199. AURELIO VS.

NATIONAL LABOR RELATIONS COMMISSION

JEAN C. AURELIO, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, NORTHWESTERN COLLEGE, BEN A. NICOLAS, ERNESTO B. ASUNCION, JOFFREY AURELIO, JOSE G. CASTRO, FRANCISCO SANTELLA, ALBA B. CADAY, LILIA
PAZ, WILFRED A. NICOLAS, GLENN AQUINO, AND LUCIDIA RUIZ-FLOREZ, RESPONDENTS.

FACTS Petitioner started as clinical instructor of the College of Nursing of Northwestern College (NWC) in June 1977 with a basic salary of P600.00 a month. In October 1979, petitioner was appointed Dean
of the College of Nursing with a starting salary of P3,000.00 a month. In September 1981, petitioner was promoted to College Administrator or Vice-President for Administration, retaining concurrently
her position of Dean of the College of Nursing, with an increased salary of P3,500.00 per month. She was later promoted to Executive Vice-President with the corresponding salary of P7,500.00.

On April 10, 1988, petitioner's husband, Oscar Aurelio, a stockholder of respondent NWC, was elected Auditor. On May 1, 1988, the individual respondents, as Board of Directors, took over the
management of respondent NWC. This new management unleashed a series of reorganization affecting the petitioner and her husband, Oscar Aurelio, to wit:

(a) On May 30, 1988, petitioner's husband, then in the United States, was removed as Auditor of the college;
(b) Without prior notice, petitioner's office was stripped of its facilities. First, the airconditioner, then the refrigerator;
(c) Respondents asked petitioner, "to justify," the continued use of the conference room which was used for team teaching; the librarian of the College of Nursing was removed and
assigned as secretary of the Chairman of Academic Matters and all the facilities of the College of Nursing were taken over by the individual respondents;
(d) Petitioner's salary was reduced from P7,500.00 to P5,000.00 then to P2,500.00 a month:
(e) While petitioner was absent because of influenza, respondents assigned her office room to the Chairman on Management and Planning; the Nursing conference room was
assigned as the lounge room of the members of the Board of Directors;

Because of the indignities and humiliation suffered by the petitioner, she wrote a letter on September 20, 1988 informing the President of Northwestern College that she was going on an indefinite
leave.

Petitioner sent a copy of the above letter to the Secretary of Education, Culture and Sports praying for assistance. The Secretary of Education, Culture and Sports referred the letter to the DECS
Director of Region I. The Director of the Bureau of Higher Education ordered the DECS Regional Director of Region I through telegram "to investigate NWC College of Nursing, Laoag City immediately
PRC recommends suspension of the operation of College of Nursing due to lack of Dean and faculty to supervise students." On November 3, 1988, the Regional Director informed respondent
Northwestern College of the order of investigation and that pursuant thereto, the Director was sending her representatives "to look into the problem stated thereon which is apparently facing the
College of Nursing." On November 7, 1988, the representatives of the Regional Director submitted their official findings and recommendations confirming the truth of the allegations of petitioner in
her September 20, 1988 letter. The DECS also confirmed the willingness of petitioner to withdraw her indefinite leave of absence. The matter of petitioner's resumption of her position as Dean of the
College of Nursing was addressed by the DECS to the attention of respondents who were given up to November 13, 1988 to make their decision. On November 7, 1988, the Regional Director sent a
telegram stating: "Please submit written decision status position dean college of nursing not later than November 14, 1988 pd."

Private respondents did not answer. They refused to accept petitioner. On November 16, 1988, petitioner filed her complaint for illegal dismissal against private respondents and prayed for
reinstatement plus backwages, moral and exemplary damages, and attorney's fees. At the arbitration level, petitioner and private respondents submitted their respective position papers. On
December 29, 1989, the labor arbiter issued a decision dismissing the complaint.

It appears that Private respondent Northwestern College is managed by its Board of Directors elected annually by the stockholders and who serve as such for the ensuing year until their successors
shall have been duly elected and qualified.

The individual respondents Ben Nicolas, Ernesto Asuncion, Joffrey Aurelio, Alva B. Caday, Lilia Paz, Wilfredo Santillan, and Glen Aquino, are members of the Board of Directors of Northwestern College
of which Jean C. Aurelio is a stockholder.

On April 30, 1988, the annual regular meeting of stockholders was held at the principal office of the corporation in Laoag City. Elected Directors were the following: Alva Caday, Lucidia Flores, Nicolas
Nicolas, Oscar Aurelio, Cherry Caday, Lilia Paz, Ben Nicolas, Joffrey Aurelio, Francisco Santella, Glenn Aquino, and Wilfredo Nicolas. The following members were elected as officers of the Northwestern
College: Alva Caday, Chairman of the Board; Ben Nicolas, Vice-Chairman and President; Joffrey Aurelio, Treasurer; Oscar Aurelio, Corporate Auditor and Lucidia Flores, Corporate Secretary. Nicolas
Nicolas, Oscar Aurelio, and Cherry Caday later resigned and in their stead, Atty. Ernesto Asuncion, Atty. Jose Castro, and Dr. Juanito Chan were elected by the stockholders.

Since their election into office, the Board members have taken effective control of the management of the college and have regularly exercised their corporate powers. The new Board conducted a
preliminary audit which revealed that the college was financially distressed, unable to meet its maturing obligations with its creditor bank. The new management headed by its President, Ben Nicolas,
embarked on a realignment of positions and functions of the different department in order to minimize expenditures.

As a result of the audit, NWC was compelled to abolish the administrative positions held by petitioner, which she did not contest, because of the following reasons:

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 a) In 1988, NWC realized that it was violating the Administrative Manual for Private Schools. Thus, the position of Administrator/Vice President had to be eliminated;
b) At that time, NWC was reeling from the effects of its failure to meet its obligations with its creditors and all efforts to minimize expenditures were being undertaken;
c) NWC realized after a study of the realignment of the positions that the functions and duties of Administrator/Vice President for Administration were being performed by the President.
Consequently, the former positions had become redundant.

During the first semester of the school year 1988-1989, Northwestern College uncovered irregularities allegedly committed by the petitioner, to wit:
a) She personally exacted without receipt P25.00 from every student in the College of Nursing for the maintenance of the College Library.
b) She did not remit nor liquidate the sum of P600.00 out of the P1,295.91 Related Learning Experience (RLE) fee paid by all students in the College of Nursing. The total sum thereof in the
amount of P114,280.00 suspiciously remained unremitted and unliquidated for an unreasonable length of time.
c) She drew salaries for teaching in the College of Nursing although she did not have a teaching load. Before the investigation could be concluded, petitioner sent a letter to the President of
the college on September 20, 1988 manifesting that she is on an indefinite leave of absence.

The labor arbiter dismissed the complaint on the basis of these findings which were adopted by the NLRC:

…Undoubtedly, complainant had occupied managerial positions, thus the rule of loss of trust and confidence applies. This office is however aware that allegations of loss of trust and
confidence must have some basis and such is not lacking on record.

Respondent had alleged and submitted evidence of irregularities of complainant during her tenure at the college. The complainant instead of refuting the charges cited alleged irregularities committed
by the respondents in their respective offices. Needless to state, the allegation does not detract anything from the charges of irregularities against her by the records respondent school. As the records
of this case stand, our complainant has not sufficiently explained the substantiated charges of Northwestern College anent exaction of P25.00 from every student of the College of nursing, receipt of
salaries for alleged teaching services for which she did not have any teaching load and failure to remit nor liquidate a total amount of P120,000.00.

ISSUE RULING

It must be emphasized that the rules of dismissal for managerial employees are different from those governing ordinary employees for it would be unjust and inequitable to compel an employer to
continue with the employment of a person who occupies a managerial and sensitive position despite loss of trust and confidence. At the very least, the relationship must be considered seriously
strained, foreclosing the remedy of reinstatement. We find that the allegations of irregularities were sufficiently substantiated thus justifying petitioner's separation.

Moreover, and still on the issue of dismissal, the records disclose that in holding on to the two positions, petitioner violated the Administrative Manual for Private Schools. Thus, the respondent had
no other recourse but to take away one of the positions from her or abolish the same. Undoubtedly, the College Board of Directors has the authority to reorganize and streamline the operations of the
college with the end in view of minimizing expenditures.

We believe that the instant case was an offshoot of a corporate reorganization, a prerogative reposed on the Board of Directors of the College.

The NLRC found that:

Admittedly, complainant was a managerial employee who has to have the complete trust and confidence of respondents. While it may be true that complainant was not strictly an
accountable employee primarily responsible for disbursement of whatever funds, respondents had some basis in losing its trust and confidence in complainant. Respondents' evidence
showed that under the principle of command responsibility, complainant was in a sense responsible in the monitoring of monetary transactions involving funds from library collections and
from Related Learning Science collection.. For it has been held that in case of termination due to loss of trust and confidence proof beyond reasonable doubt of misconduct is not necessary
but some basis being sufficient.

However, we find that complainant was not accorded notice and investigation prior to termination. Indeed, circumstances herein resulted in constructive dismissal. We lend credence to
complainant's allegation that investigation was conducted after she tendered her indefinite leave. Law and jurisprudence mandate due process prior to termination. Considering the circumstances
obtaining and in the spirit of compassionate justice, we find complainant entitled to separation pay, equivalent to one-half month per year of service based on her salary of P7,500.00 or the total
amount of P32,750.00.

Petitioner's claim of constructive dismissal stems from her alleged removal from the positions of Administrator, Vice President for Administration and Executive Vice President. From the time
petitioner assumed the position of Executive Vice President, she did not possess any legal right to claim security of tenure concerning this position because she assumed the same without authority
from the Board of Directors. Petitioner cannot claim that she was dismissed from the position of Administrator and Vice-President for Administration because her continuous occupation of the
positions is at the discretion or pleasure of the Board of Directors.

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In La Sallete of Santiago, Inc. vs. NLRC (195 SCRA 80 [1991]), this Court explained:

The acquisition of security of tenure by the teacher in the manner indicated signifies that he shall thenceforth have the right to remain in employment as such teacher until he reaches the
compulsory retirement age in accordance with the rules of the school or the law. That tenure, once acquired, cannot be adversely affected or defeated by requiring the teacher to execute
contracts stipulating the termination of his employment upon the expiration of a fixed period or term. Contracts of that sort are anathema and will be struck down as null and void.

Now, a teacher may also be appointed as a department head or administrative officer of the school, e.g., as member of the school’s governing council, as college dean or assistant dean, as
high school principal, as college secretary. Except in the case of a clear and explicit agreement to the contrary, the acceptance by a teacher of an administrative position offered to him or to
which he might have aspired, does not operate as a relinquishment or loss by him of his security of tenure as a faculty member; he retains his tenure as a teacher during all the time that he
occupies the additional position of department head or administrative officer of the school. Indeed, the agreement between him and the school may very well include a provision for him to
continue teaching even on a part-time basis.

The teacher designated as administrative officer ordinarily serves for a definite term or at the pleasure of the school head or board of trustees or regents depending on the rules of the
school and the agreement he may enter into with the institution. This appears to the Court to be the invariable practice in most private schools, the purpose being, as the Court en banc has
also had occasion to point out, to afford to as many of the teaching staff as possible the opportunity to serve as dean or principal or as administrative officer of one type or another. There
is, to be sure, nothing whatever amiss in said practice of having teachers serve as administrative officials for a fixed term or in a non-permanent capacity.

xxx
xxx
xxx

A distinction should thus be drawn between the teaching staff of private educational institutions, on one hand--teachers, assistant instructors, assist ant professors, associate professors, full
professors--and department or administrative heads or officials on the other--college or department secretaries, principals, directors, assistant deans, deans. The teaching staff, the faculty
members, may and should acquire tenure in accordance with the rules and regulations of the Department of Education and Culture and the school's own rules and standards. On the other
hand, teachers appointed to serve as administrative officials do not normally and should not expect to, acquire a second or additional tenure. The acquisition of such an additional tenure is
not normal, is the exception rather than the rule, and should therefore be clearly and specifically provided by law or contract.

The management of NWC rests on its Board of Directors including the selection of members of the faculty who may be allowed to assume other positions in the college aside from that of teacher or
instructor. In 1988, when the then new Board of Directors abolished the additional positions held by the petitioner, it was merely exercising its right.

The Board abolished the positions not because the petitioner was the occupant thereof but because the positions had become redundant with functions overlapping those of the President of the
college. The Board realized that the college was violating the Administrative Manual for Private School which requires that all collegiate departments should have a full-time head.

In Philippine School of Business Administration et al. vs. Labor Arbiter Lacandola S. Leano and Rufino R. Tan (127 SCRA 778 [1984]), this Court held:

This is not a case of dismissal. The situation is that of a corporate office having been declared vacant, and of TAN's not having been elected thereafter. The matter of whom to elect is a
prerogative that belongs to the Board, and involves the exercise of deliberate choice and the faculty of discriminative selection. Generally speaking, the relationship of a person to a
corporation, whether as officer or agent or employee, is not determined by the nature of the services performed, but by the incidents of the relationship as they actually exist.

The Board of Directors of NWC merely exercised rights vested in it by the Articles of Incorporation. Petitioner failed to refute the evidence proffered by NWC before the labor arbiter. In her appeal to
the NLRC, petitioner also failed to rebut the findings of the labor arbiter. In the instant petition, she has again failed to overturn private respondents' evidence as well as the findings of the labor
arbiter which were affirmed by the NLRC.

Petitioner's application for an indefinite leave of absence was not approved by the college authorities, but this notwithstanding, she failed to follow-up her application and did not report for work.
Believing she was dismissed, petitioner filed the complaint for illegal dismissal, illegal deductions, underpayment, unpaid wages or commissions and for moral damages and attorney's fees on
November 16, 1988.

As pointed out earlier, the rules on termination of employment, penalties for infractions, and resort to concerted actions, insofar as managerial employees are concerned, are not necessarily the same
as those applicable to termination of employment of ordinary employees. Employers, generally, are allowed a wider latitude of discretion in terminating the employment of managerial personnel or
those of similar rank performing functions which by their nature require the employer's trust and confidence, than in the case of ordinary rank-and-file employees (Cruz vs. Medina, 177 SCRA 565
(1989]).

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Article 282(c) of the Labor Code provides that an employer may terminate an employment for "fraud or willful breach by the employee of the trust reposed in him by his employer or his duly
authorized representative."

Under this provision, loss of trust and confidence is a valid ground for dismissing an employee. Termination of employment on this ground does not require proof beyond reasonable doubt. All that is
needed is for the employer to establish sufficient basis for the dismissal of the employee (Cruz vs. Medina, supra).

Both the labor arbiter and the public respondent NLRC found that there is some basis for respondent NWC's loss of trust and confidence on petitioner.

The dismissal of the petitioner was for a just and valid cause. However, public respondent gave credence to petitioner's allegation that she was not accorded notice and hearing prior to
termination. It appears on record that the investigation of petitioner's alleged irregularities was conducted after the filing of the complaint for illegal dismissal.

Under Section 1, Rule XIV of the Implementing Rules and Regulations of the Labor Code, the dismissal of an employee must be for a just or authorized cause and after due process.

The two requirements of this legal provision are:

1. The legality of the act of dismissal, that is, dismissal under the ground provided under Article 283 of the New Labor Code; and
2. The legality in the manner of dismissal, that is, with due observance of the procedural requirements of Sections 2, 5, and 6 of Batas Pambansa Blg. 130.

While the Labor Code treats of the nature and the remedies available with regard to the first, such as:

(a) reinstatement to his former position without loss of seniority rights, and
(b) payment of backwages corresponding to the period from his illegal dismissal up to actual reinstatement, said Code does not deal at all with the second, that is, the manner of dismissal,
which is therefore, governed exclusively by the Civil Code.

In cases where there was a valid ground to dismiss an employee but there was non-observance of due process, this Court held that only a sanction must be imposed upon the employer for failure to
give formal notice and to conduct an investigation required by law before dismissing the employee in consonance with the ruling in Wenphil v. NLRC, 170 SCRA 69 (1989); Shoemart, Inc. vs. NLRC,
supra; and in Pacific Mills, Inc. vs. Zenaida Alonzo, 199 SCRA 617 (1991).

In Wenphil, we held:

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
discussed above. 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 circumstance 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.

Public respondent's finding that petitioner was not afforded due process is correct but the Commission erred when it awarded separation pay in the amount of P32,750.00. In the Pacific Mills, Inc. and
Wenphil cases, this Court merely awarded P1,000.00 as penalty for non-observance of due process.

The Board of Directors, composed of the individual private respondents herein, has the power granted by the Corporation Code to implement a reorganization of respondent college's offices,
including the abolition of various positions, since it is implied or incidental to its power to conduct the regular business affairs of the corporation. The prerogative of management to conduct its own
business affairs to achieve its purposes cannot be denied. Management is at liberty, absent any malice on its part, to abolish positions which it deems no longer necessary. When petitioner was
stripped by the Board of her positions as Executive Vice President and Vice President for Administration, with a corresponding reduction in salary, the Board did not act in a capricious, whimsical,
and arbitrary manner, thus negating malice and bad faith.

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200. ETCUBAN, JR.. VS. SULPICIO LINES, INC.

VICENTE C. ETCUBAN, JR., PETITIONER, VS. SULPICIO LINES, INC., RESPONDENT.

FACTS Respondent Sulpicio Lines, Inc. is a domestic corporation engaged in the business domestic shipping. Among its fleet of inter-island vessels was the M/V Surigao Princess, plying the Cebu–Cagayan de
Oro–Jagna–Bohol route.

The petitioner was employed by the respondent on January 30, 1978 until his dismissal on June 10, 1994 for loss of trust and confidence. At the time of his dismissal, the petitioner was the Chief
Purser of the M/V Surigao Princess receiving a monthly salary of P5,000.00. As the Chief Purser, the petitioner handled the funds of the vessel and was the custodian of all the passage tickets and bills
of lading. It was his responsibility, among other things, to issue passage tickets and to receive payments from the customers of the respondent, as well as to issue the corresponding official receipts
therefor. He was also tasked to disburse the salaries of the crewmen of the vessel.

Sometime in the last week of May 1994, the newly designated jefe de viaje of the M/V Surigao Princess, in a surprise examination, discovered that several yellow passenger’s duplicate original of yet
to be sold or unissued passage tickets already contained the amount of P88.00 – the fare for adult passengers for the Cagayan de Oro to Jagna, Bohol route. He noticed that three other original
copies which made up the full set did not bear the same impression, although they were supposed to have been prepared at the same time. Acting on what appeared to be a strong evidence of
short-changing the company, the jefe de viaje dug deeper on what he uncovered. As expected, he found inordinate amount of ticket issuances for children at half the fare of P44.00 in Voyage 434 of
the vessel. When word of the anomaly reached the respondent, it waited for the petitioner to return to Cebu City in the hope of shedding more light on the matter.

On May 30, 1994, shortly after disembarking from the M/V Surigao Princess at the port of Cebu, the petitioner received a memorandum of even date from Personnel Officer Artemio F. Añiga relative
to the irregularity in the “alleged involvement in anomaly of ticket issuance,” instructing him to forthwith report to the main office and to explain in writing why no disciplinary action should be meted
on him or to submit himself to an investigation. The memorandum warned the petitioner that his failure to comply with the aforementioned instructions would be construed as a waiver of his right to
be heard. It also informed the petitioner of his immediate preventive suspension until further notice. The petitioner, however, refused to acknowledge receipt of the memorandum which was
personally served on him, prompting the respondent to mail the same, and which the petitioner received days later.

Meanwhile, upon his arrival at the office, the petitioner was questioned by Mr. Carlo S. Go, Senior Executive Vice-President and General Manager of respondent. Thereafter, petitioner was
preliminarily investigated by Mr. Añiga wherein his statements were taken down. After the initial investigation, the petitioner was told to sign its minutes but he adamantly refused, claiming the same
to be “self-incriminatory.” The next day, the petitioner was replaced by Mr. Felix Almonicar as the Chief Purser of the M/V Surigao Princess. As a result of his replacement, the petitioner thought he
was fired from his job.

Barely a week after the petitioner’s preventive suspension and pending his administrative investigation, he filed a complaint against the respondent for illegal dismissal, non-payment of overtime pay,
13thmonth pay and other monetary benefits with the NLRC, Regional Arbitration Branch No. VII, Cebu City. The case was docketed as NLRC No. RAB-VII-06-0607-84. The petitioner alleged that the
ground for his dismissal, i.e., loss of trust and confidence, was ill-motivated and without factual basis. He did not deny that the anomalous tickets were in his possession, but denied that he was guilty
of any wrongdoing. He dismissed the handwriting on the tickets as his, and claimed that he was singled out for the dismissal. He averred that the “trumped-up” charge was a clever scheme resorted
to by his employer so it could avoid paying him monetary benefits, considering that he was with the company for more than sixteen (16) years. He argued that assuming that it was he who wrote
those entries in the tickets, the fact remains that they were still unissued; hence, no money went to his pocket and no material prejudice was caused to the respondent. According to the petitioner, he
would not jeopardize his livelihood for something as miniscule as P88.00. He prayed not for reinstatement but for separation pay, monetary benefits plus damages.

On June 9, 1994, the respondent received its summons. Short of pre-empting its administrative investigation, coupled with the petitioner’s obstinate refusal to submit to further investigation, the
respondent decided to terminate the petitioner’s employment for loss of trust and confidence in connection with passage tickets nos. 636742-636748. A copy of the notice of termination dated
June 10, 1994 was sent by mail to the petitioner.

After hearing on the merits, Labor Arbiter Ernesto F. Carreon rendered his Decision dated March 13, 1995, finding the petitioner’s dismissal illegal. He ruled that the respondent failed to substantiate
and prove that the petitioner committed any wrongdoing. He found the evidence of impression on the tickets inadequate, considering that the petitioner was not the only person in the vessel
handling or issuing the passage tickets. According to the Labor Arbiter, the anomalous entries on the unissued tickets could not be attributed entirely to the petitioner; thus, there was no reason for
the respondent to lose its trust and confidence on the petitioner.

Both parties appealed to the NLRC, 4 th Division, Cebu City. In its appeal, the respondent insisted that the dismissal was justified. The petitioner, on the other hand, questioned the computation of his
backwages, besides reiterating his claim for moral damages.

On February 21, 1996, a Decision was rendered by the NLRC affirming the challenged decision with the modification that the backwages to be paid to the petitioner shall be reckoned from the time of

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 his actual dismissal on June 10, 1994, up to the issuance of the writ of execution on the finality of the decision, but not to exceed five (5) years. In fixing the additional backwages, the NLRC concluded
that the respondent has “the open recourse to the Supreme Court” which could “prolong his (petitioner’s) agony.”

In affirming the decision of the Labor Arbiter, the NLRC ruled as follows –

We do not find the allegedly highly irregular condition of the tickets valid reason to even suspend, much less terminate the complainant-appellant for loss of trust and confidence. It
has not been established by clear and competent evidence that the alleged irregular condition of the tickets was attributable to the complainant or to other members of the
team of inspectors who have equal access to the tickets. This is vital in view of the complainant’s denial to have committed the same. Moreover, there is no showing at all on
record that the respondent suffered damage as a consequence of the existence of these tickets with entry of the rate or cost of transportation from Cagayan de Oro City to Jagna,
Bohol, or that the complainant has benefited from the same. To establish loss of confidence, the employer must have reasonable ground to believe that the employee is responsible
for the misconduct and his participation therein renders him unworthy of the trust and confidence demanded of his position, and makes him absolutely unfit to continue with his
employment.

With more reason, we do not find valid loss of confidence to warrant dismissal the alleged “stabbing the back” by the complainant-appellant of the respondent-appellant by the
mere filing of the case. This act of the complainant-appellant is not a misconduct. It is a valid recourse to the instrumentality of the government that can give him ample protection
and labor justice especially when he felt that his 16 years of service is being threatened.
The respondent filed a motion for reconsideration which was denied by the NLRC in a Resolution [28] promulgated on April 15, 1996. It stressed its finding that the petitioner’s alleged breach of trust
was not sufficiently established by the evidence on record. It further ruled that the petitioner’s indefinite suspension from work amounted to his constructive dismissal. The respondent filed a petition
for certiorari with this Court, ascribing to the NLRC, among others, grave abuse of discretion when it ruled that the preventive suspension of the petitioner was tantamount to constructive dismissal.
Following the pronouncement in St. Martin Funeral Home v. NLRC, the petition was referred to the Court of Appeals for its appropriate action and disposition. The Court of Appeals reversed and set
aside the NLRC decision. [33] It ruled that there was valid and just cause for the petitioner’s dismissal, as there was sufficient basis for loss of trust and confidence on him. The appellate court amplified
that in cases of dismissal for loss of trust and confidence, it is not required that there is proof beyond reasonable doubt.

ISSUE RULING

Whether or not there was The petition is bereft of merit.

sufficient basis for its loss of
trust and confidence on The petitioner insists that his dismissal was without factual and legal basis. Echoing the findings of the Labor Arbiter and the NLRC, he maintains that the handwriting on the irregular tickets was not
petitioner. proven to be his. He argues that the reluctance of the respondent to take on his challenge to subject the same tickets to a handwriting expert proved his inculpability. Moreover, he points out that the
very testimony of the respondent’s Personnel Officer, Mr. Añiga, to the effect that the latter had no idea whose handwriting it was on the questioned tickets, helped clear his innocence.

Upon the other hand, the respondent counters that there was sufficient basis for its loss of trust and confidence on petitioner; the tampered tickets were found in his possession, and as Chief Purser,
he was the custodian of the unissued tickets. The respondent avers that proof beyond reasonable doubt is not necessary to justify loss of trust and confidence, it being sufficient that there is some
basis to justify it.

We agree with the respondent.

Law and jurisprudence have long recognized the right of employers to dismiss employees by reason of loss of trust and confidence. More so, in the case of supervisors or personnel occupying
positions of responsibility, loss of trust justifies termination. Loss of confidence as a just cause for termination of employment is premised from the fact that an employee concerned holds a position
of trust and confidence. This situation holds where a person is entrusted with confidence on delicate matters, such as the custody, handling, or care and protection of the employer’s property. But, in
order to constitute a just cause for dismissal, the act complained of must be “work-related” such as would show the employee concerned to be unfit to continue working for the employer.

The degree of proof required in labor cases is not as stringent as in other types of cases. It must be noted, however, that recent decisions of this Court have distinguished the treatment of managerial
employees from that of rank-and-file personnel, insofar as the application of the doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file personnel, loss of trust and
confidence as ground for valid dismissal requires proof of involvement in the alleged events in question, and that mere uncorroborated assertions and accusations by the employer will not be
sufficient. But as regards a managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. Hence, in the
case of managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there is some basis for such loss of confidence, such as when the employer has reasonable
ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded
by his position.

In the present case, the petitioner is not an ordinary rank-and-file employee. The petitioner’s work is of such nature as to require a substantial amount of trust and confidence on the part of the
employer. Being the Chief Purser, he occupied a highly sensitive and critical position and may thus be dismissed on the ground of loss of trust and confidence. One of the many duties of the petitioner

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included the preparation and filling up passage tickets, and indicating the amounts therein before being given to the passengers. More importantly, he handled the personnel funds of the MV Surigao
Princess. Clearly, the petitioner’s position involves a high degree of responsibility requiring trust and confidence. The position carried with it the duty to observe proper company procedures in the
fulfillment of his job, as it relates closely to the financial interests of the company.

The requirement that there be some basis or reasonable ground to believe that the employee is responsible for the misconduct was sufficiently met in the case at bar. As Chief Purser, the petitioner
cannot feign ignorance on the irregularity as he had custody of the tickets when the anomaly was discovered. It would not be amiss to suppose that the petitioner, who would benefit directly or
indirectly from the fruits of such fraudulent scheme, was a party to such irregularity. That there were other pursers who could have done the irregularity is of no moment. It bears stressing that the
petitioner was the Chief Purser who was tasked to directly supervise each and every purser under him. While, indeed, it was not proved that he was the one who made the irregular entries on the
tickets, the fact that he did not lift a finger at all to determine who it was is a sad reflection of his job. In fact, even if the petitioner had no actual and direct participation in the alleged anomalies, his
failure to detect any anomaly in the passage tickets amounts to gross negligence and incompetence, which are, likewise, justifiable grounds for his dismissal. Be that as it may, to our mind, it is no
longer necessary to prove the petitioner’s direct participation in the irregularity, for what is material is that his actuations were more than sufficient to sow in his employer the seed of mistrust and
loss of confidence.

Neither are we impressed with the petitioner’s claim that he was singled out, or that his dismissal was a ploy to obviate payment of his retirement benefits. There is nothing in the records to show that
beyond making these allegations, the petitioner did nary of anything to substantiate the same.

Finally, the petitioner theorizes that even assuming that there was evidence to support the charges against him, his dismissal from the service is unwarranted, harsh and is not commensurate to his
misdeeds, considering the following: first, his 16 long years of service with the company; second, no loss or damages was suffered by the company since the tickets were unissued; third, he had no
previous derogatory record; and, lastly, the amount involved is miniscule. Citing jurisprudence, he appeals for compassion and requests that he be merely suspended, or at the very least, given
separation pay for his length of service.

We find no merit in the petitioner’s contention.

We are not unmindful of the foregoing doctrine, but after a careful scrutiny of the cited cases, the Court is convinced that the petitioner’s reliance thereon is misplaced. It must be stressed that in all
of the cases cited, the employees involved were all rank-and-file or ordinary workers. As pointed out earlier, the rules on termination of employment, penalties for infractions, insofar as fiduciary
employees are concerned, are not necessarily the same as those applicable to the termination of employment of ordinary employees. Employers, generally, are allowed a wider latitude of discretion
in terminating the employment of managerial personnel or those of similar rank performing functions which by their nature require the employer’s trust and confidence, than in the case of ordinary
rank-and-file employees.

The fact that the petitioner has worked with the respondent for more than 16 years, if it is to be considered at all, should be taken against him. The infraction that he committed, vis-a-vis his long
years of service with the company, reflects a regrettable lack of loyalty. Loyalty that he should have strengthened instead of betrayed. If an employee’s length of service is to be regarded as a
justification for moderating the penalty of dismissal, it will actually become a prize for disloyalty, perverting the meaning of social justice and undermining the efforts of labor to cleanse its ranks of all
undesirables.

The argument that the petitioner was not guilty of anything because the tickets were never issued or that he had received nothing from the passengers that he could short-change the company would
not mitigate his liability, nor efface the respondent’s loss of trust and confidence in him. Whether or not the respondent was financially prejudiced is immaterial. Also, what matters is not the amount
involved, be it paltry or gargantuan; rather the fraudulent scheme in which the petitioner was involved, which constitutes a clear betrayal of trust and confidence. In fact, there are indications that this
fraudulent act had been done before, and probably would have continued had it not been discovered.

Moreover, the records show that the petitioner is not as blameless as he claimed to be. In 1979 and 1980, he was suspended by the respondent for several company infractions, which the petitioner
did not deny. It must also be stressed that when an employee accepts a promotion to a managerial position or to an office requiring full trust and confidence, he gives up some of the rigid guaranties
available to an ordinary worker. Infractions which, if committed by others, would be overlooked or condoned or penalties mitigated may be visited with more serious disciplinary action.

It cannot be over emphasized that there is no substitute for honesty for sensitive positions which call for utmost trust. Fairness dictates that the respondent should not be allowed to continue with the
employment of the petitioner who has breached the confidence reposed on him. Unlike other just causes for dismissal, trust in an employee, once lost, is difficult, if not impossible, to regain. There
can be no doubt that the petitioner’s continuance in the extremely sensitive fiduciary position of Chief Purser would be patently inimical to the respondent’s interests. It would be oppressive and
unjust to order the respondent to take him back, for the law, in protecting the rights of the employee, authorizes neither oppression nor self-destruction of the employer.

Anent the petitioner’s request for separation pay, the Court is constrained to deny the same. Well-settled is the rule that separation pay shall be allowed only in those instances where the employee is
validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Inasmuch as reason for which the petitioner was validly separated involves his integrity, which is
especially required for the position of purser, he is not worthy of compassion as to deserve at least separation pay for his length of service.

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2.1.4. HABITUAL ABSENCES/TARDINESS

201. WORLDWIDE PAPERMILLS, INC. VS. NATIONAL LABOR RELATIONS COMMISSION

WORLDWIDE PAPERMILLS, INC. AND/OR HONORIO POBLADOR, III, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION AND EDWIN P. SABUYA, RESPONDENTS.

FACTS Edwin P. Sabuya was employed by petitioner as a packer on July 8, 1982 until his services were terminated on September 28, 1991.

It appears that private respondent incurred excessive unexcused absences from 1986 to 1989:

● In 1986, he incurred a total of 46 days without pay including AWOL but excluding 30 days VL & SL given to him.
● The following year, 1987, he accumulated about 17. 5 days leave without pay including AWOL after exhausting the 30 days VL/SL with pay.
● Followed by 1988, in which after exhausting the 30 days leave with pay, he again accumulated 60 days leave without pay, 12 days of which AWOL.
● Finally, 1989 he acquired a total of 26 days leave without pay including 3 days AWOL after exhausting the 30 days leave with pay.

Disciplined for unofficial leaves, in 1986, he was admonished, (1) month. In 1987, he was admonished, warned sternly, and suspended for one (1) week. While in 1988 for AWOL he
was admonished, warned sternly and suspended for one (1) month. On Nov. 11, he was warned sternly for excessive leave without pay. Finally in 1989, he got an admonition and
consequently warned sternly for AWOL.

Sabuya was counseled several times to improve his attendance. On April 11, 1988, he promised not to absent himself, yet, no compliance. Due to having incurred 12 days AWOL in
1988, he was supposed to be terminated based on our rule, but due to his asking reconsideration and intervention of R. Brusola, Union President he was only suspended for one
(1) month. A promissory note to this effect was executed by Sabuya and witnessed by R. Brusola, stressing among others to improve his attendance in 19 89; once he exceeds the
VL & SL granted by the company, he accepts to be terminated; and the next time he is declared AWOL he accepts the DA of termination.

To summarize it all, no improvement up to this date. In 1989 he has exceeded the required VL & SL given by the company and aggravated by the fact that he was disciplined for
AWOL twice already for that same year. The undersigned also called the attention of R. Brusola of this in fact he even talked to Sabuya several times to improve his attendance but
to no avail.'

On February 2, 1990, private respondent wrote petitioner a letter promising to mend his ways after the personnel officer of petitioner recommended his dismissal due to his
numerous absences.

Private respondent, however, again incurred absences without official leave on January 2, February 20, June 1, 2 and 3, 1991. He was consequently suspended effective June 24,
1991. For the third time, private respondent was suspended for two weeks effective July 22, 1991 up to August 4, 1991 when, he incurred absences on July 5 and 8, 1991.

A week after he had served his latest suspension, private respondent applied for sick leave covering the period August 12-18, 1991. On August 15, 1991, Ms. Belinda Luna, the
company nurse, paid private respondent a home visit. However, he was not there. Neither was anybody at home, though the radio was on. Ms. Luna learned from private
respondent's son that his father was moonlighting as a pedicab driver at Bayanan, Muntinlupa, market.

After petitioner was informed of the incident, private respondent's application for sick leave was disapproved. Then, on Aug. 29, 1991, petitioner issued a memorandum to private
respondent requiring him to explain within twenty-four (24) hours from receipt why no disciplinary action should be imposed upon him for his excessive absences without official
leave. In compliance therewith, private respondent gave his answer.

Petitioner terminated the employment of private respondent. Thus, the latter filed a complaint for illegal dismissal, praying for reinstatement and payment of backwages.

Labor Arbiter Caday rendered" a decision finding the dismissal of private respondent illegal, and ordered his reinstatement without loss of seniority ^rights and privileges, with full backwages.

In holding that private respondent was illegally dismissed, Labor Arbiter Caday found that not only were petitioners remiss in according private respondent the due process requirements of notice and
hearing, but, more importantly, petitioners offered no just cause for his dismissal.

Aggrieved, petitioners appealed the Labor Arbiter's decision to the NLRC. On 14 July 1993, respondent NLRC rendered its decision reversing Labor Arbiter Caday's decision by ruling that private
respondent was dismissed for just cause. However, due to petitioners' failure to observe the requirements of due process in dismissing private respondent, respondent NLRC ordered petitioners to
indemnify private respondent the amount of one thousand pesos (PI,000.00). Petitioners were also ordered to pay private respondent separation pay equivalent to one (1) month salary for every year

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 of service, for equitable reasons.

ISSUE RULING

Article 282 of the Labor Code provides the grounds for which an employer may validly dismiss an employee, among which is gross and habitual neglect by the employee of his duties.

In the case at bench, it is undisputed that respondent Edwin P. Sabuya had within a span of almost six (6) years been repeatedly admonished, warned and suspended for incurring excessive
unauthorized absences. Worse, he was not-at home but was out driving a pedicab to earn extra income when the company nurse visited his residence after he filed an application for sick leave. Such
conduct of respondent Edwin P. Sabuya undoubtedly constitutes gross and habitual neglect of duties.

In Philippine Geothermal, Inc. v. NLRC, the Court stated thus:

"While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, it
should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability to the
employer. The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer. It should be made clear that when the law tilts the scale of
justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice; to put the two parties on
relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an
injustice to the employer. Justicia nemini neganda est (Justice is to be denied to none).”

Our decision in Filipro , Inc. v. The Honorable Minister Bias F. Ople, et al. does not preclude private respondent's dismissal for, unlike in Filipro, respondent Edwin P. Sabuya was given notice that the
next time he again exceeds his allowed vacation and sick leaves or goes on absence without official leave, he would be terminated from employment. Private respondent did not heed the warning. His
dismissal from employment is, therefore, justified.

On the issue of separation pay, we ruled also in Philippine Geothermal, Inc. that separation pay of one-half (1/2) month salary for every year of service is equitable, even if the employee's termination
of employment is justified.

Finally, on the issue of violation of private respondent's right to procedural due process, it is clear that the right was violated when no hearing was conducted prior to dismissal.

In Wenphil Corporation v. NLRC the Court ordered an employer to pay P1,000.00 to an employee who was denied due process prior to dismissal. It should be stressed however that the Court did not
intend to fix a value or price on such right of an employee, for rights, specially the right to due process, cannot be translated in monetary value. The amount awarded in such cases was intended to
serve as a penalty to the employer who violated an employee's right as well as to serve as an example for other employers inclined to violate their employees rights. Considering the importance of
said right to procedural due process, petitioners should indemnify private respondent the amount of Five Thousand Pesos (P5,000.00).

2.1.5. FRAUD / SERIOUS MISCONDUCT

202. AUSTRIA VS. HON. NATIONAL LABOR RELATIONS COMMISSION

PASTOR DIONISIO V. AUSTRIA, PETITIONER, VS. HON. NATIONAL LABOR RELATIONS COMMISSION (FOURTH DIVISION), CEBU CITY, CENTRAL PHILIPPINE UNION MISSION CORPORATION OF THE SEVENTH-DAY ADVENTIST, ELDER
HECTOR V. GAYARES, PASTORS REUBEN MORALDE, OSCAR L. ALOLOR, WILLIAM U. DONATO, JOEL WALES, ELY SACAY, GIDEON BUHAT, ISACHAR GARSULA, ELISEO DOBLE, PROFIRIO BALACY, DAVID RODRIGO, LORETO MAYPA, MR.
RUFO GASAPO, MR. EUFRONIO IBESATE, MRS. TESSIE BALACY, MR. ZOSIMO KARA-AN, AND MR. ELEUTERIO LOBITANA, RESPONDENTS.

FACTS Private Respondent Central Philippine Union Mission Corporation of the Seventh-Day Adventists is a religious corporation duly organized and existing under Philippine law and is represented in this
case by the other private respondents, officers of the SDA. Petitioner, on the other hand, was a Pastor of the SDA until 31 October 1991, when his services were terminated.

Petitioner Pastor Dionisio V. Austria worked with the SDA for twenty eight (28) years from 1963 to 1991. He began his work with the SDA on 15 July 1963 as a literature evangelist, selling literature of
the SDA over the island of Negros. From then on, petitioner worked his way up the ladder and got promoted several times. In January, 1968, petitioner became the Assistant Publishing Director in the
West Visayan Mission of the SDA. In July, 1972, he was elevated to the position of Pastor in the West Visayan Mission covering the island of Panay, and the provinces of Romblon and Guimaras.
Petitioner held the same position up to 1988. Finally, in 1989, petitioner was promoted as District Pastor of the Negros Mission of the SDA and was assigned at Sagay, Balintawak and Toboso, Negros
Occidental, with twelve (12) churches under his jurisdiction. In January, 1991, petitioner was transferred to Bacolod City. He held the position of district pastor until his services were terminated on 31
October 1991.

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 On various occasions from August up to October, 1991, petitioner received several communications from Mr. Eufronio Ibesate, the treasurer of the Negros Mission asking him to admit
accountability and responsibility for the church tithes and offerings collected by his wife, Mrs. Thelma Austria, in his district which amounted to P15,078.10, and to remit the same to the Negros
Mission.

In his written explanation, petitioner reasoned out that he should not be made accountable for the unremitted collections since it was private respondents Pastor Gideon Buhat and Mr. Eufronio
Ibesate who authorized his wife to collect the tithes and offerings since he was very sick to do the collecting at that time.

Thereafter, on 16 October 1991, at around 7:30 a.m., petitioner went to the office of Pastor Buhat, the president of the Negros Mission. During said call, petitioner tried to persuade Pastor Buhat to
convene the Executive Committee for the purpose of settling the dispute between him and the private respondent, Pastor David Rodrigo. The dispute between Pastor Rodrigo and petitioner arose
from an incident in which petitioner assisted his friend, Danny Diamada, to collect from Pastor Rodrigo the unpaid balance for the repair of the latter's motor vehicle which he failed to pay to Diamada.
Due to the assistance of petitioner in collecting Pastor Rodrigo's debt, the latter harbored ill-feelings against petitioner. When news reached petitioner that Pastor Rodrigo was about to file a
complaint against him with the Negros Mission, he immediately proceeded to the office of Pastor Buhat on the date abovementioned and asked the latter to convene the Executive Committee. Pastor
Buhat denied the request of petitioner since some committee members were out of town and there was no quorum. Thereafter, the two exchanged heated arguments. Petitioner then left the office
of Pastor Buhat. While on his way out, petitioner overheard Pastor Buhat saying, "Pastor daw inisog na ina iya (Pastor you are talking tough)." Irked by such remark, petitioner returned to the office of
Pastor Buhat, and tried to overturn the latter's table, though unsuccessfully, since it was heavy. Thereafter, petitioner banged the attache case of Pastor Buhat on the table, scattered the books in his
office, and threw the phone. Fortunately, private respondents Pastors Yonilo Leopoldo and Claudio Montaño were around and they pacified both Pastor Buhat and petitioner.

Petitioner received a letter inviting him and his wife to attend the Executive Committee meeting at the Negros Mission Conference Room. To be discussed in the meeting were the non-remittance of
church collection and the events that transpired on 16 October 1991. A fact-finding committee was created to investigate petitioner. For two (2) days, from October 21 and 22, the fact-finding
committee conducted an investigation of petitioner. Sensing that the result of the investigation might be one-sided, petitioner immediately wrote Pastor Rueben Moralde, president of the SDA and
chairman of the fact-finding committee, requesting that certain members of the fact-finding committee be excluded in the investigation and resolution of the case. Out of the six (6) members
requested to inhibit themselves from the investigation and decision-making, only two (2) were actually excluded, namely: Pastor Buhat and Pastor Rodrigo. Subsequently, on 29 October 1991,
petitioner received a letter of dismissal citing misappropriation of denominational funds, willful breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of an
offense against the person of employer's duly authorized representative, as grounds for the termination of his services.

Reacting against the adverse decision of the SDA, petitioner filed a complaint before the Labor Arbiter for illegal dismissal against the SDA and its officers and prayed for reinstatement with backwages
and benefits, moral and exemplary damages and other labor law benefits. On 15 February 1993, Labor Arbiter Cesar D. Sideño rendered a decision in favor of petitioner. The SDA, through its officers,
appealed the decision of the Labor Arbiter to the National Labor Relations Commission, Fourth Division, Cebu City. In a decision, the NLRC vacated the findings of the Labor Arbiter.

ISSUE RULING

Whether or not the dismissal In termination cases, the settled rule is that the burden of proving that the termination was for a valid or authorized cause rests on the employer. Thus, private respondents must not merely rely on
of the petitioner was valid. the weaknesses of petitioner's evidence but must stand on the merits of their own defense.

The issue being the legality of petitioner's dismissal, the same must be measured against the requisites for a valid dismissal, namely:

(a) the employee must be afforded due process, i.e., he must be given an opportunity to be heard and to defend himself, and;
(b) the dismissal must be for a valid cause as provided in Article 282 of the Labor Code.
Without the concurrence of this twin requirements, the termination would, in the eyes of the law, be illegal.

Before the services of an employee can be validly terminated, Article 277 (b) of the Labor Code and Section 2, Rule XXIII, Book V of the Rules Implementing the Labor Code further require the
employer to furnish the employee with two (2) written notices, to wit:
(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; and,
(b) 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.

The first notice, which may be considered as the proper charge, serves to apprise the employee of the particular acts or omissions for which his dismissal is sought. The second notice on the other
hand seeks to inform the employee of the employer's decision to dismiss him. This decision, however, must come only after the employee is given a reasonable period from receipt of the first notice
within which to answer the charge and ample opportunity to be heard and defend himself with the assistance of a representative, if he so desires. This is in consonance with the express provision of
the law on the protection to labor and the broader dictates of procedural due process. Non-compliance therewith is fatal because these requirements are conditions sine quo non before dismissal may
be validly effected.

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Private respondent failed to substantially comply with the above requirement s. With regard to the first notice, the letter, dated 17 October 1991, which notified petitioner and his wife to attend the
meeting on 21 October 1991, cannot be construed as the written charge required by law. A perusal of the said letter reveals that it never categorically stated the particular acts or omissions on which
petitioner's impending termination was grounded. In fact, the letter never even mentioned that petitioner would be subject to investigation. The letter merely mentioned that petitioner and his wife
were invited to a meeting wherein what would be discussed were the alleged unremitted church tithes and the events that transpired on 16 October 1991. Thus, petitioner was surprised to find out
that the alleged meeting turned out to be an investigation. From the tenor of the letter, it cannot be presumed that petitioner was actually on the verge of dismissal. The alleged grounds for the
dismissal of petitioner from the service were only revealed to him when the actual letter of dismissal was finally issued. For this reason, it cannot be said that petitioner was given enough opportunity
to properly prepare for his defense. While admittedly, private respondents complied with the second requirement, the notice of termination, this does not cure the initial defect of lack of the proper
written charge required by law.

In the letter of termination, dated 29 October 1991, private respondents enumerated the following as grounds for the dismissal of petitioner, namely: misappropriation of denominational funds, willful
breach of trust, serious misconduct, gross and habitual neglect of duties, and commission of an offense against the person of employer's duly authorized representative. Breach of trust and
misappropriation of denominational funds refer to the alleged failure of petitioner to remit to the treasurer of the Negros Mission tithes, collections and offerings amounting to P15,078.10 which were
collected by his wife, Mrs. Thelma Austria, in the churches under his jurisdiction. On the other hand, serious misconduct and commission of an offense against the person of the employer's duly
authorized representative pertain to the 16 October 1991 incident wherein petitioner allegedly committed an act of violence in the office of Pastor Gideon Buhat. The final ground invoked by private
respondents is gross and habitual neglect of duties allegedly committed by petitioner.

We cannot sustain the validity of dismissal based on the ground of breach of trust. Private respondents allege that they have lost their confidence in petitioner for his failure, despite demands, to
remit the tithes and offerings amounting to P15,078.10, which were collected in his district. A careful study of the voluminous records of the case reveals that there is simply no basis for the alleged
loss of confidence and breach of trust. Settled is the rule that under Article 282 (c) of the Labor Code, the breach of trust must be willful. A breach is willful if it is done intentionally, knowingly and
purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. It must rest on substantial grounds and not on the employer's
arbitrariness, whims, caprices or suspicion; otherwise, the employee would eternally remain at the mercy of the employer. It should be genuine and not simulated. This ground has never been
intended to afford an occasion for abuse, because of its subjective nature. The records show that there were only six (6) instances when petitioner personally collected and received from the church
treasurers the tithes, collections, and donations for the church. The stenographic notes on the testimony of Naomi Geniebla, the Negros Mission Church Auditor and a witness for private
respondents, show that Pastor Austria was able to remit all his collections to the treasurer of the Negros Mission.
Though private respondents were able to establish that petitioner collected and received tithes and donations several times, they were not able to establish that petitioner failed to remit the same to
the Negros Mission, and that he pocketed the amount and used it for his personal purpose. In fact, as admitted by their own witness, Naomi Geniebla, petitioner remitted the amounts which he
collected to the Negros Mission for which corresponding receipts were issued to him. Thus, the allegations of private respondents that petitioner breached their trust have no leg to stand on.

In a vain attempt to support their claim of breach of trust, private respondents try to pin on petitioner the alleged non-remittance of the tithes collected by his wife. This argument deserves little
consideration. First of all, as proven by convincing and substantial evidence consisting of the testimonies of the witnesses for private respondents who are church treasurers, it was Mrs. Thelma
Austria who actually collected the tithes and donations from them, and, who failed to remit the same to the treasurer of the Negros Mission. The testimony of these church treasurers were
corroborated and confirmed by Ms. Geniebla and Mr. Ibesate, officers of the SDA. Hence, in the absence of conspiracy and collusion, which private respondents failed to demonstrate, between
petitioner and his wife, petitioner cannot be made accountable for the alleged infraction committed by his wife. After all, they still have separate and distinct personalities. For this reason, the Labor
Arbiter found it difficult to see the basis for the alleged loss of confidence and breach of trust. The Court does not find any cogent reason, therefore, to digress from the findings of the Labor Arbiter
which is fully supported by the evidence on record.

With respect to the grounds of serious misconduct and commission of an offense against the person of the employer's duly authorized representative, we find the same unmeritorious and, as such, do
not warrant petitioner's dismissal from the service.

Misconduct has been defined as improper or wrong conduct. It is the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and
implies wrongful intent and not mere error in judgment. For misconduct to be considered serious it must be of such grave and aggravated character and not merely trivial or unimportant. Based on
this standard, we believe that the act of petitioner in banging the attache case on the table, throwing the telephone and scattering the books in the office of Pastor Buhat, although improper, cannot
be considered as grave enough to be considered as serious misconduct.

After all, though petitioner committed damage to property, he did not physically assault Pastor Buhat or any other pastor present during the incident of 16 October 1991. In fact, the alleged offense
committed upon the person of the employer's representatives was never really established or proven by private respondents. Hence, there is no basis for the allegation that petitioner's act
constituted serious misconduct or that the same was an offense against the person of the employer's duly authorized representative. As such, the cited actuation of petitioner does not justify the
ultimate penalty of dismissal from employment. While the Constitution does not condone wrongdoing by the employee, it nevertheless urges a moderation of the sanctions that may be applied to him
in light of the many disadvantages that weigh heavily on him like an albatross on his neck. Where a penalty less punitive would suffice, whatever missteps may have been committed by the worker
ought not be visited with a consequence so severe such as dismissal from employment. For the foregoing reasons, we believe that the minor infraction committed by petitioner does not merit the
ultimate penalty of dismissal.

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 The final ground alleged by private respondents in terminating petitioner, gross and habitual neglect of duties, does not requires an exhaustive discussion. Suffice it to say that all private respondents
had were allegations but not proof. Aside from merely citing the said ground, private respondents failed to prove culpability on the part of petitioner. In fact, the evidence on record shows otherwise.
Petitioner's rise from the ranks disclose that he was actually a hard-worker. Private respondents' evidence, which consisted of petitioner's Worker's Reports, revealed how petitioner travelled to
different churches to attend to the faithful under his care. Indeed, he labored hard for the SDA, but, in return, he was rewarded with a dismissal from the service for a non-existent cause.

In view of the foregoing, we sustain the finding of the Labor Arbiter that petitioner was terminated from service without just or lawful cause. Having been illegally dismissed, petitioner is entitled to
reinstatement to his former position without loss of seniority right and the payment of full backwages without any deduction corresponding to the period from his illegal dismissal up to actual
reinstatement.

203. FELIX VS. ENERTECH SYSTEMS INDUSTRIES, INC.

MANUEL C. FELIX, PETITIONER, VS. ENERTECH SYSTEMS INDUSTRIES, INC. AND COURT OF APPEALS, RESPONDENTS.

FACTS Respondent Enertech System Industries, Incorporated is engaged in the manufacture of boilers and tanks. Petitioner Manuel C. Felix worked as a welder/fabricator in respondent company. On August
5, 1994, petitioner and three other employees, namely, Dante Tunglapan, Hilario Lamog, and Emerson Yanos, were assigned to install a smokestack at the Big J Feedmills in Sta. Monica, Bulacan.
During the entire period they were working at the Big J Feedmills, petitioner and his companions accomplished daily time records (DTRs). Petitioner wrote in his DTR that he had worked eight hours a
day on the basis of which his wages were computed.

The work was estimated to be completed within seven days, but it actually took the workers until August 17, 1994, or about two weeks, before it was finished. On that day, petitioner and his three co-
employees were each given notice by respondent, which read in part:

Reports came to our office that for the past few days you were reporting at [the] Big J jobsite at around eleven o'clock in the morning and you were leaving said site at two o'clock.

We would like to inform you that said act constitutes Abandonment of Work which is [a] violation of our Company Code on Employees Discipline that warrants a penalty of
DISMISSAL.

Therefore, you are hereby given 24 hours to explain your side on the said matter.
The next day, August 18, 1994, petitioner and his co-workers were placed under preventive suspension for seven working days. On August 26, 1994, respondent, through its personnel assistant, Ma.
Imelda E. Samson (MIES), and in the presence of two union officers, Armando B. Tumamao (ABT) and Jessie T. Yanos (JTY), interviewed Johnny F. Legaspi (JFL), who owned the Big J Feedmills, and his
engineer, Juanito Avena. These statements were corroborated by the affidavit of petitioner's co-employee, Emerson G. Yanos, who stated that petitioner and his co-worker Dante Tunglapan usually
arrived for work at the Big J Feedmills between 9:30 to 10:00 a.m., stopped working at 12:00 noon, then resumed work at 1:00 p.m., continuing until 3:00 p.m. Before going home, they had snacks.

Reynaldo Tapiru, petitioner's co-employee and neighbor in Sitio Kabanatuan, Valenzuela, also stated in an affidavit that he had seen petitioner either in his house or within their compound on August
6, 7, 8, and 14, 1994, between 3 and 4 o'clock in the afternoon, when he was supposed to be working at the Big J Feedmills in Bulacan at that time.

Respondent required petitioner to report to the company lawyer on September 13, 1994 for investigation. Then, on October 17, 1994, it issued a memorandum placing petitioner under preventive
suspension for 30 days. Finally, respondent sent petitioner a memorandum terminating his employment on the grounds of dishonesty and insubordination. Petitioner filed a complaint for illegal
dismissal against respondent before the Arbitration Branch of the NLRC.

ISSUE RULING

There was substantial evidence presented showing that petitioner did not really work eight hours a day, as he had stated in his time cards.

For this reason, we find petitioner's dismissal to be in order. Falsification of time cards constitutes serious misconduct and dishonesty or fraud, which are just causes for the termination of employment
under Art. 282(a) and (c) of the Labor Code which provides:

ART. 282. Termination by employer. ¾ An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;

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 Whether or not a timekeeper Employees are hired in order to foster the employer's business, and company rules and regulations are part of such goal. If we adhere to the labor arbiter's view that a timekeeper should have been
should have been assigned to placed by private respondent or to commission the latter's client to act as timekeeper, it would be an additional burden not only on the part of private respondent but also on its client. It would be
the Big J Feedmills. contrary to every business motto that "clients should be given utmost satisfaction and convenience." Moreover, if every time an assignment is given to an employee, the employer will send out
someone to spy, the atmosphere of harmonious relationship between the employer and its employees will be beclouded, thundering forth suspicion and distrust among themselves.

2.1.6. ANALOGOUS CAUSES

204. CATHEDRAL SCHOOL OF TECHNOLOGY VS. NATIONAL LABOR RELATIONS COMMISSION

CATHEDRAL SCHOOL OF TECHNOLOGY AND SR. APOLINARIA TAMBIEN, RVM, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION AND TERESITA VALLEJERA, RESPONDENTS.

FACTS Private respondent Teresita Vallejera sought admission as an aspirant to the Congregation of the Religious of Virgin Mary (RVM), upon the recommendation of Archbishop Patrick Cronin. In order to
observe the life of a religious, she came to live with the sisters of the congregation and received free board and lodging at the house of the nuns. During the period of her aspirancy and in return for
her accommodations, she volunteered to assist as a library aide in the library section of the Cathedral School of Technology, an educational institution run by the RVM sisters. In return for her work as
such, she was given a monthly allowance of P200.00.

Private respondent had a change of heart in later years and confessed to the sisters that she was no longer interested in becoming a nun. She pleaded, however, to be allowed to continue living with
the sisters for she had no other place to stay in, to which request the sisters acceded and, in exchange therefor, she voluntarily continued to assist in the school library.

Private respondent formally applied for and was appointed to the position of library aide with a monthly salary of P1,171.00. It was at around this time, however, that trouble developed. The sisters
began receiving complaints from students and employees about private respondent's difficult personality and sour disposition at work.

Before the opening of classes, or more specifically on June 2, 1989, private respondent was summoned to the Office of the Directress by herein petitioner Sister Apolinaria Tambien, RVM, shortly after
the resignation of the school's Chief Librarian, Heraclea Nebria, on account of irreconcilable differences with said respondent, for the purpose of clarifying the matter. Petitioner also informed private
respondent of the negative reports received by her office regarding the latter's frictional working relationship with co-workers and students and reminded private respondent about the proper
attitude and behavior that should be observed in the interest of peace and harmony in the school library.

Private respondent resented the observations about her actuations and was completely unreceptive to the advice given by her superior. She reacted violently to petitioner's remarks and angrily
offered to resign, repeatedly saying, “OK, I will resign. I will resign.” Thereafter, without waiting to be dismissed from the meeting, she stormed out of the office in discourteous disregard and callous
defiance of authority.

On separate occasions thereafter, petitioners sent at least three persons to talk to and convince private respondent to settle her differences with the former. Private respondent, however, remained
adamant in her refusal to submit to authority. On June 15, 1989, Sister Apolinaria sent a letter formally informing private respondent that she had a month from said date or until July 15, 1989 to look
for another job as the school had decided to accept her resignation. Private respondent then filed a complaint for illegal deduction and underpayment of salary, overtime pay and service incentive
pay. On July 19, 1989, she was prevented from entering the school premises by one Sister Virginia Villamino in view of her dismissal from the service as per the aforestated letter of June 15, 1989.
Consequently, private respondent amended her complaint to include illegal dismissal.
Conversely, private respondent contends that on February 11, 1981, she was hired as a library aide by petitioner school with a monthly salary of P200.00 but was provided with free board and lodging.
Her salary was gradually increased so that by 1986, she was already receiving P1,171.00 per month and by June, 1988, her monthly salary was P1,386.00. Inexplicably, this was reduced to P1,227.00 in
July, 1988, which amount she continued to receive until May 31, 1989, when it was raised to P2,316.00. However, private respondent alleges that on June 2, 1989, she was forced by petitioner school
directress to tender her resignation but she refused. She was informed that her services would be terminated effective July 15, 1989 through the letter dated June 15, 1989.

Private respondent nonetheless insists that she continued to report for work, but on July 17, 1989 and thereafter she could not find her daily time record, so she just requested a fellow employee to
sign a piece of paper to show that she reported for work. On July 19, 1989, she was barred from entering the school due to the fact that she had already been dismissed. She requested that she be
furnished a copy of the termination paper but she was told that the letter of June 15, 1989 served that purpose. Hence, her complaint for illegal dismissal.
Petitioner, as respondent in the proceedings below, in its manifestation and answer of July 25, 1989 specifically denied all of private respondent's allegations as complainant therein. The subsequent
acrimonious exchanges containing opposing contentions of the parties on practically every substantive and procedural aspect of the controversy clearly exhibited that the prospect of arriving at an
amicable settlement of the case was practically nil if not completely impossible

The labor arbiter rendered a decision in favor of private respondent, holding that she was illegally dismissed for lack of due process, in that she was summarily dismissed without a hearing being
conducted in order to afford her an opportunity to present her side. The complementary adjudication was to the effect that private respondent was not entitled to reinstatement with backwages, but
the payment of separation pay was ordered as an appropriate remedy under the circumstances.

38

ISSUE
Whether or not there is an
existence of an employer-
employee relationship
between the parties.
On appeal, the NLRC affirmed the labor arbiter's decision, with the modifications stated at the outset of this opinion, on the rationale that while petitioners had valid reasons to terminate the services
of private respondent, the dismissal was nonetheless illegal for lack of due process, hence the award of backwages, separation pay and attorney's fees. It is this holding of public respondent, which is
sought to be set aside in the present recourse on the issue of whether or not the NLRC committed grave abuse of discretion in ordering the payment of said monetary claims where the dismissal is
illegal for denial of due process but there is a finding of a valid ground for termination.
RULING
Teresita Vallejera was a regular employee of respondent, Cathedral School of Technology. And as intimated earlier, the resolution of the issue of employer-employee relationship will plays (sic) a
decisive role in the other claims of complainant. The finding that the complainant was a regular employee of respondents is predicated on the fact that her assignment as a library aide was necessary
and/or desirable in the business of the respondents which was operating an educational institution. Necessity and/or desirability is the gauge mandated by Art. 280 of the Labor Code as amended in
determining the status of an employee. Needless to say a liabrary (a)ide is practically indispensable in running a school. Her status, however, as a regular employee should not date back to her first
connection with the school on February 11, 1981. It should only start from January 30, 1988. This becomes immediately apparent from Exh. ‘4’ of respondent's position paper. In this document which
is a letter application of complainant, she applies for the position of library aide. Simple logic will therefore show that she herself did not consider herself to be a regular employee prior to said date
because why should she apply for the position if she already had an appointment and was already functioning as such a regular employee? In short, complainant prior to January 29, 1988 was a library
aide of respondent only on a volunteer basis. The deduction that complainant was a regular worker from January 30, 1988 is also bolstered by the fact that respondent Sr. Ma. Apolinaria Tambien
herself, in her letter dated June 15, 1989 admitted that she and complainant were employer and employee, and we quote:
‘So, before it will be too late for a possible scandal that might issue between us (employer and employee) at this time of the school year, I'm giving you this alternative-freedom to find a
better place to live and work in.’
“January 29, 1988 plays a very significant date in this case because on this date complainant applied to be appointed as a regular library aide. She therefore was divesting herself of her voluntary
status as such. And respondents who despite receipt of said letter-application continued to employ her is (sic) deemed to have waived the voluntariness of complainant's services. From January 20,
(sic, 30) 1988, therefore, complainant became a regular worker. To rule otherwise would be the height of injustice as it would result in unjust enrichment on the part of respondent. Moreover, if
respondent did not wish to hire complainant, then it should have done so upon receipt of said letter application.”
The reason for which private respondent's services were terminated, namely, her unreasonable behavior and unpleasant deportment in dealing with the people she closely works with in the course
of her employment, is analogous to the other “just causes” enumerated under the Labor Code, as amended:
“Art. 282. Termination by employer. - An employer may terminate an employment for any of the following just causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work;
(b) Gross and habitual breach by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.”
Petitioners’ averments on private respondent's disagreeable character -- “quarrelsome, bossy, unreasonable and very difficult to deal with” -- are supported by the various testimonies of several co-
employees and students of the school. In fact, as earlier stated, her overbearing personality caused the chief librarian to resign. Furthermore, the complaints about her objectionable behavior were
confirmed by her reproachable actuations during her meeting with the petitioner directress on June 2, 1989, when private respondent, upon being advised of the need to improve her working
relations with others, obstreperously reacted and unceremoniously walked out on her superior, and arrogantly refused to subsequently clear up matters or to apologize therefor. To make matters
worse, she ignored the persons sent by petitioners on separate occasions to intervene in an effort to bring the matter to a peaceful resolution. The conduct she exhibited on that occasion smacks of
sheer disrespect and defiance of authority and assumes the proportion of serious misconduct or insubordination, any of which constitutes just cause for dismissal from employment.
As petitioner school is run by a religious order, it is but expected that good behavior and proper deportment, especially among the ranks of its own employees, are major considerations in the
fulfillment of its mission. Under the circumstances, the sisters cannot be faulted for deciding to terminate private respondent whose presence “has become more a burden rather than a joy” and had
proved to be disruptive of the harmonious atmosphere of the school.
Moreover, there is no dispute as to the existence of such just cause for petitioners have presented sufficient evidence attesting to private respondent's unsavory character. On the other hand, no
evidence was offered by private respondent to controvert the charges and statements of petitioners and their witnesses, beyond a general denial that the same were “imaginal (sic) and “fanciful”
along with unsubstantiated allegations that her dismissal was allegedly due to her union activities. Instead, the fact that there was sufficient basis for termination of the services of private respondent
was implicitly conceded by public respondent when, in its assailed resolution, it remarked that -?
“x x x while the dismissal of complainant is illegal, it is not whimsical, malicious and wanton. The record shows that complainant is not without fault, for what precipitated her
39

It is the contention of
petitioners that dismissal for
cause but without due
process does not warrant an
order for reinstatement or
separation pay, as the case
may be, nor of backwages, for
these are sanctions that
pertain to dismissals without
just cause.
separation was her behaviour and deportment in her inter-personal relationship with her co-employees and the students which respondents could not relish with approval. The
decision to dismiss her was not personally ill-motivated.”[13]
On the matter of illegal dismissal, petitioners do not dispute the findings, and in effect admit, that private respondent was denied her right to due process. As found by the labor arbiter, no hearing on
the impending dismissal was conducted as would have afforded private respondent an opportunity to explain her side and, if need be, to defend herself. True, petitioners notified her of the
school's decision to terminate her services. But notice alone, without the requisite hearing does not suffice. Albeit with some ambiguity which will hereafter be clarified, this Court has held that:
“Under the Labor Code, as amended, the requirements of lawful dismissal of an employee by his employer are two-fold: the substantive and the procedural. Not only must the
dismissal be for a valid or authorized cause as provided by law (Arts. 279, 281, 282-284), but the rudimentary requirements of due process - notice and hearing - must also be
observed before an employee may be dismissed (Art. 277 [b]). One cannot go without the other, for otherwise the termination would, in the eyes of the law, be illegal.”
Nevertheless, we find no merit in public respondent's ratiocination, quoting the labor arbiter, that:
“It is likewise the finding (of) and this Branch so holds that complainant was illegally dismissed. This finding is anchored on the lack of due process. In this case complainant was not
afforded the opportunity to defend herself in a hearing called for the purpose. She was just summarily dismissed contrary to the provision(s) of Batas Pambansa Bilang 130 and its
Implementing Rules.”
Clearly, therefore, its ruling that private respondent was illegally dismissed was premised solely on the fact of alleged lack of procedural due process, without regard to whether or no there was lawful
cause for such dismissal, which latter aspect constitutes the element of substantive due process. We accordingly proceed to resolve the issue that is thereby presented.
In the landmark case of Wenphil Corporation vs. National Labor Relations Commission, et. al, and consistently reiterated in substantially identical cases that followed, the rule was stated thus:
“The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of seniority and the payment of his wages during the period of his
separation until his actual reinstatement but not exceeding three (3) years without qualification or deduction, when it appears he was not afforded due process, although his
dismissal was found to be for just and authorized cause in an appropriate proceeding in the Ministry of Labor and Employment, should be re-examined. It will be highly prejudicial to
the interests of the employer to impose on him the services of an employee who has been shown to be guilty of the charges that warranted his dismissal from employment. Indeed,
it will demoralize the rank and file if the underserving, if not undesirable, remains in the service.
“x x x Under the circumstances the dismissal of the private respondent for just cause should be maintained. He has no right to return to his former employer.
“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 fact of each case and the
gravity of the omission commited by the employer.”
Rubberword (Phils.) Inc. et. al. vs. National Labor Relations Commission, et al., supra, supplies the rationale for this noteworthy doctrine in labor law, in this wise:
“It is now axiomatic that if just cause for termination of employment actually exists and is established by substantial evidence in the course of the proceedings before the Labor
Arbiter, the fact that the employer failed, prior to such termination, to accord to the discharged employee the right of formal notice of the charge or charges against him and a right
to ventilate his side with respect thereto, will not operate to eradicate said just cause so as to impose on the employer the obligation of reinstating the employee and otherwise
granting him such other concomitant relief as is appropriate in the premises.”
A close scrutiny of the facts of the cases relied on by public respondent, namely, De Leon vs. NLRC, et al., Atlas Consolidated Mining and Development Corporation vs. NLRC, et al., Tingson, Jr., et al. vs.
NLRC, et al., De Vera vs. NLRC., et al.,[21] and Salaw vs. NLRC, et al., reveals that either there was no lawful cause or no basis for the claim of loss of confidence or the same was not sufficiently
established, aside from the fact that there was a denial of due process, thus indubitably justifying the order for either reinstatement or payment of separation pay with backwages.
The rulings in these cases are merely in compliance with the strictures of the Labor Code, to wit:
“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.”
40
 However, no refuge can be sought by respondents under the aforecited cases or statutory foundation. They are not controlling insofar as the instant case is concerned in view of the marked
differences in the factual features; specifically on the presence or lack of lawful cause for dismissal. The seeming conflict in the cases respectively relied on by the contending parties is, consequently,
more apparent than real.

It stands to reason that the separation of private respondent from the service is justified as borne out by the circumstances of this case, and is bolstered by the jurisprudential tenet of long and
indisputable standing that --

“An employer cannot legally be compelled to continue with the employment of a person who admittedly was guilty of misfeasance or malfeasance towards his employer, and whose
continuance in the service of the latter is patently inimical to his interests. The law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the
employer.”

This being so, there can be no award for backwages, for it must be pointed out that while backwages are granted on the basis of equity for earnings which a worker or employee has lost due to his
illegal dismissal, [24] where private respondent's dismissal is for just cause, as is the case herein, there is no factual or legal basis to order payment of backwages; otherwise, private respondent would be
unjustly enriching herself at the expense of petitioners. Where the employee's dismissal was for a just cause, it would be neither fair nor just to allow the employee to recover something he has not
earned or could not have earned.

Neither can there be an award for separation pay. In Cosmopolitan Funeral Homes, Inc. vs. Maalat, et al.,[27] we reiterated the categorical abandonment of the doctrine that employees dismissed for
cause are entitled to separation pay on the ground of social and compassionate justice. This ruling finds support in Section 7, Book VI of the Implementing Rules of the Labor Code which expressly
states that:

“Sec. 7. The just causes for terminating the services of an employee shall be those provided in Article 282 of the Code. The separation from work of an employee for a just cause
does not entitle him to the termination pay provided in the Code, without prejudice, however, to whatever rights, benefits and privileges he may have under the applicable
individual or collective bargaining agreement with the employer or voluntary employer policy or practice.”

It is true that, exceptionally and as an equitable concession, separation pay may be allowed as a measure of social justice but only in those instances where the employee is validly dismissed for causes
other than serious misconduct or those reflecting on his moral character. However, such exceptional circumstance does not obtain in the present case.

Verily, an award for payment of separation pay presupposes that the illegally dismissed employee would otherwise have been entitled to reinstatement. Where, as in this case, there is sufficient basis
to dismiss private respondent (aside from the obvious existence of strained relations between the parties) which accordingly is a lawful impediment to her reinstatement, an award for separation pay
would be a specious inconsistency. Not being entitled to reinstatement, private respondent cannot legally be entitled to separation pay.

Finally, private respondent is not entitled to recover attorney's fees since the instant case clearly does not fall under either the general rule therefor or any of the exceptions thereto as enunciated in
Article 2208 of the Civil Code.

205. YRASUEGUI VS. PHILIPPINE AIRLINES, INC.

ARMANDO G. YRASUEGUI, PETITIONER, VS. PHILIPPINE AIRLINES, INC., RESPONDENT.

FACTS Petitioner Armando G. Yrasuegui was a former international flight steward of Philippine Airlines, Inc. (PAL). He stands five feet and eight inches (5'8") with a large body frame. The proper weight for a
man of his height and body structure is from 147 to 166 pounds, the ideal weight being 166 pounds, as mandated by the Cabin and Crew Administration Manual of PAL.

The weight problem of petitioner dates back to 1984. Back then, PAL advised him to go on an extended vacation leave from December 29, 1984 to March 4, 1985 to address his weight concerns.
Apparently, petitioner failed to meet the company's weight standards, prompting another leave without pay from March 5, 1985 to November 1985.

After meeting the required weight, petitioner was allowed to return to work. But petitioner's weight problem recurred. He again went on leave without pay from October 17, 1988 to February 1989.

On April 26, 1989, petitioner weighed 209 pounds, 43 pounds over his ideal weight. In line with company policy, he was removed from flight duty effective May 6, 1989 to July 3, 1989. He was formally
requested to trim down to his ideal weight and report for weight checks on several dates. He was also told that he may avail of the services of the company physician should he wish to do so. He was
advised that his case will be evaluated on July 3, 1989.

On February 25, 1989, petitioner underwent weight check. It was discovered that he gained, instead of losing, weight. He was overweight at 215 pounds, which is 49 pounds beyond the limit.

41

ISSUE
The obesity of petitioner is a
ground for dismissal under
Article 282(e) of the Labor
Code.
Consequently, his off-duty status was retained.
On October 17, 1989, PAL Line Administrator Gloria Dizon personally visited petitioner at his residence to check on the progress of his effort to lose weight. Petitioner weighed 217 pounds, gaining 2
pounds from his previous weight. After the visit, petitioner made a commitment to reduce weight in a letter addressed to Cabin Crew Group Manager Augusto Barrios.
Despite the lapse of a ninety-day period given him to reach his ideal weight, petitioner remained overweight. On January 3, 1990, he was informed of the PAL decision for him to remain grounded until
such time that he satisfactorily complies with the weight standards. Again, he was directed to report every two weeks for weight checks.
Petitioner failed to report for weight checks. Despite that, he was given one more month to comply with the weight requirement. As usual, he was asked to report for weight check on different dates.
He was reminded that his grounding would continue pending satisfactory compliance with the weight standards.
Again, petitioner failed to report for weight checks, although he was seen submitting his passport for processing at the PAL Staff Service Division.
On April 17, 1990, petitioner was formally warned that a repeated refusal to report for weight check would be dealt with accordingly. He was given another set of weight check dates. Again, petitioner
ignored the directive and did not report for weight checks. On June 26, 1990, petitioner was required to explain his refusal to undergo weight checks.
When petitioner tipped the scale on July 30, 1990, he weighed at 212 pounds. Clearly, he was still way over his ideal weight of 166 pounds. From then on, nothing was heard from petitioner until he
followed up his case requesting for leniency on the latter part of 1992. He weighed at 219 pounds on August 20, 1992 and 205 pounds on November 5, 1992.
PAL finally served petitioner a Notice of Administrative Charge for violation of company standards on weight requirements. He was given ten (10) days from receipt of the charge within which to file
his answer and submit controverting evidence.
Petitioner submitted his Answer. Notably, he did not deny being overweight. What he claimed, instead, is that his violation, if any, had already been condoned by PAL since "no action has been taken
by the company" regarding his case "since 1988." He also claimed that PAL discriminated against him because "the company has not been fair in treating the cabin crew members who are similarly
situated." A clarificatory hearing was held where petitioner manifested that he was undergoing a weight reduction program to lose at least two (2) pounds per week so as to attain his ideal weight.
On June 15, 1993, petitioner was formally informed by PAL that due to his inability to attain his ideal weight, "and considering the utmost leniency" extended to him "which spanned a period covering
a total of almost five (5) years," his services were considered terminated "effective immediately." His motion for reconsideration having been denied, petitioner filed a complaint for illegal dismissal
against PAL.
RULING
A reading of the weight standards of PAL would lead to no other conclusion than that they constitute a continuing qualification of an employee in order to keep the job. Tersely put, an employee may
be dismissed the moment he is unable to comply with his ideal weight as prescribed by the weight standards. The dismissal of the employee would thus fall under Article 282(e) of the Labor Code. As
explained by the CA:
x x x [T]he standards violated in this case were not mere "orders" of the employer; they were the "prescribed weights" that a cabin crew must maintain in order to qualify for and
keep his or her position in the company. In other words, they were standards that establish continuing qualifications for an employee's position. In this sense, the failure to
maintain these standards does not fall under Article 282(a) whose express terms require the element of willfulness in order to be a ground for dismissal. The failure to meet the
employer's qualifying standards is in fact a ground that does not squarely fall under grounds (a) to (d) and is therefore one that falls under Article 282(e) - the "other causes
analogous to the foregoing."
By its nature, these "qualifying standards" are norms that apply prior to and after an employee is hired. They apply prior to employment because these are the standards a job
applicant must initially meet in order to be hired. They apply after hiring because an employee must continue to meet these standards while on the job in order to keep his job.
Under this perspective, a violation is not one of the faults for which an employee can be dismissed pursuant to pars. (a) to (d) of Article 282; the employee can be dismissed simply
because he no longer "qualifies" for his job irrespective of whether or not the failure to qualify was willful or intentional. x x x
Petitioner, though, advances a very interesting argument. He claims that obesity is a "physical abnormality and/or illness." Relying on Nadura v. Benguet Consolidated, Inc., he says his dismissal is
illegal.
The reliance on Nadura is off-tangent. The factual milieu in Nadura is substantially different from the case at bar. First, Nadura was not decided under the Labor Code. The law applied in that case was
Republic Act (RA) No. 1787. Second, the issue of flight safety is absent in Nadura, thus, the rationale there cannot apply here. Third, in Nadura, the employee who was a miner, was laid off from work
because of illness, i.e., asthma. Here, petitioner was dismissed for his failure to meet the weight standards of PAL. He was not dismissed due to illness. Fourth, the issue in Nadura is whether or not
the dismissed employee is entitled to separation pay and damages. Here, the issue centers on the propriety of the dismissal of petitioner for his failure to meet the weight standards of PAL. Fifth, in
42
 Nadura, the employee was not accorded due process. Here, petitioner was accorded utmost leniency. He was given more than four (4) years to comply with the weight standards of PAL.

In the case at bar, the evidence on record militates against petitioner's claims that obesity is a disease. That he was able to reduce his weight from 1984 to 1992 clearly shows that it is possible for him
to lose weight given the proper attitude, determination, and self-discipline. Indeed, during the clarificatory hearing on December 8, 1992, petitioner himself claimed that "[t]he issue is could I bring my
weight down to ideal weight which is 172, then the answer is yes. I can do it now."

True, petitioner claims that reducing weight is costing him "a lot of expenses." However, petitioner has only himself to blame. He could have easily availed the assistance of the company physician, per
the advice of PAL.[51] He chose to ignore the suggestion. In fact, he repeatedly failed to report when required to undergo weight checks, without offering a valid explanation. Thus, his fluctuating weight
indicates absence of willpower rather than an illness.

Petitioner cites Bonnie Cook v. State of Rhode Island, Department of Mental Health, Retardation and Hospitals ,[52] decided by the United States Court of Appeals (First Circuit). In that case, Cook
worked from 1978 to 1980 and from 1981 to 1986 as an institutional attendant for the mentally retarded at the Ladd Center that was being operated by respondent. She twice resigned voluntarily
with an unblemished record. Even respondent admitted that her performance met the Center's legitimate expectations. In 1988, Cook re-applied for a similar position. At that time, "she stood 5'2" tall
and weighed over 320 pounds." Respondent claimed that the morbid obesity of plaintiff compromised her ability to evacuate patients in case of emergency and it also put her at greater risk of serious
diseases.

Cook contended that the action of respondent amounted to discrimination on the basis of a handicap. This was in direct violation of Section 504(a) of the Rehabilitation Act of 1973, [53] which
incorporates the remedies contained in Title VI of the Civil Rights Act of 1964. Respondent claimed, however, that morbid obesity could never constitute a handicap within the purview of the
Rehabilitation Act. Among others, obesity is a mutable condition, thus plaintiff could simply lose weight and rid herself of concomitant disability.

The appellate Court disagreed and held that morbid obesity is a disability under the Rehabilitation Act and that respondent discriminated against Cook based on "perceived" disability. The evidence
included expert testimony that morbid obesity is a physiological disorder. It involves a dysfunction of both the metabolic system and the neurological appetite - suppressing signal system, which is
capable of causing adverse effects within the musculoskeletal, respiratory, and cardiovascular systems. Notably, the Court stated that "mutability is relevant only in determining the substantiality of
the limitation flowing from a given impairment," thus "mutability only precludes those conditions that an individual can easily and quickly reverse by behavioral alteration."

Unlike Cook, however, petitioner is not morbidly obese. In the words of the District Court for the District of Rhode Island, Cook was sometime before 1978 "at least one hundred pounds more than
what is considered appropriate of her height." According to the Circuit Judge, Cook weighed "over 320 pounds" in 1988. Clearly, that is not the case here. At his heaviest, petitioner was only less than
50 pounds over his ideal weight.

In fine, We hold that the obesity of petitioner, when placed in the context of his work as flight attendant, becomes an analogous cause under Article 282(e) of the Labor Code that justifies his dismissal
from the service. His obesity may not be unintended, but is nonetheless voluntary. As the CA correctly puts it, "[v]oluntariness basically means that the just cause is solely attributable to the employee
without any external force influencing or controlling his actions. This element runs through all just causes under Article 282, whether they be in the nature of a wrongful action or omission. Gross and
habitual neglect, a recognized just cause, is considered voluntary although it lacks the element of intent found in Article 282(a), (c), and (d).”

2.2 AUTHORIZED CAUSES FOR TERMINATION

206. JPL MARKETING PROMOTIONS VS. NLRC

JPL MARKETING PROMOTIONS, PETITIONER, VS. COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION, NOEL GONZALES, RAMON ABESA III AND FAUSTINO ANINIPOT, RESPONDENTS.

FACTS JPL Marketing and Promotions is a domestic corporation engaged in the business of recruitment and placement of workers. On the other hand, private respondents Noel Gonzales, Ramon Abesa III
and Faustino Aninipot were employed by JPL as merchandisers on separate dates and assigned at different establishments in Naga City and Daet, Camarines Norte as attendants to the display of
California Marketing Corporation (CMC), one of petitioner’s clients.

JPL notified private respondents that CMC would stop its direct merchandising activity in the Bicol Region, Isabela, and Cagayan Valley effective 15 August 1996. They were advised to wait for further
notice as they would be transferred to other clients. However, private respondents Abesa and Gonzales filed before the National Labor Relations Commission Regional Arbitration Branch (NLRC) Sub V
complaints for illegal dismissal, praying for separation pay, 13th month pay, service incentive leave pay and payment for moral damages. Aninipot filed a similar case thereafter.

After the submission of pertinent pleadings by all of the parties and after some clarificatory hearings, the complaints were consolidated and submitted for resolution. Executive Labor Arbiter Gelacio L.
Rivera, Jr. dismissed the complaints for lack of merit. The Labor Arbiter found that Gonzales and Abesa applied with and were employed by the store where they were originally assigned by JPL even

43
 before the lapse of the six (6)-month period given by law to JPL to provide private respondents a new assignment. Thus, they may be considered to have unilaterally severed their relation with JPL,
and cannot charge JPL with illegal dismissal. The Labor Arbiter held that it was incumbent upon private respondents to wait until they were reassigned by JPL, and if after six months they were not
reassigned, they can file an action for separation pay but not for illegal dismissal. The claims for 13th month pay and service incentive leave pay was also denied since private respondents were paid
way above the applicable minimum wage during their employment.

Private respondents appealed to the NLRC. In its Resolution, the Second Division of the NLRC agreed with the Labor Arbiter’s finding that when private respondents filed their complaints, the six-
month period had not yet expired, and that CMC’s decision to stop its operations in the areas was beyond the control of JPL, thus, they were not illegally dismissed. However, it found that despite
JPL’s effort to look for clients to which private respondents may be reassigned it was unable to do so, and hence they are entitled to separation pay. Setting aside the Labor Arbiter’s decision, the
NLRC ordered the payment of:
1. Separation pay, based on their last salary rate and counted from the first day of their employment with the respondent JPL up to the finality of this judgment;

2. Service Incentive Leave pay, and 13th month pay, computed as in No.1 hereof.
Aggrieved, JPL filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of Appeals, imputing grave abuse of discretion on the part of the NLRC. It claimed that private
respondents are not by law entitled to separation pay, service incentive leave pay and 13th month pay.

The Court of Appeals dismissed the petition and affirmed in toto the NLRC resolution. While conceding that there was no illegal dismissal, it justified the award of separation pay on the grounds of
equity and social justice. The Court of Appeals rejected JPL’s argument that the difference in the amounts of private respondents’ salaries and the minimum wage in the region should be considered as
payment for their service incentive leave and 13th month pay. [14] Notwithstanding the absence of a contractual agreement on the grant of 13th month pay, compliance with the same is mandatory
under the law. Moreover, JPL failed to show that it was exempt from paying service incentive leave pay. JPL filed a motion for reconsideration of the said resolution, but the same was denied on 25
January 2002.[15]

In the instant petition for review, JPL claims that the Court of Appeals committed reversible error in rendering the assailed Decision and Resolution. [16] The instant case does not fall under any of the
instances where separation pay is due, to wit: installation of labor-saving devices, redundancy, retrenchment or closing or cessation of business operation, [17] or disease of an employee whose
continued employment is prejudicial to him or co-employees,[18] or illegal dismissal of an employee but reinstatement is no longer feasible. [19] Meanwhile, an employee who voluntarily resigns
is not entitled to separation unless stipulated in the employment contract, or the collective bargaining agreement, or is sanctioned by established practice or policy of the employer. [20] It argues that
private respondents’ good record and length of service, as well as the social justice precept, are not enough to warrant the award of separation pay. Gonzales and Aninipot were employed by JPL for
more than four (4) years, while Abesa rendered his services for more than two (2) years, hence, JPL claims that such short period could not have shown their worth to JPL so as to reward them with
payment of separation pay.[21]

In addition, even assuming arguendo that private respondents are entitled to the benefits awarded, the computation thereof should only be from their first day of employment with JPL up to 15
August 1996, the date of termination of CMC’s contract, and not up to the finality of the 27 July 2000 resolution of the NLRC. [22] To compute separation pay, 13th month pay, and service incentive
leave pay up to 27 July 2000 would negate the findings of both the Court of Appeals and the NLRC that private respondents were not unlawfully terminated. [23] Additionally, it would be erroneous to
compute service incentive leave pay from the first day of their employment up to the finality of the NLRC resolution since an employee has to render at least one (1) year of service before he is
entitled to the same. Thus, service incentive leave pay should be counted from the second year of service. [24]

On the other hand, private respondents maintain that they are entitled to the benefits being claimed as per the ruling of this Court in Serrano v. NLRC, et al.[25] They claim that their dismissal, while
not illegal, was tainted with bad faith. [26] They allege that they were deprived of due process because the notice of termination was sent to them only two (2) days before the actual termination. [27]
Likewise, the most that JPL offered to them by way of settlement was the payment of separation pay of seven (7) days for every year of service. [28]

Replying to private respondents’ allegations, JPL disagrees that the notice it sent to them was a notice of actual termination. The said memo merely notified them of the end of merchandising for
CMC, and that they will be transferred to other clients. [29] Moreover, JPL is not bound to observe the thirty (30)-day notice rule as there was no dismissal to speak of. JPL counters that it was private
respondents who acted in bad faith when they sought employment with another establishment, without even the courtesy of informing JPL that they were leaving for good, much less tender their
resignation.[30] In addition, the offer of seven (7) days per year of service as separation pay was merely an act of magnanimity on its part, even if private respondents are not entitled to a single
centavo of separation pay.[31]

ISSUE RULING

Whether or not private Under Arts. 283 and 284 of the Labor Code, separation pay is authorized only in cases of dismissals due to any of these reasons:
respondents are entitled to
separation pay, 13th month (a) installation of labor saving devices;
pay and service incentive (b) redundancy;
leave pay, and granting that (c) retrenchment;

44
they are so entitled, what (d) cessation of the employer's business; and
should be the reckoning point (e) when the employee is suffering from a disease and his continued employment is prohibited by law or is prejudicial to his health and to the health of his co-employees.
for computing said awards.
However, separation pay shall be allowed as a measure of social justice in those cases where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his
moral character, but only when he was illegally dismissed. In addition, Sec. 4(b), Rule I, Book VI of the Implementing Rules to Implement the Labor Code provides for the payment of separation pay to
an employee entitled to reinstatement but the establishment where he is to be reinstated has closed or has ceased operations or his present position no longer exists at the time of reinstatement for
reasons not attributable to the employer.

The common denominator of the instances where payment of separation pay is warranted is that the employee was dismissed by the employer. In the instant case, there was no dismissal to speak
of. Private respondents were simply not dismissed at all, whether legally or illegally. What they received from JPL was not a notice of termination of employment, but a memo informing them of the
termination of CMC’s contract with JPL. More importantly, they were advised that they were to be reassigned. At that time, there was no severance of employment to speak of.

Furthermore, Art. 286 of the Labor Code allows the bona fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, wherein an employee/employees are
placed on the so-called “floating status.” When that “floating status” of an employee lasts for more than six months, he may be considered to have been illegally dismissed from the service. Thus, he
is entitled to the corresponding benefits for his separation, and this would apply to suspension either of the entire business or of a specific component thereof.

As clearly borne out by the records of this case, private respondents sought employment from other establishments even before the expiration of the six (6)-month period provided by law. As they
admitted in their comment, all three of them applied for and were employed by another establishment after they received the notice from JPL. JPL did not terminate their employment; they
themselves severed their relations with JPL. Thus, they are not entitled to separation pay.

The Court is not inclined in this case to award separation pay even on the ground of compassionate justice. The Court of Appeals relied on the cases wherein the Court awarded separation pay to
legally dismissed employees on the grounds of equity and social consideration. Said cases involved employees who were actually dismissed by their employers, whether for cause or not. Clearly, the
principle applies only when the employee is dismissed by the employer, which is not the case in this instance. In seeking and obtaining employment elsewhere, private respondents effectively
terminated their employment with JPL.

In addition, the doctrine enunciated in the case of Serrano cited by private respondents has already been abandoned by our ruling in Agabon v. National Labor Relations Commission. There we ruled
that an employer is liable to pay indemnity in the form of nominal damages to a dismissed employee if, in effecting such dismissal, the employer failed to comply with the requirements of due
process. However, private respondents are not entitled to the payment of damages considering that there was no violation of due process in this case. JPL’s memo dated 13 August 1996 to private
respondents is not a notice of termination, but a mere note informing private respondents of the termination of CMC’s contract and their re-assignment to other clients. The thirty (30)-day notice
rule does not apply.

Nonetheless, JPL cannot escape the payment of 13th month pay and service incentive leave pay to private respondents. Said benefits are mandated by law and should be given to employees as a
matter of right.

Presidential Decree No. 851, as amended, requires an employer to pay its rank and file employees a 13th month pay not later than 24 December of every year. However, employers not paying their
employees a 13th month pay or its equivalent are not covered by said law. The term “its equivalent” was defined by the law’s implementing guidelines as including Christmas bonus, mid-year bonus,
cash bonuses and other payment amounting to not less than 1/12 of the basic salary but shall not include cash and stock dividends, cost-of-living-allowances and all other allowances regularly enjoyed
by the employee, as well as non-monetary benefits.

On the other hand, service incentive leave, as provided in Art. 95 of the Labor Code, is a yearly leave benefit of five (5) days with pay, enjoyed by an employee who has rendered at least one year of
service. Unless specifically excepted, all establishments are required to grant service incentive leave to their employees. The term “at least one year of service” shall mean service within twelve (12)
months, whether continuous or broken reckoned from the date the employee started working. The Court has held in several instances that “service incentive leave is clearly demandable after one
year of service.”

Admittedly, private respondents were not given their 13th month pay and service incentive leave pay while they were under the employ of JPL. Instead, JPL provided salaries which were over and
above the minimum wage. The Court rules that the difference between the minimum wage and the actual salary received by private respondents cannot be deemed as their 13th month pay and
service incentive leave pay as such difference is not equivalent to or of the same import as the said benefits contemplated by law. Thus, as properly held by the Court of Appeals and by the NLRC,
private respondents are entitled to the 13th month pay and service incentive leave pay.

However, the Court disagrees with the Court of Appeals’ ruling that the 13th month pay and service incentive leave pay should be computed from the start of employment up to the finality of the
NLRC resolution. While computation for the 13th month pay should properly begin from the first day of employment, the service incentive leave pay should start a year after commencement of

45
 service, for it is only then that the employee is entitled to said benefit. On the other hand, the computation for both benefits should only be up to 15 August 1996, or the last day that private
respondents worked for JPL. To extend the period to the date of finality of the NLRC resolution would negate the absence of illegal dismissal, or to be more precise, the want of dismissal in this case.
Besides, it would be unfair to require JPL to pay private respondents the said benefits beyond 15 August 1996 when they did not render any service to JPL beyond that date. These benefits are given
by law on the basis of the service actually rendered by the employee, and in the particular case of the service incentive leave, is granted as a motivation for the employee to stay longer with the
employer. There is no cause for granting said incentive to one who has already terminated his relationship with the employer.

2.2.1. REDUNDANCY

207. ALMODIEL VS. NATIONAL LABOR RELATIONS COMMISSION

FARLE P. ALMODIEL, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION (FIRST DIVISION), RAYTHEON PHILS., INC., RESPONDENTS.

FACTS Petitioner Farle P. Almodiel is a certified public accountant who was hired in October, 1987 as Cost Accounting Manager of respondent Raytheon Philippines, Inc. through a reputable placement firm,
John Clements Consultants, Inc. with a starting monthly salary of P18,000.00. Before said employment, he was the accounts executive of Integrated Microelectronics, Inc. for several years. He left his
lucrative job therein in view of the promising career offered by Raytheon. He started as a probationary or temporary employee. As Cost Accounting Manager, his major duties were: (1) plan,
coordinate and carry out year and physical inventory; (2) formulate and issue out hard copies of Standard Product costing and other cost/pricing analysis if needed and required and (3) set up the
written Cost Accounting System for the whole company. After a few months, he was given a regularization increase of P1,600.00 a month. Not long thereafter, his salary was increased to P21.600.00 a
month.

He recommended and submitted a Cost Accounting/Finance Reorganization, affecting the whole finance group but the same was disapproved by the Controller. However, he was assured by the
Controller that should his position or department which was apparently a one-man department with no staff becomes untenable or unable to deliver the needed service due to manpower constraint,
he would be given a three (3) year advance notice.

In the meantime, the standard cost accounting system was installed and used at the Raytheon plants and subsidiaries worldwide. It was likewise adopted and installed in the Philippine
operations. As a consequence, the services of a Cost Accounting Manager allegedly entailed only the submission of periodic reports that would use computerized forms prescribed and designed by
the international head office of the Raytheon Company in California, USA.

On January 27, 1989, petitioner was summoned by his immediate boss and in the presence of IRD Manager, Mr. Rolando Estrada, he was told of the abolition of his position on the ground of
redundancy. He pleaded with management to defer its action or transfer him to another department, but he was told that the decision of management was final and that the same has been conveyed
to the Department of Labor and Employment. Thus, he was constrained to file the complaint for illegal dismissal before the Arbitration Branch of the National Capital Region, NLRC, Department of
Labor and Employment.

On September 27, 1989, Labor Arbiter Daisy Cauton-Barcelona rendered a decision, the dispositive portion of which reads as follows:

"WHEREFORE, judgment is hereby rendered declaring that complainant's termination on the ground of redundancy is highly irregular and without legal and factual basis, thus
ordering the respondents to reinstate complainant to his former position with full backwages without lost of seniority rights and other benefits. Respondents are further ordered to
pay complainant P200,000.00 as moral damages and P20.000.00 as exemplary damages, plus ten percent (10%) of the total award as attorney's fees."
Raytheon appealed therefrom on the grounds that the Labor Arbiter committed grave abuse of discretion in denying its right to dismiss petitioner on the ground of redundancy, in relying on baseless
surmises and self-serving assertions of the petitioner that its act was tainted with malice and bad faith and in awarding moral and exemplary damages and attorney's fees.
The NLRC reversed the decision and directed Raytheon to pay petitioner the total sum of P100.000.00 as separation pay/financial assistance.

ISSUE RULING

Termination of an employee's services because of redundancy is governed by Article 283 of the Labor Code which provides as follows:

"Art. 283. Closure of establishment and reduction of personnel.-The employer may also terminate the employment of any employee due to installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the worker and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least one (1) month pay for
every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or undertaking not due to

46
 serious business losses or financial reverses, the separation pay shall be equivalent to at least one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year."

There is no dispute that petitioner was duly advised, one (1) month before, of the termination of his employment on the ground of redundancy in a written notice by his immediate superior, Mrs.
Magdalena B.D. Lopez sometime in the afternoon of January 27, 1989. He was issued a check for P54,863.00 representing separation pay but in view of his refusal to acknowledge the notice and the
check, they were sent to him thru registered mail on January 30, 1989. The Department of Labor and Employment was served a copy of the notice of termination of petitioner in accordance with the
pertinent provisions of the Labor Code and the implementing rules.

The crux of the controversy lies on whether bad -faith, malice and irregularity crept in the abolition of petitioner's position of Cost Accounting Manager on the ground of redundancy. Petitioner claims
that the functions of his position were absorbed by the Payroll/Mis/Finance Department under the management of Danny Ang Tan Chai, a resident alien without any working permit from the
Department of Labor and Employment as required by law. Petitioner relies on the testimony of Raytheon's witness to the effect that corollary functions appertaining to cost accounting were dispersed
to other units in the Finance Department. And granting that his department has to be declared redundant, he claims that he should have been the Manager of the Payroll/Mis/Finance Department
which handled general accounting, payroll and encoding. As a B.S. Accounting graduate, a CPA with M.B.A. units, 21 years of work experience, and a natural born Filipino, he claims that he is better
qualified than Ang Tan Chai, a B.S. Industrial Engineer, hired merely as a Systems Analyst Programmer or its equivalent in early 1987, promoted as MIS Manager only during the middle part of 1988
and a resident alien.

On the other hand, Raytheon insists that petitioner's functions as Cost Accounting Manager had not been absorbed by Ang Tan Chai, a permanent resident born in this country. It claims to have
established below that Ang Tan Chai did not displace petitioner or -absorb his functions and duties as they were occupying entirely different and distinct positions requiring different sets of expertise
or qualifications and discharging functions altogether different and foreign from that of petitioner's abolished position. Raytheon debunks petitioner's reliance on the testimony of Mr. Estrada saying
that the same witness testified under oath that the functions of the Cost Accounting Manager had been completely dispensed with and the position itself had been totally abolished.

Whether petitioner's functions as Cost Accounting Manager have been dispensed with or merely absorbed by another is however immaterial. Thus, notwithstanding the dearth of evidence on the
said question, a resolution of this case can be arrived at without delving into this matter. For even conceding that the functions of petitioner's position were merely transferred, no malice or bad faith
can be imputed from said act. A survey of existing case law will disclose that in Wiltshire File Co., Inc. v. NLRC the position of Sales Manager was abolished on the ground of redundancy as the duties
previously discharged by the Sales Manager simply added to the duties of the General Manager to whom the Sales Manager used to report. In adjudging said termination as legal, this Court said that
redundancy, for purposes of our Labor Code, exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. The characterization
of an employee's services as no longer necessary or sustainable, and therefore, properly terminable, was an exercise of business judgment on the part of the employer. The wisdom or soundness of
such characterization or decision was not subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so long, of course, as violation of law or merely arbitrary and malicious action
is not shown.

In the case of International Macleod, Inc. v. Intermediate Appellate Court, this Court also considered the position of Government Relations Officer to have become redundant in view of the
appointment of the International Heavy Equipment Corporation as the company's dealer with the government. It held therein that the determination of the need for the phasing out of a department
as a labor and cost saving device because it was no longer economical to retain said services is a management prerogative and the courts will not interfere with the exercise thereof as long as no
abuse of discretion or merely arbitrary or malicious action on the part of management is shown.

In the same vein, this Court ruled in Bondoc v. People's Bank and Trust Co., that the bank's board of directors possessed the power to remove a department manager whose position depended on the
retention of the trust and confidence of management and whether there was need for his services. Although some vindictive motivation might have impelled the abolition of his position, this Court
expounded that it is undeniable that the bank's board of directors possessed the power to remove him and to determine whether the interest of the bank justified the existence of his department.

Indeed, an employer has no legal obligation to keep more employees than are necessary for the operation of its business. Petitioner does not dispute the fact that a cost accounting system was
installed and used at Raytheon subsidiaries and plants worldwide; and that the functions of his position involve the submission of periodic reports utilizing computerized forms designed and
prescribed by the head office with the installation of said accounting system. Petitioner attempts to controvert these realities by alleging that some of the functions of his position were still
indispensable and were actually dispersed to another department. What these indispensable functions that were dispersed, he failed however, to specify and point out. Besides, the fact that the
functions of a position were simply added to the duties of another does not affect the legitimacy of the employer's right to abolish a position when done in the normal exercise of its prerogative to
adopt sound business practices in the management of its affairs.

Considering further that petitioner herein held a position which was definitely managerial in character, Raytheon had a broad latitude of discretion in abolishing his position. An employer has a much
wider discretion in terminating employment relationship of managerial personnel compared to rank and file employees. The reason obviously is that officers in such key positions perform not only
functions which by nature require the employer's full trust and confidence but also functions that spell the success or failure of an enterprise.

208. ASIA WORLD PUBLISHING HOUSE, INC. VS. OPLE

47
 ASIA WORLD PUBLISHING HOUSE, INC., PETITIONER, VS. HON. BLAS OPLE, MINISTER OF LABOR & EMPLOYMENT AND CONCEPCION M. JOAQUIN, RESPONDENTS.

FACTS The private respondent was hired by Asiaworld Publishing House, Inc., as its advertising sales director. As such, she managed and supervised the petitioner's advertising sales force, prepared
advertising sales campaign programs, and solicited advertisements from local and foreign adversities.

To enable the private respondent to entertain advertisers in the course of her duties, she was allowed to establish a credit line with Shiruko Restaurant with the petitioner agreeing to pay whatever
amount was incurred by her for representation purposes. Sometimes, the private respondent had to entertain clients elsewhere, spending her own money and petitioner would later reimburse her for
such expenses.

Due to the respondent's able management and hard work, Asiaworld's income from sales advertising increased tremendously. Sometime in 1976, Vicente Pesayco, Jr., the corporation's president and
private respondent's immediate superior, requested Ms. Joaquin not to go on vacation leave because she was needed to help direct the advertising sales campaign of Asia Forum, a magazine the
petitioner had newly acquired. Respondent Joaquin acceded to such request. She did not avail of her vacation leave benefits for three times at the request of Pesayco. Meanwhile, in October of 1976,
the respondent was eventually designated to take charge of the advertising sales work for Asia Forum.
In 1977, the private respondent was appointed Vice President for marketing in a concurrent capacity and her monthly compensation was increased to P2,300.00.

On May 3, 1978, the petitioner advised the private respondent in writing that her services would be terminated effective May 16, 1978 because of continued losses and offered to pay her one (1)
month's salary for her more than three (3) years of service.

The private respondent filed a complaint with the Office of the Regional Director, National Capital Region (NCR), Minister of Labor and Employment for illegal dismissal and for recovery of unpaid
earned and unused vacation leave credits and reimbursement of representation expenses which she advanced for the petitioner.

On May 31, 1978, the case was set for hearing on June 6, 1978 before NCR Hearing Officer Demetrio Marero. The petitioner appeared on that date and requested that the hearing be postponed to
June 14, 1978. The private respondent acceded to the petitioner's request.

The June 14, 1978 hearing, by agreement of both parties, was also reset to June 23, 1978., On this latter date, both parties agreed to simultaneously submit their respective position papers not later
than July 19, 1978.

On July 19, 1978, Joaquin requested that she be granted seven working days to submit her position paper. Subsequently, the parties submitted their respective position papers with supporting
evidence.

On February 28, 1979, the Regional Director promulgated an order, the dispositive portion of which reads:
WHEREFORE, premises considered, respondent is hereby ordered to reinstate complainant to her former position with full backwages from May 16, 1978 up to actual reinstatement without loss of
seniority rights and other benefits. Further, respondent is hereby ordered to pay complainant the cash equivalent of her vacation leave totalling forty-five days and reimburse her representation
expenses amounting to P1,517.00.

On March 19, 1979, the petitioner filed a motion for reconsideration which was treated as an appeal and which, upon review, was denied for lack of merit by the respondent Minister. Hence,
petitioner filed this petition.

ISSUE RULING

In the first place, the only justification presented by the petitioner for dismissing the private respondent was its financial statement showing a loss of P196,087.83 for the year 1977. Asiaworld failed to
show that fair and reasonable standards were used in ascertaining who would be dismissed and who would be retained among its employees.

As the Solicitor General correctly stated, there must be fair and reasonable criteria to be used in selecting employees to be dismissed, such as:
(a) less preferred status (e.g. temporary employee);
(b) efficiency rating, and
(c) Seniority.

In the case at bar, the petitioner never denied the fact that the private respondent was performing her job satisfactorily so much so that its income from sales advertising increased.

Secondly, both the Regional Director and the respondent Minister found that after the private respondent's termination, the petitioner hired a new employee to take the former's position.
Although the petitioner belies the fact that the person who assumed the private respondent's job was a new employee, it did not present any employment contract or other proof to support its

48
 allegation. It merely presented BIR forms of the new employee showing reported income from commissions given by the petitioner and its record of payment to the employee of sales commission,
gasoline allowances, and incentive bonus purportedly received for the years 1977 and 1978.

Thirdly, the petitioner never controverted the private respondent's allegation that in all instances when she did not go on vacation leave it was upon the request of the president of Asiaworld. Clearly,
she was prevented from taking the vacation leaves to which she was entitled.

To argue now that the private respondent should have secured the authority of her superior and the approval of management to liquidate and convert into cash her unused vacation leaves for 1975,
1976, and 1977, would be grossly unfair. The respondent Minister correctly affirmed the decision of the Regional Director in awarding the respondent the cash equivalent of her unused vacation
leaves.

We do not see any justifiable reason from the foregoing why the findings of facts of the respondent Minister should be set aside. Such findings are not tainted with grave abuse of discretion. However,
as regards the order of reinstatement, we have to take into account that antagonism between the petitioner and the private respondent has been brought about by the filing of this case plus the fact
that a new employee had been hired to take over the place of the respondent. There is no showing that an equivalent position is available to Ms. Joaquin. All of these militate against the propriety of
reinstating the respondent. As we have ruled in Divine Word High School v. National Labor Relations Commission (143 SCRA 346, 350):

Nonetheless we hesitate ordering the reinstatement of private respondent Luz Ballano Catenza, as a high school teacher in the petitioner high school, which is a Catholic institution, serving
the educational and moral needs of its Catholic studentry. While herself innocent, the continued presence of Mrs. Catenza as a teacher in the school may well be met with antipathy and
antagonism by some sectors in the school community.

If the respondent had been a laborer, clerk, or other rank and file employee, there would be no problem in ordering her reinstatement with facility. But she was Vice President for Marketing of
Asiaworld. An officer in such a key position can work effectively only if she enjoys the full trust and confidence of top management.

Likewise, in Balaquezon EWTU v. Zamora (97 SCRA 5, 8), we ruled:

It should be underscored that the backwages are being awarded on the basis of equity or in the nature of a severance pay. This means that a monetary award is to be paid to the striking
employees as an alternative to reinstatement which can no longer be effected in view of the long passage of time or because of the 'realities of the situation.

We, therefore, affirm the award of backwages with modifications as an alternative to reinstatement. We limit the award to a maximum of three (3) years. Since the private respondent has worked
for the petitioner since 1975, twelve months salaries as severance pay appear reasonable.

209. SEBUGUERO VS. NATIONAL LABOR RELATIONS COMMISSION

FE S. SEBUGUERO, CARLOS ONG, NENE MANAOG, JUANITO CUSTODIO, CRISANTA LACSAM, SATURNINO GURAL, WILMA BALDERA, LEONILA VALDEZ, FATIMA POTESTAD, EVANGELINE AGNADO, RESTITUTO GLORIOSO, JANESE DE LOS
REYES, RODOLFO SANCHEZ, WILMA ORBELLO, DAISY PASCUA, AND ALEX MASAYA, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION, G.T.I. SPORTSWEAR CORPORATION AND/OR BENEDICTO YUJUICO, RESPONDENTS.

FACTS The petitioners were among the thirty-eight (38) regular employees of private respondent GTI Sportswear Corporation, a corporation engaged in the manufacture and export of ready-to-wear
garments, who were given "temporary lay-off" notices by the latter on 22 January 1991 due to alleged lack of work and heavy losses caused by the cancellation of orders from abroad and by the
garments embargo of 1990.

Believing that their "temporary lay-off" was a ploy to dismiss them, resorted to because of their union activities and was in violation of their right to security of tenure since there was no valid ground
therefor, the 38 laid-off employees filed with the Labor Arbiter's office in the National Capital Region complaints for illegal dismissal, unfair labor practice, underpayment of wages under Wage Orders
Nos. 01 and 02, and non-payment of overtime pay and 13th month pay.

Private respondent GTI denied the claim of illegal dismissal and asserted that it was its prerogative to lay-off its employees temporarily for a period not exceeding six months to prevent losses due to
lack of work or job orders from abroad, and that the lay-off affected both union and non-union members. It justified its failure to recall the 38 laid-off employees after the lapse of six months because
of the subsequent cancellations of job orders made by its foreign principals, a fact which was communicated to the petitioners and the other complainants who were all offered severance pay.
Twenty-two (22) of the 38 complainants accepted the separation pay. The petitioners herein did not.

The cases then involving those who accepted the separation pay were pro tanto dismissed with prejudice.

49
In his decision with respect to the claims of the petitioners, Labor Arbiter Pablo C. Espiritu, Jr. found for them and disposed as follows:

(1) WHEREFORE, above premises considered, judgment is hereby rendered finding Respondent, G.T.I. Sportswear Corporation, liable for constructive dismissal, underpayment of wages under
NCR 01 and 02, and 13th-month pay differentials and concomitantly, Respondent corporation is hereby ordered:
a. To pay the following complainants backwages from the time of their constructive dismissal (July 22, 1991) till promulgation considering that reinstatement is no longer decreed: .
..
b. To pay complainants separation pay of 1/2 month for every year of service in lieu of reinstatement in the following amounts: . .
c. To pay complainants 13th-month pay differentials arising out of underpayment of wages and proportionate 13th-month pay for 1991 in the following amounts: . . .
d. To pay complainants underpayment of wages under NCR Wage 01 and NCR Wage 02 in the following amounts: . . .
e. To pay complainants the amount of P120,618.87 representing 10% attorney's fees based on the total judgment award of P1,326,807.63.

In support of the disposition, the Labor Arbiter made the following ratiocinations:

On the validity of the temporary lay-off, this Arbitration Branch finds that there was ample justification on the part of Respondent company to lay-off temporarily some of its employees to prevent
losses as a result of the reduction of the garment quota allocated to Respondent company due to the garment embargo of 1990. In fact, in the months of March, April, and May of 1991 respondent
company received several messages/correspondence from its foreign principals informing them (Respondent) that they are canceling/transferring some of their quotas/orders to other countries. The
evidence presented by Respondent company proves this fact (Exhibits "12", "13", "14", "15", "15-A", "16", "17" and Annexes "5", "6", "7", showing the different documentary evidence on cancellation
of orders and forced leave schedules of workers due to lack of work). This is sustainable, as in this case, where the Respondent found it unnecessary to continue employing some of its workers
because of business recession, lack of materials to work on due to government controls (garments embargo) and due to the lack of the demand for export quota from its principal foreign buyers.

Although, as a general rule, Respondent company has the prerogative and right to resort to temporary lay-off, such right is likewise limited to a period of six (6) months applying Art. 286 of the Labor
Code on suspension of employer-employee relationship not exceeding six (6) months.

In this case, respondent company was justified in the temporary lay-off of some of its employees. However, Respondent company should have recalled them after the end of the six month period or at
the least reasonably informed them (complainants) that the Respondent company is still not in a position to recall them due to the continuous drop of demand in the export market (locally or
internationally), thereby extending the temporary lay-off with a definite period of recall and if the same cannot be met, then the company should implement retrenchment and pay its employees
separation pay. Failing in this regard, respondent company chose not to recall nor send notice to the complainants after the lapse of the six (6) month period. Hence, there is in this complaint a clear
case of constructive dismissal. While there is a valid reason for the temporary lay-off, the same is also limited to a duration of six months. Thereafter the employees, complainants herein, are entitled
under the law (Art. 286) to be recalled back to work. As result thereof, the temporary lay-off of the complainants from January 22, 1991 (date of lay-off) to July 22, 1991 is valid, however, thereafter
complainants are already entitled to backwages, in view of constructive dismissal, due to the fact that they were no longer recalled back to work. Complainants cannot be placed on temporary lay-off
forever. The limited period of six (6) months is based provisionally too prevent circumvention on the right to security of tenure and to prevent grave abuse of discretion on the part of the employer.
However, since during the trial it was proven, as testified by the Vice-President for marketing and personnel manager, that the lack of work and selection of personnel continued to persist and
considering the antagonism and hostility displayed by both litigants, as observed by this Arbiter, during the trial of this case and in view of the strained relations between the parties, reinstatement of
the complainants would not be prudent. (Divine Word High School vs. NLRC, G.R. 72207, 6 Aug. 1986; Esmalin vs. NLRC, G.R. 67880, 15 Sept. 1989; Hernandez vs. NLRC, G.R. 34302, 10 Aug. 1989).
Hence, separation pay of 1/2 month for every year of service in lieu of reinstatement is in order. . . .

On the issue of monetary claims this Arbitration Branch finds that Respondent is liable for underpayment of wages under NCR Wage Order 01 and 02 considering that respondent failed to rebut the
claims of the complainants. Respondent failed to show proof by means of payrolls to disprove the claim of the complainants. Complainants are also entitled to their proportionate 13th-month pay
differentials as a result of the underpayment of wages under NCR-01 and 02 and likewise to their proportionate 13th-month pay for 1991 for the month of January 1991. . . .

However, complainants are entitled to reasonable attorney's fees considering they were forced to engage the services of counsel in order to fully ventilate their rights and grievances in accordance
with the Labor Code as amended.6
The Labor Arbiter found no sufficient evidence to prove the petitioners' charges of unfair labor practice, overtime pay, and for moral and exemplary damages.
Private respondent GTI seasonably appealed the aforesaid decision to the NLRC, which docketed the appeal as NLRC NCR CA Case No. 004673-93.
In its challenged decision, the NLRC concurred with the findings of the Labor Arbiter that there was a valid lay-off of the petitioners due to lack of work, but disagreed with the latter's ruling granting
back wages after 22 July 1991. The NLRC justified its postulation as follows:

(1) However, we cannot sustain the findings of the Labor Arbiter in awarding the complainants backwages after July 22, 1991 in view of constructive dismissal, it being acknowledged by him
that ". . . during the trial it was proven, as testified by the Vice-President for marketing and personnel manager, that the lack of work and selection of personnel continued to persist . . ."
Besides, it was not denied by the complainants that during the proceeding of the case, the respondents conveyed to the complainants the impossibility of having them recalled in view of
the continued unavailability of work as the economic recession of the respondent's principal market persisted. In fact, the respondent company offered to complainants payment of their
separation pay which offer [w]as accepted by 22 out of 38 complainants.

50

ISSUE
Whether or not there was a
valid and legal reduction of
business and in sustaining the
theory of redundancy in
justifying the dismissal of the
petitioners;
Having established lack of work, it necessarily follow[s] that retrenchment did take place and not constructive dismissal. Dismissal by its term, presuppose that there was still work available and that
the employer terminated the services of the employee therefrom. The same cannot be said of the case at bar. The complainants did not question the evidence of lack of work on account of reduction
of government quota or cancellation of orders.
Art. 286 of the Labor Code is precised [sic] in this regards when it provided that:
Art. 286. When employment not deemed terminated. — The bona fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, . . . shall not
terminate employment . . . .
It is only after the six months period that an employee can be presumed to have been terminated. It thus set aside the awards for back wages, proportionate 13th month pay for 1991, and for
attorney's fees which it found to be without basis.
RULING
What the NLRC sustained and affirmed is not redundancy, but retrenchment as a ground for termination of employment. They are not synonymous but distinct and separate grounds under Article 283
of the Labor Code, as amended.
Redundancy exists where the services of an employee are in excess of what is reasonably demanded by the actual requirements of the enterprise. A position is redundant where it is superfluous, and
superfluity of a position or positions may be the outcome of a number of factors, such as overhiring of workers, decreased volume of business, or dropping of a particular product line or service
activity previously manufactured or undertaken by the enterprise.
Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the termination of employment initiated by the employer through no fault of the employee's and without
prejudice to the latter, resorted to by management during periods of business recession, industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of
materials, conversion of the plant for a new production program or the introduction of new methods or more efficient machinery, or of automation. Simply put, it is an act of the employer of
dismissing employees because of losses in the operation of a business, lack of work, and considerable reduction on the volume of his business, a right consistently recognized and affirmed by this
Court.
Article 283 of the Labor code which covers retrenchment, reads as follows:
Art. 283. Closure of establishment and reduction of personnel. — The employer may also terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by servicing a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to
at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or
undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of
service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year.
This provision, however, speaks of a permanent retrenchment as opposed to a temporary lay-off as is the case here. There is no specific provision of law which treats of a temporary retrenchment or
lay-off and provides for the requisites in effecting it or a period or duration therefor. These employees cannot forever be temporarily laid-off. To remedy this situation or fill the hiatus, Article 286 may
be applied but only by analogy to set a specific period that employees may remain temporarily laid-off or in floating status. Six months is the period set by law that the operation of a business or
undertaking may be suspended thereby suspending the employment of the employees concerned. The temporary lay-off wherein the employees likewise cease to work should also not last longer
than six months. After six months, the employees should either be recalled to work or permanently retrenched following the requirements of the law, and that failing to comply with this would be
tantamount to dismissing the employees and the employer would thus be liable for such dismissal.
To determine, therefore, whether the petitioners were validly retrenched or were illegally dismissed, we must determine whether there was compliance with the law regarding a valid retrenchment at
anytime within the six month-period that they were temporarily laid-off.
Under the aforequoted Article 283 of the Labor Code, there are three basic requisites for a valid retrenchment:
(1) the retrenchment is necessary to prevent losses and such losses are proven;
(2) written notice to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; and
(3) payment of separation pay equivalent to one month pay or at least 1/2 month pay for every year of service, whichever is higher.
As for the first requisite, whether or not an employer would imminently suffer serious or substantial losses for economic reasons is essentially a question of fact for the Labor Arbiter and the NLRC to
51
 determine. Here, both the Labor Arbiter and the NLRC found that the private respondent was suffering and would continue to suffer serious losses, thereby justifying the retrenchment of some of
its employees, including the petitioners.

The requirement of notice to both the employees concerned and the Department of Labor and Employment (DOLE) is mandatory and must be written and given at least one month before the
intended date of retrenchment. In this case, it is undisputed that the petitioners were given notice of the temporary lay-off. There is, however, no evidence that any written notice to permanently
retrench them was given at least one month prior to the date of the intended retrenchment. The NLRC found that GTI conveyed to the petitioners the impossibility of recalling them due to the
continued unavailability of work. But what the law requires is a written notice to the employees concerned and that requirement is mandatory. The notice must also be given at least one month in
advance of the intended date of retrenchment to enable the employees to look for other means of employment and therefore to ease the impact of the loss of their jobs and the corresponding
income. That they were already on temporary lay-off at the time notice should have been given to them is not an excuse to forego the one-month written notice because by this time, their lay-off is to
become permanent and they were definitely losing their employment.

There is also nothing in the records to prove that a written notice was ever given to the DOLE as required by law. GTI's position paper, offer of exhibits, Comment to the Petition, and Memorandum in
this case do not mention of any such written notice. The law requires two notices — one to the employee/s concerned and another to the DOLE — not just one. The notice to the DOLE is essential
because the right to retrench is not an absolute prerogative of an employer but is subject to the requirement of law that retrenchment be done to prevent losses. The DOLE is the agency that will
determine whether the planned retrenchment is justified and adequately supported by facts.

With respect to the payment of separation pay, the NLRC found that GTI offered to give the petitioners their separation pay but that the latter rejected such offer which was accepted only by 22 out
of the 38 original complainants in this case. As to when this offer was made was not, however, proven. All that the parties, the Labor Arbiter and the NLRC stated in their respective pleadings and
decisions was that the offer and payment were made during the pendency of the illegal dismissal case with the Labor Arbiter. But with or without this offer of separation pay, our conclusion would
remain the same: that the retrenchment of the petitioners is defective in the face of our finding that the required notices to both the petitioners and the DOLE were not given.

The lack of written notice to the petitioners and to the DOLE does not, however, make the petitioners' retrenchment illegal such that they are entitled to the payment of back wages and separation
pay in lieu of reinstatement as they contend. Their retrenchment, for not having been effected with the required notices, is merely defective. In those cases where we found the retrenchment to be
illegal and ordered the employees' reinstatement and the payment of back wages, the validity of the cause for retrenchment, that is the existence of imminent or actual serious or substantial losses,
was not proven. But here, such a cause is present as found by both the Labor Arbiter and the NLRC. There is only a violation by GTI of the procedure prescribed in Article 283 of the Labor Code in
effecting the retrenchment of the petitioners.

It is now settled that where the dismissal of an employee is in fact for a just and valid cause and is so proven to be but he is not accorded his right to due process, i.e., he was not furnished the
twin requirements of notice and the opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of or for failure to
observe due process. The sanction, in the nature of indemnification or penalty, depends on the facts of each case and the gravity of the omission committed by the employer.

Accordingly, we affirm the deletion by the NLRC of the award of back wages. But because the required notices of the petitioners' retrenchment were not served upon the petitioners and the DOLE, GTI
must be sanctioned for such failure and thereby required to indemnify each of the petitioners the sum of P2,000.00 which we find to be just and reasonable under the circumstances of this case.

As for the award of the 13th-month pay made by the Labor Arbiter and deleted by the NLRC, we do not find anything in the decision of the NLRC to support the deletion of this award other than its
opinion that there is lack of legal basis to support such an award, without, however, furnishing any explanation for this finding. Thus, the award of the 13th-month pay made and sufficiently justified
by the Labor Arbiter must be reinstated as prayed for by the petitioners.

Also, the petitioners are entitled to an award for attorney's fees pursuant to paragraph 7, Article 2208 of the Civil Code which must, however, be reasonable. The award of P120,618.87, which is
equivalent to ten percent (10%) of the amounts recovered, as attorney's fees should be reduced to P25,000.00, an amount we find to be reasonable. The ten percent (10%) attorney's fees provided for
in Article 111 of the Labor Code and Section 11, Rule VIII, Book III of the Implementing Rules is the maximum; hence, any amount less than that may be awarded as the circumstances of the case may
warrant.

2.2.2. RETRENCHMENT OR BUSINESS REVERSES

210. NORTH DAVAO MINING CORPORATION AND ASSET PRIVATIZATION TRUST VS. NATIONAL LABOR RELATIONS COMMISSION

NORTH DAVAO MINING CORPORATION AND ASSET PRIVATIZATION TRUST, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION, LABOR ARBITER ANTONIO M. VILLANUEVA AND WILFREDO GUILLEMA, RESPONDENTS.

FACTS Petitioner North Davao Mining Corporation (North Davao) was incorporated in 1974 as a 100% privately-owned company. Later, the Philippine National Bank (PNB) became part owner thereof as a
result of a conversion into equity of a portion of loans obtained by North Davao from said bank. On June 30, 1986, PNB transferred all its loans to and equity in North Davao in favor of the national

52

ISSUE
Whether or not an employer
whose business operations
ceased due to serious
business losses or financial
reverses is obliged to pay
separation pay to its
employees separated by
reason of such closure.
government which, by virtue of Proclamation No. 50 dated December 8, 1986, later turned them over to petitioner Asset Privatization Trust (APT). As of December 31, 1990 the national government
held 81.8% of the common stock and 100% of the preferred stock of said company.
Respondent Wilfredo Guillema is one among several employees of North Davao who were separated by reason of the company’s closure on May 31, 1992, and who were the complainants in the
cases before the respondent labor arbiter.
On May 31, 1992, petitioner North Davao completely ceased operations due to serious business reverses. From 1988 until its closure in 1992, North Davao suffered net losses averaging three billion
pesos (P3,000,000,000.00) per year, for each of the five years prior to its closure. All told, as of December 31, 1991, or five months prior to its closure, its total liabilities had exceeded its assets by
20.392 billion pesos, as shown by its financial statements audited by the Commission on Audit. When it ceased operations, its remaining employees were separated and given the equivalent of 12.5
days’ pay for every year of service, computed on their basic monthly pay, in addition to the commutation to cash of their unused vacation and sick leaves. However, it appears that, during the life
of the petitioner corporation, from the beginning of its operations in 1981 until its closure in 1992, it had been giving separation pay equivalent to thirty (30) days’ pay for every year of service.
Moreover, inasmuch as the region where North Davao operated was plagued by insurgency and other peace and order problems, the employees had to collect their salaries at a bank in Tagum, Davao
del Norte, some 58 kilometers from their workplace and about 2 ½hours’ travel time by public transportation; this arrangement lasted from 1981 up to 1990.
Subsequently, a complaint was filed with respondent labor arbiter by respondent Wilfredo Guillema and 271 other seperated employees for: (1) additional separation pay of 17.5 days for every year of
service; (2) back wages equivalent to two days a month; (3) transportation allowance; (4) hazard pay; (5) housing allowance; (6) food allowance; (7) post-employment medical clearance; and (8) future
medical allowance, all of which amounted to P58,022,878.31 as computed by private respondent.
On May 6, 1993, respondent Labor Arbiter rendered a decision ordering petitioner North Davao to pay the complainants the additional separation pay of 17.5 days for every year of service; backwages
equivalent to two (2) days a month times the number of years of service but not to exceed three (3) years; and transportation allowance at P80 a month times the number of years of service but not
to exceed three (3) years."
On appeal, respondent NLRC affirmed the decision in toto. Petitioner North Davao’s motion for reconsideration was likewise denied. Hence, this petition.
RULING
To resolve this issue, it is necessary to revisit the provision of law adverted to by the parties in their submissions, namely Art. 283 of the Labor Code, which reads as follows:
"Art. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or under-taking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (½) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year."
The underscored portion of Art. 283 governs the grant of separation benefits "in case of closures or cessation of operation" of business establishments "NOT due to serious business losses or financial
reverses x x x". Where, however, the closure was due to business losses - as in the instant case, in which the aggregate losses amounted to over P20 billion - the Labor Code does not impose any
obligation upon the employer to pay separation benefits, for obvious reasons.
However, respondents tenaciously insist on the award of separation pay, anchoring their claim solely on petitioner North Davao’s long-standing policy of giving separation pay benefits equivalent to
30- days’ pay, which policy had been in force in the years prior to its closure. Respondents contend that, by denying the same separation benefits to private respondent and the others similarly
situated, petitioners discriminated against them. They rely on this Court’s ruling in Businessday Information Systems and Services, Inc. (BISSI) vs. NLRC, (supra). In said case, petitioner BISSI, after
experiencing financial reverses, decided "as a retrenchment measure" to lay-off some employees on May 16, 1988 and gave them separation pay equivalent to one-half (½) month pay for every year
of service. BISSI retained some employees in an attempt to rehabilitate its business as a trading company. However, barely two and a half months later, these remaining employees were likewise
discharged because the company decided to cease business operations altogether. Unlike the earlier terminated employees, the second batch received separation pay equivalent to a full month’s
salary for every year of service, plus a mid-year bonus. This Court ruled that "there was impermissible discrimination against the private respondents in the payment of their separation benefits. The
law requires an employer to extend equal treatment to its employees. It may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to others. x x x"
In resolving the present case, it bears keeping in mind at the outset that the factual circumstances of BISSI are quite different from the current case. The Court noted that BISSI continued to suffer
losses even after the retrenchment of the first batch of employees; clearly, business did not improve despite such drastic measure. That notwithstanding, when BISSI finally shut down, it could well
afford to (and actually did) pay off its remaining employees with MORE separation benefits as compared with those earlier laid off; obviously, then, there was no reason for BISSI to skimp on
separation pay for the first batch of discharged employees. That it was able to pay one-month separation benefit for employees at the timeof closure of its business meant that it must have been also
53
 in a position to pay the same amount to those who were separated prior to closure.That it did not do so was a wrongful exercise of management prerogatives. That is why the Court correctly faulted it
with "impermissible discrimination." Clearly, it exercised its management prerogatives contrary to "general principles of fair play and justice."

In the instant case however, the company’s practice of giving one month’s pay for every year of service could no longer be continued precisely because the company could not afford it anymore. It
was forced to close down on account of accumulated losses of over P20 billion. This could not be said of BISSI. In the case of North Davao, it gave 30-days’ separation pay to its employees when it was
still a going concern even if it was already losing heavily. As a going concern, its cash flow could still have sustained the payment of such separation benefits. But when a business enterprise completely
ceases operations, i.e., upon its death as a going business concern, its vital lifeblood -its cashflow - literally dries up. Therefore, the fact that less separation benefits were granted when the company
finally met its business death cannot be characterized as discrimination. Such action was dictated not by a discriminatory management option but by its complete inability to continue its business life
due to accumulated losses. Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched land.

As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to losses. In the case before us, the basis for the claim of the additional
separation benefit of 17.5 days is alleged discrimination, i.e., unequal treatment of employees, which is proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under the facts and
circumstances of the present case, the grant of a lesser amount of separation pay to private respondent was done, not by reason of discrimination, but rather, out of sheer financial bankruptcy - a fact
that is not controlled by management prerogatives. Stated differently, the total cessation of operation due to mind-boggling losses was a supervening fact that prevented the company from
continuing to grant the more generous amount of separation pay. The fact that North Davao at the point of its forced closure voluntarily paid any separation benefits at all - although not required by
law - and 12.5-days’ worth at that, should have elicited admiration instead of condemnation. But to require it to continue being generous when it is no longer in a position to do so would certainly be
unduly oppressive, unfair and most revolting to the conscience. As this Court held in Manila Trading & Supply Co. vs. Zulueta, and reiterated in San Miguel Corporation vs. NLRC and later, in Allied
Banking Corporation vs. Castro,"(t)he law, in protecting the rights of the laborer, authorizes neither oppression nor self-destruction of the employer."

211. BALASBAS VS. NATIONAL LABOR RELATIONS COMMISSION

BASILIO A. BALASBAS, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND VETERANS PHILIPPINE SCOUT SECURITY AGENCY, RESPONDENTS.

FACTS Private respondent Jamilla & Company, Inc., owns a security agency named Veterans Philippine Scout Security Agency. It hired Basilio Balasbas as operations supervisor and assigned him in the
security division. Part of his job was to issue orders relative to the guards’ assignments, direct work activities of the inspectors and re-screen guard applicants.
Eight months after his employment, the company handed him a termination notice advising him of his severance from the service effective immediately pursuant to a retrenchment program that
was being implemented.

The same day, he filed NLRC Case with the Labor Arbiter for illegal dismissal, non-payment of the 13th month pay and underpayment of basic salary.
Finding that the petitioner's dismissal was indeed unlawful, having been effected without proper notice as required by law, Labor Arbiter Ruben M. Alberto rendered a judgment ordering the
petitioner's reinstatement with full backwages and other benefits from the date of his dismissal until actually reinstated. Additionally, he ordered the payment of petitioner's 13th month pay for 1985
(partial) as admitted by respondent company. However, the rest of the complaint was rejected and dismissed for lack of basis or insufficiency of evidence. Interposing grave abuse of discretion and
serious errors in the findings of facts, the respondent company appealed to the NLRC on April 21, 1986.

The NLRC reversed and set aside the Labor Arbiter's ruling, citing in particular the petitioner's waiver of the mandatory 30-day notice required by law to justify the reversal.

ISSUE RULING

The employer shall furnish
the worker whose
employment is sought to be
terminated a written notice
containing a statement of the
causes for termination and
shall afford the latter ample
opportunity to be heard and
to defend himself with the
assistance of his
representative, if he so
desires. Finding himself
Finding the petition meritorious, the Court rules that the NLRC gravely abused its discretion in ordering only the payment of the petitioner's 13th month pay instead of reinstating him to his previous
position with full backwages.
Under Article 283 of the Labor Code, the closure of a business establishment or reduction of personnel is a ground for the termination of the services of any employee unless the closing or retrenching
is for the purpose of circumventing the provision of the law. But while business reverses can be a just cause for terminating employees, these must be sufficiently proved by the employer.
The case of Sugar Lopez Corporation v. Federation of Free Workers, ]lays down the general standards under which an employer may retrench or reduce the number of his employees.
Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial
and inconsequential in character, the bonafide nature ofthe retrenchment would appear to be seriously in question.
Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words,

54
 suddenly jobless, he had no be a certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid-off.
choice but to accept his
separation pay of P1,750.00, Because of the far-reaching nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses.
as well as P500.00 as extra
cash bonus. Lastly, but certainly not the least important, the alleged losses if already incurred, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing
evidence.
In the case at bar, there is a dearth of sufficient and convincing documentary evidence to bolster the claim of the respondent company that it is indeed suffering from business losses of such
magnitude as to impel the retrenchment of petitioner Basilio Balasbas. The records are bereft of evidence of any application for a reduction of employees or written notice to the Department of Labor.
If indeed there were, it would have been logical for the respondent company to have attached copies of the same.

Interestingly, the records, however, show that immediately after the petitioner's termination from work, the respondent company advertised and hired another employee for the position of inspector
or investigator, indubitable proof that the alleged retrenchment was merely a cover-up to ease out herein petitioner Basilio Balasbas.

This unlawful and unjust act of the respondent company was compounded when it dismissed the petitioner without complying with the 30-day advance notice of termination containing a
statement of the cause for his termination, thus affording him ample opportunity to be heard.
The alleged waiver by the petitioner of the 30-day notice of termination deserves scant consideration. Being an ordinary rank and file employee, the petitioner may not be expected to completely
comprehend or realize the consequences of his act. This is more than adequately shown by the fact that he immediately filed a complaint for illegal dismissal on April 12, 1985, the same day he was
served the notice of termination of employment.

212. REVIDAD VS. NATIONAL LABOR RELATIONS COMMISSION

ROLANDO REVIDAD, PABLITO LALUNA, RAFAEL ANGELES, TEODORO ROSARIO, ROMEO REVIDAD, JACINTO GRUTA, JOSE ESPAÑOL, FLORENTINO LOCSIN, ROGELIO PARADERO, MARCELINO DEROTA, ARMANDO CABALES, BENJAMIN
MONTESA AND RAYMOND VIDAL, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION AND ATLANTIC, GULF AND PACIFIC COMPANY OF MANILA, INC., RESPONDENTS.

FACTS Private respondent Atlantic, Gulf and Pacific Company of Manila, Inc. terminated the services of 178 employees, including herein petitioners, under a redundancy program. As a consequence, a
complaint for illegal dismissal with prayer for reinstatement was filed by herein petitioners (except Jose Español) with public respondent. These cases were subsequently decided in favor of
petitioners, as a result of which they were reinstated on July 8, 1991 and assigned to the Batangas plant of private respondent.

The records show, however, that pursuant to Presidential Directive No. 0191 issued on July 25, 1991 by the company's president and containing management's decision to lay off 40% of the
employees due to financial losses incurred from 1989-1990, AG & P implemented and effected, starting August 3, 1991, the temporary lay-off of some 705 employees. By reason thereof, the AG & P
United Rank and File Association (URFA, for facility), which was the employees' union, staged a strike.

In a conciliation conference over the labor dispute held before the National Conciliation and Mediation Board on August 13, 1991, the parties agreed to submit the legality of the lay-offs to voluntary
arbitration. Accordingly, the case was filed with Voluntary Arbitrator Romeo B. Batino, entitled "AG & P United Rank and File Association vs. AG & P Company of Manila, Inc.," on the principal issue of
whether the massive lay-off, in the exercise of AG & P's management prerogative, constituted a violation of their existing collective bargaining agreement which would be tantamount to an unfair
labor practice. This issue was eventually resolved by the voluntary arbitrator in a decision dated January 7, 1992 where it was held that AG & P had the right to exercise its management prerogative to
temporarily lay off its employees owing to the unfavorable business climate being experienced by the company consequent to the financial reverses it suffered from 1987 to 1991.
In the meantime, as found by public respondent in its decision, the three labor unions then existing at AG & P met on September 7, 1991 with the corporation's management officials at its Batangas
plant in a conference presided by Congressman Hernando B. Perez and wherein the parties arrived at the agreement. Herein petitioners were served a notice of temporary lay-off. Thereafter,
petitioners received their respective financial assistance and they signed a pro forma authorization in favor of AG & P to deduct from the separation pay due them the amount of financial assistance
received pursuant to the aforesaid agreement of September 7, 1991.

As earlier stated, it was on January 7, 1992 when the voluntary arbitrator rendered a decision finding justification for the mass lay-off of the AG & P employees caused by financial reverses suffered by
the company.

On February 11, 1992, considering that petitioners were not being recalled by the AG & P management, they filed a complaint for illegal dismissal and unfair labor practice against AG & P before
respondent commission. On August 24, 1992, Labor Arbiter Nieves V. de Castro rendered judgment ordering the reinstatement of petitioners, with payment of full back wages, on the ground that AG
& P failed to substantiate the alleged losses it incurred in 1991 which resulted in the retrenchment of its operations. The labor arbiter explicated in her aforesaid decision that while it had been
established that private respondent suffered serious losses from 1987 to 1990, it allegedly failed to prove continuous losses in 1991 which would justify the temporary lay-off of herein petitioners.

On appeal, public respondent NLRC reversed and set aside the decision of the labor arbiter, and dismissed the complaint for illegal dismissal for lack of merit. In ruling that the order of reinstatement

55
 with payment of back wages has no basis in fact and in law, public respondent declared that, contrary to the labor arbiter's findings, there was only one lay-off, that is, the lay-off effected on
September 17, 1991 the legality of which had already been passed upon and upheld in the voluntary arbitration proceedings. Hence, this petition which prays for the affirmance in toto of the labor
arbiter's decision.

ISSUE RULING

We are accordingly convinced, and so hold, that both the retrenchment program of private respondent and the dismissal of petitioners were valid and legal.

First, it has been sufficiently and convincingly established by AG & P before the voluntary arbitrator that it was suffering financial reverses. Even the rank and file union at AG & P did not contest the
fact that management had been undergoing financial difficulties for the past several years. Hence, the voluntary arbitrator considered this as an admission that indeed AG & P was actually
experiencing adverse business conditions which would justify the exercise of its management prerogative to retrench in order to avoid the not so remote possibility of the closure of the entire
business which, in the opinion of the voluntary arbitrator, would in the last analysis be adverse to both the management and the union.

Second, the voluntary arbitrator's conclusions were premised upon and substantiated by the audited financial statements and the auditor's reports of AG & P for the years 1987 to 1991. These
financial statements audited by independent external auditors constitute the normal and reliable method of proof of the profit and loss performance of a company.

Third, contrary to petitioners' asseverations, proof of actual financial losses incurred by the company is not a condition sine qua non for retrenchment. Retrenchment is one of the economic grounds
to dismiss employees, which is resorted to by an employer primarily to avoid or minimize business losses. The law recognizes this under Article 283 of the Labor Code which provides that:

"ART. 283. Closure of establishment and reduction of personnel. - The employer may also terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking, unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month
pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered one (1) whole year."

In its ordinary connotation, the phrase "to prevent losses" means that retrenchment or termination of the services of some employees is authorized to be undertaken by the employer sometime
before the anticipated losses are actually sustained or realized. It is not, in other words, the intention of the lawmaker to compel the employer to stay his hand and keep all his employees until after
losses shall have in fact materialized. If such an intent were expressly written into the law, that law may well be vulnerable to constitutional attack as unduly taking property from one man to be given
to another.

At the other end of the spectrum, it seems equally clear that not every asserted possibility of loss is sufficient legal warrant for the reduction of personnel. In the nature of things, the possibility of
incurring losses is constantly present, in greater or lesser degree, in the carrying on of business operations, since some, indeed many, of the factors which impact upon the profitability or viability
of such operations may be substantially outside the control of the employer.

On the bases of these considerations, it follows that the employer bears the burden to prove his allegation of economic or business reverses with clear and satisfactory evidence, it being in the nature
of an affirmative defense. As earlier discussed, we are fully persuaded that the private respondent has been and is besieged by a continuing downtrend in both its business operations and financial
resources, thus amply justifying its resort to drastic cuts in personnel and costs. To the point of being plethoric, the explanation advanced by private respondent in its position paper submitted to the
voluntary arbitrator is highly enlightening and is here quoted in full:

"Figure 1 shows, in bar graph form, the comparative Net Income or Net Loss of the Company from 1987 to 1990 as well as the projected Net Loss for 1991. The graph clearly
illustrates the financial hemorrhage being endured by the Company. The Net Incomes of 1968 and 1989 (P2.6 million and P5.8 million, respectively) dwindles into insignificance
beside the net Losses of 1987 and 1990 as well as the estimated Net Loss for 1991 (P35.4 million, P76.2 million and P250 million, respectively). Moreover, the P54.8 million Net
Income of 1989 is due solely to the dissolution of 2 subsidiaries which resulted in a `paper gain' of about P134 million. In other words, there was an actual loss of about 80 million
but a paper gain of P54 million in 1989.

"Figure 2, on the other hand, shows the dwindling number of projects being undertaken by the Company for the past four years. As of August 1991, there are only 17 ongoing
projects of the Company (as compared to the 1987 peak of 67), 13 of which are mere carry-overs from the previous years. The projects being the main source of the Company's
revenues, the graph in Figure 2 further confirms the severe losses being suffered by the Company.

"With retained earnings at the financially comfortable level of more than P400 million, it may be suggested that the Company delay implementation of the decisions to streamline,

56
 centralize, retrench, and cut expenses in general, in the hope that the situation of the Company's financial conditions proves that this suggestion is not viable. Figure 3 proves this by
showing, in bar graph form, a comparative study of the Company's Working Capital for the period 1987 to 1990. The legend 'Working Capital - source' indicates the amount
generated by the Company during the fiscal year. 'Working Capital - use' indicates the amount used by the Company during the fiscal year. And `Inc/Dec in Working Capital'
indicates the increase or decrease in Working Capital at fiscal year's end. It is readily seen from Figure 3 that, except for 1988, more working capital was used than was generated for
the period under study and the same is chronically being depleted. This means that the Company is running out of money to pay for its bills.

"Figure 4 plots the Current Ratio of the Company over time. 'Current Ratio' is the ratio of a firm's Current Assets to its Current Liabilities. It thus measures the firm's ability to
immediately pay its current debts. The rule of thumb prescribes a Current Ratio of 2, meaning, for every peso of short-term debt, there should be two pesos of cash or 'near-cash'
available. Figure 4 clearly shows that as early as 1987, the Company is below par. Worse, in 1990, the Current Ratio is less than 1. This means that it has more short-terms debts
than current assets."

We might as well make mention of the fact that as early as March 4, 1991, the President of AG & P had issued Circular No. CEO-191, addressed to all AG & P employees wherein they were apprised of
the financial difficulties of the company and of the decisions made by its board of directors aimed at arresting any further dissipation of company resources. It informed the employees that "we simply
no longer have the resources required to fully support anything much beyond our mainline activities. We each must therefore now make a choice to either stand solidly behind these critical moves or
poise ourselves for an eventual collapse." According to private respondent AG & P, the decision was calculated to turn the company into a lean and trim centralized organization, by shedding off
marginal business activities, in the process availing of the Company's Retirement Plan and retrenching personnel in the affected areas whenever necessary. The circular is more than sufficient
notice to AG & P employees, as well as herein petitioners, of the then impending decision of the company to carry out its retrenchment program for the reasons therein stated.

Anent the mandatory written notice to be filed with the labor department one month before the date of retrenchment, we are of the considered opinion that the proceedings had before the
voluntary arbitrator, where both parties were given the opportunity to be heard and present evidence in their favor, constitute substantial compliance with the requirement of the law. The
purpose of this notice requirement is to enable the proper authorities to ascertain whether the closure of the business is being done in good faith and is not just a pretext for evading compliance with
the just obligations of the employer to the affected employees. In fact, the voluntary arbitration proceedings more than satisfied the intendment of the law considering that the parties were accorded
the benefit of a hearing, in addition to the right to present their respective position papers and documentary evidence.

For that matter, hearing and investigation by the employer, where the reason for termination is retrenchment due to financial reverses and not to an act attributable to the employee, is not even
required because it is considered a surplusage under existing jurisprudence. Hence, it has been held that:

"x x x Where, as in the instant case, the ground for dismissal or termination of services does not relate to a blameworthy act or omission on the part of the employee, there appears
to us no need for an investigation and hearing to be conducted by the employer who does not, to begin with, allege any malfeasance or nonfeasance on the part of the employee. In
such case, there are no allegations which the employee should refute and defend himself from. Thus, to require petitioner Wiltshire to hold a hearing, at which private respondent
would have had the right to be present, on the business and financial circumstances compelling retrenchment and resulting in redundancy, would be to impose upon the employer
an unnecessary and inutile hearing as a condition for legality of termination.

"This is not to say that the employee may not contest the reality or good faith character of the retrenchment or redundancy asserted as grounds for termination of services. The
appropriate forum for such controversion would, however, be the Department of Labor and Employment and not an investigation or hearing to be held by the employer itself. It is
precisely for this reason that an employer seeking to terminate services of an employee or employees because of 'closure of business establishment and reduction of personnel,' is
legally required to give written notice not only to the employee but also to the Department of Labor and Employment at least one month before effectivity date of the
termination."[24]

At any rate, considering that the Office of the Voluntary Arbitrator is under the jurisdiction of the Department of Labor and Employment, it would be superfluous to still require the service of notice
with the latter when proceedings have already been initiated with the former precisely to carry out the very purpose for which said notice is intended.

In Lopez Sugar Corporation vs. Federation of Free Workers, et al.,supra, this Court set out the general standards in terms of which the acts of an employer in retrenching or reducing the number of its
employees must be appraised, to wit:

"x x x. Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be
insubstantial and inconsequential in character, the bona fide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss apprehended must
be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the
retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid off. Because of the consequential nature
of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to
retrenchment to forestall losses, i.e., cut other costs than labor costs. x x x.

57
 "Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and
convincing evidence. The reason for requiring this quantum of proof is apparent; any less exacting standard of proof would render too easy the abuse of this ground for termination
of services of employees. x x x."

It is obvious from the preceding discussions that the aforequoted guidelines have been faithfully met by the company.

213. BUSINESSDAY INFORMATION SYSTEMS AND SERVICES, INC. VS. NATIONAL LABOR RELATIONS COMMISSION

BUSINESSDAY INFORMATION SYSTEMS AND SERVICES, INC., AND RAUL LOCSIN, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION, NEMESIO MOYA, ALFREDO AMANTE, EDWIN BERSAMINA, SAMUEL CUELA, ROMEO DELA
CRUZ, MANUEL DE JESUS, SEVERINO DELA CRUZ, DANILO ESPIRITU, ANGEL FLORES, DANILO FRANCISCO, FLORENCIO GLORIOSO, GERARDO MANUEL, ARMANDO MENDOZA, PEDRO MORELOS, ALEXON ORBETA, ROMEO PEREZ,
ALFREDO SABANDO, NESTOR SANTOS, ALFREDO SEPTRIMO, OSCAR SEVILLA, EDUARDO SIOSON, REYMUNDO TIONGCO, TERESITA REYES, CARMENCITA CARPIO, GENARO NABUTAS, DANILO MAMPLATA, AND ROLANDO GAMIT,
RESPONDENTS.

FACTS BSSI was engaged in the manufacture and sale of computer forms. Due to financial reverses, its creditors, the Development Bank of the Philippines (DBP) and the Asset Privatization Trust (APT),
took possession of its assets, including a manufacturing plant in Marilao, Bulacan.

As a retrenchment measure, some plant employees, including the private respondents, were laid off on May 16, 1988, after prior notice, and were paid separation pay equivalent to one-half (1/2)
month pay for every year of service. Upon receipt of their separation pay, the private respondents signed individual releases and quitclaims in favor of BSSI.

BSSI retained some employees in an attempt to rehabilitate its business as a trading company.

However, barely two and a half months later, these remaining employees were likewise discharged because the company decided to cease business operations altogether. Unlike the private
respondents, that batch of employees received separation pay equivalent to a full month's salary for every year of service plus mid-year bonus.

Protesting against the discrimination in the payment of their separation benefits, the twenty-seven (27) private respondents filed three (3) separate complaints against the BSSI and Raul Locsin. These
cases were later consolidated.

At the conciliation proceedings before Labor Arbiter Manuel P. Asuncion, petitioners denied that there was unlawful discrimination in the payment of separation benefits to the employees. They
argued that the first batch of employees was paid "retrenchment" benefits mandated by law, while the remaining employees were granted higher "separation" benefits because their termination was
on account of the closure of the business.

Based on the pleadings of the parties, Labor Arbiter Asuncion rendered a decision on April 25, 1989 in favor of the complainants, now private respondents, the dispositive portion of which reads:
"WHEREFORE, the respondents are hereby ordered to pay the complainants their separation pay differentials and mid-year bonus for the year 1988." (p. 38, Rollo).

Upon appeal by the company to the NLRC, the Second Division on February 13, 1991, affirmed the decision of the Labor Arbiter. Petitioners' motion for reconsideration of the resolution having been
denied, they have taken the present recourse.

ISSUE RULING

In case of retrenchment of a company to prevent losses and closure of business operation, the law provides:

"Art. 283. Closure of establishment and reduction of personnel.--The employer may also terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operations of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of termination
due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one
(1) month pay for every year of service, whichever is higher. In case of retenchment to prevent losses and in cases of closuresor cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one half (1/2) month pay forevery year of service, whichever is
higher. A fraction of at least six (6) months shall be considered one (1) whole year."

Undoubtedly, petitioners' right to terminate employees on account of retrenchment to prevent losses or closure of business operations, is recognized by law, but it may not pay separation benefits

58
 unequally for such discrimination breeds resentment and ill-will among those who have been treated less generously than others.

The following observations of the Commission are relevant:

"The respondents cited financial business difficulties to justify their termination of the complainants' employment on 16 May 1988. They were given one-half (1/2) month of their salary for
every year of service. Due to continuing losses, which is a sign that business, after the termination did not improve, they closed operations on 31 July 1989, where they dismissed the
second batch of employees who were given one (1) month pay for every year they served. The third batch of employees were terminated on 28 February 1989, who were likewise given
one (1) month pay for every year of service. The business climate obtaining on 16 May 1988 when the complainants were terminated did not at all defer (sic) improvement-wise, with that
of 31 July 1988 nor to 28 February 1989. The interval between the dates of termination was so closed to each other, so that, no improvement in business maybe likely expected. In fact, the
respondents suffered continuous losses, hence, there is no difference in the circumstances of the business to distinguish.

"Granting that the 16 May 1988 termination was a retrenchment scheme, and the 31 July 1988 and the 28 February 1989 were due to closure, the law requires the granting of the same
amount of separation benefits to the affected employees in any of the cases. The respondent argued that the giving of more separation benefit to the second and third batches of
employees separated was their expression of gratitude and benevolence to the remaining employees who have tried to save and make the company viable in the remaining days of
operations. This justification is not plausible. There are workers in the first batch who have rendered more years of service and could even be said to be more efficient than those separated
subsequently, yet, they did not receive the same recognition. Understandably, their being retained longer in their job and be not included in the batch that was first terminated, was a
concession enough and may already be considered as favor granted by the respondents to the prejudice of the complainants. As it happened, there are workers in the first batch who have
rendered more years in service but received lesser separation pay, because of that arrangement made by the respondents in paying their termination benefits. x x x"

Clearly, there was impermissible discrimination against the private respondents in the payment of their separation benefits. The law requires an employer to extend equal treatment to its
employees. It may not, in the guise of exercising management prerogatives, grant greater benefits to some and less to others. Management prerogatives are not absolute prerogatives but are subject
to legal limits, collective bargaining agreements, or general principles of fair play and justice. Article 283 of the Labor Code, as amended, protects workers whose employment is terminated because of
closure of the establishment or reduction of personnel.

With regard to the private respondents' claim for the mid-year bonus, it is settled doctrine that the grant of a bonus is a prerogative, not an obligation, of the employer. The matter of giving a bonus
over and above the worker's lawful salaries and allowances is entirely dependent on the financial capability of the employer to give it. The fact that the company's business was no longer profitable (it
was in fact moribund) plus the fact that the private respondents did not work up to the middle of the year (they were discharge in May 1988) were valid reasons for not granting them a mid-year
bonus. Requiring the company to pay a mid-year bonus to them also would in effect penalize the company for its generosity to those workers who remained with the company "till the end" of its days.
The award must therefore be deleted.

214. NATIONAL FEDERATION OF LABOR VS. NATIONAL LABOR RELATIONS COMMISSION

NATIONAL FEDERATION OF LABOR, ABELARDO SANGADAN, LUCIANO RAMOS, NESTOR TILASAN, GREGORIO TILASAN, JOAQUIN GARCIA, ROGELIO SABAITAN, CASTRO LEONARDO, PILARDO POTENCIANO, RONILLO POTENCIANO,
SANTIAGO SABAITAN, JOVENCIO BARTOLOME, JUANITO CONCERMAN, GEORGE TUMILAS, PATROCINIO DOMINGO, AVELINO FRANCISCO, MELITON SANGADAN, ALEXANDER GERONIMO, JOAQUIN GERONIMO, RAMIL MACASO,
LAMBERTO JOVEN, CRISTINO GARINA, SAMMY GANTAAN, NACIAL USTALAN, EDWIN USTALAN, ROLAND POTENCIANO, RODY CONCERMAN, ELMER DOMINGO, ARNAGUEZ SANGADAN, UNDING BOLENG, EDUARDO BOLENG, ROBERTO
PANEO AND HENRY SANGADAN, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION (5TH DIVISION), PATALON COCONUT ESTATE AND/OR CHARLIE REITH AS GENERAL MANAGER AND SUSIE GALLE REITH, AS OWNER,
RESPONDENTS.

FACTS Petitioners are bona fide members of the National Federation of Labor (NFL), a legitimate labor organization duly registered with the Department of Labor and Employment. They were employed by
private respondents Charlie Reith and Susie Galle Reith, general manager and owner, respectively, of the 354-hectare Patalon Coconut Estate located at Patalon, Zamboanga City. Patalon Coconut
Estate was engaged in growing agricultural products and in raising livestock.

In 1988, Congress enacted into law Republic Act (R.A.) No. 6657, otherwise known as the Comprehensive Agrarian Reform Law (CARL), which mandated the compulsory acquisition of all covered
agricultural lands for distribution to qualified farmer beneficiaries under the so-called Comprehensive Agrarian Reform Programme (CARP).

Pursuant to R.A. No. 6657, the Patalon Coconut Estate was awarded to the Patalon Estate Agrarian Reform Association (PEARA), a cooperative accredited by the Department of Agrarian Reform (DAR),
of which petitioners are members and co-owners.

As a result of this acquisition, private respondents shut down the operation of the Patalon Coconut Estate and the employment of the petitioners was severed on July 31, 1994. Petitioners did not
receive any separation pay.

59

ISSUE
Whether or not an employer
that was compelled to cease
its operation because of the
compulsory acquisition by the
government of its land for
purposes of agrarian reform,
is liable to pay separation pay
to its affected employees.
2.2.3. DISEASE
215.CEBU ROYAL PLANT (SAN MIGUEL CORPORATION) VS. DEPUTY MINISTER OF LABOR
FACTS
On August 1, 1994, the cooperative took over the estate. A certain Abelardo Sangadan informed respondents of such takeover via a letter which was received by the respondents on July 26, 1994.
Being beneficiaries of the Patalon Coconut Estate pursuant to the CARP, the petitioners became part-owners of the land.
On April 25, 1995, petitioners filed individual complaints before the Regional Arbitration Branch (RAB) of the National Labor Relations Commission (NLRC) in Zamboanga City, praying for their
reinstatement with full backwages on the ground that they were illegally dismissed. The petitioners were represented by their labor organization, the NFL.
RULING
The petition is bereft of merit.
Petitioners contend that they are entitled to separation pay citing Article 283 of the Labor Code which reads:
"ART. 283. Closure of establishment and reduction of personnel. – The employer may also terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof. In case of
termination due to the installation of labor saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month
pay or to at least one (1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of
establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (½) month pay
for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year."
It is clear that Article 283 of the Labor Code applies in cases of closures of establishment and reduction of personnel. The peculiar circumstances in the case at bar, however, involves neither the
closure of an establishment nor a reduction of personnel as contemplated under the aforesaid article. When the Patalon Coconut Estate was closed because a large portion of the estate was
acquired by DAR pursuant to CARP, the ownership of that large portion of the estate was precisely transferred to PEARA and ultimately to the petitioners as members thereof and as agrarian lot
beneficiaries. Hence, Article 283 of the Labor Code is not applicable to the case at bench.
In other words, Article 283 of the Labor Code does not contemplate a situation where the closure of the business establishment is forced upon the employer and ultimately for the benefit of the
employees.
As earlier stated, the Patalon Coconut Estate was closed down because a large portion of the said estate was acquired by the DAR pursuant to the CARP. Hence, the closure of the Patalon Coconut
Estate was not effected voluntarily by private respondents who even filed a petition to have said estate exempted from the coverage of RA 6657. Unfortunately, their petition was denied by the
Department of Agrarain Reform. Since the closure was due to the act of the government to benefit the petitioners, as members of the Patalon Estate Agrarian Reform Association, by making them
agrarian lot beneficiaries of said estate, the petitioners are not entitled to separation pay. The termination of their employment was not caused by the private respondents. The blame, if any, for the
termination of petitioners’ employment can even be laid upon the petitioner-employees themselves inasmuch as they formed themselves into a cooperative, PEARA, ultimately to take over, as
agrarian lot beneficiaries, of private respondents’ landed estate pursuant to RA 6657. The resulting closure of the business establishment, Patalon Coconut Estate, when it was placed under CARP,
occurred through no fault of the private respondents.
While the Constitution provides that "the State x x x shall protect the rights of workers and promote their welfare", that constitutional policy of providing full protection to labor is not intended to
oppress or destroy capital and management. Thus, the capital and management sectors must also be protected under a regime of justice and the rule of law.
CEBU ROYAL PLANT (SAN MIGUEL CORPORATION), PETITIONER, VS. THE HONORABLE DEPUTY MINISTER OF LABOR AND RAMON PILONES, RESPONDENTS.
The private respondent was removed by the petitioner and complained to the Ministry of Labor. His complaint was dismissed by the regional director, who was, however, re versed by the public
respondent. Required to reinstate the separated employee and pay him back wages, the petitioner has come to us, faulting the Deputy Minister with grave abuse of discretion. We have issued in the
meantime a temporary restraining order.
The public respondent held that Ramon Pilones, the private respondent, was already a permanent employee at the time of his dismissal and so was entitled to security of tenure. The alleged ground
for his removal, to wit, "pulmonary tuberculosis minimal," was not certified as incurable within six months as to justify his separation. Additionally, the private respondent insists that the petitioner
60
 should have first obtained a clearance, as required by the regulations then in force, for the termination of his employment.

The petitioner for its part claims that the private respondent was still on probation at the time of his dis missal and so had no security of tenure. His dismissal was not only in conformity with company
policy but also necessary for the protection of the public health, as he was handling ingredients in the processing of soft drinks which were being sold to the public. It is also argued that the findings of
the regional director, who had direct access to the facts, should not have been disturbed on appeal. For these same reasons, it contends, the employee's reinstate ment as ordered by the public
respondent should not be allowed.

The original findings were contained in a one-page order reciting simply that "complainant was employed on probationary period of employment for six (6) months. After said period, he underwent
medical examination for qualification as regular employee but the results showed that he is suffering from PTB minimal. Consequently, he was informed of the termination of his employment by
respondent." The order then concluded that the termination was "justified." That was all.

As there is no mention of the basis of the above order, we may assume it was the temporary payroll authority submitted by the petitioner showing that the private respondent was employed on
probation on February 16, 1978. Even supposing that it is not self-serving, we find nevertheless that it is self-defeating. The six-month period of probation started from the said date of appoint ment
and so ended on August 17, 1978, but it is not shown that the private respondent's employment also ended then; on the contrary, he continued working as usual. Under Article 282 of the Labor Code,
"an employee who is allowed to work after a probationary period shall be considered a regular employee." Hence, Pilones was already on permanent status when he was dismissed on August 21,
1978, or four days after he ceased to be a probationer.

The petitioner claims it could not have dismissed the private respondent earlier because the x-ray examination was made only on August 17, 1978, and the results were not immediately available.
That excuse is untenable. We note that when the petitioner had all of six months during which to conduct such examination, it chose to wait until exactly the lastday of the probation period. In the
light of such delay, its protestations now that reinstatement of Pilones would prejudice public health cannot but sound hollow and hypocritical. By its own implied admission, the petitioner had
exposed its customers to the employee's disease because of its failure to examine him before entrusting him with the functions of a "syrup man." Its belated concern for the consuming public is hardly
persuasive, if not clearly insincere and self-righteous.

ISSUE RULING

The applicable rule on the ground for dismissal invoked against him is Section 8, Rule I, Book VI, of the Rules and Regulations Implementing the Labor Code reading as follows:

"Sec. 8. Disease as a ground for dismissal. - Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the
health of his co-employees, the employer shall not terminate his employment unless there is a certification by a competent public health authority that the disease is of such
nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period,
the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the
restoration of his normal health."

The record does not contain the certification required by the above rule. The medical certificate offered by the petitioner came from its own physician, who was not a "competent public health
authority," and merely stated the employee's disease, without more. We may surmise that if the required certification was not presented, it was because the disease was not of such a nature or
seriousness that it could not be cured within a period of six months even with proper medical treatment. If so, dismissal was unquestionably a severe and unlawful sanction.

It is also worth noting that the petitioner's application for clearance to terminate the employment of the private respondent was filed with the Ministry of Labor only on August 28, 1978, or seven days
after his dismissal. As the NLRC has repeatedly and correctly said, the prior clearance rule (which was in force at that time) was not a "trivial technicality." It required "not just the mere filing of a
petition or the mere attempt to procure a clearance" but that "the said clearance be obtained prior to the operative act of termination."

2.3. OTHER GROUNDS

2.3.1. MERGER OR CONSOLIDATION WITH ANOTHER COMPANY

216. MANLIMOS VS. NATIONAL LABOR RELATIONS COMMISSION

RONALD MANLIMOS, FROILAN PAGALAN, MERLITA DUHAY LUNGSOD, ELIZABETH ANDAGAN, DORIS SERDAN, LEONORA BIBIANO, PERLA CUMPAY, VIRGINIA ETIC, REMEGIA NOEL, ROSARIO CUARTO, RONALD BOOC, JAIME TIMBAL,
GERMAN GISTA, FEDERICO AMPER, FRANCISCO EVALE, AND RENANTE YACAPIN, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION AND SUPER MAHOGANY PLYWOOD CORPORATION/ALBERT GO, RESPONDENTS.

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FACTS The petitioners were among the regular employees of the Super Mahogany Plywood Corporation, a domestic corporation organized in 1988 and based in Butuan City. They had been hired as patchers,
taper-graders, and receivers-dryers. A new owner/management group headed by Alfredo Roxas acquired complete ownership of the corporation. The petitioners were advised of such change of
ownership; however, the petitioners continued to work for the new owner and were considered terminated, with their conformity, only as of December 1991 when they received their separation pay,
13th month pay, and all other benefits due them computed as of the said month. Each of them then executed on 17 December 1991 a Release and Waiver which they acknowledged before Atty.
Nolasco Discipulo, Hearing Officer of the Butuan City District Office of the Department of Labor and Employment (DOLE).

The new owner caused the publication of a notice for the hiring of workers, indicating therein who of the separated employees could be accepted on probationary basis. The petitioners then filed
their applications for employment. Except for Rosario Cuarto, they were hired on probationary basis for six months as patchers or tapers, but were compensated on piece-rate or task basis.

For their alleged absence without leave, Perla Cumpay and Virginia Etic were considered to have abandoned their work. The rest were dismissed because they allegedly committed acts prejudicial to
the interest of the new management which consisted of their "including unrepaired veneers in their reported productions on output as well as untaped corestock or whole sheets in their supposed
taped veneers/corestock." However, upon their appeal, the effectivity of such termination was deferred to 20 June 1992.

The petitioners maintained that they remained regular employees regardless of the change of management in September 1991 and their execution of the Release and Waiver. They argue that being a
corporation, the private respondent's juridical personality was unaffected even if ownership of its shares of stock changed hands. Their signing of the Release and Waiver was of no moment not only
because the consideration was woefully inadequate, but also because employees who receive their separation pay are not barred from contesting the legality of their dismissal and quit claims
executed by laborers are frowned upon for being contrary to public policy.

On the other hand, the private respondent contended that the petitioners were deemed legally terminated from their previous employment as evidenced by the execution of the Release and Waiver
and the filing of their applications for employment with the new owner; that the new owner was well within its legal right or prerogative in considering as terminated the petitioners'
probationary/temporary appointment; and that the petitioners were not illegally dismissed; hence, they are not entitled to the reliefs prayed for.

ISSUE RULING

The case of Mobil Employees Association vs. National Labor Relations Commission was not applicable because Mobil involved the termination of employment under Article 283 (before Article 284) of
the Labor Code and not termination of employment as a result of the change of corporate ownership, as in the case of private respondent Super Mahogany Plywood Corporation. In Mobil, the
original employer, Mobil Oil Philippines, Inc., completely withdrew from business and was even dissolved. In the case at bar, there was only a change of ownership of Super Mahogany Plywood
Corporation which resulted in a change of ownership. In short, the corporation itself, as a distinct and separate juridical entity, continues to exist. The issue of whether there was a closing or
cessation of business operations which could have operated as a just cause for the termination of employment was not material. The change in ownership of the management was done bona fide and
the petitioners did not for any moment before the filing of their complaints raise any doubt on the motive for the change. On the contrary, upon being informed thereof and of their eventual
termination from employment, they freely and voluntarily accepted their separation pay and other benefits and individually executed the Release or Waiver which they acknowledged before no less
than a hearing officer of the DOLE.

A change of ownership in a business concern is not proscribed by law. In Central Azucarera del Danao vs. Court of Appeals, this Court stated:

There can be no controversy for it is a principle well-recognized, that it is within the employer's legitimate sphere of management control of the business to adopt economic policies or
make some changes or adjustments in their organization or operations that would insure profit to itself or protect the investment of its stockholders. As in the exercise of such management
prerogative, the employer may merge or consolidate its business with another, or sell or dispose all or substantially all of its assets and properties which may bring about the dismissal or
termination of its employees in the process. Such dismissal or termination should not however be interpreted in such a manner as to permit the employer to escape payment of termination
pay. For such a situation is not envisioned in the law. It strikes at the very concept of social justice.

In a number of cases on this point, the rule has been laid down that the sale or disposition must be motivated by good faith as an element of exemption from liability. Indeed, an innocent transferee of
a business establishment has no liability to the employees of the transferor to continue employing them. Nor is the transferee liable for past unfair labor practices of the previous owner, except, when
the liability therefor is assumed by the new employer under the contract of sale, or when liability arises because of the new owner's participation in thwarting or defeating the rights of the employees.
Where such transfer of ownership is in good faith, the transferee is under no legal duty to absorb the transferor's employees as there is no law compelling such absorption. The most that the
transferee may do, for reasons of public policy and social justice, is to give preference to the qualified separated employees in the filling of vacancies in the facilities of the purchaser.
Since the petitioners were effectively separated from work due to a bona fide change of ownership and they were accordingly paid their separation pay, which they freely and voluntarily
accepted, the private respondent corporation was under no obligation to employ them; it may, however, give them preference in the hiring. The private respondent in fact hired, but on
probationary basis, all the petitioners, except Rosario Cuarto. The non-hiring of Cuarto was legally permissible.

The hiring of employees on a probationary basis is an exclusive management prerogative. The employer has the right or privilege to choose who will be hired and who will be denied employment. It is

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 within the exercise of this right that the employers may set or fix a probationary period within which it may test and observe the employee's conduct before hiring him permanently.

It is settled that while probationary employees do not enjoy permanent status, they are accorded the constitutional protection of security of tenure. They may only be terminated for just cause or
when they fail to qualify as regular employees in accordance with reasonable standards made known to them by the employer at the time of their engagement. This constitutional protection,
however, ends upon the expiration of the period provided for in their probationary contract of employment. Thereafter, the parties are free to renew the contract or not.

The petitioners themselves admit that upon their request the effective date of their separation was deferred from 13 June 1992 to 20 June 1992. The latter date apparently coincided with the
expiration of the six-month probationary period. This development has rendered moot the question of whether there was a just cause for the dismissal of the petitioners other than Perla Cumpay and
Virginia Etic.

A different conclusion would have to be reached with respect to Perla Cumpay and Virginia Etic. They were dismissed on 4 May 1992 for having allegedly abandoned their work. It is settled that to
constitute abandonment, there must be a clear and deliberate intent to discontinue one's employment, without any intention of returning. [18] In this case, the private respondent not only failed to
prove such intent, it as well violated the due process rule in dismissal of employees. The requirements of lawful dismissal of an employee by his employer are two-fold, viz., notice and hearing. These
requirements constitute the essential elements of due process. These requirements not having been met with respect to Cumpay and Etic, their dismissal was, consequently, illegal.

It results, therefore, that only petitioners Perla Cumpay and Virginia Etic were entitled to reinstatement and back wages. Nonetheless, considering that their probationary employment would have
similarly expired six months after commencement, reinstatement is no longer feasible.

2.3.2. RESIGNATION

217. SICANGCO VS. NATIONAL LABOR RELATIONS COMMISSION

REY PABLO D. SICANGCO, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND METRO DRUG, INC., RESPONDENTS.

FACTS Rey Pablo D. Sicangco was appointed Senior Attorney in the Metro Drug Corporation (MDC). He was promoted to the position of Assistant Vice-President for Legal Affairs. MDC was acquired by
another company and subsequently renamed Metro Drug Inc. (MDI). Sicangco retained his position in MDI. As Assistant Vice-President for Legal Affairs, he was in charge of labor relations, personnel
administration, and all other corporate concerns of MDI.

Sicangco was assigned to the legal staff of the mother company, First Pacific Metro Corporation, under the supervision of its general counsel. In a letter dated June 2, 1989, the company informed
him that his position would be declared redundant effective July 2, 1989. He was assured of benefits due him under the law.

Sicangco did not protest and instead successfully negotiated for higher separation benefits. The separation pay was only P93,436.10, but the company agreed to write off his outstanding car loan of
P162,000.00 as part of his separation package. Sicangco was paid an extra amount of P13,291.57, representing his pay adjustment and proportionate bonuses for the period covering January to June
1989. All in all, the separation benefits awarded to him amounted to P268,727.67.

In accordance with his agreement with the company and before the declared redundancy of his position took effect, Sicangco tendered his resignation.
Upon receipt of his separation benefits, Sicangco signed a document entitled "Release, Waiver and Quitclaim." This document was prepared by him and the other lawyers of the company. Before he
signed it, its contents were explained to him by another company lawyer, Atty. Elmer Nitura.

Sicangco filed an action against the company for unfair labor practice and illegal dismissal.

The Labor Arbiter declared Sicangco's dismissal as illegal and ordered his reinstatement with back wages, moral and exemplary damages, and attorney's fees. However, the National Labor Relations
Commission took the opposite view when the decision was appealed to it.

The NLRC held that Sicangco's termination from employment was due to his voluntary resignation and not because of redundancy. It did not give credence to Sicangco's claim of "dire necessity" as the
reason that compelled him to execute the quitclaim. Sicangco's allegation of coercion and undue influence was also dismissed for lack of evidence. The NLRC said that by negotiating for a bigger
separation package, he was deemed to have waived whatever defects may have attended the declaration of his redundancy.

ISSUE RULING

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The illegality of the company's The following provisions in the Civil Code are pertinent:
declaration that his position
had become redundant Art. 1335. x x x There is intimidation when one of the contracting parties is compelled by a reasonable and well-grounded fear of an imminent and grave evil upon his person and
property, or upon the person or property of his spouse, descendants or ascendants, to give his consent.

To determine the degree of the intimidation, the age, sex and condition of the person shall be borne in mind. x x x

Art. 1337. There is undue influence when a person takes improper advantage of his power over the will of another, depriving the latter of a reasonable freedom of choice. The
following circumstances shall be considered: the confidential, family, spiritual, and other relations between the parties, or the fact that the person alleged to have been unduly
influenced was suffering from mental weakness, or was ignorant or in financial distress.

Art. 1338. There is fraud when, through insidious words or machinations, of one of the contracting parties, the other is induced to enter into a contract which, without them, he
would not have agreed to.

Contrary to Sicangco's allegations, there is no indication in the record that he was coerced into resigning from the company. It should be noted that the petitioner is a lawyer and specializes in labor
relations at that. There is every reason to suppose that he knows his basic rights as an employee and, no less importantly, knows how to protect these rights as a lawyer. In fact, he used this
knowledge to his advantage when he negotiated successfully for higher separation benefits.

The petitioner was not illegally dismissed. It would appear that when he was informed that his position had become redundant, he decided to resign and was allowed to do so before his redundancy
took effect. We have said that there is nothing illegal with the practice of allowing an employee to resign instead of being separated for just cause, so as not to smear his employment record.

Moreover, the petitioner cannot renege on the release, waiver and quitclaim he executed. His contention that it was coerced, considered especially in the light of the fact that he is a lawyer, must be
rejected. Lawyers are not easily coerced into signing legal documents.

Quitclaims executed by employees are commonly frowned upon as contrary to public policy and ineffective to bar claims for the full measure of the worker's legal rights. Neither does acceptance of
benefits estop the employee from prosecuting his employer for unfair labor practice acts. The reason is plain. Employer and employee obviously do not stand on the same footing.
Nevertheless, the above rule is not without exception, as this Court held in Periquet v. NLRC:
Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represents a reasonable settlement, it is binding on the parties
and may not later be disowned simply because of a change of mind. It is only where there is clear proof that the waiver was wangled from an unsuspecting or gullible person, or the
terms of settlement are unconscionable on its face, that the law will step in to annul the questionable transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration for the quitclaim is credible and reasonable, the transaction must be recognized as a valid and
binding undertaking.

As for his excuse of "dire necessity," Veloso v. DOLE, commented on precisely this ground thus:
"Dire necessity" is not an acceptable ground for annulling the releases, especially since it has not been shown that the employees had been forced to execute them. It has not even
been proven that the considerations for the quitclaims were unconscionably low and that the petitioners had been tricked into accepting them. x x x

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