[G.R. No. 117040. January 27, 2000]

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

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

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

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

ISSUEWhether the petitioner’s dismissal was illegal.

RULING: Valid, but ineffectual (without legal effect) – payment of backwages, separation pay and other monetary claimsNo. The Court held that the dismissal was due to an authorized cause under Art. 283 of the Labor Code, i.e. redundancy. However, while an authorized cause exists, Isetann failed to follow the procedural requirement provided by Art. 283 of LC. For termination due to authorized causes, the employer must give a written notice of termination to the employee concerned and to the DOLE at least 30 days prior to its effectivity. This Isetann failed to do.

The question now arises as to whether the failure of Isetann to comply with the procedural requirements renders the dismissal invalid, or, in the event that it is valid, what the appropriate sanction or penalty must be meted out. Prior to the doctrine laid down in the decision rendered in Wenphil Corp. NLRC in 1989, the termination of an employee, even for just cause but without following the requisite procedure, renders such dismissal illegal, and therefore null and void.

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

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

The present ruling of the Court held that the dismissal of the employee is merely ineffectual, not void. The dismissal was upheld but it is ineffectual. The sanction provided was the payment of backwages from the time of dismissal up to the decision of the court finding just or authorized cause. This was thought to balance the interests of both parties, recognizing the employee’s right to notice and at the same time the right of the employer to dismiss for any of the just and authorized causes.

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

1) The due process clause is a limitation on governmental powers, inapplicable to the exercise of private power, such as in this case. The provision “No person shall be deprived of life, liberty and property

without due process of law” pertains only to the State, as only it has the authority to do the same.

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

3) The employer cannot be expected to be an impartial judge of his own cause.

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

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

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

Petition was denied.

AGABON v.NLRC

FACTSVirgilio and Jenny Agabon worked for respondent Riviera Home Improvements, Inc. as gypsum and cornice installers from January 1992 until Feb 1999. Their employment was terminated when they were

dismissed for allegedly abandoning their work. Petitioners Agabon then filed a case of illegal dismissal. /// The LA ruled in favor of the spouses and ordered Riviera to pay them their money claims. The NLRC reversed the LA, finding that the Agabons were indeed guilty of abandonment. The CA modified the LA by ruling that there was abandonment but ordering Riviera to pay the Agabons’ money claims.///

The arguments of both parties are as follows:The Agabons claim, among others that Riviera violated the requirements of notice and hearing when the latter did not send written letters of termination to their addresses. Riviera admitted to not sending the Agabons letters of termination to their last known addresses because the same would be futile, as the Agabons do not reside there anymore. However, it also claims that the Agabons abandoned their work. More than once, they subcontracted installation works for other companies. They already were warned of termination if the same act was repeated, still, they disregarded the warning.

ISSUES1. Whether the Agabons were illegally dismissed2. Whether Riviera violated the requirements of notice and hearing3. Is the violation of the procedural requirements of notice and hearing for

termination of employees a violation of the Constitutional due process?4. What are the consequences of violating the procedural requirements of

termination?

RULING: Valid dismissal but violation of statutory due process = payment of nominal damages (P30,000) & balance of 13 th month pay, etc.1. No. There was just cause for their dismissal, i.e., abandonment. Art. 282

specifies the grounds for just dismissal, to wit:a. Serious misconduct or willful disobedience of the lawful orders of the

employer or his duly authorized representative in connection with the employee’s work

b. Gross and habitual neglect of the by the employee of his duties (includes abandonment)

c. Fraud or willful breach of the trust reposed by the employer or his duly authorized representative to the employee

d. Commission of a crime or offense by the employee against the person of the employer or any member of his immediate family or his duly authorized representative

e. Any other causes analogous to the foregoing.

To establish abandonment, two elements must be present:

a. The unjustified failure of the employee to report for workb. A clear intention to sever e-e relationship, manifested by overt acts

Here, the Agabons were frequently absent from work for having performed installation work for another company, despite prior warning given by Riviera. This clearly establishes an intention to sever the e-e relationship between them, and which constitutes abandonment.

2. Yes. While the employer has the right to expect good performance, diligence, good conduct and loyalty from its employees, it also has the duty to provide just compensation to his employees and to observe the procedural requirements of notice and hearing in the termination of his employees.Procedure of termination (Omnibus Rules Implementing the Labor Code):a. A written notice to the employee specifying the grounds for

termination and giving the employee reasonable opportunity to be heard

b. A hearing where the employee is given the opportunity to respond to the charges against him and present evidence or rebut the evidence presented against him (if he so requests)

c. A written notice of termination indicating that grounds have been established to justify his termination upon due consideration of all circumstances

In this case, Riviera failed to notify the Agabons of their termination to their last known addresses. Hence, they violated the procedural requirement laid down by the law in the termination of employees.

3. No. Constitutional due process is that provided under the Constitution, which involves the protection of the individual against governmental oppression and the assurance of his rights In civil, criminal and administrative proceedings; statutory due process is that found in the Labor Code and its Implementing Rules and protects the individual from being unjustly terminated without just or authorized cause after notice and hearing.

The two are similar in that they both have two aspects: substantive due process and procedural due process. However, they differ in that under the Labor Code, the first one refers to the valid and authorized causes of employment termination, while the second one refers to the manner of dismissal. A denial of statutory due process is not the same as a denial of Constitutional due process for reasons enunciated in Serrano v. NLRC.

4. The dismissal is valid, but Riviera should pay nominal damages to the Agabons in vindication of the latter for violating their right to notice and hearing. The penalty is in the nature of a penalty or indemnification, the amount dependent on the facts of each case, including the nature of gravity of offense of the employer.

In this case, the Serrano doctrine was re-examined. First, in the Serrano case, the dismissal was upheld, but it was held to be ineffectual (without legal effect). Hence, Serrano was still entitled to the payment of his backwages from the time of dismissal until the promulgation of the court of the existence of an authorized cause. Further, he was entitled to his separation pay as mandated under Art. 283. The ruling is unfair to employers and has the danger of the following consequences:a. The encouragement of filing frivolous suits even by notorious

employees who were justly dismissed but were deprived of statutory due process; they are rewarded by invoking due process

b. It would create absurd situations where there is just or authorized cause but a procedural infirmity invalidates the termination, ie an employee who became a criminal and threatened his co-workers’ lives, who fled and could not be faound

c. It could discourage investments that would generate employment in the economy

Second, the payment of backwages is unjustified as only illegal termination gives the employee the right to be paid full backwages. When the dismissal is valid or upheld, the employee has no right to backwages.

ADDITIONAL NOTES:1. Dismissals based on just causes: acts or omissions attributable to

the employee; no right to claim backwages or to pay separation pay (separation pay is subject to exception, ie if termination is not based on serious misconduct or a conduct reflecting the moral depravity of a person, separation pay may be granted by reason of social justice) Dismissals based on authorized causes: involve grounds provided under the Labor Code; employee (and DOLE) is entitled the payment of separation pay (redundancy and installation of labor-saving devices: 1 month pay or 1 month/yr of service, whichever is higher; retrenchment and closure or cessation of business: 1 month pay or ½ month per year of service, whichever is higher)Illegal termination: employee is entitled to the payment of full backwages as well as reinstatement without loss of seniority rights and other privileges, inclusive of allowances and other monetary claims

from the time compensation was withheld until reinstatement; if reinstatement is not possible, separation pay shall be given.

INTEGRATED MICROELECTRONICS, INC. (IMI) VS ADONIS A. PIONILLA

G.R. NO. 200222, AUGUST 28, 2013

FACTS:

Petitioner IMI employed respondent Adonis Pionilla as one of its production worker. Pionilla was later on dismissed for violating company

rules and regulations which prohibits lending one's ID since the same is considered a breach of its security rules. It was reported that Pionilla was seen escorting a lady to board the company shuttle bus at a terminal, and that the lady was wearing a company ID – which serves as a free pass for shuttle bus passengers – even if she was just a job applicant at IMI. Pionilla admitted that he lent his ID to the lady who turned out to be his relative. It was also admitted by Pionilla that at the time of the incident, he had two Ids in his name as he lost his original ID but was able to secure a temporary ID later on. As Pionilla and his relative were about to board the shuttle bus, they were both holding separate Ids, both in his name. The day after the incident, Pionilla received a notice requiring him to explain the incident and a committee was subsequently formed to investigate the matter. Subsequently IMI found Pionilla guilty and was dismissed from service.

ISSUE: Whether or not Pionilla was illegally dismissed and hence entitled to reinstatement and full back wages

RULING:

An illegally dismissed employee is entitled to either reinstatement, if viable or separation pay if reinstatement is no longer viable and backwages. In certain cases, however, the Court has ordered reinstatement of the employee without backwages considering the fact that (1) the dismissal of the employee would be too harsh a penalty and, (2) the employer was in good faith in terminating the employee.

The Court observed that: (a) the penalty of dismissal was too harsh of a penalty to be imposed against Pionilla for his infractions; and (b) IMI was in good faith when it dismissed Pionilla as his dereliction of its policy on ID usage was honestly perceived to be a threat to the company's security. In this respect, since these circumstances trigger the application of the exception to the rule on backwages, the Court finds it proper to accord the same disposition and consequently directs the deletion of the award of back wages in favor of Pionilla, notwithstanding the illegality of the dismissal.

NATHANIEL DONGON v. RAPID MOVERS AND FORWARDERS CO. INC. ET AL.

G.R. No. 163431, August 28, 2013, First Division (Bersamin, J.)

The prerogative of the employer to dismiss an employee on the ground or willful disobedience to company policies must be exercised in good faith and with due regard to the rights of labor.

Natahniel Dongon was dismissed from Rapid Movers and Forwarders Co. Inc. due to willful disobedience. Dongon is a fromer truck

helper leadman. Dongon’s area of assignment is in Tanduay Otis Warehous where Dongon and his driver Vicente Villaruz tried to get some goods to be distributed to their clients. To get the clearance for the release of the goods, Dongon lent his ID card to Villaruz. However, the security guard, who saw the misrepresentation committed by Dongon and Villaruz, accosted them and reported the matter to the management of Tanduay. Now, Dongon is claiming that he is illegally dismissed from his work.

Dongon claims that his dismissal was a penalty too harsh and disproportionate to his supposed violation; and that his dismissal was inappropriate due to the violation being his first infraction that was even committed in good faith and without malice. On the other hand, Rapid Movers claims they rightly exercised its prerogative to dismiss petitioner because he violated the Company’s Manual of Discipline which amounted to willful disobedience. The Labor Arbiter dismissed the complaint and agrees with the contention of Rapid Movers. On appeal, the NLRC reversed the decision of the Labor Arbiter. The Court of Appeals affirmed the decision of the NLRC.

ISSUE: Is the dismissal of Dongon on the ground of willful disobedience to the company regulation lawful?

RULING:Dongon was not guilty of willful disobedience; hence, his dismissal was illegal.

The Supreme Court ruled the disobedience attributed to Dongon could not be justly characterized as willful within the contemplation of Article 296 of the Labor Code. Willfulness must be attended by a wrongful and perverse mental attitude rendering the employee’s act inconsistent with proper subordination.

Dongon neither benefitted from it, nor thereby prejudiced the business interest of Rapid Movers. His explanation that his deed had been intended to benefit Rapid Movers was credible. There could be no wrong or perversity

on his part that warranted the termination of his employment based on willful disobedience and considering also that he had rendered seven long unblemished years of service to Rapid Movers, his dismissal was plainly unwarranted.

Moreover, the Supreme Court reiterated an employer is given a wide latitude of discretion in managing its own affairs. The broad discretion includes the implementation of company rules and regulations and the imposition of disciplinary measures on its employees. But the exercise of a management prerogative like this is not limitless, but hemmed in by good faith and a due consideration of the rights of the worker.

Eats-Cetera Food Services Outlet v. Letran, G.R. No. 179507, October 2, 2009

Facts:

Espadero had been employed by Eats-cetera Food Services Outlet since June 30, 2001 as cashier. When she reported for duty, Espadero discovered that her time card was already punched in. After asking around, she found out that a certain Joselito Cahayagan was the one who punched in her time card. Espadero, however, failed to report the incident to her supervisor, Clarissa Reduca (Reduca), who reported the incident to the personnel manager, Greta dela Hostria. Espadero contended that she was dismissed outright without being given ample opportunity to explain her side. She

claimed that on November 21, 2002, petitioners called her and asked her to make a letter of admission as a condition for her reemployment. After writing a letter [of apology about not being able to report the incident immediately], Espadero was told to wait for an assignment. The following day, on November 22, 2002, the company issued a Memorandum terminating her for violation of Rule 24 of the company rules and regulations. Because of this, Espadero decided to file a complaint for illegal dismissal before the NLRC.

Petitioners maintained that – the company rules and regulations, as well as the corresponding penalties in case of violation thereof, were made known to Espadero before and upon her actual employment as cashier; that contrary to her claim, petitioners gave Espadero ample opportunity to explain her side; and presented the affidavit of supervisor Reduca [containing the incident report]; they conducted an impartial investigation of the incident and found substantial evidence that Espadero was in cahoots with a co-worker in punching in her time card. For this reason, petitioners decided to terminate her.

Labor Arbiter declared petitioners liable for illegally terminating Espadero. Upon appeal, the NLRC reversed the Labor Arbiter’s findings. Aggrieved, respondents filed a petition for certiorari before the CA, who rendered a ruling affirming the Labor Arbiter’s pronouncement that Espadero was not afforded due process. The appellate court also observed that the punishment of dismissal was too harsh and unjustified.

Issues:

whether Espadero was afforded her right to due process prior to being dismissed from her job;

whether Espadero’s infraction was serious enough to warrant the penalty of dismissal.

Ruling:

Article 282 of the Labor Code includes – serious misconduct, fraud and willful breach of trust among the just causes for termination. But prior to termination on such grounds, the employer must satisfy both substantive and procedural due process. Not only must the employee be afforded a reasonable opportunity to be heard and to submit any evidence he may

have in support of his defense, but the dismissal must be for a just or authorized cause as provided by law.

THE PROCEDURAL REQUIREMENTS are set forth in

Section 2(d), Rule I of the Implementing Rules of Book VI of the Labor Code, to wit:

SEC. 2. Security of Tenure. x x x. x x x x (d) In all cases of termination of employment, the following standards of due process shall be substantially observed:For termination of employment based on just causes as defined in Article 282 of the Labor Code:A written notice served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his side.A hearing or conference during which the employee concerned, with the assistance of counsel if he so desires is given opportunity to respond to the charge, present his evidence, or rebut the evidence presented against him.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.

Petitioners complied with the second notice requirement. Greta dela Hostria, as personnel manager, issued a Memorandum stating with clarity the reason for Espadero’s dismissal.

SUBSTANTIVELY, we also sustain petitioners’ reasoning that – Espadero’s position as a cashier - is one that requires a high degree of trust and confidence, and that her infraction reasonably taints such trust and confidence reposed upon her by her employer.

A POSITION OF TRUST AND CONFIDENCE - has been defined as one – where a person is entrusted with confidence on delicate matters, or with the custody, handling, or care and protection of the employer’s property and/or funds.

One such position is that of a cashier. A cashier is a highly sensitive position which requires absolute trust and honesty on the part of the employee. It is for this reason that the Court has sustained the dismissal of cashiers who have been found to have breached the trust and confidence of their employers.

In one case, the Court upheld the validity of the dismissal of a school cashier despite her 19 years of service after evidence showed that – there was a discrepancy in the amount she was entrusted to deposit with a bank.

In Metro Drug Corporation v. National Labor Relations Commission, we explained:

LOSS OF CONFIDENCE - as a ground for dismissal – does not entail proof beyond reasonable doubt of the employee’s misconduct. It is enough that there be “some basis” for such loss of confidence or that “the employer has reasonable grounds to believe, if not to entertain the moral conviction[,]

that the employee concerned is responsible for the misconduct and that the nature of his participation therein rendered him absolutely unworthy of the trust and confidence demanded by his position.

The rule, therefore, is that - if there is sufficient evidence to show that – the employee occupying - a position of trust and confidence - is guilty of a breach of trust, or that his employer - has ample reason to distrust him, the labor tribunal cannot justly deny the employer - the authority to dismiss such employee.

In the instant case, petitioners cannot be faulted for losing their trust in Espadero.

As an employee occupying a job - which requires utmost fidelity to her employers, she failed to report to her immediate supervisor - the tampering of her time card. Whether her failure was deliberate - or due to sheer negligence, and whether Espadero was or was not - in cahoots with a co-worker, the fact remains that - the tampering was not promptly reported and could, very likely, not have been known by petitioners, or, at least, could have been discovered at a much later period, if it had not been reported by Espadero’s supervisor - to the personnel manager. Petitioners, therefore, cannot be blamed for losing their trust in Espadero.

Moreover, the peculiar nature of Espadero’s position aggravates her misconduct. MISCONDUCT has been defined as improper or wrong conduct; the transgression of some established or definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. The misconduct, to be serious, must be of such a grave character and not merely trivial or unimportant. To constitute just cause for termination, it must be in connection with the employee’s work.

With the degree of trust expected of Espadero, such infraction can hardly be classified as one that is trivial or unimportant. Her failure to promptly report the incident reflects a cavalier regard for the responsibility required of her in the discharge of the duties of her position.

G.R. No. 198620, November 12, 2014P.J. LHUILLIER, INC. AND MARIO RAMON LUDEÑA, Petitioners, v. FLORDELIZ VELAYO, Respondent.

The FactsThe essential antecedent facts are summarized in the assailed CA decision, to wit:chanroblesvirtuallawlibrary

On June 13, 2003, (herein petitioner) PJ (CEBU) LHUILLIER, INC. (PJ LHUILLIER for brevity) hired FLORDELIZ M. ABATAYO [sic] as Accounting Clerk at the LH-4, Cagayan de Oro City Branch with a basic monthly salary of P9,353.00. On February 9, 2008 appellant (herein private respondent) was served with a Show Cause Memo by MARIO RAMON LUDENA, Area Operations Manager of PJ Lhuillier (herein petitioner), ordering her to explain within 48 hours why no disciplinary action should be taken against

her for dishonesty, misappropriation, theft or embezz[le]ment of company funds in violation of Item 11, Rule V of the Company Code of Conduct. Thereafter, (s)he was placed under preventive suspension from February 9 to March 8, 2008 while her case was under investigation.

The charges against the appellant (herein private respondent) were based on the Audit Findings conducted on October 29, 2007, where the overage amount of P540.00 was not reported immediately to the supervisor, not recorded at the end of that day.

On February 11, 2008, complainant (herein private respondent) submitted her reply and admitted that she was not able to report the overage to the supervisor since the latter was on leave on that day and that she was still tracing the overage; and that the omission or failure to report immediately the overage (sic) was just a simple mistake without intent to defraud her employer.

On March 10, 2008, after the conduct of a formal investigation and after finding complainant's (herein private respondent's) [explanations] without merit, PJ LHUILLIER (herein petitioner) terminated her employment as per Notice of Termination on grounds of serious misconduct and breach of trust.4 (Citation omitted)

On March 14, 2008, the respondent filed a complaint for illegal dismissal, separation pay and other damages against RJ. Lhuillier, Inc. (PJLI) and Mario Ramon Ludena, Area Operations Manager (petitioners). On July 23, 2008, the Labor Arbiter (LA) rendered judgment, the dispositive portion of which reads as follows:chanroblesvirtuallawlibrary

WHEREFORE, in view of all the foregoing, judgment is hereby entered ordering the dismissal of the instant complaint for lack of merit.

SO ORDERED.5chanrobleslaw

The LA found that the respondent's termination was valid and based not on a mere act of simple negligence in the performance of her duties as cashier:chanroblesvirtuallawlibrary

This is not a case of simple negligence as the facts show that complainant, instead of reporting the matter immediately, had set aside the P540.00 for her personal use instead of reporting the overage or recording it in the operating system of the company.

Complainant is not entitled to moral as well as exemplary damages for lack of basis.6chanrobleslaw

On appeal, the NLRC in its Decision dated March 19, 2009 countermanded the LA, holding that the respondent was illegally dismissed since the petitioners failed to prove a just cause of serious misconduct and willful breach of trust:chanroblesvirtuallawlibrary

In fine, the Labor Arbiter a quo utterly disregarded the rule on proportionality that has been observed in a number of cases, that is, "the penalty imposed should be commensurate to the gravity of his offense." x x x

x x x x

In the instant case, PJ LHUILLIER was not able to discharge the burden of proving that the dismissal of the complainant was for valid or just causes of serious misconduct and willful breach of trust. Thus, We disagree with the Labor Arbiter's findings and conclusion that complainant was validly dismissed from service.

x x x x

... Significantly, the complainant's omission or procedural lapse did not cause any loss or damage to the company.7chanrobleslaw

Nonetheless, finding that the relations between the petitioners and the respondent have become strained, the NLRC did not order the reinstatement of the respondent. Thus:chanroblesvirtuallawlibrary

WHEREFORE, the instant appeal is GRANTED. The assailed decision is hereby SET ASIDE and REVERSED, and a new one entered declaring that complainant was ILLEGALLY DISMISSED. Accordingly, respondent PJ (CEBU) LHUILLIER, INC. is hereby ORDERED:chanroblesvirtuallawlibrary

(a) to pay complainant separation pay equivalent to one (1) month salary for every year of service, a fraction of at least six (6) months being considered as one (1) whole year in lieu of reinstatement due to strained relationship, computed from June 13, 2003 up to the finality of the promulgation of this judgment;cralawlawlibrary

(b) to pay complainant FULL BACKWAGES in accordance with Bustamante vs. NLRC ruling (265 SCRA 061); and

(c) to pay ten percent (10%) of the total money award as attorney's fees.

SO ORDERED.8chanrobleslaw

The NLRC subsequently denied the petitioners' motion for reconsideration thereof. On July 31, 2009, the petitioners filed a petition for certiorari in the CA with prayer for issuance of a temporary restraining order (TRO) and/or writ of preliminary injunction, invoking the following issues:chanroblesvirtuallawlibrary

I

WHETHER OR NOT THE RESPONDENT [NLRC] COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHEN IT DEVIATED FROM THE FINDINGS OF FACTS OF THE HONORABLE LABOR ARBITER.ChanRoblesVirtualawlibrary

II

WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A TEMPORARY RESTRAINING ORDER AND/OR WRIT OF PRELIMINARY INJUNCTION PENDING THE RESOLUTION OF THE INSTANT PETITION.9chanrobleslaw

The respondent filed her comment on August 19, 2009. On October 8, 2009, the petitioners filed an urgent motion to resolve their petition for certiorari and prayer for TRO and/or writ of preliminary injunction. On November 9, 2009, the CA denied the petitioners' prayer for TRO stating that they have not shown that they stood to suffer grave and irreparable injury if the TRO was denied. The remaining issue in the CA, then, was whether the NLRC acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it set aside the factual conclusion and ruling of the LA. The CA ruled in the negative:chanroblesvirtuallawlibrary

We concur with the NLRC in finding for private respondent. Time and again, the Supreme Court has held that it is cruel and unjust to impose the drastic penalty of dismissal if not commensurate to the gravity of the misdeed.

In employee termination disputes, the employer bears the burden of proving that the employee's dismissal was for just and valid cause. In the instant case, the evidence does not support the finding of the Labor Arbiter that private respondent is guilty of serious misconduct.

In this jurisdiction, the Supreme Court has consistently defined misconduct as an improper or wrong conduct, a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, implies wrongful intent and not mere error of judgment. To be a just cause for termination under Article 282 of the Labor Code of the Philippines, the misconduct must be serious, that is, it must be of such grave and aggravated character and not merely trivial or unimportant. However serious, such misconduct must nevertheless be in connection with the employee's work; the act complained of must be related to the performance of the employee's duties showing him to be unfit to continue working for the employer.

Private respondent's lapse was not a "serious" one, let alone indicative of serious misconduct. In fact, she (herein private respondent) admitted that she was not able to report the overage to the supervisor since the latter was on leave on that day and that she was still tracing the overage; and that the omission or failure to report immediately the overage was just a simple mistake without intent to defraud her employer. As found by the NLRC, private respondent worked for petitioner for almost six (6) years, and it is not shown that she committed any infraction of company rules during her employment. In fact, private respondent was once awarded by petitioner due to her heroic act of defending her Manager, Ms. Lilibeth Cortez, while resisting a hold-upper.

The settled rule is that when supported by substantial evidence, factual findings made by quasi-judicial and administrative bodies are accorded great respect and even finality by the courts. These findings are not infallible, though; when there is a showing that they were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the courts. Hence, when factual findings of the Labor Arbiter and the NLRC are contrary to each other, there is a necessity to review the records to determine which conclusions are more conformable to the evidentiary facts. The case before Us shows that the finding of the NLRC is supported by substantive evidence as compared to the finding of the Labor Arbiter with respect to the issue of illegal dismissal. Moreover, in case of doubt, such cases should be resolved in favor of labor, pursuant to the social justice policy of labor laws and the Constitution.

Finally, it is a time-honored principle that although it is the prerogative of management to employ the services of a person and likewise to discharge him, such is not without limitations and restrictions. The dismissal of an employee must be done with just cause and without abuse of discretion. It must not be done in an arbitrary and despotic manner. To hold otherwise

would render nugatory the security of tenure clause enshrined in the Constitution.10 (Citations omitted and emphasis ours)

Invoking Article 27911 of the Labor Code, the CA agreed with the NLRC that the respondent should have been reinstated without loss of seniority rights and other privileges, with payment of her full backwages, inclusive of allowances and other benefits or their monetary equivalent computed from the time her compensation was withheld up to the time of actual reinstatement. However, with the parties' relations now strained, the CA conceded that the payment of a separation pay, along with backwages as a separate and distinct relief, is an acceptable alternative to reinstatement. The CA further awarded the respondent attorney's fees since she was forced to litigate and incur expenses to protect her rights and interests by reason of the unjustified acts of the petitioners.ChanRoblesVirtualawlibrary

Petition for Review in the Supreme Court

In this petition, the petitioners raise the following issues:chanroblesvirtuallawlibrary

WHETHER OR NOT THE MISAPPROPRIATION BY A PAWNSHOP PERSONNEL IN THE AMOUNT OF [P]540.00, COUPLED WITH SUBSEQUENT DENIALS, AMOUNT TO A SERIOUS MISCONDUCT IN OFFICE?

WHETHER OR NOT THE IMPOSITION OF THE PENALTY OF TERMINATION FROM OFFICE [UPON] A PAWNSHOP PERSONNEL WHO MISAPPROPRIATED AN AMOUNT OF P540.00 FROM THE COFFERS OF THE PAWNSHOP, AND WHO MADE SUBSEQUENT DENIALS, IS CRUEL AND UNJUST?12

The appellate court agreed with the NLRC that the respondent's lapse was "just a simple mistake without intent to defraud her employer;"13 that the incident was neither serious nor indicative of serious misconduct; and that her dismissal was disproportionate to her offense. It accepted the respondent's explanation that her failure to report her cash overage of P540.00 on October 29, 2007 to the branch manager, who was her immediate superior, was because the latter was then on leave, and that for days thereafter, she was hard-pressed in trying to trace and determine the cause thereof. The CA noted that the respondent had worked for PJLI for almost six years without any previous infractions of company rules, and that she was once commended for a heroic act of defending her former branch manager, Ms. Lilibeth Cortez, during a branch holdup.

On the other hand, the petitioners strongly maintain that under Rule V(A)(11) of its Code of Conduct on "Dishonesty, Misappropriation, Theft or

Embezzlement of Company Funds or Property," the respondent committed a "First Level Offense" which is punishable by outright dismissal. According to the petitioners, the respondent committed the following acts which constitute dishonesty and serious misconduct:chanroblesvirtuallawlibrary

The respondent did not enter the discovered cash overage in the "operating system" (computerized cash ledger) of the branch on October 29, 2007 notwithstanding that she was fully aware of the company's policy that such unexplained receipt should be recorded at the end of the business day;cralawlawlibrary

The respondent did not report the cash overage to her immediate superior, Branch Manager Violette Grace Tuling (Tuling), upon the latter's return from a leave of absence on November 3, 2007. Neither did the respondent seek Tuling's help concerning the matter, and just averred that she was afraid to be scolded by Tuling;cralawlawlibrary

The respondent deliberately lied about her cash overage after Tuling confronted her on December 17, 2007;cralawlawlibrary

Again, the respondent falsely denied the cash overage when the company auditor asked her to explain how it happened; and

The respondent concocted a cover-up by claiming that a computer glitch occurred when she was about to post the cash overage in the operating system.14

Ruling of the Court

There is merit in the petition.

It need not be stressed that the nature or extent of the penalty imposed on an erring employee must be commensurate to the gravity of the offense as weighed against the degree of responsibility and trust expected of the employee's position. On the other hand, the respondent is not just charged with a misdeed, but with loss of trust and confidence under Article 282(c) of the Labor Code, a cause premised on the fact that the employee holds a position whose functions may only be performed by someone who enjoys the trust and confidence of management. Needless to say, such an employee bears a greater burden of trustworthiness than ordinary workers, and the betrayal of the trust reposed is the essence of the loss of trust and confidence which is a ground for the employee's dismissal.15

The respondent's misconduct must

be viewed in light of the strictly fiduciarynature of her position.

In addition to its pawnshop operations, the PJLI offers its "Pera Padala" cash remittance service whereby, for a fee or "sending charge," a customer may remit money to a consignee through its network of pawnshop branches all over the country. On October 29, 2007, a customer sent P500.00 through its branch in Capistrano, Cagayan de Oro City, and paid a remittance fee of P40.00. Inexplicably, however, no corresponding entry was made to recognize the cash receipt of P540.00 in the computerized accounting system (operating system) of the PJLI. The respondent claimed that she tried very hard but could not trace the source of her unexplained cash surplus of P540.00, but a branch audit conducted sometime in December 2007 showed that it came from a "Pera Padala" customer.

To be sure, no significant financial injury was sustained by the PJLI in the loss of a mere P540.00 in cash, which, according to the respondent she sincerely wanted to account for except that she was pre-empted by fear of what her branch manager might do once she learned of it. But in treating the respondent's misconduct as a simple negligence or a simple mistake, both the CA and the NLRC grossly failed to consider that she held a position of utmost trust and confidence in the company.

There are two classes of corporate positions of trust: on the one hand are the managerial employees whose primary duty consists of the management of the establishment in which they are employed or of a department or a subdivision thereof, and other officers or members of the managerial staff; on the other hand are the fiduciary rank-and-file employees, such as cashiers, auditors, property custodians, or those who, in the normal exercise of their functions, regularly handle significant amounts of money or property. These employees, though rank-and-file, are routinely charged with the care and custody of the employer's money or property, and are thus classified as occupying positions of trust and confidence.16

The respondent was first hired by the petitioners as an accounting clerk on June 13, 2003, for which she received a basic monthly salary of P9,353.00. On October 29, 2007, the date of the subject incident, she performed the function of vault custodian and cashier in the petitioners' Branch 4 pawnshop in Capistrano, Cagayan de Oro City. In addition to her custodial duties, it was the respondent who electronically posted the day's transactions in the books of accounts of the branch, a function that is essentially separate from that of cashier or custodian. It is plain to see then that when both functions are assigned to one person to perform, a very risky situation of conflicting interests is created whereby the cashier can

purloin the money in her custody and effectively cover her tracks, at least temporarily, by simply not recording in the books the cash receipt she misappropriated. This is commonly referred to as lapping of accounts.17 Only a most trusted clerk would be allowed to perform the two functions, and the respondent enjoyed this trust.

The series of willful misconduct committed by the respondent in mishandling the unaccounted cash receipt exposes her as unworthy of the utmost trust inherent in herposition as branch cashier and vaultcustodian and bookkeeper.

The respondent insists that she never intended to appropriate the money but was afraid that Tuling would scold her, and that she kept the money for a long time in her drawer and only decided to take it home after her search for the cause of the cash overage had proved futile. Both the CA and the NLRC agreed with her, and held that what she committed was a simple mistake or simple negligence.

The Court disagrees.

Granting arguendo that for some reason not due to her fault, the respondent could not trace the source of the cash surplus, she nonetheless well knew and understood the company's policy that unexplained cash must be treated as miscellaneous income under the account "Other Income," and that the same must be so recognized and recorded at the end of the day in the branch books or "operating system." No such entry was made by the respondent, resulting in unrecorded cash in her possession of P540.00, which the company learned about only two months thereafter through a branch audit.

Significantly, when Tuling returned on November 3, 2007 from her leave of absence, the respondent did not just withhold from her the fact that she had an unaccounted overage, but she refused to seek her help on what to do about it, despite having had five days to mull over the matter until Tuling's return.

In order that an employer may invoke loss of trust and confidence in terminating an employee under Article 282(c) of the Labor Code, certain requirements must be complied with, namely: (1) the employee must be holding a position of trust and confidence; and (2) there must be an act that would justify the loss of trust and confidence.18 While loss of trust and

confidence should be genuine, it does not require proof beyond reasonable doubt,19 it being sufficient that there is some basis to believe that the employee concerned is responsible for the misconduct and that the nature of the employee's participation therein rendered him unworthy of trust and confidence demanded by his position.20

The petitioners are fully justified in claiming loss of trust and confidence in the respondent. While it is natural and understandable that the respondent should feel apprehensive about Tuling's reaction concerning her cash overage, considering that it was their first time to be working together in the same branch, we must keep in mind that the unaccounted cash can only be imputed to the respondent's own negligence in failing to keep track of the transaction from which the money came. A subsequent branch audit revealed that it came from a "Pera Padala" remittance, implying that although the amount had been duly remitted to the consignee, the sending branch failed to record the payment received from the consigning customer. For days following the overage, the respondent tried but failed to reconcile her records, and for this inept handling of a "Pera Padala" remittance, she already deserved to be sanctioned.

Further, as a matter of strict company policy, unexplained cash is recognized at the end of the day as miscellaneous income. Inexplicably, despite being with the company for four years as accounting clerk and cashier, the respondent failed to make the required entry in the branch operating system recognizing miscellaneous income. Such an entry could have been easily reversed once it became clear how the overage came about. But the respondent obviously thought that by skipping the entry, she could keep Tuling from learning about the overage. Her trustworthiness as branch cashier and bookkeeper has been irreparably tarnished. The respondent's untrustworthiness is further demonstrated when she began to concoct lies concerning the overage: first, by denying its existence to Tuling and again to the company auditor; later, when she falsely claimed that a computer glitch or malfunction had prevented her from posting the amount on October 29, 2007; and finally, when she was forced to admit before the company's investigating panel that she took and spent the money.[21

Mere substantial evidence is sufficient to establish loss of trustand confidence

The respondent's actuations were willful and deliberate. A cashier who, through carelessness, lost a document evidencing a cash receipt, and then wilfully chose not to record the excess cash as miscellaneous income and

instead took it home and spent it on herself, and later repeatedly denied or concealed the cash overage when confronted, deserves to be dismissed.

Article 28222 of the Labor Code allows an employer to dismiss an employee for willful breach of trust or loss of confidence. It has been held that a special and unique employment relationship exists between a corporation and its cashier. Truly, more than most key positions, that of a cashier calls for utmost trust and confidence,23 and it is the breach of this trust that results in an employer's loss of confidence in the employee.24 In San Miguel Corporation v. NLRC, et al.,25cralawred the Court held:chanroblesvirtuallawlibrary

As a rule this Court leans over backwards to help workers and employees continue in their employment. We have mitigated penalties imposed by management on erring employees and ordered employers to reinstate workers who have been punished enough through suspension. However, breach of trust and confidence and acts of dishonesty and infidelity inthe handling of funds and properties are an entirely different matter. 26 (Emphasis ours)

It has been held that in dismissing a cashier on the ground of loss of confidence, it is sufficient that there is some basis for the same or that the employer has a reasonable ground to believe that the employee is responsible for the misconduct, thus making him unworthy of the trust and confidence reposed in him.27 Therefore, if there is sufficient evidence to show that the employer has ample reason to distrust the employee, the labor tribunal cannot justly deny the employer the authority to dismiss him.[28 Indeed, employers are allowed wider latitude in dismissing an employee for loss of trust and confidence, as the Court held in Atlas Fertilizer Corporation v. NLRC:[29

As a general rule, employers are allowed a wider latitude of discretion in terminating the services of employees who perform functions which by their nature require the employer's full trust and confidence. Mere existence of basis for believing that the employee has breached the trust of the employer is sufficient and does not require proof beyond reasonable doubt. Thus, when an employee has been guilty of breach of trust or his employer has ample reason to distrust him, a labor tribunal cannot deny the employer the authority to dismiss him. x x x.30 (Citations omitted)

Furthermore, it must also be stressed that only substantial evidence is required in order to support a finding that an employer's trust and confidence accorded to its employee had been breached. As explained in Lopez v. Alturas Group of Companies:[31

[T]he language of Article 282(c) of the Labor Code states that the loss of trust and confidence must be based on willful breach of the trust reposed in the employee by his employer. Such 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. Moreover, it must be based on substantial evidence and not on the employer's whims or caprices or suspicions otherwise, the employee would eternally remain at the mercy of the employer. Loss of confidence must not be indiscriminately used as a shield by the employer against a claim that the dismissal of an employee was arbitrary. And, in order to constitute a just cause for dismissal, the act complained of must be work-related and shows that the employee concerned is unfit to continue working for the employer. In addition, loss of confidence as a just cause for termination of employment is premised on the fact that the employee concerned holds a position of responsibility, trust and confidence or that the employee concerned is entrusted with confidence with respect to delicate matters, such as the handling or care and protection of the property and assets of the employer. The betrayal of this trust is the essence of the offense for which an employee is penalized.32 (Emphasis and underscoring in the original)

In holding a position requiring full trust and confidence, the respondent gave up some of the rigid guarantees available to ordinary employees. She insisted that her misconduct was just an "innocent mistake," and maybe it was, had it been committed by other employees. But surely not as to the respondent who precisely because of the special trust and confidence given her by her employer must be penalized with a more severe sanction.33

A cashier's inability to safeguard and account for missing cash is sufficientcause to dismiss her.

The respondent insisted that she never intended to misappropriate the missing fund, but in Santos v. San Miguel Corp.,34 the Court held that misappropriation of company funds, notwithstanding that the shortage has been restituted, is a valid ground to terminate the services of an employee for loss of trust and confidence.35 Also, in Cañeda v. Philippine Airlines, Inc. ,36 the Court held that it is immaterial what the respondent's intent was concerning the missing fund, for the undisputed fact is that cash which she held in trust for the company was missing in her custody. At the very least, she was negligent and failed to meet the degree of care and fidelity demanded of her as cashier. Her excuses and failure to give a satisfactory explanation for the missing cash only gave the petitioners sufficient reason

to lose confidence in her.37 As it was held in Metro Drug Corporation v. NLRC:38

It would be most unfair to require an employer to continue employing as its cashier a person whom it reasonably believes is no longer capable of giving full and wholehearted trustworthiness in the stewardship of company funds.39chanrobleslaw

WHEREFORE, premises considered, the petition is hereby GRANTED. The Decision dated June 30, 2011 of the Court of Appeals in CA-G.R. SP No. 03069 is REVERSED and SET ASIDE. The Decision of the Labor Arbiter dated July 23, 2008 is REINSTATED.

SO ORDERED.

G.R. No. 157633, September 10, 2014

NORTHWEST AIRLINES, INC., Petitioner, v. MA. CONCEPCION M. DEL ROSARIO, Respondent.

BERSAMIN, J.:

Under review is the decision promulgated on June 21, 2002,1 whereby the Court of Appeals (CA) dismissed the petition for certiorari filed by Northwest Airlines, Inc. to assail on the ground of grave abuse of discretion amounting to lack or excess of jurisdiction the adverse decision of the National Labor Relations Commission (NLRC).

Antecedents

Petitioner Northwest Airlines, Inc. employed respondent Ma. Concepcion M. Del Rosario on December 10, 1994 as one of its Manila-based flight attendants. On May 18, 1998, Del Rosario was assigned at the Business Class Section of Northwest Flight NW 26 bound for Japan. During the boarding preparations, Kathleen Gamboa, another flight attendant assigned at the First Class Section of Flight NW 26, needed to borrow a wine bottle opener from her fellow attendants because her wine bottle opener was dull. Vivien Francisco, Gamboa’s runner, went to the Business Class Section to borrow a wine bottle opener from Del Rosario, but the latter remarked that any flight attendant who could not bring a wine bottle opener had no business working in the First Class Section. Upon hearing this, Aliza Ann Escaño, another flight attendant, offered her wine bottle opener to Francisco. Apparently, Gamboa overheard Del Rosario’s remarks, and later on verbally confronted her. Their confrontation escalated into a heated argument. Escaño intervened but the two ignored her, prompting her to rush outside the aircraft to get Maria Rosario D. Morales, the Assistant Base Manager, to pacify them.

The parties differed on what happened thereafter. Del Rosario claimed that only an animated discussion had transpired between her and Gamboa, but Morales insisted that it was more than an animated discussion, recalling that Del Rosario had even challenged Gamboa to a brawl (sabunutan). Morales asserted that she had tried to pacify Del Rosario and Gamboa, but the two did not stop; that because the two were still arguing although the Business Class passengers were already boarding, she ordered them out of

the plane and transfer to another nearby Northwest aircraft; that she inquired from them about what had happened, and even asked if they were willing to fly on the condition that they would have to stay away from each other during the entire flight; that because Del Rosario was not willing to commit herself to do so, she decided not to allow both of them on Flight NW 26, and furnished them a Notice of Removal from Service (effectively informing Del Rosario of her dismissal from the service pending an investigation of the fighting incident between her and Gamboa).

On May 19, 1998, Morales sent a letter to Del Rosario telling her that Northwest would conduct an investigation of the incident involving her and Gamboa. The investigation was held on May 28, 1998 before Atty. Ceazar Veneracion III, Northwest’s Legal Counsel and Head of its Human Resources Department. All the parties attended the investigation

On June 19, 1998, Del Rosario was informed of her termination from the service. Northwest stated that based on the results of the investigation, Del Rosario and Gamboa had engaged in a fight on board the aircraft, even if there had been no actual physical contact between them; and that because fighting was strictly prohibited by Northwest to the point that fighting could entail dismissal from the service even if committed for the first time, Northwest considered her dismissal from the service justified and in accordance with the Rules of Conduct for Employees, as follows:chanRoblesvirtualLawlibrary

Section 1, General

x x x. Rule infractions will be dealt with according to the seriousness of the offense and violators will be subjected to appropriate disciplinary action up to and including discharge. Some acts of misconduct, even if committed for the first time, are so serious that, standing alone, they justify immediate discharge. Some examples of these offenses are violations of rules regarding theft, alcohol and drugs, insubordination, dishonesty, fighting, falsification of records, sleeping on the job, failure to cooperate or lying in a Company investigation, intentional destruction or abuse of property, threatening, intimidating or interfering with other employees, abuse of nonrevenue and reduced rate travel privileges and unauthorized use of Company communications systems.

x x x x

Section 24 (c), Disturbing Others, which states that:

Harassing, threatening, intimidating, assaulting, fighting or provoking a fight or similar interference with other employees at any time, on or off duty is prohibited.” (Italics supplied)

Del Rosario subsequently filed her complaint for illegal dismissal against Northwest.2cralawlawlibrary

Decision of the Labor Arbiter

In her decision dated January 18, 1999,3 Labor Arbiter Teresita D. Castillon-Lora ruled in favor of Northwest, holding that the dismissal of Del Rosario had been justified and valid upon taking into account that Northwest had been engaged in the airline business in which a good public image had been demanded, and in which flight attendants had been expected to maintain an image of sweetness and amiability; that fighting among its employees even in the form of heated arguments or discussions were very contradictory to that expected image;4 and that it could validly dismiss its employees like the respondent because it had been entitled to protect its business interests by putting up an impeccable image to the public.

Ruling of the NLRC

Upon appeal, the NLRC reversed the decision of the Labor Arbiter, and ruled in favor of Del Rosario, declaring that the incident between her and Gamboa could not be considered as synonymous with fighting as the activity prohibited by Northwest’s Rules of Conduct; that based on Black’s Law Dictionary, fight referred to a hostile encounter, affray, or altercation; a physical or verbal struggle for victory, pugilistic combat; that according to Bouvier’s Law Dictionary, fighting did not necessarily imply that both parties should exchange blows, for it was sufficient that they voluntarily put their bodies in position with that intent;5 and that the incident between Del Rosario and Gamboa could not be held similar to the fight that Northwest penalized under its Rules of Conduct.

The NLRC further ratiocinated as follows:chanRoblesvirtualLawlibrary

Evident in the definition of fighting is the existence of an underlying hostility between the parties which is so intense that there is an imminent danger of a physical conflict (if there is none yet). In other words, when we say two people are fighting, at the very least, they should project a general appearance of wanting to physically strike each other. Was this the image that appellant and FA Gamboa projected when they were facing each other during the incident of May 18, 1998[?] We do not think so.

x x x Almost unanimously, the witnesses of NWA refer to the incident as “arguing” or a “serious or animated discussion.” An argument is an effort to establish belief by a course of reasoning (Bouvier's Law Dictionary). In ordinary parlance, arguing is merely talking or debating about a certain issue. There are no underpinnings of animosity in the discussion nor (sic) between the parties. These witnesses never saw any hostility between the appellant and FA Gamboa. Neither did they see these two ladies wanting to strike each other. What they saw were two FAs engaged in an animated verbal exchange, arguing but not fighting.6chanrobleslaw

The NLRC ordered the reinstatement of Del Rosario to her former position without loss of seniority rights and with payment of backwages, per diems, other lost income and benefits from June 19, 1998; as well as the payment of attorney’s fees equivalent to 10% of the monetary award.

Decision of the CA

Aggrieved, Northwest elevated the adverse decision of the NLRC to the CA on certiorari, averring that the NLRC thereby committed grave abuse of discretion in reversing the decision of the Labor Arbiter, and submitting that Del Rosario’s dismissal from the service had been for a just cause, with the evidence presented against her being more than sufficient to substantiate its position that there had really been a fight between her and Gamboa; and that the NLRC likewise gravely abused its discretion in ordering the reinstatement of Del Rosario and the payment of her backwages and attorney’s fees.

As stated, the CA sustained the NLRC through its decision promulgated on June 21, 2002, observing that Northwest did not discharge its burden to prove not merely reversible error but grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC; and that, indeed, the NLRC had correctly held that Del Rosario’s conduct did not constitute serious misconduct, because the NLRC, in determining the usual, ordinary and commonly understood meaning of the word fighting, had resorted to authoritative lexicons that supported its conclusion that the exchange of words between Del Rosario and Gamboa did not come within the definition of the word fighting. 7cralawlawlibrary

The CA disposed thusly:chanRoblesvirtualLawlibrary

WHEREFORE, for lack of merit, the instant petition is DISMISSED. Accordingly, the decision of the NLRC dated January 11, 2000, is hereby AFFIRMED with the MODIFICATION that in lieu of reinstatement, petitioner is ordered to pay private respondent separation pay equivalent to one month's

salary for every year of service plus full backwages without deduction or qualification, counted from the date of dismissal until finality of this decision including other benefits to which she is entitled under the law. Petitioner is likewise ordered to pay respondent Del Rosario attorney’s fees consisting of five (5%) per cent of the adjudged relief.

SO ORDERED. 8

Issues

The issues are the following, namely: (1) Was Del Rosario’s dismissal from the service valid?; and (2) Were the monetary awards appropriate?

Ruling

The Court AFFIRMS the decision of the CA.

As provided in Article 282 of the Labor Code, an employer may terminate an employee for a just cause, to wit:chanRoblesvirtualLawlibrary

Art. 282. TERMINATION BY EMPLOYER

An employer may terminate an employee for any of the following causes:chanRoblesvirtualLawlibrary

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

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

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

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

(e) Other causes analogous to the foregoing.

Northwest argues that Del Rosario was dismissed on the grounds of serious misconduct and willful disobedience. Misconduct refers to the improper or wrong conduct that transgresses 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. But misconduct or improper

behavior, to be a just cause for termination of employment, must: (a) be serious; (b) relate to the performance of the employee’s duties; and (c) show that the employee has become unfit to continue working for the employer.9cralawlawlibrary

There is no doubt that the last two elements of misconduct were present in the case of Del Rosario. The cause of her dismissal related to the performance of her duties as a flight attendant, and she became unfit to continue working for Northwest. Remaining to be determined is, therefore, whether the misconduct was serious as to merit Del Rosario’s dismissal. In that respect, the fight between her and Gamboa should be so serious that it entailed the termination of her employment even if it was her first offense. Northwest insists that what transpired on May 18, 1998 between her and Gamboa was obviously a form of fight that it strictly prohibited, but Del Rosario disputes this by contending that it was only an animated discussion between her and Gamboa. She argues that as settled in American jurisprudence fight pertained to combat or battle, like the hostile encounter or engagement between opposing forces, suggesting primarily the notion of a brawl or unpremeditated encounter, or of a pugilistic combat;10 while argument was a connected discourse based upon reason, or a course of reasoning tending and intended to establish a position and to induce belief.11cralawlawlibrary

In several rulings where the meaning of fight was decisive, the Court has observed that the term fight was considered to be different from the term argument. In People v. Asto,12 for instance, the Court characterized fight as not just a merely verbal tussle but a physical combat between two opposing parties, to wit:chanRoblesvirtualLawlibrary

Well into their second bottle of gin, at about eleven o'clock that morning, Fernando Aquino and Peregrino had a verbal tussle. Fernando Aquino declared that he was going to run for councilor of Alcala, Pangasinan. Peregrino countered by saying: “If you will run for that post, cousin, I will fight you.” After a brief exchange of words, Fernando Aquino, laughing, went to sit beside Abagat. As Aquino continued with his mirth, Abagat stared at Peregrino with contempt.

xxx. A few minutes later, he heard a commotion in the plantation some two hundred meters away. He claims to have seen several people fighting each other with pieces of wood but did not go to the field to check what was happening.13 (Italics supplied.)

Similarly, in Pilares, Sr. v. People,14fight was held to be more than just an exchange of words that usually succeeded the provocation by either party, thus:chanRoblesvirtualLawlibrary

When the petitioner was about to hand over the bottles of beer to the private complainant, the latter called him “coward” and dared him to get out for a fight. Insulted, the petitioner went out of his store and chased the private complainant. (Italics supplied.)

Based on the foregoing, the incident involving Del Rosario and Gamboa could not be justly considered as akin to the fight contemplated by Northwest. In the eyes of the NLRC, Del Rosario and Gamboa were arguing but not fighting. The understanding of fight as one that required physical combat was absent during the incident of May 18, 1998. Moreover, the claim of Morales that Del Rosario challenged Gamboa to a brawl (sabunutan) could not be given credence by virtue of its being self-serving in favor of Northwest, and of its being an apparent afterthought on the part of Morales during the investigation of the incident, without Del Rosario having the opportunity to contest Morales’ statement. In that context, the investigation then served only as Northwest’s means to establish that the grounds of a valid dismissal based on serious misconduct really existed.

Moreover, even assuming arguendo that the incident was the kind of fight prohibited by Northwest’s Rules of Conduct, the same could not be considered as of such seriousness as to warrant Del Rosario’s dismissal from the service. The gravity of the fight, which was not more than a verbal argument between them, was not enough to tarnish or diminish Northwest’s public image.

Under the circumstances, therefore, the CA properly ruled that the NLRC did not gravely abuse its discretion amounting to lack or excess of jurisdiction by declaring Del Rosario’s dismissal unjustified. Northwest as the petitioner for certiorari must demonstrate grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the NLRC. Grave abuse of discretion, according to De los Santos v. Metropolitan Bank and Trust Company,15 “must be grave, which means either that the judicial or quasi-judicial power was exercised in an arbitrary or despotic manner by reason of passion or personal hostility, or that the respondent judge, tribunal or board evaded a positive duty, or virtually refused to perform the duty enjoined or to act in contemplation of law, such as when such judge, tribunal or board exercising judicial or quasi-judicial powers acted in a capricious or whimsical manner as to be equivalent to lack of jurisdiction.” Alas, Northwest did not show how

the NLRC could have abused its discretion, let alone gravely, in ruling adversely against it.

WHEREFORE, the Court AFFIRMS the decision of the Court of Appeals promulgated on June 21, 2002; and ORDERS the petitioner to pay the costs of suit.

SO ORDERED.

G.R. No. 200729, September 29, 2014

TEMIC AUTOMOTIVE (PHILIPPINES), INC., Petitioner, v. RENATO M. CANTOS, Respondent.

BRION, J.:

We resolve the present petition for review on certiorari1 which seeks the reversal of the decision2 dated September 28, 2011 and resolution3 dated February 16, 2012 of the Court of Appeals (CA) in CA-G.R. SP No. 117171.

The Antecedents

On March 9, 2009, respondent Renato M. Cantos (Cantos) filed a complaint for illegal dismissal against petitioner Temic Automotive (Phils.), Inc. (Temic) based in Taguig City and its General Manager (GM), Martin Wadewitz (Wadewitz).4 Cantos started his employment with Temic on July 16, 1993 as Special Projects Officer of the company's Materials Department. Sometime in 1998, he was appointed Purchasing & Import-Export Manager (Purchasing Manager) of the Logistics Department and, on December 1, 2007, he was named Warehouse & Import-Export Manager (Wimpex Manager), the last position he held before he was allegedly dismissed illegally.

Temic is a member firm of Continental Corporation, a multinational company (with head office in Germany), with over sixty facilities worldwide. It is engaged in vehicle safety applications, comfort and powertrain, as well as in the networking of active and passive driving systems.5 In September and December 2008, a team from the head office audited Temic's operations. The audit team allegedly discovered several irregularities, particularly with respect to Temic's purchasing transactions supposedly attended by "fraudulent activities."6 Some purchase orders (POs), it was claimed, were ensured to go to some suppliers, thereby systematically avoiding a competitive tender process. Temic believed the irregularities could only have happened with the participation of personnel in the Purchasing and Manufacturing departments. It stressed that initial findings indicated that Cantos, as former Purchasing Manager, "was likely involved in said transactions."7cralawred

On December 11, 2008, Temic issued a Show Cause and Preventive Suspension Notice8 to Cantos, requiring him to explain in writing several infractions which he allegedly committed during his stint as Purchasing Manager. He was charged principally with having violated Temic's procedures on purchases, particularly the Purchase Activities in System, Application, Products in Data Processing (FV 9-F0081) and the Non-Production/Indirect Material Purchasing Procedures (FV9-F0158).

Allegedly, Cantos failed to meet the required number of purchase quotations, in violation of paragraph 10.6.1 of FV 9-F0158 under which purchases of all articles must conform with Continental Temic Electronics (Phils.), Inc. (CTEPI,) Procurement Policy and that of Temic as a general rule.9 Cantos would claim10 that from 2005 to early 2008, he was tasked to also serve the Purchasing Department of CTEPI (without additional compensation), a sister firm of Temic located in Calamba, Laguna and that it was in relation with his work in CTEPI that his dismissal was chiefly based. He would also claim that the purchasing procedures are essentially the same for CTEPI and for Temic, except that in CTEPI's case, the signature of

the GM is not required for the Process Deviation Temporary Authority (PDTA).

Under par. 10.6.1 of FV 9-F0158, before a purchase is made in Temic, quotations must be secured based on the purchasing value as follows: (1) P1.00-P50,599.00 (1 quotation/bid); (2) P51,000.00-P200,999.00 (min. 2 quotations/bids); and (3) P201,000-above (min. 3 quotations/bids). Cantos allegedly allowed the proliferation of deviations from the established procedures and resorted instead to the PDTAs favoring suppliers Globaltech Automation, Inc. (Globaltech) and Maxtronix, Inc. (Maxtronix) without a valid reason and despite the lapse of a substantial lead time (up to three months between the date of receipt of the quotation and date of validity of the PDTA). Under both the Temic and CTEPI purchasing procedures, the acquisition of machines without the three quotations/bids is allowed through the PDTA.

Temic maintained that by favoring Globaltech and Maxtronix, Cantos violated the provisions of pars. 10.6.1 and 10.6.3 of FV 9-F0158 requiring that "in general, [djecision has to be made in favor of the accredited supplier/vendor or bidder with the lowest total cost, based on the fulfillment of the specification," insinuating that the two suppliers were not accredited. As none of the PDTAs was approved and signed by the GM, Cantos was also charged of deviating from the normal protocol in the tender process (par. 10.6.3 of FV-9-F0158) which requires that the PDTA should be signed by the department manager, senior manager, purchasing manager, controlling manager and GM.

Additionally, Cantos was charged with the: (1) disappearance of optional items supposed to be part of purchase orders; (2) engagement of customs brokers Airfreight 2100 and Diversified Cargo without contracts; (3) unauthorized engagement of personnel of the two customs brokers to work for Temic; and (4) failure to consolidate deliveries from the same point of origin, resulting in higher costs for the company. Cantos supposedly also violated the Employee Handbook and Code of Discipline, particularly Group II on Insubordination, No. 9 and Group III on Fraud, Acts of Dishonesty and/or Breach of Trust, No. 14, and the Code of Conduct on Personal Ethics provisions on "suppliers," "internal controls" and "conflict of interest."

On December 12, 2008, Cantos asked for copies of documents he considered necessary for his reply to the show-cause notice,11 but he was given only copies of the POs. He was advised that the other documents were "irrelevant" or "can be presented at the proper time if deemed necessary by the company."12cralawred

Cantos submitted his explanation on December 18, 2008.13 The salient points of the submission are as follows:14cralawred

1. There are three instances when a deviation from the three- quotation requirement is allowed and they are: (a) when skeleton agreements or global contracts are available; (b) when "accredited suppliers/vendors are approved;" or (c) when there is an immediate need for the item to be purchased. The POs in question which number only twelve (12),15 out of more than thirty thousand (30,000)16 processed during his tenure as Purchasing Manager, were all covered by duly- accomplished PDTAs.

2. He was not to blame for the missing optional items because he handled only the purchasing aspect of the transactions. The items were delivered to Temic's Receiving Section to determine whether they are complete and then sent to the end-user department which determines if the deliveries are indeed complete and, when an item is missing, informs the Purchasing Department about it. He never received information on missing deliveries.

3. The contracts with Airfreight 2100 and Diversified Cargo were just awaiting the signatures of the customs brokers. Said contracts were upon the initiative of Temic management who had been dealing with the two customs brokers even before he became head of the Imports-Exports Department.

4. The hiring of the personnel of the two customs brokers was at the behest of his superior Rosalie Isaac (Isaac) and former Warehouse Manager Antonio Gregorio in order to respond to Temic's need for additional manpower without incurring the costs usually entailed for regular employees.

5. The non-consolidation of shipments coming from the same point of origin happens only when the other shipments are under DDU or DDP terms or when the delivery charges are for the account of the suppliers. During his tour of duty, he significantly lowered shipment costs by reducing evening shipments, thus avoiding special customs fees for night or backdoor releases.

Temic then conducted an administrative investigation17 where Cantos appeared, together with his counsel. Cantos believed he was able to establish his compliance with Temic's procurement procedures during his term as Purchasing Manager and was confident he would be found innocent of the charges against him.18 Even so, he bewailed Temic's suspicion, aired during the investigation, that he connived with CTEPI's Raul Navarro (Navarro), Senior Manager for Manufacturing, and Navarro's subordinate,

Arnold Balita (Balita), Process Engineering & Maintenance Manager, as well as Globaltech and Maxtronix, in favoring the two suppliers' bids.

Cantos explained that sometime in 2008, Temic's former foreign expatriate GM, Eynollah Rahideh (GM Rahideh), was audited due to a conflict of interest incident involving the planned purchase of a FUJI NXT machine from Japan for P30,000,000.00. The purchase was cancelled and transferred to a European firm, FUJI-Germany, where his son worked. GM Rahideh suspected Navarro and Balita to have given the information to the head office in Germany about the incident. Cantos was asked by the head office for copies of documents on the planned purchase. He complied with the request and since then he had never been in good terms with GM Rahideh.

Thereafter, according to Cantos, rumors circulated that Navarro and Balita were conniving with Globaltech and Maxtronix for the two suppliers to corner Temic's equipment purchases, for a commission. Then, word spread that Cantos was complicit with the alleged fraudulent act, despite the fact that he was not close to Navarro and Balita.

In October 2008, flowers for the dead were sent to Temic's Purchasing Manager, Gemma Ignacio (Ignacio) who had taken over Cantos' position as Purchasing Manager. Navarro and Balita were suspected to be behind the sending of the flowers. Ignacio allegedly tried to get back at the two, but she was pre-empted by their resignation. She thus trained her attention on Cantos whose position as Wimpex Manager she coveted.

The new foreign expatriate GM, Wadewitz, took the cudgels for Ignacio who had assumed the position of Wimpex Manager. Wadewitz wanted Cantos to provide the company information about the "fraudulent activities" of Navarro and Balita, but since Cantos had no knowledge of their activities, he could not tell Temic anything. This proved to be his undoing as he was dismissed for charges that he claimed remained unsubstantiated.

On February 16, 2009, Temic issued a notice of termination of employment19 to Cantos, with immediate effect, on grounds of loss of trust and confidence. It stressed that while Cantos initially denied any wrongdoing, he eventually admitted having bypassed some purchasing procedures and/or local controls, although allegedly due to simple oversight on his part. It added that after a careful deliberation and based on his own admission, as well as the evidence, it had been established that he committed the acts he was charged with.

The Compulsory Arbitration Rulings

In a decision20 dated November 27, 2009, Labor Arbiter Jaime M. Reyno (LA Reyno) dismissed the complaint for lack of merit. LA Reyno declared that Cantos, a managerial employee, had lost the trust and confidence of his employer for the various infractions he committed as company Purchasing Manager.

Cantos appealed the dismissal. Through its decision21 of July 30, 2010, the National Labor Relations Commission (NLRC) affirmed LA Reyno's ruling and dismissed the appeal. Cantos then moved for reconsideration, but the NLRC denied the motion,22 prompting him to seek relief from the CA by way of a petition for certiorari under Rule 65 of the Rules of Court.

The CA Proceedings

Cantos argued before the CA that the NLRC committed grave abuse of discretion in upholding his dismissal. He maintained that he committed no act that violated the purchasing procedures of either CTEPI or Temic since both procedures allow the acquisition of machines from a supplier even without the three-quotations/bids requirement, through the due. accomplishment of PDTAs. Contrary to the pronouncement of the NLRC, he never admitted violating the company rules on purchases as there was no proof of his wrongdoing. He decried the absence of the minutes of the investigation since only an attendance sheet was presented in evidence.23cralawred

He pointed out that his supposed admission was mentioned only in Ignacio's affidavit.24 He disputed the probative value of the affidavit because it came from a company official who had been hostile to him, rendering her declarations suspect; no other employee corroborated her story and she merely "parroted" the words used in the termination-of-employment letter25 issued to him by Temic through Human Resource Manager Artemio Del Rosario (Del Rosario).

For its part, Temic argued that the NLRC correctly ruled that the complaint is devoid of merit as Cantos patently violated the company's purchasing procedures. It maintained that he was caught red-handed in the act and his belated presentation of separate purchasing rules for CTEPI and Temic would not do him any good as the documents should have been presented as early as during the administrative investigation.

It argued that Cantos cannot rely on mere unsubstantiated arguments to refute the valid and admissible evidence it presented. It insisted that he was afforded due process before he was dismissed.

In its decision under review, the CA granted the petition. It reversed the NLRC rulings and declared that Cantos had been illegally dismissed. It found no valid cause for his dismissal and he was not accorded due process. Consequently, the CA ordered Temic to pay Cantos full backwages and separation pay (in lieu of reinstatement since it is no longer viable), moral and exemplary damages, plus attorney's fees. However, it absolved Wadewitz from liability for Cantos' dismissal as no malice or bad faith on his part was "sufficiently proven."26cralawred

While the CA noted that Cantos occupied a position of trust and confidence as Purchasing Manager (so as to satisfy one of the requisites of a dismissal for breach of trust), it found that Temic "utterly" failed to establish the requirements under the law and jurisprudence for his dismissal on that ground. It noted that the principal charge Temic lodged against Cantos arose from his violation of its purchasing procedures (FV 9-F0158), yet it adduced in evidence POs for CTEPI, an entity separate and distinct from it and had a different set of purchasing procedures.

The CA stressed that nowhere in the records could evidence be found showing that Cantos deliberately failed to secure at least three quotations (under par. 10.6.1 of FV 9-F0158) for the supply of equipment covered by the eleven (11) POs. It upheld his position that there are exceptions to the rule and that he relied on this excepting clause for the PDTAs in question. The CA further pointed out that Temic failed to prove its allegation that the purchases were not from accredited suppliers or bidders with the lowest total cost. It also faulted Temic for blaming Cantos for not securing the GM's approval (signature) for the subject PDTAs as the GM's signature is not required for CTEPI purchases, although it is a requirement for Temic PDTAs.

The CA disagreed with the NLRC's finding that based on the minutes of the administrative hearing, Cantos admitted having violated company rules. The "minutes," the CA clarified, were a mere attendance sheet.27cralawred

In sum, the CA concluded that Temic's charges against Cantos "were never substantiated by any evidence other than the barefaced allegations in the Affidavit of Ignacio which must be taken with a grain of salt considering that she is an employee of the company who harbored hostility against [the] petitioner x x x."28 The CA believed that Cantos' "imputed guilt" was based on Temic's claim that he was complicit in the "anomalous transactions of CTEPI employees Balita and Navarro,"29 but which had never been proven.

On the due process issue, the CA found Temic to have "almost" complied with the procedural requirements under the law30 as indicated by the following: (1) a show-cause notice to Cantos of the charges against him; (2)

conduct of an administrative investigation on said charges; and (3) a notice of termination of his employment. Nonetheless, it still found Temic's compliance insufficient since charges B, C, D and E in the show-cause notice were not stated with particularity.31cralawred

The Petition

Temic seeks a reversal of the CA judgment for being contrary to law and jurisprudence. It contends that the appellate court should have accorded respect to the labor tribunals' rulings because they were supported by overwhelming evidence consisting of affidavits of key officers and pertinent documents as compared with Cantos' bare assertions. It submits that Cantos affirmed that he knew the company's purchasing procedures fully well, having co-authored the procedures himself. It adds that when asked by the investigating committee about his acts being violative of the company procedures, he made an admission that they were, but said that it was merely due to oversight.

The Case for Cantos

By way of a Comment,32 Cantos asks for the petition's dismissal for lack of merit.

He argues that the CA committed no error in finding that Temic failed to afford him due process on account of its refusal to provide him with copies of relevant documents he needed in his defense, especially the purchasing procedures of both Temic and CTEPI which Temic dismissed as irrelevant. Through his own efforts, however, he was able to secure a copy each of Temic's and CTEPI's purchasing procedures and accordingly submitted copies of the documents to LA Reyno, but the latter rejected the documents for late submission.33 Further, he insists that Temic also failed to prove that there was a valid cause for his dismissal.

Cantos urges the Court to make Temic accountable for its refusal to furnish him copies of the purchasing procedures because the documents are material to his defense that he did not violate Temic's purchasing procedures. He maintains that all the PDTAs and POs for which he was charged pertained to CTEPI, a distinct and separate corporation from Temic. He points out that the set of procedures for Temic is pre-numbered 9;34 whereas, that for CTEPI is pre-numbered 8.35 He bewails Temic's resorting to "foul trickery" when it denied him access to the documents he was asking, the obvious reason being the fact that under Temic's purchasing procedures (par. 10.6.3.2 of FV 9-F0158 in relation to par. 10.6.3.2.5),36 a

PDTA has to be signed by the GM; whereas, it is not a requirement under CTEPI's purchasing procedures (par. 10.6.3.1 of FV 8-F0007).37cralawred

He contends that Temic was not telling the truth when it alleged that Globaltech and Maxtronix from whom the machines covered by questioned PDTAs were purchased are not Temic accredited suppliers, the truth being that Temic and CTEPI had long been buying machines from the two suppliers even before he was hired by Temic. In fact, he adds, the items covered by the subject PDTAs were repeat orders and "many earlier purchases from these companies" were made "in the past without requiring three (3) prior bidders, and the [petitioner never raised a howl about them."38cralawred

Cantos further contends that Temic singled him out for dismissal at all costs with respect to the PDTAs in question, to the extent of resorting to misrepresentations, denying him access to relevant documents and passing off generalizations as evidence in the form of affidavits of its key officers, such as Ignacio and Del Rosario,39 to pin him down. He asserts that Temic is aware, as it is written in the purchasing procedures of both Temic and CTEPI, that a PDTA starts from an end-user unit of either firm. The subject PDTAs, he explains, came from the Manufacturing Department headed by Navarro and Balita who were suspected to have received "kickbacks" from suppliers and yet, they were allowed to retire with full benefits. He laments that he, a mere conduit of the two, was dismissed and his benefits withheld, without proof that he profited from the POs covered by the PDTAs.

Moreover, Cantos points out, Navarro and Balita were not the only ones who participated in the execution of the PDTAs. He names Purchasing Officer Clave Campos (Campos), Controlling Manager Susan Aranilla (Aranilla) and their "over-arching" officer, his superior Isaac, who all took part in consummating the transactions covered by the subject PDTAs,. but the said employees were never investigated, let alone charged. Neither was there evidence that Temic filed charges against Globaltech and Maxtronix for the damage that it caused the company, as it claims, resulting from the questioned POs.

Cantos takes exception to Temic's submission that his "sterling sixteen (16) years of service" for the company should work against him because with such a long exemplary tenure with the company, he should not have deliberately violated the company's purchasing procedures. He stresses that one year after he allegedly participated in the purported anomalous purchase transactions, Temic recognized his excellent service, evidenced by its letters of commendations which the CA acknowledged.40cralawred

In fine, Cantos maintains that the burden of proof that his dismissal was for a just cause was hardly, if ever, discharged by Temic.

The Court's Ruling

We deny the petition for patent lack of merit.

Like the CA, we are convinced that the NLRC committed grave abuse of discretion in upholding Cantos' dismissal. We find no substantial evidence in the records in support of its ruling. In Ilagan v. Court of Appeals,41 we re-echoed the principle in employee dismissals that it is the employer's burden to prove that the dismissal was for a just or authorized cause. Temic failed to discharge this burden of proof in Cantos' case.

First. The POs Temic offered in evidence to prove the principal charge against Cantos pertained to its sister company CTEPI,42 most of which, except for two POs, were made in 2005 and 2006 as listed in the show-cause notice. In the face of Cantos' submission that the two entities are separate and distinct from each other, it is puzzling that Temic did not bother to explain why it proceeded against Cantos based on purchase transactions entered into by CTEPI and not by itself; it did not also explain the precise relationship between it and CTEPI with respect to the POs in question. The reason for this, we believe, was Temic's undue haste to dismiss Cantos, such that it did not even check on the documentary support for the charges it laid against him.

Thus, and apparently without being aware that it was referring to CTEPI's purchasing procedures, it faulted Cantos for resorting to the PDTAs without the signature and approval of the GM. Under Temic rules, the GM approves and signs the PDTA; it is not a requirement under CTEPI rules. There is no basis therefore for making Cantos accountable for the absence of the GM's signature for CTEPI's PDTAs.

Also, Temic faulted Cantos for belatedly presenting to the LA the purchasing procedures of Temic and CTEPI to prove his point, which the labor official rejected for not having been raised during the company investigation.43 This is rather unfortunate considering that the NLRC and the LAs are mandated by law to "use every and all reasonable means to ascertain the facts in each case speedily and objectively and without regard to technicalities of law or procedure; all in the interest of due process. "44 LA Reyno overlooked the fact that Cantos requested Temic for copies of documents which he considered vital to his defense.

Second. The foregoing notwithstanding and, as the CA declared, nowhere in the records is there evidence that directly pointed to Cantos as having deliberately violated the company procedures for the procurement of services and materials by allowing the proliferation of PDTAs.

We agree with the CA pronouncement. Other than the fact that Cantos was the Purchasing Manager at the time and was a signatory to the PDTAs in question, we find no other indication of his involvement in the execution of the subject PDTAs. More importantly, his position as Purchasing Manager and his signature appearing on the PDTAs do not prove that the PDTAs [eleven (11) out of thirty thousand (30,000) POs during his term as Purchasing Manager)] were executed in violation of Temic's purchasing procedures and that he was responsible for their execution.

Indeed, there is no evidence on record that it was Cantos who caused the execution of the subject PDTAs or that he did it for his personal gain or in collusion with Navarro and Balita of CTEPIs Manufacturing Department who were suspected to be involved in fraudulent purchase transactions — discovered by the audit team from Germany — in favor of certain suppliers. In fact, as the records show, Temic never refuted Cantos' submission that under the purchasing procedures of both Temic and CTEPI, a PDTA starts at an end-user department and that the PDTAs in question came from the Manufacturing Department as the end-user.

Further, there were others who participated in the execution of the PDTAs — Purchasing Officer Campos, Controlling Manager Aranilla and Cantos' superior Isaac — yet they were never investigated for their involvement in the supposed violation of the company's purchasing procedures and meted a similar dismissal action. Again, Temic is silent with respect to this particular assertion of Cantos.

As we see it, the overwhelming evidence45 which Temic claims supported the rulings of LA Reyno and the NLRC that Cantos was validly dismissed does not exist. This purported overwhelming evidence consists largely of generalizations, suppositions and bare conclusions of Cantos' direct involvement or participation in the alleged anomalous execution of PDTAs for eleven (11) POs, mostly between 2005 and 2006, which as the evidence shows,46even pertained to CTEPI and not to Temic. We thus wonder how Temic arrived at its conclusion that Cantos was caught red-handed to have patently violated the company's clear policies, particularly its purchasing procedures, which he even co-authored.47cralawred

Third. Temic's contention that Cantos made an admission of guilt during the administrative investigation48 likewise has no evidentiary support. The

supposed "admission" could have sealed the company's case against him had it backed up its claim with what transpired during the investigation. It could have been done by simply presenting the minutes of the investigation. No such investigation minutes were ever presented, only an attendance sheet.49 This was a serious lapse on Temic's part since in her affidavit,50 Ignacio (a member of the investigating committee and who succeeded Cantos as purchasing manager) deposed that Cantos admitted that he violated the company's purchasing procedures. In the absence of the minutes, we can understand why the CA dismissed Ignacio's affidavit as nothing but "barefaced allegations."51cralawred

To our mind, the minutes of the investigation are crucial, especially since Cantos has persistently denied that he made the admission of wrongdoing during the investigation. Ignacio's affidavit, as well as that of Human Resource Manager Del Rosario in the same tenor,52 cannot substitute for the minutes of the investigation whose absence in the evidence presented remains unexplained. Under the circumstances, we cannot accept the affidavits of Ignacio and Del Rosario as evidence of Cantos' purported admission that he violated Temic's purchasing procedures.

In sum, we reiterate and emphasize that the NLRC committed grave abuse of discretion in validating the dismissal of Cantos as we find no substantial evidence in support of this pronouncement. We thus find the due process question academic.

In conclusion, we quote with approval the following CA observation:chanRoblesvirtualLawlibrary

xxx [the petitioner] did not commit any act which was dishonest or deceitful. He did not use his authority as the Purchasing Manager to misappropriate company property and derive benefits therein nor did he abuse the trust reposed in him by respondent Temic with respect to his responsibilities. There was no demonstration of moral perverseness that would justify the claimed loss of trust and confidence attendant to [the] petitioner's job. Temic failed to adduce any proof that [the] petitioner ever profited from the transactions involved in the purchase orders. The supplies described in the purchase orders are still with the company even up to the time when petitioner's services were terminated. And neither was there evidence shown that the same deviates from the specifications of the company or has no more use to the company.53 (Emphases supplied)

WHEREFORE, premises considered, the petition is DENIED for lack of merit. The assailed decision and resolution of the Court of Appeals are AFFIRMED.

Costs against petitioner Temic Automotive (Phils.), Inc.

SO ORDERED.

ALILEM CREDIT COOPERATIVE, INC., NOW KNOWN AS ALILEM MULTIPURPOSE COOPERATIVE, INC. v. SALVADOR M. BANDIOLA, JR.G.R. No. 173489, 25 February 2013

FACTS

Salvador M. Bandiola (Bandiola) was employed by Alilem Multipurpose Cooperative (AMPC) as its bookkeeper. AMPC, thru its Board of Directors, after complying with due process, terminated the services of Bandiola when it was informed that the latter engaged in extra-marital affairs with one Thelma G. Palma (Palma). The termination letter informed Bandiola of the existence of a prima facie case against him for “illicit marital affair, an act that brings discredit to the cooperative and a cause for termination pero AMPC Personnel Policy.” AMPC’s evidence consisted of sworn statements of the relatives and friends of Palma and Bandiola.

Insisting that the ground for his termination was not among the just causes enumerated under the Labor Code, Bandiola filed a Complaint for Illegal Dismissal before the Labor Arbiter (LA). The LA dismissed the Complaint for lack of merit. The National Labor Relations Commission (NLRC) set aside the LA’s Decision. The Court of Appeals (CA) reinstated the earlier Decision of the LA.

RULING

An employer is free to regulate all aspects of employment. It may make reasonable rules and regulations for the government of its employees which become part of the contract of employment provided they are made known to the employee. In the event of a violation, an employee may be validly terminated from employment on the ground that an employer cannot rationally be expected to retain the employment of a person whose lack of morals, respect and loyalty to his employer, regard for his employer’s rules and application of the dignity and responsibility, has so plainly and completely been barred.

The employer’s evidence consists of sworn statements of either relatives or friends of Palma and Bandiola. They either had direct personal

knowledge of the illicit relationship or revealed circumstances indicating the existence of such relationship.

While Bandiola’s act of engaging in extra-marital affairs may be considered personal to him and does not directly affect the performance of his assigned task as bookkeeper, aside from the fact that the act was specifically provided for by AMPC’s Personnel Policy as one of the grounds for termination of employment, said act raised concerns to AMPC as the Board received numerous complaints and petitions from the cooperative members themselves asking for the removal of Bandiola because of his immoral conduct.

CAVITE APPAREL, INCORPORATED and ADRIANO TIMOTEO vs. MICHELLE MARQUEZG.R. No. 172044, February 06, 2013 Facts:

Cavite Apparel is a domestic corporation engaged in the manufacture of garments for export. Michelle was hired as a regular employee in its Finishing Department. She enjoyed, among other benefits, vacation and sick leaves of seven (7) days each per annum. Prior to her dismissal, Michelle committed the following infractions (with their corresponding penalties):a. First Offense: Absence without leave (AWOL) on December 6, 1999 – written warningb. Second Offense: AWOL on January 12, 2000 – stern warning with three (3) days suspensionc. Third Offense: AWOL on April 27, 2000 – suspension for six (6) days.

Michelle got sick and did not report for work. When she returned, she submitted a medical certificate. Cavite Apparel, however, denied receipt of the certificate. Michelle did not report for work on May 15-27, 2000 due to illness. When she reported back to work, she submitted the necessary medical certificates. Nonetheless, Cavite Apparel suspended Michelle for six (6) days (June 1-7, 2000). When Michelle returned on June 8, 2000, Cavite Apparel terminated her employment for habitual absenteeism.

LA dismissed the complaint filed by Michelle for illegal dismissal.NLRC reversed the decision of LA Ramos and concluded that Michelle

had been illegally dismissed. CA found no grave abuse of discretion on the part of the NLRC and

accordingly dismissed Cavite Apparel’s petition.

Issue:Whether or not Michelle has been validly dismissed from employment

based on totality of infractions.

Held:No. Michelle’s four absences were not habitual; "totality of infractions"

doctrine not applicable. Neglect of duty, to be a ground for dismissal under Article 282 of the Labor Code, must be both gross and habitual. Gross negligence implies want of care in the performance of one’s duties. Habitual neglect imparts repeated failure to perform one’s duties for a period of time, depending on the circumstances. Under these standards and the circumstances obtaining in the case, we agree with the CA that Michelle is not guilty of gross and habitual neglect of duties.

Michelle’s penalty of dismissal too harsh or not proportionate to the infractions she commited. The court held that "[e]ven when there exist some rules agreed upon between the employer and employee on the subject of dismissal, x x x the same cannot preclude the State from inquiring on whether [their] rigid application would work too harshly on the employee." This Court will not hesitate to disregard a penalty that is manifestly disproportionate to the infraction committed. Michelle might have been guilty of violating company rules on leaves of absence and employee discipline, still we find the penalty of dismissal imposed on her unjustified under the circumstances. As earlier mentioned, Michelle had been in Cavite Apparel’s employ for six years, with no derogatory record other than the four absences without official leave in question, not to mention that she had already been penalized for the first three absences, the most serious penalty being a six-day suspension for her third absence on April 27, 2000.

While previous infractions may be used to support an employee’s dismissal from work in connection with a subsequent similar offense, we cautioned employers in an earlier case that although they enjoy a wide latitude of discretion in the formulation of work-related policies, rules and regulations, their directives and the implementation of their policies must be fair and reasonable; at the very least, penalties must be commensurate to the offense involved and to the degree of the infraction.

Finally, we find no evidence supporting Cavite Apparel’s claim that Michelle’s absences prejudiced its operations; there is no indication in the records of any damage it sustained because of Michelle’s absences. Also, we are not convinced that allowing Michelle to remain in employment even after her fourth absence or the imposition of a lighter penalty would result in a breakdown of discipline in the employee ranks.

In fine, we hold that Cavite Apparel failed to discharge the burden of proving that Michelle’s dismissal was for a lawful cause. We, therefore, find her to have been illegally dismissed.

Abbot Laboratories Philippines, et al. vs Perlie Alcaraz GR No. 192571, July 23, 2013

Case Doctrine:

Compliance with the certification against forum shopping is separate from and independent of the avoidance of the act of forum shopping itself.

Facts:

The respondent Alcaraz was the Regulatory Affairs and Information Manager of Aventis Pasteur Philippines who showed interest in applying as a Medical and Regulatory Affairs Manager, a position that was published by the petitioner Abbot Laboratories in the newspaper. When the petitioner formally offered the position to the respondent, the latter accepted the position. It was on May 23, 2005 that Walsh, Almazar and Bernardo formally handed to the respondent a letter terminating her employment with the detailed explanation for her termination. The respondent then filed a complaint for illegal dismissal with damages against the petitioner and its officers. The Labor Arbiter upheld the termination of probationary employment of the respondent holding that the termination was justified with no evidence showing that the officers of the Abbot Lab acted in bad faith when terminating her services.

The NLRC annulled and set aside the ruling of the Labor Arbiter which prompted the petitioners to file before the Court of Appeals a petition for certiorari with prayer for issuance of a temporary restraining order and writ of preliminary injunction. Meanwhile, the action of the petitioner on its motion for reconsideration of the CA’s resolution in the second CA petition was denied that became final on January 10, 2011 because the petitioner failed to file a timely appeal on the said decision. Alcaraz, in her comment, raised the issue on forum shopping when the petitioner filed its second petition to the CA pending the resolution of the motion for reconsideration that they filed earlier in the December 10, 2009 decision. Alcaraz further contends that the petitioners failed to comply with certification requirement under Section 5, Rule 7 of the rules of court when they failed to disclose in their petition filed on June 16, 2010 Memorandum of Appeal filed before the NLRC.

Issue:

Whether or not the petitioner violated the rule against forum shopping and have violated the certification requirement under Section 5, Rule 7 of the Rules of Court.

Ruling:

The court emphasized that the compliance with the certification against forum shopping is different and separate from the avoidance of the act of forum shopping itself. There is difference in the treatment between the two situations in terms of the imposable sanctions and the means of enforcing them. The failure to comply with the certification requirement against forum shopping is sufficient cause for the dismissal of the complaint without prejudice to the filing of the complaint or initiatory pleading upon motion and after hearing. The failure to avoid the act of forum shopping, on the other hand, is a sufficient ground for a summary dismissal and direct contempt.

In the first situation, forum shopping takes place when the party files multiple suits that involve the same parties with the same issue, either simultaneously or successively, in order to obtain a favorable judgment. It is present when there is the requisites of litis pendentia namely : (1) identity of parties is the same with the same interests in both actions, (2) identity of rights asserted and reliefs prayed for and founded on the same facts, (3) identity of the two preceding cases where a judgment rendered in the pending case will amount to res judicata in the other case. Taking into account these requisites, the court found no elements of a forum shopping. The first petition before the CA was instituted in order to question the NLRC ruling with respect to the illegal dismissal of Alcaraz. The second petition before the CA involves the issue on the propriety of the enforcement of the judgment award pending the resolution of the first CA petition and the finality of the decision in the labor dispute between the parties. The decision on the first CA petition does not amount to res judicata with respect to the second petition before the CA as the two petitions involve different subject matter and cause of action, hence there is no forum shopping.

In the second situation, section 5 of Rule 7 of the Rules of Court requires the plaintiff to disclose/declare under oath that the best of his knowledge no such other action or claim is pending before other courts. Records show that the issues raised in the petition before the CA and those raised in the June 16, 2010 Memorandum of Appeal filed before the NLRC cover different subject matter and causes of action, therefore there was no violation of the said provision of the rules of court.

G.R. No. 198538               September 29, 2014

EXOCET SECURITY AND ALLIED SERVICES CORPORATION and/or MA. TERESA MARCELO, Petitioner, vs.ARMANDO D. SERRANO, Respondent.

D E C I S I O N

VELASCO, JR., J.:

Nature of the Case

This is a Petition for Review on Certiorari under Rule 45 seeking to reverse and set aside the March 31, 2011 Decision1 and September 7, 2011 Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 113251, which ordered petitioner to pay respondent separation pay and backwages fqr having been illegally dismissed from employment.

The Antecedent Facts

Petitioner Exocet Security and Allied Services Corporation (Exocet) is engaged in the provision of security personnel to its various clients or principals. By virtue of its contract with JG Summit Holdings Inc. (JG Summit), Exocet assigned respondent Armando D. Serrano (Serrano) on September 24, 1994 as "close-in" security personnel for one of JG Summit's corporate officers, Johnson Robert L. Go.2 After eight years, Serrano was re-assigned as close-in security for Lance Gokongwei, and then to his wife, Mary Joyce Gokongwei.3 As close-in security, records show that Serrano was receiving a monthly salary of P11,274.30.4

On August 15, 2006, Serrano was relieved by JG Summit from his duties. For more than six months after he reported back to Exocet, Serrano was without any reassignment. OnMarch 15, 2007, Serrano filed a complaint for illegal dismissal against Exocet with the National Labor Relations Commission (NLRC).5

For its defense, Exocet denied dismissing Serrano alleging that, after August 15, 2006, Serrano no longer reported for duty assignment as VIP security for JG Summit, and that on September 2006, hewas demanding for VIP Security detail to another client. However, since, at that time, Exocet did not have clients in need of VIP security assignment, Serrano was temporarily assigned to general security service.6 Exocet maintained that it was Serrano who declined the assignment on the ground that he is not used to being a regular security guard. Serrano, Exocet added, even refused to report for immediate duty, as he was not given a VIP security assignment.7

Considering the parties’ respective allegations, the Labor Arbiter ruled that Serrano was illegally dismissed. In its June 30, 2008 Decision, the Labor Arbiter found that Serrano, while not actually dismissed, was placed on a floating status for more than six months and so, was deemed constructively dismissed. Thus, the Labor Arbiter ordered Exocet to pay Serrano separation pay,8 viz:

Since complainant prayed for separation pay in lieu of reinstatement, he is entitled to the same, computed below as follows:

"SEPARATION PAY: September 24, 1994 –August 15, 2006 = 12

years. P300.00 x 13 x 12 years = P46,800.00"

WHEREFORE, premises considered, respondent corporation is hereby directed to pay complainant’s monetary awards as computed above.

SO ORDERED.9

Not satisfied with the award, Serrano appealed the Labor Arbiter’s Decision to the NLRC. In its March 5, 2009 Resolution, the NLRC initially affirmed the ruling of the Labor Arbiter,but modified the monetary award to include the payment of backwages for six months that Serrano was not given a security assignment. The dispositive portion of the March 5, 2009 Resolution reads:

ACCORDINGLY, premises considered, the decision appealed from is hereby modified. The respondents are hereby ordered to pay complainant separation pay plus backwages computed from [the] date he effectively became dismissed from service which is after the lapse of the 6 month period up to the issuance of thisdecision, the computation of which is attached as Annex A.

All others are hereby affirmed.10

Acting on Exocet’s motion for reconsideration, however, the NLRC, in its September 2, 2009 Resolution, further modified its earlier decision by removing the award for backwages.11 The NLRC deviated from its earlier findings and ruled that Serrano was notconstructively dismissed, as his termination was due to his own fault, stubborn refusal, and deliberate failure to accept a re-assignment.12 Nevertheless, the NLRC proceeded to affirm in totothe decision of the Labor Arbiter on the ground that Exocet did not interpose the appeal. The falloof the NLRC’s September 2, 2009 Resolution reads:

WHEREFORE, the motion is GRANTED and the assailed decision is RECONSIDERED and SET ASIDE. Consequently, the decision of the Labor Arbiter is hereby upheld in toto.

SO ORDERED.13

On January 22, 2010, the NLRC issued another Resolution denying Serrano’s motion for reconsideration.14Hence, not satisfied with the NLRC’s ruling, Serrano filed a petition for certiorari with the CA assailing the September 2, 2009 Resolution of the NLRC. Serrano insisted that he was constructively dismissed and, thus, isentitled to reinstatement without loss of seniority rights and to full backwages from the time of the alleged dismissal up to the time of the finality of the Decision.

On March 31, 2011, the appellatecourt rendered a Decision in Serrano’s favor, reversing and setting aside the NLRC’s September 2, 2009 Resolution and ordering Exocet topay Serrano separation pay and backwages.15 In so ruling, the CA found that Serrano was constructively dismissed, as Exocet failed to re-assign him within six

months after placing him on "floating status."16 The appellate court disposed of Serrano’s appeal as follows:

WHEREFORE, the assailed Resolutions promulgated on September 2, 2009 and January 22, 2010 issued by the NLRC LAC No. 09-003163-08 (NLRC NCR No. 00-03-02423-07) are REVERSED and SET ASIDE, and in lieu thereof, a new judgment is ENTERED ordering respondent company to pay petitioner his separation pay and backwages.

Upon finality of this decision, the Research and Computation Unit of public respondent NLRC is DIRECTED to recompute the monetary benefits due to petitioner in accordance with this decision.

SO ORDERED.

Petitioner Exocet’s Motion for Reconsideration was denied by the appellate court inits September 7, 2011 Resolution.17 Hence, Exocet filed this petition.

The Issue

The sole issue for resolution is whether or not Serrano was constructively dismissed. The Court’s Ruling

The petition has merit.

The crux of the controversy lies on the consequence of the lapse of the six-month period, during which respondent Serrano was placed on a "floating status" and petitioner Exocet could not assign him to a position he wants. The appellate court was of the view that Serrano was constructively dismissed. The Court maintains otherwise.

While there is no specific provision in the Labor Code which governs the "floating status" or temporary "off-detail" of security guards employed by private security agencies, this situation was considered by this Court in several cases as a form of temporary retrenchment or lay-off.18 The concept has been defined as that period of time when security guards are in between assignments or when they are madeto wait after being relieved from a previous post until they are transferred to a new one.19 As pointed out by the CA, it takes place when the security agency’s clients decide not to renew their contracts with the agency, resulting in a situation where the available posts under its existing contracts are less than the number of guards in its roster. It also happens ininstances where contracts for security services stipulate that the client may request the agency for the replacement of the guards assigned to it, even for want of cause, such that the replaced security guard may be placed on temporary "off-detail" if there are no available posts under the agency’s existing contracts.20

As the circumstance is generally outside the control of the security agency or the employer, the Court has ruled that when a security guard is placed on a "floating

status," he orshe does not receive any salary or financial benefit provided by law. Pido v. National Labor Relations Commission21 explains why:

Verily, a floating status requires the dire exigency of the employer’s bona fidesuspension of operation of a business or undertaking. In security services, thishappens when the security agency’s clients which do not renew their contracts are more than those that do and the new ones that the agency gets. Also, in instances when contracts for security services stipulate that the client may request the agency for the replacement of the guards assignedto it even for want of cause, the replaced security guard may be placed on temporary "off-detail" if there are no available posts under respondent’s existing contracts.

When a security guard is placed on a "floating status," he does not receive any salary or financial benefit provided by law. Due to the grim economic consequences to the employee, the employer should bear the burden of proving that there are no posts available to which the employee temporarily out of work can be assigned." (emphasis supplied)

It must be emphasized, however, that although placing a security guard on "floating status" or a temporary "off-detail" is considered a temporary retrenchment measure, there issimilarly no provision in the Labor Code which treats of a temporary retrenchment or lay-off. Neither is there any provision which provides for its requisites or its duration.22 Nevertheless, since an employee cannot be laid-off indefinitely, the Court has applied Article 292 (previously Article 286) of the Labor Code by analogyto set the specific period of temporary lay-off to a maximum of six (6) months. The said provision states:

ART. 292. When employment not deemed terminated.- The bonafide suspension of the operation of a business or undertaking for a period not exceeding six (6) months, or the fulfillment by the employee of a military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights ifhe indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty.

Thus, this Court has held, citing Sebuguero v. NLRC,23 that the placement of the employee on a floating status should not last for more than six months. After six months, the employee should be recalled for work, or for a new assignment; otherwise,he is deemed terminated.

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 [now 292] 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.

In accordance with the aforementioned ruling, the Department of Labor and Employment (DOLE) issued Department Order No. 14, Series of 2001 (DO 14-01), entitled "GuidelinesGoverning the Employment and Working Conditions of Security Guards and Similar Personnel in the Private Security Industry," Section 6.5, in relation to Sec. 9.3, of which states that the lack of service assignment for a continuous period of six (6) months is an authorized cause for the termination of the employee, who is then entitled to a separation pay equivalent to half month pay for every year of service, viz:

6.5 Other Mandatory Benefits. Inappropriate cases, security guards/similar personnel are entitled to the mandatory benefits as listed below, although the same may not beincluded in the monthly cost distribution in the contracts, except the required premiums form their coverage:

a. Maternity benefit as provided under SS Law;

b. Separation pay if the termination of employment is for authorized causeas provided by law and as enumerated below:

Half-Month Pay Per Year of Service, but in no case less than One Month Pay if separation pay is due to:

1. Retrenchment or reduction of personnel effected by management to prevent serious losses;

2. Closure or cessation of operation of an establishment not due to serious losses or financial reverses;

3. Illness or disease not curable within a period of 6 months and continued employment is prohibited by law or prejudicial to the employee’s health or that of coemployees;

4. Lack of service assignment for a continuous period of 6 months.

x x x x

9.3 Reserved Status – A security guard or similar personnel may be placed in a work pool or on reserved status due to lack of service assignments after the expiration or

termination of the service contract with the principalwhere he/she or assigned or due to temporary suspension of agency operations.

No security guard or personnel can be placed in a work pool or on reserved status in any of the following situations: a) after expiration of a service contract if there are other principals where he/she can be assigned; b) as a measure to constructively dismiss the security guard; and c) as an act of retaliation for filing complaints against the employer on violations of labor laws, among others.

If after the period of 6 months, the security agency/employer cannot provide work or give assignment to the reserved security guard, the latter can be dismissed from service and shall be entitled to separation pay as described in subsection 6.5.

Security guards on reserved status who accept employment in other security agencies or employers before the end of the above six-month period may not be given separation pay. (emphasis supplied)

In Reyes v. RP Guardians Security Agency, Inc.,24 the Court explained the application of DO 14-01 to security agencies and their security guards, and the procedural requirements with which the securityagencies must comply:

Furthermore, the entitlement of the dismissed employee to separation pay of one month for every year of service should not be confused with Section 6.5 (4) of DOLE D.O. No. 14 which grants a separation pay of one half month for every year service x x x.

x x x x

The said provision contemplatesa situation where a security guard is removed for authorized causes such as when the security agency experiences a surplus of security guards brought about by lack of clients.In such a case, the security agency has the option to resort to retrenchment upon compliance with the procedural requirements of "two-notice rule"set forth in the Labor Code. (emphasis supplied)

Thus, to validly terminate a security guard for lack of service assignment for a continuous period of six months under Secs. 6.5 and 9.3 of DO 14-01, the security agency must comply with the provisions of Article 289 (previously Art. 283) of the Labor Code,25 which mandates that a written notice should be served on the employee on temporary off-detail or floating status andto the DOLE one (1) month before the intended date of termination. This is also clear in Sec. 9.2of DO 14-01 which provides:

9.2 Notice of Termination - In caseof termination of employment due to authorized causes provided in Article 283 and 284 of the Labor Code and in the succeeding subsection, the employer shall serve a written notice on the security guard/personnel and the DOLE at least one (1) month before the intended date thereof.

In every case, the Court has declaredthat the burden of proving that there are no posts available to which the security guard may be assigned rests on the employer. We ruled in Nationwide Security and Allied Services Inc. v. Valderama:26

In cases involving security guards,a relief and transfer order in itself does not sever employment relationship between a security guard and his agency. An employee has the right to security of tenure, but this does not give him a vested right tohis position as would deprive the company of its prerogative to change his assignment or transfer him where his service, as securityguard, will be most beneficial to the client. Temporary "off-detail" or the period of time security guards are made to wait until they are transferred or assigned to a new post or client does not constitute constructive dismissal, so long as such status does not continue beyond six months.

The onus of proving that there is no post available to which the security guard can be assigned rests on the employer x x x. (emphasis supplied)

It cannot, therefore, be gainsaid thatthe right of security guards to security of tenure is safeguardedby administrative issuances and jurisprudence, in parallel with the mandate of the Labor Code and the Constitution to protect labor and the working people. Nonetheless, while the Court has recognized the security guards’ right to security of tenure under the "floating status" rule, the Court has similarly acknowledged the management prerogative of security agencies to transfer security guards when necessary in conducting its business, provided it is done in good faith. In Megaforce Security and Allied Services, Inc. v. Lactao,27 the Court explained:

In cases involving security guards,a relief and transfer order in itself does not sever employment relationship between a security guard and his agency. An employee has the right tosecurity of tenure, but this does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where his service, as security guard, will be most beneficial to the client. Temporary "off-detail" or the period of time security guards are made to wait until they are transferred or assigned to a new post or client does not constitute constructive dismissal as their assignments primarily depend on the contracts entered into by the security agencies with third parties.Indeed, the Court has repeatedly recognized that "off-detailing" is not equivalent to dismissal, so long as such status does not continue beyond a reasonable time; when such a "floating status" lasts for more than six months, the employee may be considered to have beenconstructively dismissed. (emphasis supplied)

In the controversy now before the Court, there is no question that the security guard, Serrano, was placed on floating status after his relief from his post as a VIP security by his securityagency’s client. Yet, there is no showing that his security agency, petitioner Exocet, acted in bad faith when it placed Serrano on such floating status. What is more, the present case is not a situation where Exocet did not recall Serrano to work within the six-month period as required by law and jurisprudence. Exocet did, in fact,

make an offer to Serrano to go back to work. It is just that the assignment—although it does not involvea demotion in rank or diminution in salary, pay, benefits or privileges—was not the security detail desired by Serrano.

Clearly, Serrano’s lack of assignment for more than six months cannot be attributed to petitioner Exocet.1avvphi1 On the contrary, records show that, as early as September 2006, or one month after Serrano was relieved as a VIP security, Exocet had already offered Serrano a position in the general security service because there were no available clients requiring positions for VIP security. Notably, even though the new assignment does not involve a demotion in rank or diminution in salary, pay, or benefits, Serrano declined the position because it was not the post that suited his preference, as he insisted on being a VIP Security.

In fact, even during the meeting with the Labor Arbiter, Exocet offered a position in the general security only to be rebuffed by Serrano.28 It was as if Serrano obliged Exocet to look for a client in need of a VIP security—the availability of which is obviously not within Exocet’s control, and by nature, difficult to procure as these contracts depend on the trust and confidence of the client or principal on the security guard. As aptly found by the NLRC:

Anent the client’s action, respondentagency had no recourse but to assign complainant to a new posting. However, complainant, having had a taste of VIP detail and perhaps the perks that come with such kind of assignment, vaingloriously assumed that he can only be assigned to VIP close-in posting and that he would accept nothing less. In fact, after his relief and tardy appearance at respondent’s office, he was offered reassignment albeit to general security services which he refused. Respondents clearly made known to him that as of the moment no VIP detail was vacant or sought byother clients but complainant was adamant in his refusal. Complainant even had the nerve to assert that he just be informed if there is already a VIP detail available for him and that he will just report for re-assignment by then.It is also well to note that to these allegations, complainant made no denial.29 (emphasis supplied)

To repeat for emphasis, the security guard’s right to security of tenure does not give him a vested right to the position as would deprive the company of its prerogative to change the assignment of, or transfer the security guard to, a station where his services would be most beneficial to the client. Indeed, an employer has the right to transfer or assign its employees from one office or area of operation to another, or in pursuit of its legitimate business interest, provided there is no demotion in rank or diminution of salary, benefits, and other privileges, and the transfer is not motivated by discrimination or bad faith, or effected as a form of punishment or demotion without sufficient cause.30

Thus, it is manifestly unfair and unacceptable to immediately declare the mere lapse of the six-month period of floating status as a case of constructive dismissal, without lookinginto the peculiar circumstances that resulted in the security guard’s failureto

assume another post. This is especially true in the present case where the security guard’s own refusal to accept a non-VIP detail was the reason that he was not given an assignment within the six-month period. The security agency, Exocet, should not then be held liable.

Indeed, from the facts presented,Serrano was guilty of wilful disobedience to a lawful order of his employer in connection with his work, which is a just cause for his termination under Art. 288 (previously Art. 282) of the Labor Code.31 Nonetheless, Exocet did not take Serrano’s wilful disobedience against him. Hence, Exocetis considered to have waived its right to terminate Serrano on such ground.

In this factual milieu, since respondent Serrano was not actually or constructively dismissed from his employment by petitioner Exocet, it is best that petitioner Exocet direct him to report for work, if any security assignment is still available to him. If respondent Serrano stillrefuses to be assigned to any available guard position, he shall be deemed to have abandoned his employment with petitioner.

If no security assignment is available for respondent, petitioner Exocet should comply with the requirements of DO 14-01, in relation to Art. 289 of the Labor Code, and serve a written notice on Serrano and the DOLE one (1) month before the intended date of termination, and pay Serrano separation pay equivalent to half month pay for every year of his actual service.

As a final note, the Court reiterates that it stands to promote the welfare of employees and continue to apply the mantle of protectionism in their favor. Thus, employees, like securityguards, should not be laid-off for an indefinite period of time. However, We hold that a similar protection should be given to employers who, ingood faith, have exerted efforts to comply with the requirements of the law by offering reasonable work and appropriate assignments during the six-month period. After all, the constitutional policy of providing full protection to labor is not intended to oppress or destroy management, and the commitment of this Court to the cause of labor does not prevent Us from sustaining the employer when it is in the right, as in this case.32

IN VIEW OF THE FOREGOING, the instant petition is GRANTED. The March 31, 2011 Decision and September 7, 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 113251 are hereby REVERSEDand SET ASIDE. Moreover, the March 5, 2009 and September 2, 2009 Resolutions of the National Labor Relations Commission in NLRC LAC No. 09-003163-08 (NLRC NCR No. 00-03-02423-07), as well as the June 30, 2008 Decision of the Labor Arbiter in NLRC-NCR-00-03-02423-07, are also REVERSEDand SET ASIDE.

Petitioner Exocet Security and Allied Services Corporation is neither guilty of illegal dismissal nor constructive dismissal. Petitioner is hereby ORDERED to look for a security assignment for respondent within a period of thirty (30) days from finality of judgment. If one is available, petitioner is ordered to notify respondent Armando D.

Serrano to report to such available guard position within ten (10) days from notice. If respondent fails to report for work within said time period, he shall be deemed to have abandoned his employment with petitioner. In such case, respondent Serrano is not entitled to any backwages, separation pay, or similar benefits.

If no security assignment is available for respondent within a period of thirty (30) days from finality of judgment, petitioner Exocet should comply with the requirements of DOLE Department Order No. 14, Series of 2001, in relation to Art. 289 of the Labor Code, and serve a written notice on respondent Serrano and the DOLE one (1) month before the intended date of termination; and pay Serrano separation pay equivalent to half month pay for every year of his service.

SO ORDERED.

SECOND DIVISION

G.R. No. 198656, September 08, 2014

NANCY S. MONTINOLA, Petitioner, v. PHILIPPINE AIRLINES, Respondent.

D E C I S I O N

LEONEN, J.:

Illegally suspended employees, similar to illegally dismissed employees, are entitled to moral damages when their suspension was attended by bad faith or fraud, oppressive to labor, or done in a manner contrary to morals, good customs, or public policy.

Petitioner Nancy S. Montinola (Montinola) comes to this court via a petition for review on certiorariunder Rule 45 of the Rules of Court. She assails the decision1 of the Court of Appeals2 dated June 28, 2011 and its resolution3 dated September 20, 2011 in Philippine Airlines v. National Labor Relations Commission and Nancy S. Montinola.4 The Court of Appeals affirmed the finding of the National Labor Relations Commission that petitioner was suspended illegally but deleted the award of moral and exemplary damages and attorney’s fees.5cralawred

The deletion of the award of attorney’s fees and moral and exemplary damages is the subject of this petition.

Montinola was employed as a flight attendant of Philippine Airlines (PAL) since 1996.6 On January 29, 2008, Montinola and other flight crew members were subjected to custom searches in Honolulu, Hawaii, USA. Items from the airline were recovered from the flight crew by customs officials. Nancy Graham (Graham), US Customs and Border Protection Supervisor, sent an email to PAL regarding the search. The email7 contained a list of PAL flight crew members involved in the search:ChanRoblesVirtualawlibrary

FP CHUIDIAN, JUAN DE GUZMANFS CARTAGENA, REGINALDFS NAVA, PETER DE GUZMANFS PADILLA, ANGELITOFA CRUZ, MARIAFA MONTINOLA, NANCYFA VICTA, ROSE ANN (Emphasis supplied)

Another email8 enumerated the list of items taken from the crew members:ChanRoblesVirtualawlibrary

Katie,

Here is the list.

Flight Crew Blitz in gate area 10 crew. Seven of the 10 crew members had items removed from the aircraft on their possession. Two additional bags were found on jet-way after blitz. No bonded items were found but crew removed food items as listed:ChanRoblesVirtualawlibrary

18 bags Doritos15 bags Banana Chips5 pkg instant chocolate5 bars Granola18 bars Kit Kat34 Chocolate flavored Goldilocks16 Regular Goldilocks cakes9 1st class Bulgari Kits2 magazines6 rolls toilet paper9 cans soda16 bottles of water1 yogurt12 small ice creams2 jars salsa2 bottles Orange Juice1 bottle Cranberry Juice1 bottle smoothie

All items returned to Philippine Airlines.

Nancy I. GrahamSupervisory CBPOA-TCET AirHonolulu Hi

PAL conducted an investigation. Montinola was among those implicated because she was mentioned in Graham’s email.9 On February 1, 2008, PAL’s Cabin Services Sub-Department required Montinola to comment on the incident.10 She gave a handwritten explanation three days after, stating that she did not take anything from the aircraft. She also committed to give her full cooperation should there be any further inquiries on the matter.11cralawred

On February 22, 2008, PAL’s International Cabin Crew Division Manager, Jaime Roberto A. Narciso (Narciso), furnished Montinola the emails from the Honolulu customs official.12 This was followed by a notice of administrative charge13 which Narciso gave Montinola on March 25, 2008. On April 12, 2008, there was a clarificatory hearing.14 The clarificatory hearing was conducted by a panel of PAL’s Administrative Personnel, namely, Senior Labor Counsel Atty. Crisanto U. Pascual (Atty. Pascual), Narciso, Salvador Cacho, June Mangahas, Lina Mejias, Carolina Victorino, and Ruby Manzano.15cralawred

Montinola alleged that her counsel objected during the clarificatory hearing regarding PAL’s failure to specify her participation in the alleged pilferage.16 Atty. Pascual threatened Montinola that a request for clarification would result in a waiver of the clarificatory hearing.17 This matter was not reflected in the transcript of the hearing.18 Despite her counsel’s objections, Montinola allowed the clarificatory hearings to proceed because she “wanted to extend her full cooperation [in] the investigation[s].”19cralawred

During the hearing, Montinola admitted that in Honolulu, US customs personnel conducted a search of her person. At that time, she had in her possession only the following food items: cooked camote, 3-in-1 coffee packs, and Cadbury hot chocolate.20cralawred

PAL, through Senior Assistant Vice President for Cabin Services Sub-Department Sylvia C. Hermosisima, found Montinola guilty of 11 violations21 of the company’s Code of Discipline and Government Regulation. She was meted with suspension for one (1) year without pay.22 Montinola asked for a reconsideration.23 Hermosisima, however, denied her motion for reconsideration a month after.24cralawred

Montinola brought the matter before the Labor Arbiter.25 The Labor Arbiter26 found her suspension illegal,27 finding that PAL never presented evidence that showed Montinola as the one responsible for any of the illegally taken airline items.28 The Labor Arbiter ordered Montinola’s reinstatement with backwages, inclusive of allowances and benefits amounting to P378,630.00.29cralawred

In addition, the Labor Arbiter awarded moral damages in the amount of P100,000.00 and exemplary damages amounting to P100,000.00 for the following reasons:30cralawred

This Office observes that the records are replete with substantial evidence that the circumstances leading to complainant’s one-year suspension without pay are characterized by arbitrariness and bad faith on the part of respondents. The totality of respondents’ acts clearly shows that complainant had been treated unfairly and capriciously, for which complainant should be awarded moral damages in the amount of One Hundred Thousand Pesos (P100,000.00) and exemplary damages also in the amount of One Hundred Thousand Pesos (P100,000.00).31

The Labor Arbiter also awarded attorney’s fees to Montinola because she was “forced to litigate and incur expenses to protect [her]

rights.”32cralawred

PAL appealed the Labor Arbiter’s decision to the National Labor Relations Commission (NLRC).33During the pendency of the appeal, PAL submitted new evidence consisting of an affidavit executed by Nancy Graham, the Customs and Border Protection Supervisor who witnessed the January 29, 2008 search in Honolulu.34 This affidavit enumerated the names of the flight crew members searched by the Honolulu customs officials. However, the National Labor Relations Commission observed that “it was categorically admitted in the said declaration that Ms. Graham did not know which items were attributable to each of the seven crew members whom she identified and there was no individual inventories (sic).”35cralawred

Through the resolution36 dated June 9, 2009, the National Labor Relations Commission37 affirmed the decision of the Labor Arbiter. PAL appealed the Commission’s decision to the Court of Appeals through a petition for certiorari .38cralawred

The Court of Appeals affirmed the decisions of the Labor Arbiter and National Labor Relations Commission in finding the suspension illegal.39 However, the Court of Appeals modified the award:ChanRoblesVirtualawlibrary

WHEREFORE, premises considered, the petition is DENIED. Respondent NLRC’s Decision in NLRC LAC No. 01000263-09 (NLRC NCR CN 08-11137-08), dated June 9, 2009, is AFFIRMED with MODIFICATION in that the award of moral and exemplary damages and attorney’s fees to private respondent are deleted.40 (Emphasis supplied)

The Court of Appeals deleted the moral and exemplary damages and attorney’s fees stating that:ChanRoblesVirtualawlibrary

Relevant to the award of moral damages, not every employee who is illegally dismissed or suspended is entitled to damages. Settled is the rule that moral damages are recoverable only where the dismissal or suspension of the employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy. Bad faith does not simply mean negligence or bad judgment. It involves a state of mind dominated by ill will or motive. It implies a conscious and intentional design to do a wrongful act for a dishonest purpose or some moral obliquity. The person claiming moral damages must prove the existence of bad faith by clear and convincing evidence for the law always presumes good faith.

In the case at bar, there is no showing that PAL was moved by any ill will or motive in suspending private respondent. It is evident that petitioner gave private respondent every opportunity to refute the charges against her and to present her side as part of due process. These negate the existence of bad faith on the part of petitioner. Under the circumstances, we hold that private respondent is not entitled to moral damages and exemplary damages. Furthermore, the Court finds the award of attorney’s fees improper. The award of attorney’s fees was merely cited in the dispositive portion of the decision without the RTC [sic] stating any legal or factual basis for said award. 41(Citations omitted)

Montinola filed a partial motion for reconsideration,42 praying that the award of moral and exemplary damages and attorney’s fees be reintegrated into the decision. PAL also filed a motion for reconsideration,43 but its motion sought a complete reversal of the decision.

The Court of Appeals denied both motions.44 Only Montinola sought to continue challenging the Court of Appeals’ decision through a petition for review on certiorari 45 brought to this court.

The sole issue in this case is whether Montinola’s illegal suspension entitled her to an award of moral and exemplary damages and attorney’s fees.

Montinola claims that she is entitled to moral damages because her illegal suspension was attended by bad faith, causing her to suffer “mental anguish, fright, serious anxiety, and moral shock.”46Furthermore, the illegal suspension tarnished her good standing.47 Prior to this incident and in her 12 years of service, she was never charged administratively.48 The illegal suspension likewise affected her family because it created “a state of uncertainty and adversity.”49cralawred

Montinola underscores that the investigation against her was conducted in a “hasty, impetuous, harsh and unjust”50 manner. She was not properly apprised of the charges against her.51 She requested for proper notice of the acts violative of PAL’s Code of Discipline. Instead of giving proper notice, PAL threatened that she would be waiving her right to a clarificatory hearing if she insisted on her request.52cralawred

Montinola likewise alleges that PAL violated its own rules by not applying the same penalty uniformly.53 Flight Purser Juan Chuidian III was involved in the same incident and was likewise suspended. However, on motion for reconsideration, PAL allowed him to retire early without serving the penalty of suspension.54cralawred

The claim for exemplary damages is anchored on Montinola’s belief that such damages “are designed to permit the courts to mould behaviour that has socially deleterious consequences, and their imposition is required by public policy to suppress the wanton acts of the offender.”55 In Montinola’s view, PAL suspended her in a “wanton, oppressive, and malevolent manner.”56cralawred

Finally, Montinola argues that she is entitled to attorney’s fees because she was forced to litigate. In Article 2208, paragraph (2) of the Civil Code, individuals forced to litigate may ask for attorney’s fees.

On the other hand, PAL argues that moral damages are only recoverable when “the dismissal of the employee was attended by bad faith or fraud, or constituted an act oppressive to labor, or was done in a manner contrary to morals, good customs or public policy.”57 The company believes that Montinola failed to present clear and convincing proof of bad faith.

PAL stands by how it investigated the alleged pilferage of the in-flight items in the January 29, 2008 flight. It believes that it afforded due process to Montinola and the other implicated crew members. From PAL’s point of view, she was given an opportunity to explain her side and was even assisted by counsel of her choice.58cralawred

PAL claims that since moral damages have not been proven, exemplary damages should likewise not be awarded.59cralawred

Moreover, PAL argues that Montinola failed to provide basis for the award of attorney’s fees. Attorney’s fees are only awarded when the trial court (or in this case, the Labor Arbiter) states a factual, legal, or equitable justification for awarding the same.60cralawred

I

Montinola is entitled to moral and exemplary damages. She is also entitled to attorney’s fees.

The Labor Code provides:ChanRoblesVirtualawlibrary

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 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.

Security of tenure of workers is not only statutorily protected, it is also a constitutionally guaranteed right.61 Thus, any deprivation of this right must be attended by due process of law.62 This means that any disciplinary action which affects employment must pass due process scrutiny in both its substantive and procedural aspects.

The constitutional protection for workers elevates their work to the status of a vested right. It is a vested right protected not only against state action but against the arbitrary acts of the employers as well. This court in Philippine Movie Pictures Workers’ Association v. Premier Productions, Inc.63categorically stated that “[t]he right of a person to his labor is deemed to be property within the meaning of constitutional guarantees.”64 Moreover, it is of that species of vested constitutional right that also affects an employee’s liberty and quality of life. Work not only contributes to defining the individual, it also assists in determining one’s purpose. Work provides for the material basis of human dignity.

Suspension from work is prima facie a deprivation of this right. Thus, termination and suspension from work must be reasonable to meet the constitutional requirement of due process of law. It will be reasonable if it is based on just or authorized causes enumerated in the Labor Code.65cralawred

On the other hand, articulation of procedural due process in labor cases is found in Article 277(b) of the Labor Code, which states:ChanRoblesVirtualawlibrary

(b) Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for a just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, 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 in accordance with the company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. Any decision taken by the employer shall be without prejudice to the right of the worker to consent the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer.

The procedure can be summarized in this manner. First, the employer must furnish the employee with a written notice containing the cause for termination. Second, the employer must give the employee an opportunity to be heard. This could be done either through a position paper or through a clarificatory hearing.66 The employee may also be assisted by a representative or counsel. Finally, the employer must give another written notice apprising the employee of its findings and the penalty to be imposed against the employee, if any.67 In labor cases, these requisites meet the constitutional requirement of procedural due process, which “contemplates notice and opportunity to be heard before judgment is rendered, affecting one’s person or property.”68cralawred

In this case, PAL complied with procedural due process as laid out in Article 277, paragraph (b) of the Labor Code. PAL issued a written notice of administrative charge, conducted a clarificatory hearing, and rendered a written decision suspending Montinola. However, we emphasize that the written notice of administrative charge did not serve the purpose required under due process. PAL did not deny her allegation that there would be a waiver of the clarificatory hearing if she insisted on a specific notice of administrative charge. With Montinola unable to clarify the contents of the notice of administrative charge, there were irregularities in the procedural due process accorded to her.

Moreover, PAL denied Montinola substantial due process.

Just cause has to be supported by substantial evidence. Substantial evidence, or “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion,”69 is the quantum of evidence required in administrative bodies such as the National Labor Relations Commission. It is reasonable to expect the employer to consider substantial evidence in disciplinary proceedings against its employees. The employer’s decision will be subject to review by the Labor Arbiter and National Labor Relations Commission.

The employer has the burden of proof in showing that disciplinary action was made for lawful cause.70 The employer must consider and show facts adequate to support the conclusion that an employee deserves to be disciplined for his or her acts or omissions.

PAL, however, merely relied on these pieces of information in finding administrative liability against Montinola:ChanRoblesVirtualawlibrary

1) a list of offenses found in PAL’s Code of Discipline that Montinola

allegedly violated;

2) a list of flight crew members that were checked at the Honolulu airport; and

3) a list of all items confiscated from all these flight crew members.

The lists are not sufficient to show the participation of any of the flight crew members, least of all Montinola. None of the evidence presented show that the customs officials confiscated any of these items from her. Thus, the evidence by themselves do not show that Montinola pilfered airline items.

Together with the manner in which the investigation proceeded, i.e., that Montinola was prevented from asking for clarification of the charges against her, the absence of substantial evidence is so apparent that disciplining an employee only on these bases constitutes bad faith.

Under the Labor Code, Labor Arbiters are authorized by law to award moral and exemplary damages:ChanRoblesVirtualawlibrary

Art. 217. Jurisdiction of Labor Arbiters and the Commission. – (a) Except as otherwise provided under this Code, the Labor Arbiters shall have original and exclusive jurisdiction to hear and decide within thirty (30) calendar days after the submission of the case by the parties for decision without extension, even in the absence of stenographic notes, the following cases involving all workers, whether agricultural or non-agricultural:ChanRoblesVirtualawlibrary

. . . .

4. Claims for actual, moral, exemplary and other forms of damages arising from the employer-employee relations[.]

The nature of moral damages is defined under our Civil Code. Article 2220 states that “[w]illful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith.” In Primero v. Intermediate Appellate Court,71 this court stated that damages, as defined in the Civil Code, is recoverable in labor cases. Thus, moral damages:ChanRoblesVirtualawlibrary

. . . cannot be justified solely upon the premise (otherwise sufficient for redress under the Labor Code) that the employer fired his employee without

just cause or due process. Additional facts must be pleaded and proven to warrant the grant of moral damages under the Civil Code, these being, to repeat, that the act of dismissal wasattended by bad faith or fraud, or was oppressive to labor, or done in a manner contrary to morals, good customs, or public policy; and, of course, that social humiliation, wounded feelings, grave anxiety, etc., resulted therefrom.72

The employee is entitled to moral damages when the employer acted a) in bad faith or fraud; b) in a manner oppressive to labor; or c) in a manner contrary to morals, good customs, or public policy.

Bad faith “implies a conscious and intentional design to do a wrongful act for a dishonest purpose or moral obliquity.”73Cathay Pacific Airways v. Spouses Vazquez74 established that bad faith must be proven through clear and convincing evidence.75 This is because “[b]ad faith and fraud . . . are serious accusations that can be so conveniently and casually invoked, and that is why they are never presumed. They amount to mere slogans or mudslinging unless convincingly substantiated by whoever is alleging them.”76 Here, there was clear and convincing evidence of bad faith adduced in the lower tribunals.

PAL’s actions in implicating Montinola and penalizing her for no clear reason show bad faith. PAL’s denial of her request to clarify the charges against her shows its intent to do a wrongful act for moral obliquity. If it were acting in good faith, it would have gathered more evidence from its contact in Honolulu or from other employees before it started pointing fingers. PAL should not have haphazardly implicated Montinola and denied her livelihood even for a moment.

PAL apparently granted Montinola procedural due process by giving her a notice of administrative charge and conducting a hearing. However, this was more apparent than real. The notice of administrative charge did not specify the acts committed by Montinola and how these acts violated PAL’s Code of Discipline. The notice did not state which among the items confiscated by the US customs officials were originally found in Montinola’s possession. Worse, the panel of PAL officers led by Atty. Pascual did not entertain any query to clarify the charges against her.

There is denial of an opportunity to be heard if the employee is not clearly apprised of the acts she committed that constituted the cause for disciplinary action. The Omnibus Rules Implementing the Labor Code requires that “a written notice [be] served on the employee specifying the ground or grounds for termination, and giving said employee reasonable opportunity within which to explain his

side.”77 Reasonable opportunity has been described as “every kind of assistance that management must accord to the employees to enable them to prepare adequately for their defense.”78cralawred

When the alleged participation of the employee in the illicit act which serves as a basis for the disciplinary action is not clear from the notice, the opportunity to be heard will not be reasonable. The notice fails to meet reasonable standards. It does not have enough information to enable the employee to adequately prepare a defense.

Moreover, the list of provisions in PAL’s Code of Discipline allegedly violated was long and exhaustive. PAL’s notice of administrative charge stated that it had probable cause to administratively charge Montinola of the following:ChanRoblesVirtualawlibrary

I. ILLEGAL ACTS – Section 2/Article 20

. . . .

As a cabin attendant you should know very well the laws, rules and regulations of every country in which the Company operates including the entry/exit requirements to which your cabin crew must adhere.

II. VIOLATION OF LAW/GOVERNMENT REGULATIONS – Section 6/Article 46

. . . .

Incident is a violation of the Entry/Exit requirements in HNL Station, as quoted:ChanRoblesVirtualawlibrary

“Note: U.S. Customs Trade Law/Sec. 301 on Intellectual Property Right prohibits bringing of counterfeit consumer goods such as fake bags, clothes, shoes, colognes, books, medicine, audio/video tapes & CD’s.” (ref. Entry-Exit Requirements Quick Reference Guide–Transpacific)

III. ANTI-COMPANY OFFENSES – Article 44/Section 5

. . . .

As noted on the e-mail report from HNL Station dated 30 January 2008, PAL will be penalized by customs and border protection – HNL due to cabin crew took items again from the aircraft upon arrival.

Article 26 NON-OBSERVANCE OF QUALITY STANDARDS

. . . .

As a cabin attendant, it is your responsibility to strictly adhered [sic] to the rules, regulations, prescriptions, mandates and policies of the Company.

Article 28 INEFFICIENCY AND WASTE

. . . .

The subject items confiscated at the holding gate area are Company supplies and resources which must only be consumed or utilized reasonably inflight [sic].

Article 37 ANTI-TEAMWORK OFFENSES

. . . .

In the email report from HNL Station, Ms. Nancy Graham, CBP–Supervisor your name was specifically listed as part of the cabin crew members who were involved in the Flight Crew Blitz in gate area.

Article 38 INSUBORDINATIONS OR WILLFUL DISOBEDIENCE

. . . .

Article 58 Mishandling/Misuse of Company Funds, Property or Records

. . . .

The subject items confiscated at the holding gate area are Company supplies and resources which must only be consumed or utilized reasonably inflight [sic].

Article 59 Theft, Pilferage, or Embezzlement

. . . .

As noted on the e-mail reports from HNL Station both from Station Supervisor, Ms. Keity Wells and Ms. Nancy Graham, CBP–Supervisor, The different items confiscated are taken by the cabin crew from the aircraft upon arrival.

Article 61 Unofficial use of Company Property and Facilities

. . . .

IV. FAILURE ON THE JOB – Article 25/Section 2

. . . .

As a cabin attendant, you should know very well the certain laws, rules and regulations of every country in which the Company operates. Thus, adherence (sic) to these rules and regulations is a must.79

To constitute proper notice, the facts constitutive of the violations of these rules — and not just the rules of conduct — must be clearly stated. Proper notice also requires that the alleged participation of the employee be clearly specified. Without these, the most fundamental requirement of a fair hearing cannot be met.

Parenthetically, we note that the enumeration of rules violated even included violation of “U.S. Customs Trade Law/Sec. 301 on Intellectual Property Right.” This has no bearing on the basis for the termination or suspension of the employee. It only serves to confuse. At worse, it is specified simply to intimidate.

Montinola was found by PAL to be guilty of all the charges against her. According to PAL, “[t]hese offenses call for the imposition of the penalty of Termination, however, we are imposing upon you the reduced penalty of One (01) year Suspension.”80 It is not clear how she could violate all the prestations in the long list of rules she allegedly violated. There is also no clear explanation why termination would be the proper penalty to impose. That the penalty was downgraded, without legal explanation, to suspension appears as a further badge of intimidation and bad faith on the part of the employer.

Nothing in PAL’s action supports the finding that Montinola committed specific acts constituting violations of PAL’s Code of Discipline.

This act of PAL is contrary to morals, good customs, and public policy. PAL was willing to deprive Montinola of the wages she would have earned during her year of suspension even if there was no substantial evidence that she was involved in the pilferage.

Moral damages are, thus, appropriate. In Almira v. B.F. Goodrich Philippines,

this court noted that unemployment “brings untold hardships and sorrows on those dependent on the wage-earner.”81This is also true for the case of suspension. Suspension is temporary unemployment. During the year of her suspension, Montinola and her family had to survive without her usual salary. The deprivation of economic compensation caused mental anguish, fright, serious anxiety, besmirched reputation, and wounded feelings. All these are grounds for an award of moral damages under the Civil Code.82cralawred

II

Montinola is also entitled to exemplary damages.

Under Article 2229 of the Civil Code, “[e]xemplary or corrective damages are imposed, by way of example or correction for the public good, in addition to the moral, temperate, liquidated or compensatory damages.” As this court has stated in the past: “Exemplary damages are designed by our civil law to permit the courts to reshape behaviour that is socially deleterious in its consequence by creating negative incentives or deterrents against such behaviour.”83cralawred

If the case involves a contract, Article 2332 of the Civil Code provides that “the court may award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.” Thus, in Garcia v. NLRC,84 this court ruled that in labor cases, the court may award exemplary damages “if the dismissal was effected in a wanton, oppressive or malevolent manner.”85cralawred

It is socially deleterious for PAL to suspend Montinola without just cause in the manner suffered by her. Hence, exemplary damages are necessary to deter future employers from committing the same acts.

III

Montinola is also entitled to attorney’s fees.

Article 2208 of the Civil Code enumerates the instances when attorney’s fees can be awarded:ChanRoblesVirtualawlibrary

ART. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except:ChanRoblesVirtualawlibrary

(1) When exemplary damages are awarded;

(2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest;

(3) In criminal cases of malicious prosecution against the plaintiff;

(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s plainly valid, just and demandable claim;

(6) In actions for legal support;

(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;

(8) In actions for indemnity under workmen’s compensation and employer’s liability laws;

(9) In a separate civil action to recover civil liability arising from a crime;

(10) When at least double judicial costs are awarded;

(11) In any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered.

In all cases, the attorney’s fees and expenses of litigation must be reasonable. (Emphasis supplied)

This case qualifies for the first, second, and seventh reasons why attorney’s fees are awarded under the Civil Code.

First, considering that we have awarded exemplary damages in this case, attorney’s fees can likewise be awarded.

Second, PAL’s acts and omissions compelled Montinola to incur expenses to protect her rights with the National Labor Relations Commission and the judicial system. She went through four tribunals, and she was assisted by counsel. These expenses would have been unnecessary if PAL had sufficient basis for its decision to discipline Montinola.

Finally, the action included recovery for wages. To bring justice to the illegal suspension of Montinola, she asked for backwages for her year of

suspension.

PAL argued that the factual, legal, or equitable justification for awarding attorney’s fees must be stated in the Labor Arbiter’s decision. The legal justification of the Labor Arbiter is apparent in the decision:ChanRoblesVirtualawlibrary

Complainant’s claim for attorney’s fees is also justified. It is settled that where an employee was forced to litigate and incur expenses to protect his rights and interest, as in the instant case, he is entitled to an award of attorney’s fees (Building Case Corp. vs. NLRC, G.R. No. 94237, February 26, 1997). She is thus granted attorney’s fees equivalent to ten percent of the total award.86

We find no factual, legal, or equitable reason to depart from this justification. Hence, we also affirm the award of attorney’s fees equivalent to 10% of the total award, or P57,863.00.87cralawred

We acknowledge the right of PAL to be constantly vigilant to prevent and deter pilferage. After all, that is equally its property which is also protected by the Constitution. However, PAL cannot assume liability on the employee. It has to endeavor to move through its administrative investigations more humanely and more in consonance with the law. Its employees may only have their work. It is their work, no matter what the classification and how significant they may be in the eyes of their employer, that should give them their dignity.

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. SP No. 112552 is MODIFIED in order to REINTEGRATE the award for moral damages of P100,000.00, exemplary damages of P100,000.00, and attorney’s fees of P57,863.00.

SO ORDERED

Sangwoo Philippines, Inc. and/or Sang Ik Jang, Jisso Jang, et al. v. Sangwoo Philippines, Inc. Employees Union-OLALIA, rep. by Porferia Salibongcogon/Sangwoo Philippines, Inc. Employees Union-

OLALIA, rep. by Porferia Salibongcogon v. Sangwoo Philippines, Inc. and/or Sang Ik Jang, Jisso Jang, et al., G.R. No. 173154./G.R. No. 173229, December 9, 2013.Termination of employment; authorized causes; retrenchment. The illegality of the basis of the implementation of both voluntary retirement and retrenchment programs of petitioners had been thoroughly ruled upon by the Court in Philippine Carpet Employees Association (PHILCEA) v. Hon. Sto. Tomas (G.R. No. 168719, February 22, 2006).  It discussed the requisites of both retrenchment and redundancy as authorized causes of termination and concluded that petitioners failed to substantiate them. In ascertaining the bases of the termination of employees, it took into consideration petitioners’ claim of  business losses; the purchase of machinery and equipment after the termination, the declaration of cash dividends to stockholders, the hiring of 100 new employees after the retrenchment, and the authorization of full blast overtime work for six hours daily. These, said the Court, are inconsistent with petitioners’ claim that there was a slump in the demand for its products which compelled them to implement the termination programs. In arriving at its conclusions, the Court took note of petitioners’ net sales, gross and net profits, as well as net income. The Court, thus, reached the conclusion that the retrenchment effected by the company is invalid due to a substantive defect. Philippine Carpet Manufacturing Corporation, et al. v. Ignacio B. Tagyamon, et al., G.R. No. 191475, December 11, 2013.Termination of employment; ground; closure of business due to serious business losses; notice requirement. Article 297 of the Labor Code provides that before any employee is terminated due to closure of business, it must give one (1) month’s prior written notice to the employee and to the Department of Labor and Employment.  In this relation, case law instructs that it is the personal right of the employee to be personally informed of his proposed dismissal as well as the reasons therefor; and such requirement of notice is not a mere technicality or formality which the employer may dispense with. Since the purpose of previous notice is to, among others, give the employee some time to prepare for the eventual loss of his job, the employer has the positive duty to inform each and every employee of their impending termination of employment. To this end, jurisprudence states that an employer’s act of posting notices to this effect in conspicuous areas in the workplace is not enough. Verily, for something as significant as the involuntary loss of one’s employment, nothing less than an individually-addressed notice of dismissal supplied to each worker is proper. The Court held that the Labor Arbiter, NLRC, and Court of Appeals erred in ruling that SPI complied with the notice requirement when it merely posted various copies of its notice of closure in conspicuous places within the business premises. SPI is required to serve individual written notices of termination to its employees.  Sangwoo Philippines, Inc. and/or Sang Ik Jang, Jisso Jang, et

al. v. Sangwoo Philippines, Inc. Employees Union-OLALIA, rep. by Porferia Salibongcogon/Sangwoo Philippines, Inc. Employees Union-OLALIA, rep. by Porferia Salibongcogon v. Sangwoo Philippines, Inc. and/or Sang Ik Jang, Jisso Jang, et al., G.R. No. 173154./G.R. No. 173229, December 9, 2013Termination of employment; authorized cause; closure of business due to serious business losses; separation pay. Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of business operations and/or an actual locking-up of the doors of establishment, usually due to financial losses. Closure of business, as an authorized cause for termination of employment, aims to prevent further financial drain upon an employer who cannot pay anymore his employees since business has already stopped. In such a case, the employer is generally required to give separation benefits to its employees, unless the closure is due to serious business losses.  As explained in the case of Galaxie Steel Workers Union (GSWU-NAFLU-KMU) v. NLRC (G.R. No. 165757, October 17, 2006): “The Constitution, while affording full protection to labor, nonetheless, recognizes “the right of enterprises to reasonable returns on investments, and to expansion and growth.” In line with this protection afforded to business by the fundamental law, Article [297] of the Labor Code clearly makes a policy distinction. It is only in instances 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” that employees whose employment has been terminated as a result are entitled to separation pay. In other words, Article [297] of the Labor Code does not obligate an employer to pay separation benefits when the closure is due to serious losses. To require an employer to be generous when it is no longer in a position to do so, in our view, would be unduly oppressive, unjust, and unfair to the employer. Ours is a system of laws, and the law in protecting the rights of the working man, authorizes neither the oppression nor the self-destruction of the employer.”In this case, the Labor Arbiter, NLRC, and the Court of Appeals all consistently found that petitioners indeed suffered from serious business losses which resulted in its permanent shutdown and accordingly, held the company’s closure to be valid. It is a rule that absent any showing that the findings of fact of the labor tribunals and the appellate court are not supported by evidence on record or the judgment is based on a misapprehension of facts, the Court shall not examine anew the evidence submitted by the parties. Perforce, without any cogent reason to deviate from the findings on the validity of respondent’s closure, the Court held that it is not obliged to give separation benefits to minority employees pursuant to Article 297 of the Labor Code. Sangwoo Philippines, Inc. and/or Sang Ik Jang, Jisso Jang, et al. v. Sangwoo Philippines, Inc. Employees Union-OLALIA, rep. by Porferia Salibongcogon/Sangwoo Philippines, Inc. Employees Union-OLALIA, rep. by Porferia Salibongcogon v. Sangwoo Philippines, Inc. and/or

Sang Ik Jang, Jisso Jang, et al.,G.R. No. 173154./G.R. No. 173229, December 9, 2013.Termination of employment due to closure; procedural infirmity; nominal damages as sanction.  It is well to stress that while respondent had a valid ground to terminate its employees, i.e., closure of business, its failure to comply with the proper procedure for termination renders it liable to pay the employee nominal damages for such omission.  Based on existing jurisprudence, an employer which has a valid cause for dismissing its employee but conducts the dismissal with procedural infirmity is liable to pay the employee nominal damages in the amount of P30,000.00 if the ground for dismissal is a just cause, or the amount of P50,000.00 if the ground for dismissal is an authorized cause.  However, case law exhorts that in instances where the payment of such damages becomes impossible, unjust, or too burdensome, modification becomes necessary in order to harmonize the disposition with the prevailing circumstance.  In this case, considering that SPI closed down its operations due to serious business losses and that said closure appears to have been done in good faith, the Court as in the case of Industrial Timber Corporation v. Ababon (G.R. No. 164518, March 30, 2006), deems it just to reduce the amount of nominal damages to be awarded to each of the minority employees from P50,000.00 to Pl0,000.00. Sangwoo Philippines, Inc. and/or Sang Ik Jang, Jisso Jang, et al. v. Sangwoo Philippines, Inc. Employees Union-OLALIA, rep. by Porferia Salibongcogon/Sangwoo Philippines, Inc. Employees Union-OLALIA, rep. by Porferia Salibongcogon v. Sangwoo Philippines, Inc. and/or Sang Ik Jang, Jisso Jang, et al., G.R. No. 173154./G.R. No. 173229, December 9, 2013.

G.R. No. 188753, October 01, 2014

AM-PHIL FOOD CONCEPTS, INC., Petitioner, v. PAOLO JESUS T. PADILLA, Respondent.

D E C I S I O N

LEONEN, J.:

This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, praying that the February 25, 2009 decision2 of the Court of Appeals sustaining the February 28, 2007 resolution3 of the National Labor Relations Commission, and the July 3, 2009 resolution4 of the Court of Appeals denying petitioner Am-Phil Food Concept, Inc.’s (Am-Phil) motion for reconsideration, be annulled.  The February 28, 2007 decision of the National Labor Relations Commission affirmed the May 9, 2005 decision5 of Labor Arbiter Eric V. Chuanico that held that respondent Paolo Jesus T. Padilla (Padilla) was illegally dismissed.

Padilla’s position paper6 states that he was hired on April 1, 2002 as a Marketing Associate by Am-Phil, a corporation engaged in the restaurant business.7  On September 29, 2002, Am-Phil sent Padilla a letter confirming his regular employment.8  Sometime in the first week of March 2004, three (3) of Am-Phil’s officers (Marketing Supervisor Elaine de Jesus, Area Director Art Latinazo, and Human Resources Officer Eunice Tugab) informed Padilla that Am-Phil would be implementing a retrenchment program that would be affecting three (3) of its employees, Padilla being one of them.  The retrenchment program was allegedly on account of serious and adverse business conditions, i.e., lack of demand in the market, stiffer competition, devaluation of the Philippine peso, and escalating operation costs.9cralawlawlibrary

Padilla questioned Am-Phil’s choice to retrench him. He noted that Am-Phil had six (6) contractual employees, while he was a regular employee who had a good evaluation record.  He pointed out that Am-Phil was actually then still hiring new employees.  He also noted that Am-Phil's sales have not been lower relative to the previous year.10cralawlawlibrary

In response, Am-Phil's three (3) officers gave him two options: (1) be retrenched with severance pay or (2) be transferred as a waiter in Am-Phil’s restaurant, a move that entailed his demotion.11cralawlawlibrary

On March 17, 2004, Am-Phil sent Padilla a memorandum notifying him of his retrenchment.12  Padilla was paid separation pay in the amount of ?26,245.38.  On April 20, 2004, Padilla executed a quitclaim and release in favor of Am-Phil.13cralawlawlibrary

On July 28, 2004, Padilla filed the complaint14 for illegal dismissal (with claims for backwages, damages, and attorney’s fees), which is now subject

of this petition.  Apart from Am-Phil, Padilla impleaded Am-Phil’s officers: Luis L. Vera, Jr., Winston L. Chan, Robert B. Epes, Richmond S. Yang, John Arthur Latinazo, and Eunice D. Tugab.

For its defense, Am-Phil claimed that Padilla was not illegally terminated and that it validly exercised a management prerogative.  It asserted that Padilla was hired merely as part of an experimental marketing program.  It added that in 2003, it did suffer serious and adverse business losses and that, in the first quarter of 2004, it was compelled to retrench employees so as to avoid further losses.  Am-Phil also underscored that Padilla executed a quitclaim and release in its favor.  With respect to its impleaded officers, Am-Phil claimed that the complaint should be dismissed as they have a personality distinct and separate from Am-Phil.15cralawlawlibrary

On May 9, 2005, Labor Arbiter Eric V. Chuanico (Labor Arbiter Chuanico) rendered the decision finding that Padilla was illegally dismissed.16  He noted that Am-Phil failed to substantiate its claim of serious business losses and that it failed to comply with the procedural requirement for a proper retrenchment (i.e., notifying the Department of Labor and Employment).17  He also held that the quitclaim and release executed by Padilla is contrary to law.18  Finding, however, that Padilla failed to show bad faith on the part of Am-Phil’s officers, Labor Arbiter Chuanico dismissed the complaint with respect to the latter and held that only Am-Phil was liable to Padilla.19cralawlawlibrary

The dispositive portion of Labor Arbiter Chuanico’s decision reads:chanRoblesvirtualLawlibrary

Prescinding from the forgoing, this office orders the respondent to pay the complainant limited backwages from the time of his dismissal up to the time of rendition of this judgment. The computation of backwages as prepared by the NLRC Computation Unit is herewith attached and made an integral part of this decision. Given that the position had already been abolished and since separation pay had already been received by the complainant, reinstatement is no longer viable [sic] remedy under the present situation.

As the complainant was constrained to hire the services of a lawyer, attorneys [sic] fees are ordered paid equivalent to ten percent of the total award thereof [sic]. Complainants [sic] claim for damages are [sic] denied for lack of merit.

For failure of the complainant to properly substantiate that individual respondents are guilty of bad faith or conduct towards him (in Sunio et. al. vs. NLRC GRN L 57767 [sic] January 31, 1984) only respondent Am-Phil Food

Concepts, Inc. is held solidarily liable towards [sic] the complainant.

SO ORDERED.20chanrobleslaw

On August 15, 2005, Am-Phil filed an appeal21 with the National Labor Relations Commission.  Apart from asserting its position that Padilla was validly retrenched, Am-Phil claimed that Labor Arbiter Chuanico was in error in deciding the case despite the pendency of its motion for leave to file supplemental rejoinder.22  Through this supplemental rejoinder, Am-Phil supposedly intended to submit its audited financial statements for the years 2001 to 2004 and, thereby, prove that it had suffered business losses.  Am-Phil claimed that its right to due process was violated by Labor Arbiter Chuanico’s refusal to consider its 2001 to 2004 audited financial statements.23cralawlawlibrary

On February 28, 2007, the National Labor Relations Commission issued the resolution affirming Labor Arbiter Chuanico’s ruling, albeit clarifying that Labor Arbiter Chuanico wrongly used the word “solidarily” in describing Am-Phil’s liability to Padilla.24cralawlawlibrary

With respect to Am-Phil’s claim that Labor Arbiter Chuanico erroneously ignored its 2001 to 2004 audited financial statements, the National Labor Relations Commission noted that a supplemental rejoinder was not a necessary pleading in proceedings before labor arbiters.  It added that, with the exception of the 2004 audited financial statements, all of Am-Phil’s relevant audited financial statements were already available at the time it submitted its position paper, reply, and rejoinder, but that Am-Phil failed to annex them to these pleadings.  The National Labor Relations Commission added that, granting that this failure was due to mere oversight, Am-Phil was well in a position to attach them in its memorandum of appeal but still failed to do so.25  Holding that Labor Arbiter Chuanico could not be faulted for violating Am-Phil’s right to due process, the National Labor Relations Commission emphasized that:chanRoblesvirtualLawlibrary

[O]mission by a party to rebut that which would have naturally invited an immediate pervasive and stiff competition creates an adverse inference that either the controverting evidence to be presented will only prejudice its case or that the uncontroverted evidence speaks the truth.26 (Citation omitted)

The dispositive portion of this National Labor Relations Commission resolution reads:chanRoblesvirtualLawlibrary

WHEREFORE, the foregoing premises considered, the instant appeal is DIMISSED for lack of merit. Accordingly, the decision appealed from is AFFIRMED.

However, the word “solidarily” in the last sentence of the decision should be deleted to conform with the Labor Arbiter’s finding that the complainant-appellee failed to properly substantiate that individual respondents-appellants were guilty of bad faith or conduct towards him.

SO ORDERED.27chanrobleslaw

In the resolution28 dated April 27, 2007, the National Labor Relations Commission denied Am-Phil’s motion for reconsideration.

Am-Phil then filed with the Court of Appeals a petition for certiorari29 under Rule 65 of the 1997 Rules of Civil Procedure.

On February 25, 2009, the Court of Appeals rendered the assailed decision30 dismissing Am-Phil’s petition for certiorari and affirming the National Labor Relations Commission’s February 28, 2007 and April 27, 2007 resolutions.  The Court of Appeals denied Am-Phil's motion for reconsideration in its July 3, 2009 resolution.

Hence, this petition.

Am-Phil insists on its position that it was denied due process and posits that the National Labor Relations Commission’s contrary findings are founded on “illogical ratiocinations.”31  It asserts that the evidence support the conclusion that Padilla was validly dismissed, that it was an error to ignore the quitclaim and release which Padilla had executed, and that Padilla’s retrenchment was a valid exercise of management prerogative.32cralawlawlibrary

For resolution is the issue of whether respondent Paolo Jesus T. Padila was dismissed through a valid retrenchment implemented by petitioner Am-Phil Food Concepts, Inc.  Related to this, we must likewise resolve the underlying issue of whether it was proper for Labor Arbiter Eric V. Chuanico to have ruled that Padilla was illegally dismissed despite Am-Phil’s pending motion for leave to file supplemental rejoinder.

Am-Phil’s right to dueprocess was not violated 

Am-Phil faults Labor Arbiter Chuanico for not having allowed its motion for leave to file supplemental rejoinder that included its 2001 to 2004 audited financial statements as annexes.  These statements supposedly show that Am-Phil suffered serious business losses. Thus, it claims that its right to due process was violated.

Am-Phil’s motion for leave to file supplemental rejoinder,33 dated May 20, 2005,34 was filed on May 31, 2005,35 well after Labor Arbiter Chuanico promulgated his May 9, 2005 decision.  Common sense dictates that as the motion for leave to file supplemental rejoinder was filed after the rendition of the decision, the decision could not have possibly taken into consideration the motion.  Giving consideration to a motion filed after the promulgation of the decision is not only unreasonable, it is impossible. It follows that it is completely absurd to fault Labor Arbiter Chuanico for not considering a May 31 motion in his May 9 decision

Even if we were to ignore the curious fact that the motion was filed after the rendition of the decision, Labor Arbiter Chuanico was under no obligation to admit the supplemental rejoinder.

Rule V of the 2002 National Labor Relations Commission Rules of Procedure (2002 Rules), which were in effect when Labor Arbiter Chuanico promulgated his decision on May 9, 2005,36 provides:chanRoblesvirtualLawlibrary

SECTION 4. SUBMISSION OF POSITION PAPERS / MEMORANDA. Without prejudice to the provisions of the last paragraph, SECTION 2 of this Rule, the Labor Arbiter shall direct both parties to submit simultaneously their position papers with supporting documents and affidavits within an inextendible period of ten (10) days from notice of termination of the mandatory conference.

These verified position papers to be submitted shall cover only those claims and causes of action raised in the complaint excluding those that may have been amicably settled, and shall be accompanied by all supporting documents including the affidavits of their respective witnesses which shall take the place of the latter’s direct testimony. The parties shall thereafter not be allowed to allege facts, or present evidence to prove facts, not referred to and any cause or causes of action not included in the complaint or position papers, affidavits and other documents.37 (Emphasis supplied)

. . . .

SECTION 11. ISSUANCE OF AN ORDER SUBMITTING THE CASE FOR DECISION. After the parties have submitted their position papers and supporting documents, and upon evaluation of the case the Labor Arbiter finds no necessity of further hearing, he shall issue an order expressly declaring the submission of the case for decision.38chanrobleslaw

From the provisions of the 2002 Rules, it is clear that a supplemental rejoinder, as correctly ruled by the National Labor Relations Commission,39 is not a pleading which a labor arbiter is duty-bound to accept.40  Even following changes to the National Labor Relations Commission Rules of Procedure in 2005 and 2011, a rejoinder has not been recognized as a pleading that labor arbiters must necessarily admit.  The 2005 and 2011 National Labor Relations Commission Rules of Procedure only go so far as to recognize that a reply “may” be filed by the parties.41cralawlawlibrary

Thus, Labor Arbiter Chuanico was under no obligation to grant Am-Phil’s motion for leave to admit supplemental rejoinder and, thereby, consider the supplemental rejoinder’s averments and annexes.  That Am-Phil had to file a motion seeking permission to file its supplemental rejoinder (i.e., motion for leave to file) is proof of its own recognition that the labor arbiter is under no compulsion to accept any such pleading and that the supplemental rejoinder’s admission rests on the labor arbiter’s discretion.

The standard of due process in labor cases was explained by this court in Sy v. ALC Industries, Inc.:42cralawlawlibrary

Due process is satisfied when the parties are afforded fair and reasonable opportunity to explain their respective sides of the controversy. In Mariveles Shipyard Corp. v. CA,we held:chanRoblesvirtualLawlibrary

The requirements of due process in labor cases before a Labor Arbiter is satisfied when the parties are given the opportunity to submit their position papers to which they are supposed to attach all the supporting documents or documentary evidence that would prove their respective claims, in the event that the Labor Arbiter determines that no formal hearing would be conducted or that such hearing was not necessary.43 (Emphasis in the original)

Am-Phil filed three (3) pleadings with Labor Arbiter Chuanico: first, its position paper44 on September 9, 2004; second, its reply45 on September 30, 2004; and third, its rejoinder46 on October 11, 2004.  It was more than six (6) months after it had filed its rejoinder that it filed its motion for leave to

admit supplemental rejoinder on May 31, 2005.

Its three (3) pleadings having been allowed, Am-Phil had no shortage of opportunities to plead its claims and to adduce its evidence.  It has no basis for claiming that it was not “afforded [a] fair and reasonable opportunity to explain [its side] of the controversy.”47  The filing of its motion for leave to admit supplemental rejoinder represents nothing more than a belated and procedurally inutile attempt at resuscitating its case.

Retrenchment and itsrequirements

Article 283 of the Labor Code recognizes retrenchment as an authorized cause for terminating employment.  It states:chanRoblesvirtualLawlibrary

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 Sebuguero v. National Labor Relations Commission,48 this court explained the concept of retrenchment as follows:chanRoblesvirtualLawlibrary

Retrenchment . . . 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.49chanrobleslaw

As correctly pointed out by Am-Phil, retrenchment entails an exercise of management prerogative.  In Andrada v. National Labor Relations Commission,50 this court stated:chanRoblesvirtualLawlibrary

Retrenchment is an exercise of management’s prerogative to terminate the employment of its employees en masse, to either minimize or prevent losses, or when the company is about to close or cease operations for causes not due to business losses.51chanrobleslaw

Nevertheless, as has also been emphasized in Andrada, the exercise of management prerogative is not absolute:chanRoblesvirtualLawlibrary

A company’s exercise of its management prerogatives is not absolute. It cannot exercise its prerogative in a cruel, repressive, or despotic manner. We held in F.F. Marine Corp. v. NLRC:chanRoblesvirtualLawlibrary

This Court is not oblivious of the significant role played by the corporate sector in the country’s economic and social progress. Implicit in turn in the success of the corporate form in doing business is the ethos of business autonomy which allows freedom of business determination with minimal governmental intrusion to ensure economic independence and development in terms defined by businessmen. Yet, this vast expanse of management choices cannot be an unbridled prerogative that can rise above the constitutional protection to labor. Employment is not merely a lifestyle choice to stave off boredom. Employment to the common man is his very life and blood, which must be protected against concocted causes to legitimize an otherwise irregular termination of employment.Imagined or undocumented business losses present the least propitious scenario to justify retrenchment.52 (Underscoring supplied, citation omitted)

Thus, retrenchment has been described as “a measure of last resort when other less drastic means have been tried and found to be inadequate.”53cralawlawlibrary

Retrenchment is, therefore, not a tool to be wielded and used nonchalantly.  To justify retrenchment, it “must be due to business losses or reverses

which are serious, actual and real.”54cralawlawlibrary

There are substantive requirements relating to the losses or reverses that must underlie a retrenchment.  That these losses are serious relates to their gravity and that they are actual and real relates to their veracity and verifiability.  Likewise, that a retrenchment is anchored on serious, actual, and real losses or reverses is to say that the retrenchment is done in good faith and not merely as a veneer to disguise the illicit termination of employees.  Equally significant is an employer’s basis for determining who among its employees shall be retrenched.  Apart from these substantive requirements are the procedural requirements imposed by Article 283 of the Labor Code.

Thus, this court has outlined the requirements for a valid retrenchment, each of which must be shown by clear and convincing evidence, as follows:chanRoblesvirtualLawlibrary

(1) that the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;

(2) that the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment;

(3) that the employer pays the retrenched employees separation pay equivalent to one month pay or at least ½ month pay for every year of service, whichever is higher;

(4) that the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and

(5) that the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status (i.e., whether they are temporary, casual, regular or managerial employees), efficiency, seniority, physical fitness, age, and financial hardship for certain workers.55(Citations omitted)

Am-Phil failed to establish compliance with the requisitesfor a valid retrenchment  

Am-Phil’s 2001 to 2004 audited financial statements, the sole proof upon which Am-Phil relies on to establish its claim that it suffered business losses,

have been deemed unworthy of consideration.  These audited financial statements were mere annexes to the motion for leave to admit supplemental rejoinder which Labor Arbiter Chuanico validly disregarded.  No credible explanation was offered as to why these statements were not presented when the evidence-in-chief was being considered by the labor arbiter.  It follows that there is no clear and convincing evidence to sustain the substantive ground on which the supposed validity of Padilla’s retrenchment rests.

Moreover, it is admitted that Am-Phil did not serve a written notice to the Department of Labor and Employment one (1) month before the intended date of Padilla’s retrenchment, as required by Article 283 of the Labor Code.56cralawlawlibrary

While it is true that Am-Phil gave Padilla separation pay, compliance with none but one (1) of the many requisites for a valid retrenchment does not absolve Am-Phil of liability.

Padilla’s quitclaim and releasedoes not negate his having beenillegally dismissed  

It is of no consequence that Padilla ostensibly executed a quitclaim and release in favor of Am-Phil.  This court’s pronouncements in F.F. Marine Corporation v. National Labor Relations Commission,57which similarly involved an invalid retrenchment, are of note:chanRoblesvirtualLawlibrary

Considering that the ground for retrenchment availed of by petitioners was not sufficiently and convincingly established, the retrenchment is hereby declared illegal and of no effect. The quitclaims executed by retrenched employees in favor of petitioners were therefore not voluntarily entered into by them. Their consent was similarly vitiated by mistake or fraud. The law looks with disfavor upon quitclaims and releases by employees pressured into signing by unscrupulous employers minded to evade legal responsibilities. As a rule, deeds of release or quitclaim cannot bar employees from demanding benefits to which they are legally entitled or from contesting the legality of their dismissal. The acceptance of those benefits would not amount to estoppel.  The amounts already received by the retrenched employees as consideration for signing the quitclaims should, however, be deducted from their respective monetary awards.58 (Citations omitted)

In sum, the Court of Appeals committed no error in holding that there was

no grave abuse of discretion amounting to lack or excess of jurisdiction on the part of the National Labor Relations Commission in affirming the May 9, 2005 decision of Labor Arbiter Eric V. Chuanico holding that respondent Paolo Jesus T. Padilla was illegally dismissed.

WHEREFORE, the petition for review on certiorari is DENIED.  The February 25, 2009 decision and the July 3, 2009 resolution of the Court of Appeals are AFFIRMED.

SO ORDERED.crala

SECOND DIVISION

G.R. No. 185449, November 12, 2014

GOODYEAR PHILIPPINES, INC. AND REMEGIO M. RAMOS, Petitioners, v. MARINA L. ANGUS,Respondent.

D E C I S I O N

DEL CASTILLO, J.:

In the absence of an express or implied prohibition against it, collection of both retirement benefits and separation pay upon severance from employment is allowed. This is grounded on the social justice policy that doubts should always be resolved in favor of labor rights.1

By this Petition for Review on Certiorari with Prayer for Injunctive Relief,2 petitioners Goodyear Philippines, Inc. (Goodyear) and Remigio M. Ramos (Ramos) assail the May 13, 2008 Decision3 and November 17, 2008 Resolution4 of the Court of Appeals (CA) in CA-G.R. SP No. 98418. The CA partly granted the Petition for Certiorari filed therewith by modifying the September 30, 2005 Decision[5 of the National Labor Relations Commission (NLRC) in that it ordered petitioners to pay respondent Marina L. Angus (Angus) separation pay, attorney's fees equivalent to 10% of the separation pay, and moral damages.

Factual Antecedents

Angus was employed by Goodyear on November 16, 1966 and occupied the position of Secretary to the Manager of Quality and Technology.

In order to maintain the viability of its operations in the midst of economic reversals, Goodyear implemented cost-saving measures which included the streamlining of its workforce. Consequently, on September 19, 2001, Angus received from Ramos, the Human Resources Director of Goodyear, a letter which reads as follows:chanroblesvirtuallawlibrary

September 18, 2001

x x x x

Dear Ms. Angus:chanroblesvirtuallawlibrary

Please be advised that, based on a thorough study made by Management, the position of Secretary to the Manager of Quality & Technology is already redundant or is no longer necessary for its effective operation and is to be abolished effective today, September 18,2001.

In view of the above, we regret to inform you that your services, as Secretary to the Manager of Quality & Technology, will be terminated effective October 18, 2001. Your last day of work, however, will be effective today, September 18, 2001, to give you a month's time to look for another employment.

As Company practice, termination due to redundancy or retrenchment is paid at 45 days' pay per year of service. Considering, that you have rendered 34.92 years of service to the Company as of October 18, 2001, and have reached the required minimum age of 55 to qualify for early retirement, Management has decided to grant you early retirement benefit at 47 days' per year of service.

The Company will pay you the following termination benefits on October 18, 2001: 47 days' pay per year of service (which will come from the Pension Fund), fractions of 13thand 14th months pay, longevity pay, emergency leave and any earned and unused vacation and/or sick leave. The refund of your contributions to the Goodyear Savings Plan, as well as the Company's share will be handled separately by Security Bank Corporation, the Administrator of said Plan.

Should the Company find in the future that your services are again needed, it shall inform you of the opportunity so you can apply. The Company will try to assist you find-new work elsewhere, and you may use Goodyear as a

reference, if needed.

We thank you for your 34.92 years of loyal service with Goodyear Philippines, and we wish you success in your future endeavours.

Very truly yours, 

GOODYEAR PHILIPPINES INC.

(signed) (signed)LUIS J. ISON REMIGIO M. RAMOSManager-Quality & Technology Human Resources Director6

Upon receipt, Angus responded through a letter of even date, viz:chanroblesvirtuallawlibrary

Dear Sirs:chanroblesvirtuallawlibrary

With reference to the attached letter dated September 18, 2001,1 accept Management decision to avail early retirement benefit. However, I do not agree on the terms stated therein. I suggest I be given a premium of additional 3 days for every year of service which is only 6.3% or a total of 50 days. I gathered it is Philippine industry's practice to give premium to encourage employees to avail of the early retirement benefit.

Acceptance of this proposal will make my separation from Goodyear pleasant.

Very truly yours,

(signed) MARINA L. ANGUS7

Meanwhile and in connection with the retrenchment of Angus, an Establishment Termination Report8was filed by Goodyear with the Department of Labor and Employment (DOLE).

On November 20, 2001, Angus accepted the checks which covered payment of her retirement benefits computed at 47 days' pay per year of service and other company benefits. However, she put the following annotation in the acknowledgement receipt thereof:chanroblesvirtuallawlibrary

Received under protest - amount is not acceptable. Acceptance is on condition that I will be given a premium of additional 3 days for every year of service.

Since my service was terminated due to redundancy, I now claim my separation pay as mandated by law. This is a separate claim from my early retirement benefit.ChanRoblesVirtualawlibrary

(Signed)Marina L. Angus 

11-20-019

Allegedly because of the above-quoted annotation, and also of Angus' refusal to sign a Release and Quitclaim, petitioners took back the checks.10

In response to Angus' protest, Ramos wrote her a letter11dated November 29, 2001 explaining that the company has already offered her the most favorable separation benefits due to redundancy, that is, 47 days' pay per year of service instead of the applicable rate of 45 days' pay per year of service. And based on the Retirement Plan under the Collective Bargaining Agreement (CBA) and the parties' Employment Contract, Angus is entitled to only one of the following kinds of separation pay: (1) normal retirement which is payable at 47 days' pay per year of service; (2) early retirement at a maximum of 47 days' pay per year of service; (3) retrenchment, redundancy, closure of establishment at 45 days' pay per year of service; (4) medical disability at 45 days' pay per year of service; or (5) resignation at 20 days' pay per year of service. Because of these, Ramos informed Angus that the company cannot anymore entertain any of her additional claims.

In reply,12 Angus reiterated her claim for both termination pay and early retirement benefits. She also demanded that she be given a copy of the Notice of Redundancy filed with the DOLE and a copy of the specific provisions in the Retirement Plan, CBA and Employment Contract which could justify the prohibition against the grant of both to a separated employee as asserted by petitioners. However, Ramos merely reminded Angus to claim her checks and brushed aside her demands in a letter13 dated December 19, 2001.

On January 17, 2002, Angus finally accepted a check in the amount of P1,958,927.89 purportedly inclusive of all termination benefits computed at 47 days' pay per year of sendee. She likewise executed a Release and Quitclaim[14 in favor of Goodyear. 

On February 5, 2002, Angus filed with the Labor Arbiter a complaint for illegal dismissal with claims for separation pay, damages and attorney's fees against petitioners.

In her Position Paper,15 Angus claimed that her termination by reason of redundancy was effected in violation of the Labor Code for it was not timely reported to the DOLE and no separation pay was given to her; that the separation pay to which she is entitled by law is entirely different from the retirement benefits that she received; that nothing in the company's Retirement Plan under the CBA, the CBA itself or the Employment Contract prohibits the grant of more than one land of separation pay; and, that she was only forced to sign a quitclaim after accepting her retirement benefits.

On the other hand, petitioners asseverated in their Position Paper16 that Angus was validly dismissed for an authorized cause; that she voluntarily accepted her termination benefits and freely executed the corresponding quitclaim; that her receipt of early retirement benefits equivalent to 47 days' pay for every year of service, which amount is higher than the regular separation pay, had effectively barred her from recovering separation pay due to redundancy; and, that the following Section 1, Article XI of the last company CBA supports the grant of only one benefit:chanroblesvirtuallawlibrary

It is hereby understood that the availment of the retirement benefits herein provided for shall exclude entitlement to any separation pay, termination pay, redundancy pay, retrenchment pay or any other severance pay.

The parties finally agree that an employee shall be entitled to only one (1) benefit, whichever is higher.17chanrobleslaw

In her Rejoinder,18 Angus disputed the existence of the aforesaid provision in the company's CBA. She presented a copy of the latest CBA19 between Goodyear and Unyon ng mga Manggagawa sa Goma sa Goodyear Phils., Inc. effective for the period July 25, 2001 to July 24, 2004, to show that the provisions alluded to by the petitioners do not exist. In contrast, she pointed to Section 5, Article VIII of the latest CBA which she claimed to be the one applicable to her case, viz:chanroblesvirtuallawlibrary

SECTION 5. Retirement Plan.

At normal retirement age of 60 years, a worker shall be entitled to a lump sum retirement benefit in an amount equivalent to his daily rate (base rate x 8) multiplied by 47 days, and further multiplied by his years of service.

A worker who is at least 50 years old and with at least 15 years of service, and who has been recommended by the President of the UNION for early retirement and duly approved by the Human Resources Director, shall be paid a lump sum retirement benefit as follows:chanroblesvirtuallawlibrary

Years of Service Rendered

Retirement Benefit Equivalent to

15 - less than 21 34 days pay per year of service21 - less than 26 35 days pay per year of service26 - less than 31 36 days pay per year of service

31 and up 47 days pay per year of service20

Ruling of the Labor Arbiter

In a Decision21 dated January 23, 2004, the Labor Arbiter upheld the validity of Angus' termination from employment. It likewise declared that the amount she received from the company was actually payment of separation pay due to redundancy, only that it was computed under the CBA's retirement plan since the same was more advantageous to her. Anent her claim for both separation pay and retirement benefits, the Labor Arbiter held that the grant of both is not allowed under the Retirement Plan/CBA. Moreover, it was held that her claim of vitiated consent in signing the quitclaim is unworthy of credence considering that she fairly negotiated the matter with the management and that the consideration for its execution is higher than what she is mandated to receive.

Hence, the dispositive portion of the Labor Arbiter's Decision, viz:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the instant complaint is hereby dismissed for lack of merit.

SO ORDERED.22chanrobleslaw

Ruling of the National Labor Relations Commission

Angus appealed to the NLRC, but was unsuccessful as it rendered a Decision23 dated September 30, 2005 affirming the ruling of the Labor Arbiter. Thus:chanroblesvirtuallawlibrary

WHEREFORE, finding no cogent reason to modify, alter, much less reverse the decision appealed from, the same is AFFIRMED and the instant appeal is DISMISSED for lack of merit.

SO ORDERED.24chanrobleslaw

Angus filed a motion for reconsideration, but was denied by the NLRC in a Resolution25cralawred dated January 9, 2007.

Ruling of the Court of Appeals

Still undeterred, Angus filed a Petition for Certiorari26 with the CA. She attributed grave abuse of discretion amounting to lack of or in excess of jurisdiction on the part of the NLRC in sustaining the ruling of the Labor Arbiter.

On May 13, 2008, the CA rendered a Decision27 partially granting Angus' Petition. While it found her dismissal valid in both substance and procedural aspects, it declared Angus entitled to separation pay in addition to the retirement pay she already received. Citing Cruz v. Philippine Global Communications, Inc.,[28 the CA ruled that Angus is entitled to the payment of both retirement benefit and separation pay in view of the absence of any provision in the CBA prohibiting the payment of both. It also concluded that Angus did not voluntarily sign the release and quitclaim as under its terms, she would receive less than what she is legally entitled to. Further, Angus was granted attorney's fees as she was forced to litigate to protect her rights and interest, as well as moral damages for the anxiety and distress that she suffered because of the pressure exerted on her to avail of early retirement and accept her retirement pay.

The dispositive portion of the CA Decision reads:chanroblesvirtuallawlibrary

WHEREFORE, premises considered, the petition for certiorari is hereby partially GRANTED. The NLRC Decision dated September 30, 2005 is modified by ordering Goodyear to pay Angus: (1) separation pay pursuant to Article 283 of the Labor Code, (2) attorney's fees equivalent to ten percent (10%) of her separation pay, and (3) moral damages in the amount of five thousand pesos (P5,000.00).

SO ORDERED.[29chanrobleslaw

Petitioners filed a Partial Motion for Reconsideration30 vehemently questioning the awards for separation pay, attorney's fees and moral damages. This was, however, denied by the CA in its Resolution31 dated November 17, 2008.

Hence, the present Petition.ChanRoblesVirtualawlibrary

Issues

Petitioners raise the following grounds for this Court's review:chanroblesvirtuallawlibrary

I.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN IT ORDERED THE PAYMENT OF SEPARATION PAY TO RESPONDENT ON TOP OF THE RETIREMENT PAY DESPITE THE FACT THAT IT IS VERY CLEAR IN THE COLLECTIVE BARGAINING AGREEMENT THAT RESPONDENT IS ENTITLED TO ONLY ONE TYPE OF BENEFIT, EITHER SEPARATION PAY OR RETIREMENT BENEFIT, WHICHEVER IS HIGHER.ChanRoblesVirtualawlibrary

II.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN IT ORDERED GOODYEAR TO PAY AGAIN SEPARATION PAY TO RESPONDENT DESPITE THE FACT THAT RESPONDENT EXECUTED A VALID AND BINDING QUITCLAIM, THE CONSEQUENCES AND EFFECTS OF WHICH SHE FULLY UNDERSTOOD, AND WHICH SHE CANNOT NOW UNILATERALLY REVOKE.ChanRoblesVirtualawlibrary

III.

THE COURT OF APPEALS COMMITTED SERIOUS ERROR OF LAW WHEN IT ORDERED THE PAYMENT OF MORAL DAMAGES AND ATTORNEY'S FEES NOTWITHSTANDING THAT THE COMPLAINT FOR ILLEGAL DISMISSAL AND MONEY CLAIMS LACKED MERIT.32chanrobleslaw

Petitioners argue that the CA erred in ordering them to still pay Angus separation pay as she was already paid the same at the rate used for computing early retirement benefits. They insist that Angus is entitled to only one kind of pay as the recovery of both retirement benefits and separation pay is proscribed by the company's CBA. Petitioners further contend that the CA has no basis in disregarding the quitclaim since it was knowingly and voluntarily executed by Angus. And such voluntary execution, coupled with her acceptance of separation pay computed at early retirement rate, had effectively barred Angus from demanding for more. ChanRoblesVirtualawlibrary

Our Ruling

The Petition is devoid of merit.

Angus is entitled to both separation pay and early retirement benefit due to the absence of a specific provision in theCBA prohibiting recovery of both.

In Aquino v. National Labor Relations Commission,33 citing Batangas Laguna Tayabas Bus Company v. Court of Appeals34 and University of the East v. Hon. Minister of Labor35 the Court held that an employee is entitled to recover both separation pay and retirement benefits in the absence of a specific prohibition in the Retirement Plan or CBA. Concomitantly, the Court ruled that an employee's right to receive separation pay in addition to retirement benefits depends upon the provisions of the company's Retirement Plan and/or CBA.36

Here, petitioners allege that there is a provision in the last CBA against the recovery of both retirement benefits and separation pay. To support their claim, petitioners submitted a copy of what appears to be a portion of the company CBA entitled "Retirement Plan, Life Insurance, Physical Disability Pay and Resignation Pay." Section 1, Article XI thereof provides that the availment of retirement benefits precludes entitlement to any separation pay. The same, however, can hardly be considered as substantial evidence because it does not appear to be an integral part of Goodyear's CBA. Even assuming that it is, it would still not suffice as there is no showing if the CBA under which the said provision is found was the one in force at the time material to this case. On the other hand, Angus presented the parties' 2001-2004 CBA and upon examination of the same, the Court agrees with her that it does not contain any restriction on the availment of benefits under the company's Retirement Plan and of separation pay. Indeed, the Labor Arbiter and the NLRC erred in ignoring this material piece of evidence which is decisive of the issue presented before them. The CA, thus, committed no error in reversing the Decisions of the labor tribunals when it ruled in favor of Angus' entitlement to both retirement benefits and separation pay.

Moreover, the Court agrees with the CA that the amount Angus received from petitioners represented only her retirement pay and not separation pay.  A cursory reading of petitioners' September 18, 2001 letter notifying Angus of her termination from employment shows that they granted her early retirement benefits pegged at 47 days' pay per year of service. This rate was arrived at after petitioners considered respondent's length of service with the company, as well as her age which qualified her for early retirement. In fact, petitioners were even explicit in stating in the said letter that the amount she was to receive would come from the company's Pension Fund, which, as correctly asserted by Angus, was created to cover retirement benefit payment of employees. In addition, the document37 showing a detailed account of Angus' termination benefits speaks for itself as the same is entitled "Summary of Retirement Pay and other Company Benefits." In view therefore of the clear showing that what petitioners decided to grant Angus was her early retirement benefits, they

cannot now be permitted to deny having paid such benefit.

Petitioners further argue that Angus is not entitled to retirement pay because she does not meet the requirements enumerated in the Retirement Plan provision of the CBA. The Court disagrees. While it is obvious that Angus is not entitled to compulsory retirement as she has not yet reached the age of 60, there is no denying, however, that she is qualified for early retirement. Under the provision of the Retirement Plan of the CBA as earlier quoted, a worker who is at least 50 years old and with at least 15 years of service, and who has been recommended by the President of the Union for early retirement and duly approved by the Human Resources Director, shall be entitled to lump sum retirement benefits. At the time of her termination, Angus was already 57 years of age and had been in the service for more than 34 years. The exchange of correspondence between Angus and Ramos also shows that the latter, as Goodyear's Human Resources Director, offered, recommended and approved the grant of early retirement in favor of the former. Clearly, all the requirements for Angus' availment of early retirement under the Retirement Plan of CBA were substantially complied with.

It is worthy to mention at this point that retirement benefits and separation pay are not mutually exclusive.38 Retirement benefits are a form of reward for an employee's loyalty and service to an employer39 and are earned under existing laws, CBAs, employment contracts and company policies.40 On the other hand, separation pay is that amount which an employee receives at the time of his severance from employment, designed to provide the employee with the wherewithal during the period that he is looking for another employment and is recoverable only in instances enumerated under Articles 283 and 284 of the Labor Code or in illegal dismissal cases when reinstatement is not feasible.41  In the case at bar, Article 283[42 clearly entitles Angus to separation pay apart from the retirement benefits she received from petitioners.

Release and Quitclaim signed by Angusis invalid.

The release and quitclaim signed by Angus cannot be used by petitioners to legalize the denial of Angus' rightful claims. As aptly observed by the CA, the terms of the quitclaim authorizes Angus to receive less than what she is legally entitled to. "Under prevailing jurisprudence, x x x a quitclaim cannot bar an employee from demanding benefits to which he is legally entitled."43 It was held to be "ineffective in barring claims for the full measure of the worker's rights and the acceptance of benefits therefrom does not amount to estoppel".44 Moreover, release and quitclaims are often

looked upon with disfavor when the waiver was not done voluntarily by employees who were pressured into signing them by unscrupulous employers seeking to evade their obligations.45

Angus is entitled to moral damages and attorney's fees.

The Court likewise finds no cogent reason to overturn the CA's award of moral damages in the amount of P5,000.00 and attorney's fees. Moral damages is awarded when fraud and bad faith have been established,46 as in this case. Petitioners' false contention over what has been paid to Angus suggests an attempt to feign compliance with their legal obligation to grant their employee all the benefits provided for by agreement and law. Their bad faith is evident in the intent to circumvent this legal mandate. And as Angus was then forced to litigate her just claims when petitioners refused to heed her demands for the payment of separation pay, the award of attorney's fees equivalent to 10% of the amount of separation pay is also in order.47

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 [Department] 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 to 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.

WHEREFORE, the Petition is DENIED.  The May 13, 2008 Decision and November 17, 2008 Resolution of the Court of Appeals in CA-G.R. SP No. 98418, are AFFIRMED.

SO ORDERED.

FLIGHT ATTENDANTS AND G.R. No. 178083STEWARDS ASSOCIATION OF

THE PHILIPPINES (FASAP), Petitioner, Present: Ynares-Santiago, J. (Chairperson), - versus - Chico-Nazario, Nachura, Peralta, and Bersamin,* JJ.PHILIPPINE AIRLINES, INC.,PATRIA CHIONG and COURT Promulgated:OF APPEALS, Respondents. October 2, 2009x ---------------------------------------------------------------------------------------- x RESOLUTION YNARES-SANTIAGO, J.: For resolution is respondent Philippine Airlines, Inc.’s (PAL) Motion for Reconsideration[1] of our Decision of July 22, 2008, the dispositive portion of which provides: WHEREFORE, the instant petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R. SP No. 87956 dated August 23, 2006, which affirmed the Decision of the NLRC setting aside the Labor Arbiter’s findings of illegal retrenchment and its Resolution of May 29, 2007 denying the motion for reconsideration, are REVERSED and SET ASIDE and a new one is rendered: 1. FINDING respondent Philippine Airlines, Inc. GUILTY of illegal dismissal; 2. ORDERING Philippine Airlines, Inc. to reinstate the cabin crew personnel who were covered by the retrenchment and demotion scheme of June 15, 1998 made effective on July 15, 1998, without loss of seniority rights and other privileges, and to pay them full backwages, inclusive of allowances and other monetary benefits computed from the time of their separation up to the time of their actual reinstatement, provided that with respect to those who had received their respective separation pay, the amounts of payments shall be deducted from their backwages. Where reinstatement is no longer feasible because the positions previously held no longer exist, respondent Corporation shall pay backwages plus, in lieu of reinstatement, separation pay equal to one (1) month pay for every year of service;

3. ORDERING Philippine Airlines, Inc. to pay attorney’s fees equivalent to ten percent (10%) of the total monetary award. Costs against respondent PAL. SO ORDERED. In its Motion for Reconsideration, PAL maintains that it was suffering from financial distress which justified the retrenchment of more than 1,400 of its flight attendants. This, it argued, was an established fact. Furthermore, FASAP never assailed the economic basis for the retrenchment, but only the allegedly discriminatory and baseless manner by which it was carried out. PAL asserts that it has presented proof of its claimed losses by attaching its petition for suspension of payments, as well as the June 23, 1998 Order of the Securities and Exchange Commission (SEC) approving the said petition for suspension of payments, in its Motion to Dismiss and/or Consolidation of Case filed with the Labor Arbiter in NLRC-NCR Case No. 06-05100-98, or the labor case subject of the herein petition. Also attached to the petition for suspension of payments were its audited financial statements for its fiscal year ending March 1998, and interim financial statements as of the end of the month prior to the filing of its petition for suspension of payments, as well as: a) A summary of its debts and other liabilities; b) A summary of its assets and properties; c) List of its equity security shareholders showing the name of the security holder and the kind of interest registered in the name of each holder; d) A schedule which contains a full and true statement of all of its debts and liabilities, together with a list of all those to whom said debts and liabilities are due; e) An inventory which contains an accurate description of all the real and personal property, estate and effects of PAL, together with a statement of the value of each item of said property, estate and effects, their respective location and a statement of the encumbrances thereon. In the instant Motion for Reconsideration, PAL attached a copy of its audited financial statements for fiscal years 1996, 1997 and 1998. It justifies the submission before the Court of Appeals of its 2002-2004, and not the 1996-1998, audited financial statements, to show that as of the time of their

submission with the Court of Appeals, PAL was still under rehabilitation, and not for the purpose of establishing its financial problems during the retrenchment period. PAL asserts further that the Court should have accorded the SEC’s findings as regards its financial condition respect and finality, considering that said findings were based on the financial statements and other documents submitted to it, which PAL now submits, albeit belatedly, via the instant Motion for Reconsideration. It cites the case of Clarion Printing House Inc. v. National Labor Relations Commission,[2] where the Court declared that the appointment of a receiver or management committee by the SEC presupposes a finding that, inter alia, a company possesses sufficient property to cover all its debts but foresees the impossibility of meeting them when they respectively fall due and there is imminent danger of dissipation, loss, wastage or destruction of assets or other properties or paralyzation of business operations. On the other hand, it claims that in Rivera v. Espiritu,[3] the Court made a finding that as a result of the pilots’ three-week strike that began on June 5, 1998, PAL’s financial situation went from bad to worse and it was faced with bankruptcy, requiring it to seek rehabilitation and downsize its labor force by more than one-third; and that said pilots’ strike was immediately followed by another four-day employee-wide strike on July 22, 1998, which involved 1,899 union[4] members. PAL likewise cites previous decisions of the Court which declared a suspension of claims against it in light of pending rehabilitation proceedings and the issuance of a stay order in the enforcement of all claims, whether for money or otherwise, which is effective from the date of its issuance until the dismissal of the petition or the termination of the rehabilitation proceedings.[5] Moreover, it claims that the infusion of $200 million in PAL in June 1999 is proof of the airline’s financial distress, and was a condition sine qua non if PAL’s Amended and Restated Rehabilitation Plan were to be approved by the SEC, and if the absolute closure of PAL were to be averted. PAL underscores that its situation in 1998 was unique, as it had to contend with – the very distinct possibility that its losses would eventually result in default on its payments to creditors for its aircraft leases. If that happened, creditors could have immediately seized all its leased planes and that would have spelled PAL’s demise. The petition for rehabilitation and suspension of payments was precisely intended to avoid PAL’s collapse and eventual liquidation.[6] Exercising its management prerogative and sound business judgment, it decided to cut its fleet of aircraft in order to minimize its operating losses

and rescue itself from “total downfall;” which meant that a corresponding company-wide reduction in manpower necessarily had to be made. As a result, 5,000 PAL employees (including the herein 1,400 cabin attendants) were retrenched. Further, PAL argues that aside from the confluence of simultaneous unfortunate events that occurred during the time, like successive strikes, peso depreciation and the Asian currency crisis, there was a serious drop in passenger traffic which necessitated the closure of PAL’s entire European, Australian, and Middle East operations and numerous Asian stations, as well as some of its domestic stations. Consequently, its 27 international routes were reduced to only 7, and its 37 domestic routes to just 17. PAL claims that it did not act with undue haste in effecting the mass retrenchment of cabin attendants since, as early as February 17, 1998, consultations were being held in connection with the proposed retrenchment, and that twice-weekly meetings between the union and the airline were being held since February 12, 1998. It claims that it took PAL four months before the retrenchment scheme was finally implemented. With regard to the implementation of Plan 22 instead of the original Plan 14, PAL asserts that, in so doing, it should not be found guilty of bad faith. It sets out the chronology of events that led it to implement Plan 22 instead of Plan 14, thus: The initial plan was, indeed, to reduce PAL’s fleet from 54 planes to 14. With a smaller fleet, PAL necessarily had to reduce manpower accordingly, and this was the basis for the retrenchment. The retrenchment was done on the basis of the conditions and circumstances existing at that time. However, a series of events ensued – PAL was placed under corporate rehabilitation by the SEC on June 23, 1998. Later, on July 22, 1998, the rank-and-file employees belonging to PALEA staged a strike. Then, on August 28, 1998, President Joseph Ejercito Estrada issued Administrative Order No. 16 creating Inter-Agency Task Force to aid PAL and its employees in solving the problem. On September 4, 1998, PAL submitted an offer to the Task Force of a plan to transfer shares of stocks to its employees with a request to suspend existing Collective Bargaining Agreements, which was later rejected by the employees.

On September 23, 1998, PAL ceased operations. Then, President Estrada intervened again through the request of PAL employees. PALEA made an offer, which was rejected by PAL. Finally, PALEA made an offer again which was successfully ratified by the employees on October 2, 1998 and accepted by PAL. Subsequently, PAL partially resumed domestic operations on October 7, 1998 believing that the mutually beneficial terms of the suspension agreement could possibly redeem PAL. Later, it partially resumed its operations internationally (Los Angeles and San Francisco, United States). True enough, with some degree of relief as a result of the suspension of payment and rehabilitation proceedings in the SEC and the suspension of the CBA, PAL began to see slow but steady improvements. Also, airline industry experts who were commissioned by PAL to assist in drafting its Amended and Restated Rehabilitation Plan came to a conclusion that PAL had to increase its fleet of planes to improve its financial and operational viability. This advice was adopted by PAL in its Amended and Restated Rehabilitation Plan, which was eventually approved by the SEC. With these supervening events, PAL decided to implement Plan 22 upon reevaluation and optimistic future projection for its operations. The decision to abandon Plan 14 was not done with precipitate haste. The Honorable Court should appreciate that the chain of unfolding events after the retrenchment encouraged PAL, in the exercise of its sound business discretion, to implement Plan 22. This was not a capricious decision. In fact, the SEC approved PAL’s Amended and Restated Rehabilitation Plan, which includes, among others, PAL’s Fleet Plan composed of 22 planes. Neither does it show that PAL was uncertain of its financial condition when it retrenched based on Plan 14. PAL would not have even petitioned the SEC for its rehabilitation were it not certain of its dire financial state. The decision to later abandon Plan 14 was a business judgment that PAL made in good faith upon the advice of foreign airline industry experts and in light of the supervening circumstances explained above. In this regard, this Honorable Court has once held that – “Questions of policy or of management are left solely to the honest decision of the board as the business manager of the corporation, and the court is without authority to substitute its judgment for that of the board, and as long as it acts in good faith and in the exercise of honest judgment in the interest of the corporation, its orders are not reviewable by the courts.”

On the basis of Plan 22, PAL decided to recall/rehire some of the retrenched employees. With due respect, this Honorable Court is mistaken in its ruling that PAL acted in bad faith simply because it later on decided to recall or rehire the employees it initially retrenched. The decision to recall/rehire was a logical consequence of PAL’s decision to increase its fleet from 14 to 22 planes, which as discussed earlier, was a business judgment exercised in good faith by PAL after a series of significant events. PAL did not even have any legal obligation to rehire the employees who have already been paid their separation pay and who have executed valid quitclaims. PAL, instead of being accused of bad faith for rehiring these employees, should in fact be commended. That the retrenched employees were given priority in hiring is certainly not bad faith. Noteworthy is the fact that PAL never hired NEW employees until November 2000 or more than 2 years after the 1998 retrenchment. It is respectfully submitted that the legality of the retrenchment could not be made to depend on the fact that PAL recalled/rehired some of the employees after five months without taking into account the supervening events. At the exact time of retrenchment, PAL was not in a position to know with certainty that it could actually recover from the precarious financial problem it was facing and, if so, when. The only thing PAL knew at that exact point in time was that it was in its most critical condition – when its liabilities amounted to about Php 85,109,075,351.00, while its assets amounted to only about Php 90,642,330,919.00 aggravated by many other circumstances as explained earlier. At the time of the retrenchment in June 1998, PAL was at the brink of total collapse and it could not have known that in five months, there will be supervening events that will impel it to reassess its initial decisions. x x x x In the present case, PAL beseeches this Honorable Court to take a second look at the peculiar facts and circumstances that clearly show that the recall/rehire was done in good faith. These facts and circumstances make the case of PAL totally different from the other cases decided by this Honorable Court where it found bad faith on the part of the employer for immediately rehiring or hiring employees after retrenchment. x x x x

But even then, PAL still endeavored to recall or rehire the maximum number of FASAP members that it could. Thus, out of the 1,423 FASAP members who were retrenched, 496 were eventually recalled or reinstated (those who did not receive separation pay and opted to resume their employment with PAL with no loss of seniority). On the other hand, 321 FASAP members were rehired (those who received separation pay and voluntarily rejoined PAL as new employees). In this regard, PAL would like to take exception to the Honorable Court’s observation that these employees were taken in as new hires without due regard to their long years of service. The FASAP members who were rehired as new employees were those who already received their separation pay because of the retrenchment but voluntarily accepted PAL’s offer for them to be rehired when Plan 22 was implemented. It cannot be said that they were prejudiced by the rehire process, as they already “cashed in” on their tenure when they accepted the separation pay. That they later on accepted PAL’s offer to rehire them as new employees was purely voluntary on their part. Meanwhile, around 591 FASAP members opted not to return anymore after receiving their full separation pay. Thus, including those who voluntarily opted not to resume their employment with PAL, only about 591 can be considered to have remained unrecalled or unrehired. It is significant to mention that FASAP directly and actively participated in the recall process, and even suggested the names of its members for prospective recall. Likewise, in the recall process, PAL followed the provisions of the CBA and as a result, some of the recalled employees were assigned to lower positions (or “demoted” as noted by this Honorable Court). However, this was only because there were not enough positions for all of them to be restored to their previous posts. Evidently, with lesser planes flying international routes, not all international flight attendants would be restored to international flight posts. Some of them would be downgraded to domestic flights. This was the natural and logical effect of the fleet downsizing that PAL adopted. This could not be a badge of bad faith, as this Honorable Court seems to believe. x x x x Likewise, no bad faith should be inferred from PAL’s closure in September 1998. That decision was by no means easy being the national flag carrier and the oldest airline in Asia (having operated for 57 years at the time). The closure could not have been a mere retaliation for rejecting the offer of PAL,

as it would have aggravated matters further and rendered rehabilitation impossible. Hence, PAL’s decision to resume operations when the employees acceded to its request to suspend the CBA should be seen in this context. This was not a coercive posture. PAL resumed operations only because the suspension of the CBA, among others, gave it hope that it could recover. Furthermore, any issue on the legality of the suspension of the CBA had already been put to rest by no less than this Honorable Court in the case of Rivera vs. Espiritu where it held that – “The assailed PAL-PALEA agreement was the result of voluntary collective bargaining negotiations undertaken in the light of the severe financial situation faced by the employer, with the peculiar and unique intention of not merely promoting industrial peace at PAL, but preventing the latter’s closure.”[7] (Emphasis supplied) PAL explains that the 140 probationary cabin attendants who were fired and subsequently rehired were part of an earlier retrenchment process in February and March 1998, a component of PAL’s “less drastic cost cutting measures” then being implemented. Eventually, these rehired probationary cabin attendants were included in the subject retrenchment of more than 1,400. Thus, it claims that it was inaccurate for the Court to have held that these 140 probationary cabin attendants were retained while those with permanent status were fired. Finally, PAL begs the Court to reconsider its finding that the retrenchment scheme in question did not pass the test of fairness and reasonableness with respect to the criteria used in selecting those whose services should be retained or terminated. That it merely used the criteria stipulated in its CBA with FASAP where efficiency rating and inverse seniority are the basic considerations as carried over from the parties’ previous CBAs could allegedly be seen from the manner the retrenchment plan was carried out. The rating variables contained in the Performance Evaluation Form of each and every cabin crew personnel’s Grooming and Appearance Handbook are fair and reasonable since they are inherent requirements (“necessarily intertwined,” as PAL would put it) for employment as flight attendant or steward. More significantly, it claims that the criteria used in the implementation of the retrenchment scheme in question was based on the ratified PAL-FASAP 1996-2000 CBA, which should be considered as the law between the parties. PAL believes that the Court may have misconstrued the significance of the term “other reasons” which the NLRC utilized in its summary of FASAP

members and causes for their retrenchment,[8] arguing that the use of the phrase does not necessarily mean that the employees were retrenched for obscure reasons that are not acceptable under the law; it simply points to the NLRC’s economy of language in lumping together various reasons for retrenchment, such as excess sick leaves, previous admonitions, suspensions, passenger complaints, poor performance, tardiness, etc. It claims that it used seniority in conjunction with a combination of these grounds in arriving at a conclusion of whether to retain or retrench. PAL defends as well its use of a single year (1997) as basis for assessing the cabin attendants’ fitness for retention or retrenchment, stressing that its CBA with FASAP requires – as basis for reduction in personnel – only one efficiency rating, which should be construed as that obtained by each cabin attendant for a single year, in accordance with Section 112 of the CBA which provides: In the event of redundancy, phase-out of equipment or reduction of operations, the following rules in the reduction of personnel shall apply: A. Reduction in the number of Pursers: 1. In the event of a reduction of purser OCARs, pursers who have not attained an efficiency rating of 85% shall be downgraded to international Cabin Attendant in the reverse order of seniority.2. If the reduction of purser OCARs would involve more than the number of pursers who have not attained an efficiency rating of 85%, then pursers who have attained an efficiency rating of 85% shall be downgraded to international Cabin Attendant in the inverse order of seniority. B. In reducing the number of international Cabin Attendants due to reduction in international Cabin Attendant OCARs, the same process in paragraph A shall be observed. International Cabin Attendants shall be downgraded to domestic. C. In the event of reduction of domestic OCARs thereby necessitating the retrenchment of personnel, the same process shall be observed. In no case, however, shall a regular Cabin Attendant be separated from the service in the event of retrenchment until all probationary or contractual Cabin Attendant in the entire Cabin Attendants Corps, in that order, shall have been retrenched. (Emphasis and underscoring supplied) PAL asserts that since efficiency ratings for each cabin or flight attendant are computed on an annual basis, it should therefore mean that when

Section 112 referred to “an” efficiency rating of 85%, then it should logically and practically follow that only one year’s worth of performance should be used as criteria for the retrenchment of cabin attendants – that is, the most recent efficiency rating obtained by each of them. For purposes of the present case, it would necessarily be that for the year 1997, or the year immediately prior to the retrenchment, and no other. Finally, regarding the quitclaims executed, PAL maintains that since the retrenchment scheme it implemented was essentially valid, then it should follow that the quitclaims are regular as well, and more so given the absence of mistake, duress, fraud or misrepresentation. In its Comment[9] to PAL’s Motion for Reconsideration, FASAP asserts that the issue is not centered on PAL’s financial condition but whether the retrenchment of the 1,400 cabin personnel was warranted. It alleges that: The issue is whether or not the nature and extent of the financial circumstances and the methods used to resolve fiscal difficulties warranted the illegal and unceremonious dismissal of around 1,400 flight attendants, stewards, and cabin crew. It was the termination without considering the legal factors for retrenchment. Because of the difficulties that the entire nation was going through, the ostensible name given was retrenchment. But it was really an illegal dismissal and arbitrary termination. x x x The casualties of illegal action, the ones sacrificed in the early stages of the situation and not as a last resort, are not the employer and its officers or owner. As the Honorable Court pointed out, the questioned action struck at the very heart of the workers’ employment, the lifeblood upon which the worker and his family owe their survival. No proof has been adduced in ten long years of litigation that retrenchment was only a measure of last resort, (that) other less drastic means were considered and tried and found inadequate. x x x x The Court has treated the instant case for what it truly is – an illegal retrenchment, one that was prematurely done and whimsically carried out. x x x This is about a “bad faith” retrenchment – one which neither complied with the legal prerequisites therefor nor observed the provisions of the PAL-FASAP CBA thereon; one which was not employed as a last resort and which did not have any fair and reasonable criteria to serve as basis for selecting who would be retrenched; one which was capriciously and whimsically implemented; one which was illegally made.[10]

FASAP declares that although it recognized PAL’s financial difficulties in 1997 and 1998, it never conceded the same to be valid reason upon which to base the questioned retrenchment, citing that in proceedings below, the reasonable necessity of the retrenchment and its effectiveness in preventing losses to PAL had been squarely raised. FASAP maintains that prior negotiations with PAL (on the possible implementation of cost-cutting measures, employee rotation plans, triple and quadruple room sharing arrangements, allocation of vacation leaves without pay, etc.) is proof of that recognition, but that ultimately, it was incumbent upon PAL to have shown that it undertook a retrenchment scheme that was in proportion to and commensurate with the financial distress it was experiencing at the time. Essentially, FASAP merely echoed our pronouncements, focusing upon our dissertation on each of the elements required in order to justify retrenchment, most of which were found lacking in PAL’s retrenchment program or scheme. Specifically, FASAP points to the lack of prior resort to cost-cutting measures, the rehiring of probationary employees, prior assurances by PAL that retrenchment was no longer necessary, and lack of fair and reasonable criteria in selecting the employees to retrench. Specifically, mention is made that there is nothing in its then existing CBA with PAL which mandates that a single year – 1997 – should be used as the gauge or measure for determining the flight attendants’ performance for purposes of retrenchment. Asserting that PAL’s justification of its use of a single year was a “very strained interpretation” of the provisions in the CBA, FASAP insists that seniority, loyalty and past efficiency are requirements of law and jurisprudence which may not be summarily disregarded in choosing whom to retrench, demote or retain, a proposition it claims to find support in Article III, Section 7(A) of its CBA which provides: The Association (FASAP) hereby acknowledges that the management of the Company (PAL) and the direction of its employees; x x x; and the lay-off and re-employment of employees in connection with increases or decreases in the work force are the exclusive rights and functions of management provided only that the Company act in accordance with applicable laws and the provisions of this Agreement.[11] (Words in parentheses supplied) FASAP goes on further to suggest that the basic criterion for effecting the retrenchment scheme should have been seniority, as enunciated in Maya Farms Employees Organization v. National Labor Relations Commission.[12] In said case, the employer was constrained to streamline its manpower base owing to losses and setbacks in operations. Management sent notices of termination (due to redundancy) to 66 of its employees. In the labor case

that ensued, the union pointed to a violation of a specific provision in its CBA which declared, thus: Sec. 2. LIFO RULE. In all cases of lay-off or retrenchment resulting in termination of employment in the line of work, the Last-In-First-Out (LIFO) Rule must always be strictly observed. Ultimately, we held therein that the employer did not violate the LIFO rule in the CBA. We explained therein that – It is not disputed that the LIFO rule applies to termination of employment in the line of work. Verily, what is contemplated in the LIFO rule is that when there are two or more employees occupying the same position in the company affected by the retrenchment program, the last one employed will necessarily be the first to go. Moreover, the reason why there was no violation of the LIFO rule was amply explained by public respondent in this wise: . . . The LIFO rule under the CBA is explicit. It is ordained that in cases of retrenchment resulting in termination of employment in line of work, the employee who was employed on the latest date must be the first one to go. The provision speaks of termination in the line of work. This contemplates a situation where employees occupying the same position in the company are to be affected by the retrenchment program. Since there ought to be a reduction in the number of personnel in such positions, the length of service of each employee is the determining factor, such that the employee who has a longer period of employment will be retained. In the case under consideration, specifically with respect to Maya Farms, several positions were affected by the special involuntary redundancy program. These are packers, egg sorters/stockers, drivers. In the case of packers, prior to the involuntary redundancy program, twenty-one employees occupied the position of packers. Out of this number, only 5 were retained. In this group of employees, the earliest date of employment was October 27, 1969, and the latest packer was employed in 1989. The most senior employees occupying the position of packers who were retained are as follows: Santos, Laura C. Oct. 27, 1969Estrada, Mercedes Aug. 20, 1970Hortaleza, Lita June 11, 1971Jimenez, Lolita April 25, 1972Aquino, Teresita June 25, 1975

All the other packers employed after June 2, 1975 (sic) were separated from the service. The same is true with respect to egg sorters. The egg sorters employed on or before April 26, 1972 were retained. All those employed after said date were separated. With respect to the position of drivers, there were eight drivers prior to the involuntary redundancy program. Thereafter only 3 positions were retained. Accordingly, the three drivers who were most senior in terms of period of employment, were retained. They are: Ceferino D. Narag, Efren Macaraig and Pablito Macaraig. The case of Roberta Cabrera and Lydia C. Bandong, Asst. Superintendent for packing and Asst. Superintendent for meat processing respectively was presented by the union as an instance where the LIFO rule was not observed by management. The union pointed out that Lydia Bandong who was retained by management was employed on a much later date than Roberta Cabrera, and both are Assistant Superintendent. We cannot sustain the union's argument. It is indeed true that Roberta Cabrera was employed earlier (January 28, 1961) and (sic) Lydia Bandong (July 9, 1966). However, it is maintained that in meat processing department there were 3 Asst. Superintendents assigned as head of the 3 sections thereat. The reason advanced by the company in retaining Bandong was that as Asst. Superintendent for meat processing she could “already take care of the operations of the other sections.” The nature of work of each assistant superintendent as well as experience were taken into account by management. Such criteria was not shown to be whimsical nor carpricious (sic).[13] Finally, FASAP claims that PAL did not provide reasons for retrenching the more than 1,400 flight attendants; that it was only when it filed its Supplemental Memorandum before the Labor Arbiter in March 2000 that the airline submitted in evidence the ICCD Masterank and Seniority 1997 Ratings, which allegedly took into account the subjective factors such as appearance and good grooming, which supposedly require the written conformity of its members if they were to be considered at all, in accordance with Section 124, Article XXVI of the CBA. By way of reply to FASAP’s Comment, PAL insists that its decision to downsize the flight fleet was the principal reason why it had to put into effect a corresponding downsizing of cabin crew personnel; that the reduction in fleet size was an integral part of its SEC-approved rehabilitation plan; that the reduction in the number of its aircraft by 75% – from 54 to

just 14 – likewise necessitated a corresponding 75% reduction in its total cabin crew personnel; and that its subsequent decision to increase its remaining fleet from 14 aircraft to 22 was a “business judgment exercised in good faith after a series of significant events and upon the advice of airline industry experts who were assisting it in its rehabilitation efforts.”[14] This increase from 14 to 22 aircraft was then included in its Amended and Restated Rehabilitation Plan, which was subsequently approved by the SEC. Because of this, it then had to increase its manpower; it recalled or rehired the services of the employees it had previously terminated. PAL begs the Court to recognize this downsizing of aircraft as a valid exercise of its management prerogative to close its business operations, and not merely to reduce personnel. In other words, PAL would have the Court believe that its retrenchment program is not merely a reduction of personnel for the purpose of cutting on costs of operations, but as a closure of its business, a cessation of business operations to prevent further financial drain.[15] PAL argues that cost-cutting measures could not have sufficed to nurse the airline back to financial health; it had to resort to partial closure of its business. Thus: 18. Moreover, how can PAL possibly implement the cost-cutting measures allegedly suggested by FASAP with 75% of its fleet already gone? The situation would be different if PAL retained its 54-plane fleet, and PAL’s only concern was to save on salaries and wages. In such a situation, PAL is indeed obliged to resort to “less drastic cost-cutting measures” before it can validly proceed with retrenchment. But this is not the case here. PAL’s financial condition could not have improved by merely adopting cost-cutting measures such as work rotation and forced leaves. In fact, retrenchment alone could not have saved PAL from financial ruin. PAL had to resort to the drastic action of partially closing its business operations by downsizing its fleet of aircrafts. This naturally resulted in the reduction of PAL’s personnel. 19. Assuming arguendo that the jurisprudence relied upon by FASAP apply, the proven facts in this case show that retrenchment was not the only option for PAL. The problem with FASAP is that it is taking a myopic view of what truly happened. It stubbornly claims that the reduction of employees is a simple case of retrenchment program that was implemented in the first instance. But it is clear from the record that when PAL suffered serious business losses, retrenchment was not the only option, obviously because the objective was to cut down on operating expenses as a whole, and not merely in terms of salaries and wages, which is the only purpose of a retrenchment.

20. What PAL did was to reduce its fleet of 54 planes to only 14 planes. It was only after PAL reduced its fleet of aircrafts that it had to terminate the employment of its employees who were already in excess of the workforce required under the reduced fleet set-up. In other words, retrenchment was merely a necessary and natural consequence of PAL’s earlier decision to downsize its fleet of aircrafts. There is thus simply no basis to say that PAL implemented retrenchment in the first instance. x x x x 22. Neither is there basis to FASAP’s claim that PAL made the assurance that there will be no more need for retrenchment. How could have PAL given such assurance in light of its huge business losses, bordering on bankruptcy? The truth is, no such assurance was ever given by PAL. This is clear in the minutes of all of the meetings with FASAP where the only issue discussed was how to proceed with the retrenchment. These meetings were held in February to April 1998, or two to three months before the decision to reduce operations was made by PAL due to various serious supervening events – the strike staged by the Airline Pilots Association of the Philippines (ALPAP) and by the Philippine Airlines Employees Association (PALEA).[16] On the use of efficiency ratings obtained for the year 1997 as singular basis for determining the fitness of cabin crew personnel to continue working with it, PAL explains that – 24. There is nothing unreasonable in using the year 1997 as basis for arriving at the efficiency ratings. FASAP’s insinuations that it ignored the employees’ alleged exceptional performance ratings and exemplary attendance records in the past are simply baseless, misleading and erroneous. 24.1. First, while an employee may rack up hundreds of awards and commendations and hundreds of hours of leave credits, it does not necessarily follow that the same employee, although admittedly of exceptional caliber, cannot be terminated if just or authorized cause subsequently exists. For instance, if there is redundancy, an employee holding a superfluous position may be terminated regardless of numerous awards and leave credits he may have earned. In this case, it cannot be denied that PAL’s reduction, or partial closure, of its business operations, i.e., downsizing its flight fleet from 54 to 14 aircrafts, in order to prevent business losses and avoid total closure of its business, is one of the recognized authorized causes expressly provided under Article 283 of the Labor Code.

PAL could, therefore, retrench employees regardless of the number of commendations, awards and accumulated leave credits the latter obtained in the course of employment provided, of course, that the retrenchment is valid and legal. In this case, the Labor Arbiter, the NLRC and the Court of Appeals unanimously found that the retrenchment is intrinsically valid and legal based on the same set of evidence. In fact, the Labor Arbiter categorically ruled: …there is no question that the rules imposed by law and jurisprudence to sustain retrenchment have been amply satisfied by PAL. The only issue at hand is whether or not the retrenchment can be upheld for complying with rules set forth in the collective bargaining agreement. 24.2. Second, in implementing retrenchment, the law does not require an employer to look back into far reaches of time to check every good deed performed by every employee. This would not only be highly impractical, but manifestly absurd as well. In evaluating job efficiency, it is enough for an employer to fix a determinate time frame within which to base its evaluation. It can be six months, one year, two years, three years or ten years. It can in fact be any period of time, subject to management’s sound discretion. But to be fair and reasonable, the application of the period must be uniform and consistent. It cannot be one year for employee A, two years for employee B and three years for employee C. In this case, PAL selected a period of one year (the year 1997), which was uniformly and consistently applied to all, without exception. The year 1997 was chosen by PAL as it was the most logical period being the year immediately preceding the retrenchment. All relevant records for the year 1997, such as attendance and performance evaluation, were complete and accurate. Certainly, the year 1997 was not selected for the purpose of discriminating against any employee, but with the sole objective of retaining the more efficient among the employees. x x x x 26. FASAP then insists that the basic criterion to effect lay-off or retrenchment is seniority. FASAP cites Article VII, Section 23 of the PAL-FASAP 1995-2000 CBA: The term “seniority” whenever used in this Agreement shall be deemed to mean a measure of a regular Cabin Attendant’s claim in relation to other regular Cabin Attendants holding similar positions, to preferential

consideration whenever the Company exercises its right to promote to a higher paying position or lay-off of any Cabin Attendant. 27. FASAP obviously misread and misinterpreted Section 23 of the PAL-FASAP 1995-2000 CBA. The provision does not even mandate seniority to be a criterion whenever PAL implements a reduction or retrenchment, much less does it say that seniority is the one and only criterion to be applied. Section 23 simply defines seniority and states that seniority may be given “preferential consideration” whenever PAL exercises its right to promote to a higher paying position or lay-off of cabin attendants. PAL did just that in complying with Section 112 of the PAL-FASAP CBA 1995-2000 when seniority was applied whenever all other factors were found to be equal. PAL clearly followed Section 23 of the PAL-FASAP CBA in giving seniority preferential consideration. This is also reflected in the tabulation made by the NLRC in its Decision.[17] PAL argues that in its past two CBAs with FASAP prior to the one under controversy, the same provisions and criteria for appearance, grooming, efficiency and performance were used, without objections having been advanced by FASAP. During oral arguments, PAL advanced an altogether new line of reasoning that has, until now, never been advanced as the primary argument in defense of its retrenchment scheme: that the principal and true reason why PAL had to implement the mass lay-off of cabin personnel was not the downsizing of aircraft fleet size, but the June 5, 1998 pilots’ strike, where approximately six hundred (600) of its pilots apparently abandoned their planes and simultaneously refused to fly. Thus, counsel for PAL manifested to the Court that – ATTY. MENDOZA As a consequence, if your Honor please, but what really brought about, shall we say, “the really perilous situation of closure was that on June 5, 1998, the pilots went on strike, ninety (90%) per cent of the pilots went on strike, approximately six hundred (600).” These pilots’ strike was so devastating because the pilots, if your Honors please, even left their place where they were at the time, somewhere in Bangkok, somewhere in Taipei and they just left the planes. Without any pilots no plane can fly, your Honor, that is the stark reality of the situation, and without airplanes flying, there would be no place for employment of cabin attendants.[18] (Emphasis supplied) As a result of this pilots’ strike, PAL claims to have suffered daily revenue losses equivalent to P100 million and P50 million of lost fixed costs, which came at a time when PAL had “no more money.”[19] Owing to this pilots’

strike, PAL was brought to the brink of disaster and emergency that it needed to align the number of cabin attendants with the number of airplanes that were flying.[20] After the pilots went on strike, PAL was left with only 68 pilots who chose to remain, but with 2,039 cabin attendants. Faced with this disproportionate ratio of pilots to cabin attendants, PAL immediately decided to terminate the services of more than 1,400 cabin attendants via the retrenchment scheme in question. At the same time, the reduction in fleet – which until that time remained a mere proposal – had to be immediately implemented, and cost-cutting measures were simply out of the question. Thus: ATTY. MENDOZA While meetings between PAL and FASAP may have occurred prior to June 1998 to discuss measures in which to possibly avoid retrenchment with its planned reduction of fleet, PAL’s financial circumstances drastically changed in June 1998 that necessitated immediate and corresponding measures. Harsh reality was that, there simply was no time. FASAP-suggested less drastic measures of work rotation, forced vacation leaves, hotel sharing etc. were no longer feasible. Indeed, reduction by about 5,000 employees, including 1,423 cabin crew, was the less drastic measure. The alternative, harsher obviously, was closure and liquidation.[21] (Emphasis supplied) All throughout, it has been impressed upon us that PAL’s decision to downsize its fleet size is the principal reason why it had to put into effect a corresponding downsizing of cabin crew personnel. However, on oral arguments before us, PAL now makes a total turnaround and attributes the retrenchment to the June 5, 1998 pilots’ strike. Repeatedly, counsel for PAL blamed the pilots’ strike as the main culprit, thus: ATTY. MENDOZA As a consequence, if your Honor please, but what really brought about, shall we say, “the really perilous situation of closure was that on June 5, 1998, the pilots went on strike, ninety (90%) per cent of the pilots went on strike, approximately six hundred (600).” These pilots’ strike was so devastating x x x. Without any pilots no plane can fly, your Honor, that is the stark reality of the situation, and without airplanes flying, there would be no place for employment of cabin attendants. x x x x ATTY. MENDOZA

Well, according to the Court, Your Honor, the Court principally invalidated this because, according to the Court it was fraudulent. And it was fraudulent because PAL misrepresented that it was losing, but in fact it was not as the Court found. So, in other words, if Your Honor please, as I have explained, there was no misrepresentation because the members of FASAP could not have but known that there were less planes that were flying. And they could not have but known that the number of cabin attendants cannot have exceed that which were required by the number of planes that were flying. So that was basically the reason for the redundancy and so it can never be said that this was redundant. But as I have said, if Your Honor please, if the Court reconsiders its finding that there was illegal dismissal there would really be no relevance to this quitclaim because, in any event, the separation pay has been received by some, except for those who declined it. So therefore, if Your Honor please, if I may conclude since my time is practically up. First, there can hardly be any question, in fact, it is considered by FASAP and found by the National Labor Relations Commission, the Labor Arbiter, and the Court of Appeals that circumstances existed that did not only warrant the reduction of personnel including the members of FASAP and the cabin attendants but that these were compelled by circumstances. If the cabin attendants were not retrenched you would have a situation where cabin attendants would be there but were not needed but would earn compensation. Second, if Your Honor please, as to the second issue, “cost-cutting measures” – they were contemplated. But when the pilots struck, an emergency situation arose and so there needed to be an immediate response to that situation and the only one of the components of that response is this retrenchment. Incidentally, if Your Honor please, a basic core of the rehabilitation of PAL was for the creditors to agree. PAL is a different business than other businesses, Your Honor. An airline cannot stand still and the creditors’ demands are not met immediately, PAL would simply lose its airplanes. And so far as Point No. 3 is concerned, if Your Honor please, PAL did the best it could under the circumstances. And as to number 3, as I said, if Your Honor please, PAL acted in accordance with criteria in the Collective Bargaining Agreement which it followed meticulously and religiously. Whereas for the fourth, if Your Honor please, there was no fraud in the execution of the quitclaim but I must emphasize once again that PAL’s case does not really rest on the quitclaims. PAL’s case rests on the response that we made on the first three (3) questions.

x x x x ATTY. MENDOZA Yes. As I explained, Your Honor, when the 1997 economic crisis took place and PAL saw that it was going to create a problem, PAL started studying measures already. But before it could implement any of these measures, even conclude the study the pilots struck, when the pilots struck the situations changed entirely. It put PAL in complete peril of total closure because no planes could fly, so that changed the picture, there was no more time to engage in cost-cutting measures. What needed to be done, if Your Honor please, is to do what was necessary to survive at that point? The first thing to do to survive was to fly as many planes as possible in order to earn some revenue. But you could only fly as many planes as there were pilots, and that was the reason for the initial flights. x x x x ASSOCIATE JUSTICE NACHURA During these conferences, did FASAP not suggest any other cost-cutting measures in order to determine the immediate implementation of a retrenchment program? ATTY. MENDOZA Well, there was an endorsed initial conversation; there were suggestions if there is to be reduction of personnel, rotations, and so on and so forth, Your Honor. So, by the time the pilots struck you have to retrench quickly x x x. ASSOCIATE JUSTICE NACHURA Because related to this is a statement in our Decision that the retrenchment was illegal because it was not actually the last resort that PAL could have; it was not the last resort that PAL could have attended, well used. That means, there were other options that would probably have opened to PAL which would not be as detrimental to FASAP as retrenchment. ATTY. MENDOZA If Your Honor please, may I put it this way? It was not just the last; it was the only resort, Your Honor, because of these circumstances. There was no other option, but to operate flghts and spend only as necessary. If you have more cabin attendants than we required for those planes which were flying you are spending needlessly actually, Your Honor, and that is certainly not conducive to bring about a recovery of Philippine Airlines.

x x x x ASSOCIATE JUSTICE DE CASTRO You mentioned that…before that, that there is a need for rehabilitation because the PAL was in dire financial condition at that time, and it was… ATTY. MENDOZA Your Honor please, the rehabilitation came after the pilots’ strike. Actually, before the pilots’ strike the effort of PAL is to find the way to address the Asian economic crisis. It’s just like, if Your Honor please, a factory which is to be more efficient in order to be able to compete, let us say, with the imported goods, so you downsize or you may try to be more efficient but the situation PAL confronted after the pilots’ strike was entirely different. It was a case of survival already, Your Honor, because it meant closure and PAL was able to operate some planes only because of what they called management pilots. There were certain pilots who were occupying supervisory positions but who were employed still by PAL. They were the ones who actually flew the plane because the members of the pilots’ union simply stopped working.[22] (Emphasis supplied) On the other hand, FASAP argued and reiterated its original contentions, inter alia, that during negotiations for the implementation of cost-cutting measures, it was assured by PAL that since there were negotiations with possible investors who were being eyed as business partners, retrenchment was no longer necessary;[23] that although it admitted PAL’s financial difficulties, it did not concede that these losses justified the urgency, necessity and extent of the questioned retrenchment scheme;[24] that the ICCD Masterank Listing was an afterthought, the same having been presented only on March 13, 2000, and was never shown to the retrenched employees during the period of retrenchment;[25] that the criteria for retrenchment did not conform to the CBA;[26] and that no cost-cutting measures were implemented.[27] PAL has all this time tried to convince the Court that its decision to downsize its flight fleet was the principal reason why it undertook a corresponding downsizing of cabin crew personnel. This time, however, it significantly changed stance and blamed the June 5, 1998 pilots’ strike as the real culprit which drove it to undertake the massive retrenchment under scrutiny. This time, PAL characterizes the retrenchment scheme and the downsizing of aircraft as mere necessary reactions to or unfortunate consequences of the pilots’ strike, which it claims likewise necessitated a disregard of all previous negotiations for the implementation of cost-cutting measures that

could have rendered the retrenchment scheme unnecessary, and which cost-cutting measures it no longer found necessary to undertake. We find this argument untenable. The strike was a temporary occurrence that did not necessitate the immediate and sweeping retrenchment of 1,400 cabin or flight attendants. By PAL’s own account, some of the striking pilots went back to work in July 1998, or less than one month after the strike began. Moreover, PAL admitted that it remedied the situation by employing “management pilots.”[28] It could have hired new pilots as well. Certainly, it could have implemented the cost-cutting measures being discussed as a temporary measure to obviate the adverse effects of the pilots’ strike. There was no reason to drastically implement a permanent retrenchment scheme in response to a temporary strike, which could have ended at any time, or remedied promptly, if management acted with alacrity. Juxtaposed with its failure to implement the required cost-cutting measures, the retrenchment scheme was a knee-jerk solution to a temporary problem that beset PAL at the time. Besides, we cannot simply allow PAL to conveniently blame the striking pilots for causing the massive retrenchment of cabin personnel. Using them as scapegoats to validate a comprehensive retrenchment scheme of cabin personnel without observing the requirements set by law is both unfair and underhanded. PAL must still prove that it implemented cost-cutting measures to obviate retrenchment, which under the law should be the last resort. By PAL’s own admission, however, the cabin personnel retrenchment scheme was one of the first remedies it resorted to, even before it could complete the proposed downsizing of its aircraft fleet. It admittedly dropped all plans of implementing cost-cutting measures as soon as the pilots went on strike, and right away it sent notices of termination to its cabin personnel.[29] This knee-jerk reaction would explain why it had to eventually recall and rehire some of the cabin attendants almost immediately after it retrenched them, because the retrenchment simply was not commensurate with the downsizing of aircraft fleet size. This outcome only proves to show that the decision to retrench came even before a final determination of how many aircraft were needed to be retained or discarded, or even before the rehabilitation plan could be approved.[30] Again, it must be emphasized that in order for a retrenchment scheme to be valid, all of the following elements under Article 283 of the Labor Code must concur or be present, to wit: (1) That retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but

substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer; (2) That the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment; (3) That the employer pays the retrenched employees separation pay equivalent to one (1) month pay or at least one-half (½) month pay for every year of service, whichever is higher; (4) That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and, (5) That the employer uses fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, efficiency, seniority, physical fitness, age, and financial hardship for certain workers. In the absence of one element, the retrenchment scheme becomes an irregular exercise of management prerogative. The employer’s obligation to exhaust all other means to avoid further losses without retrenching its employees is a component of the first element as enumerated above. To impart operational meaning to the constitutional policy of providing full protection to labor, the employer’s prerogative to bring down labor costs by retrenching must be exercised essentially as a measure of last resort, after less drastic means have been tried and found wanting.[31] In the instant case, PAL admitted that since the pilots’ strike allegedly created a situation of extreme urgency, it no longer implemented cost-cutting measures and proceeded directly to retrench. This being so, it clearly did not abide by all the requirements under Article 283 of the Labor Code. At the time it was implemented, the retrenchment scheme under scrutiny was not triggered directly by any financial difficulty PAL was experiencing at the time, nor borne of an actual implementation of its proposed downsizing of aircraft. It was brought about by – and resorted to as an immediate reaction to – a pilots’ strike which, in strict point of law and as herein earlier discussed, may not be considered as a valid reason to retrench, nor may it be used to excuse PAL for its non-observance of the requirements of the law on retrenchment under the Labor Code. On the basis of the foregoing disquisition, we find no further need to discuss the other arguments advanced by the parties in their pleadings and during the oral arguments.

Therefore, this Court finds no reason to disturb its finding that the retrenchment of the flight attendants was illegally executed. As held in the Decision sought to be reconsidered, PAL failed to observe the procedure and requirements for a valid retrenchment. Assuming that PAL was indeed suffering financial losses, the requisite proof therefor was not presented before the NLRC which was the proper forum. More importantly, the manner of the retrenchment was not in accordance with the procedure required by law. Hence, the retrenchment of the flight attendants amounted to illegal dismissal. Consequently, the flight attendants affected are entitled to the reliefs provided by law, which include backwages and reinstatement or separation pay, as the case may be. PAL begs the compassion of this Court and alleges that the monetary award it stands to pay to the affected flight attendants totals a whopping P2.3 billion, the payment of which will certainly paralyze its operations and even lead to its untimely demise. However, a careful review of the records of the case, as well as the respective allegations of the parties, shows that several of the crew members do not need to be paid full backwages or separation pay. A substantial fraction of the 1,400 flight attendants have already been either recalled, reinstated or relieved from the service. Still, some of them have reached the age of compulsory retirement or even died. Likewise, a significant portion of these retrenched flight attendants have already received separation pay and signed quitclaim. All of these factors, to the mind of the Court, will greatly reduce the quoted amount of the money judgment that PAL will have to pay. After finality of this case, the records will have to be remanded to the Labor Arbiter who decided the case at the first instance. There, the actual amount of PAL’s liability to each and every flight attendant will be computed. Both parties will have a chance to submit further proof and argument in support of their respective proposed computations. For the guidance of the Labor Arbiter as well as the parties, this Court lays down the following yardsticks in the computation of the final amount of liability, in order to avoid any protracted and heated debates which can again lead to further delays in the final resolution of this case and the full realization by the retrenched flight attendants of the amounts necessary to compensate and indemnify them for the wrongful retrenchment. 1. Flight attendants who have been re-employed without loss of seniority rights shall be paid backwages but only up to the time of their actual reinstatement.

2. Flight attendants who have been re-employed as new hires shall be restored their seniority and other preferential rights. However, their backwages shall be computed only up to the date of actual re-hiring. 3. Flight attendants who have reached their compulsory age of retirement shall receive backwages up to the date of their retirement only. The same is true as regards the heirs of those who have passed away. 4. Flight attendants who have not been re-employed by PAL, including those who executed quitclaims and received separation pay or financial assistance, shall be reinstated without loss of seniority rights and paid full backwages. However, the amounts they already received should be deducted from whatever amounts are finally adjudged to them individually. Four members of the Division voted to include a fifth (5th) criterion, namely that flight attendants who had obtained substantially equivalent or even more lucrative employment elsewhere in 1998 or thereafter are deemed to have severed their employment with PAL. They shall be entitled to full backwages from the date of their retrenchment only up to the date they found employment elsewhere. On a final note, this Court finds that the award of attorney’s fees equivalent to 10% of the total monetary award should be tempered, considering the number of flight attendants who stand to receive monetary awards and the totality of all amounts due to them. To be sure, attorney’s fees in labor cases are awarded specifically in actions for recovery of wages or where an employee was forced to litigate and thus incurred expenses to protect his rights and interests. In such cases, a maximum of 10% of the total monetary award is justifiable under Article 111 of the Labor Code, Section 8, Rule VIII, Book III of its Implementing Rules and paragraph 7, Article 2208 of the Civil Code.[32] The award of attorney’s fees is proper where there is a showing that the lawful wages were not paid accordingly.[33] x x x [T]here are two commonly accepted concepts of attorney’s fees, the so-called ordinary and extraordinary. In its ordinary concept, an attorney’s fee is the reasonable compensation paid to a lawyer by his client for the legal services he has rendered to the latter. The basis of this compensation is the fact of his employment by and his agreement with the client. In its extraordinary concept, attorney’s fees are deemed indemnity for damages ordered by the court to be paid by the losing party in a litigation. The instances where these may be awarded are those enumerated in Article 2208 of the Civil Code, specifically par. 7 thereof which pertains to actions for recovery of wages, and is payable not to the lawyer but to the client, unless they have agreed that the award shall pertain to the lawyer as additional compensation or as part thereof. The extraordinary concept of

attorney’s fees is the one contemplated in Article 111 of the Labor Code, which provides: Art. 111. Attorney’s fees. – (a) In cases of unlawful withholding of wages, the culpable party may be assessed attorney’s fees equivalent to ten percent of the amount of wages recovered x x x The afore-quoted Article 111 is an exception to the declared policy of strict construction in the awarding of attorney’s fees. Although an express finding of facts and law is still necessary to prove the merit of the award, there need not be any showing that the employer acted maliciously or in bad faith when it withheld the wages. There need only be a showing that the lawful wages were not paid accordingly, as in this case. In carrying out and interpreting the Labor Code’s provisions and its implementing regulations, the employee’s welfare should be the primordial and paramount consideration. This kind of interpretation gives meaning and substance to the liberal and compassionate spirit of the law as provided in Article 4 of the Labor Code which states that “[a]ll doubts in the implementation and interpretation of the provisions of [the Labor] Code including its implementing rules and regulations, shall be resolved in favor of labor”, and Article 1702 of the Civil Code which provides that “[i]n case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.” (Emphasis supplied)[34] In the case of Concept Placement Resources, Inc. v. Funk,[35] this Court reduced the amount of attorney’s fees which it ruled to be iniquitous and unconscionable after finding that the lawyer did not encounter difficulty in representing his client. It was held: We observe, however, that respondent did not encounter difficulty in representing petitioner. The complaint against it was dismissed with prejudice. All that respondent did was to prepare the answer with counterclaim and possibly petitioner’s position paper. Considering respondent’s limited legal services and the case involved is not complicated, the award of P50,000.00 as attorney’s fees is a bit excessive. In First Metro Investment Corporation vs. Este del Sol Mountain Reserve, Inc., we ruled that courts are empowered to reduce the amount of attorney’s fees if the same is iniquitous or unconscionable. Under the circumstances obtaining in this case, we consider the amount of P20,000.00 reasonable.[36] In the case at bar, we find that the flight attendants were represented by respondent union which, in turn, engaged the services of its own counsel. The flight attendants had a common cause of action. While the

work performed by respondent’s counsel was by no means simple, seeing as it spanned the whole litigation from the Labor Arbiter stage all the way to this Court, nevertheless, the issues involved in this case are simple, and the legal strategies, theories and arguments advanced were common for all the affected crew members. Hence, it may not be reasonable to award said counsel an amount equivalent to 10% of all monetary awards to be received by each individual flight attendant. Based on the length of time that this case has been litigated, however, we find that the amount of P2,000,000.00 is reasonable as attorney’s fees. This amount should include all expenses of litigation that were incurred by respondent union. WHEREFORE, for lack of merit, the Motion for Reconsideration is hereby DENIED with FINALITY. The assailed Decision dated July 22, 2008 is AFFIRMED with MODIFICATION in that the award of attorney’s fees and expenses of litigation is reduced to P2,000,000.00. The case is hereby REMANDED to the Labor Arbiter solely for the purpose of computing the exact amount of the award pursuant to the guidelines herein stated. No further pleadings will be entertained. SO ORDERED.