relations.
However, such provision does not cover not all disputes between an employer and his employee(s). In
order that Article 217, paragraph 4 of the Labor Code may be invoked, there must be a reasonable causal
connection between the claim and the employer-employee relationship.

The Supreme Court in Dai-Chi Electronics Manufacturing Corporation v. Villarama held that a non-
compete clause, as in the “Goodwill Clause” refers to post-employment relations of the parties.

In this case, Lietz, Inc.'s claim against Portillo for violation of the goodwill clause is a money claim based
on an act done after the cessation of the employment relationship. And, while the jurisdiction over
Portillo's claim is vested in the labor arbiter, the jurisdiction over Lietz, Inc.'s claim rests on the regular
courts.