[G.R. No. 117040.

January 27, 2000]

RUBEN SERRANO, petitioner, vs. NATIONAL LABOR RELATIONS

COMMISSION and ISETANN DEPARTMENT STORE, respondents.

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

The LA rendered a decision in favor of Serrano. It stated that Isetann failed

to establish that it had retrenched its security division, that the petitioner
was not accorded due process, etc. and even stated that the day after
Serranos 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
supervisors position was long in place prior to Serranos separation from
the company, or the phase-out of the Security Section.

ISSUE
Whether the petitioners dismissal was illegal.

RULING: Valid, but ineffectual (without legal effect) payment of

backwages, separation pay and other monetary claims
No. The Court held that the dismissal was due to an authorized cause under
Art. 283 of the Labor Code, i.e. redundancy. However, while an authorized
cause exists, Isetann failed to follow the procedural requirement provided by
Art. 283 of LC. For termination due to authorized causes, the employer must
give a written notice of termination to the employee concerned and to the
DOLE at least 30 days prior to its effectivity. This Isetann failed to do.

The question now arises as to whether the failure of Isetann to comply with
the procedural requirements renders the dismissal invalid, or, in the event
that it is valid, what the appropriate sanction or penalty must be meted out.

Prior to the doctrine laid down in the decision rendered in Wenphil Corp.
NLRC in 1989, the termination of an employee, even for just cause but
without following the requisite procedure, renders such dismissal illegal, and
therefore null and void.

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

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

The present ruling of the Court held that the dismissal of the employee is
merely ineffectual, not void. The dismissal was upheld but it is
ineffectual. The sanction provided was the payment of backwages from
the time of dismissal up to the decision of the court finding just or
authorized cause. This was thought to balance the interests of both parties,
recognizing the employees 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 reqts 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
FACTS

Virgilio 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.
ISSUES
1. Whether the Agabons were illegally dismissed
2. Whether Riviera violated the requirements of notice and hearing
3. 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
employees 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 work
b. 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 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. Dongons 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 Companys 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 employees 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 Arbiters findings. Aggrieved,
respondents filed a petition for certiorari before the CA, who rendered a
ruling affirming the Labor Arbiters 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 Espaderos 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 Espaderos dismissal.
SUBSTANTIVELY, we also sustain petitioners reasoning that Espaderos
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 employers 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 employees 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 coworker, 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 Espaderos supervisor - to the personnel manager. Petitioners,
therefore, cannot be blamed for losing their trust in Espadero.
Moreover, the peculiar nature of Espaderos 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
employees 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, 2014

P.J. LHUILLIER, INC. AND MARIO RAMON LUDEA, Petitioners, v.
FLORDELIZ VELAYO, Respondent.
The Facts
The 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
xxxx
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.
xxxx
... 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 fiduciary
nature 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 her
position as branch cashier and vault
custodian 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 trust
and 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 workrelated 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 sufficient
cause 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 Caeda 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, Gamboas 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
Escao, another flight attendant, offered her wine bottle opener to
Francisco. Apparently, Gamboa overheard Del Rosarios remarks, and later
on verbally confronted her. Their confrontation escalated into a heated
argument. Escao 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, Northwests 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.
xxxx

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. CastillonLora 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 Northwests Rules of Conduct; that based on Blacks Law
Dictionary, fight referred to a hostile encounter, affray, or altercation; a
physical or verbal struggle for victory, pugilistic combat; that according to
Bouviers 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 attorneys 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 Rosarios 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
attorneys 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 Rosarios 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 attorneys fees consisting of
five (5%) per cent of the adjudged relief.
SO ORDERED. 8
Issues
The issues are the following, namely: (1) Was Del Rosarios 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 employees 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 Rosarios 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 Northwests 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 Northwests Rules of Conduct, the same could not be
considered as of such seriousness as to warrant Del Rosarios 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 Northwests
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 Rosarios 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 NonProduction/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 reechoed 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 showcause 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. AMPCs 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
LAs 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 employers rules
and application of the dignity and responsibility, has so plainly and
completely been barred.
The employers 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 Bandiolas 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 AMPCs 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
MARQUEZ
G.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 warning
b. Second Offense: AWOL on January 12, 2000 stern warning with three (3)
days suspension
c. 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 Apparels petition.
Issue:
Whether or not Michelle has been validly dismissed from employment
based on totality of infractions.
Held:
No. Michelles 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 ones duties. Habitual
neglect imparts repeated failure to perform ones 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.
Michelles 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 Apparels 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 employees
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 Apparels claim that
Michelles absences prejudiced its operations; there is no indication in the
records of any damage it sustained because of Michelles 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 Michelles 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 CAs 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.
DECISION
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
complainants monetary awards as computed above.
SO ORDERED.9
Not satisfied with the award, Serrano appealed the Labor Arbiters 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 Exocets 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 NLRCs 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 Serranos motion
for reconsideration.14Hence, not satisfied with the NLRCs 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 Serranos favor,
reversing and setting aside the NLRCs 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
Serranos 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. 00-0302423-07) 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 Exocets 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 Courts 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 agencys 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 agencys 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 employers bona
fidesuspension of operation of a business or undertaking. In security services,
thishappens when the security agencys 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 respondents 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 employees health or
that of coemployees;
4. Lack of service assignment for a continuous period of 6 months.
xxxx
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.
xxxx
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 securityagencys 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 assignmentalthough it
does not involvea demotion in rank or diminution in salary, pay, benefits or privileges
was not the security detail desired by Serrano.
Clearly, Serranos 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 securitythe availability of which is obviously not
within Exocets 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 clients 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 respondents 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 guards 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 guards failureto
assume another post. This is especially true in the present case where the security
guards 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 Serranos 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.
DECISION
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 attorneys fees.5cralawred
The deletion of the award of attorneys 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 GUZMAN

FS CARTAGENA, REGINALD
FS NAVA, PETER DE GUZMAN
FS PADILLA, ANGELITO
FA CRUZ, MARIA
FA MONTINOLA, NANCY
FA 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 Doritos
15 bags Banana Chips
5 pkg instant chocolate
5 bars Granola
18 bars Kit Kat
34 Chocolate flavored Goldilocks
16 Regular Goldilocks cakes
9 1st class Bulgari Kits
2 magazines
6 rolls toilet paper
9 cans soda
16 bottles of water
1 yogurt
12 small ice creams
2 jars salsa
2 bottles Orange Juice
1 bottle Cranberry Juice
1 bottle smoothie
All items returned to Philippine Airlines.
Nancy I. Graham

Supervisory CBPO
A-TCET Air
Honolulu Hi
PAL conducted an investigation. Montinola was among those implicated
because she was mentioned in Grahams email.9 On February 1, 2008, PALs
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, PALs 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 PALs 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 PALs 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 counsels 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 SubDepartment Sylvia C. Hermosisima, found Montinola guilty of 11
violations21 of the companys 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 Montinolas
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 complainants 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 attorneys fees to Montinola because she
was forced to litigate and incur expenses to protect [her]
rights.32cralawred
PAL appealed the Labor Arbiters 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
Commissions 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
NLRCs Decision in NLRC LAC No. 01000263-09 (NLRC NCR CN 08-1113708), dated June 9, 2009, is AFFIRMED with MODIFICATION in that the
award of moral and exemplary damages and attorneys fees to private
respondent are deleted.40 (Emphasis supplied)
The Court of Appeals deleted the moral and exemplary damages and
attorneys 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 attorneys fees
improper. The award of attorneys 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 attorneys 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 Montinolas illegal suspension entitled
her to an award of moral and exemplary damages and attorneys 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 unjust50 manner. She was not properly
apprised of the charges against her.51 She requested for proper notice of the
acts violative of PALs 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 Montinolas 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 Montinolas
view, PAL suspended her in a wanton, oppressive, and malevolent
manner.56cralawred
Finally, Montinola argues that she is entitled to attorneys fees because she
was forced to litigate. In Article 2208, paragraph (2) of the Civil Code,
individuals forced to litigate may ask for attorneys 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 PALs 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
attorneys fees. Attorneys 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 attorneys 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
employees liberty and quality of life. Work not only contributes to defining
the individual, it also assists in determining ones 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 ones 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 employers 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 PALs 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 nonagricultural: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.
PALs actions in implicating Montinola and penalizing her for no clear reason
show bad faith. PALs 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 PALs Code of
Discipline. The notice did not state which among the items confiscated by
the US customs officials were originally found in Montinolas 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 PALs Code of Discipline allegedly violated
was long and exhaustive. PALs 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 & CDs.
(ref. Entry-Exit Requirements Quick Reference GuideTranspacific)

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, CBPSupervisor,
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 PALs action supports the finding that Montinola committed
specific acts constituting violations of PALs 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 attorneys fees.
Article 2208 of the Civil Code enumerates the instances when attorneys
fees can be awarded:ChanRoblesVirtualawlibrary
ART. 2208. In the absence of stipulation, attorneys fees and expenses of
litigation, other than judicial costs, cannot be recovered,
except:ChanRoblesVirtualawlibrary

(1) When exemplary damages are awarded;

(2) When the defendants 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 plaintiffs 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 workmens compensation and employers
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
attorneys fees and expenses of litigation should be recovered.
In all cases, the attorneys fees and expenses of litigation must be
reasonable. (Emphasis supplied)
This case qualifies for the first, second, and seventh reasons why attorneys
fees are awarded under the Civil Code.
First, considering that we have awarded exemplary damages in this case,
attorneys fees can likewise be awarded.
Second, PALs 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
attorneys fees must be stated in the Labor Arbiters decision. The legal
justification of the Labor Arbiter is apparent in the
decision:ChanRoblesVirtualawlibrary
Complainants claim for attorneys 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
attorneys fees (Building Case Corp. vs. NLRC, G.R. No. 94237, February
26, 1997). She is thus granted attorneys 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 attorneys 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 attorneys 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) months 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 employers 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 ones employment, nothing less than an individuallyaddressed 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, 2013
Termination 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
companys 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 respondents 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 UnionOLALIA, 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.
DECISION
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 decision 5 of
Labor Arbiter Eric V. Chuanico that held that respondent Paolo Jesus T.
Padilla (Padilla) was illegally dismissed.

Padillas 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-Phils 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-Phils 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-Phils
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 attorneys fees), which is now subject
of this petition. Apart from Am-Phil, Padilla impleaded Am-Phils 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-Phils 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 Chuanicos 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. AmPhil claimed that its right to due process was violated by Labor Arbiter
Chuanicos 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 Chuanicos ruling, albeit clarifying that
Labor Arbiter Chuanico wrongly used the word solidarily in describing AmPhils liability to Padilla.24cralawlawlibrary
With respect to Am-Phils 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-Phils
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-Phils 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 Arbiters finding that the complainantappellee 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-Phils 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-Phils petition for certiorari and affirming the
National Labor Relations Commissions 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 Commissions 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 Padillas
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-Phils pending
motion for leave to file supplemental rejoinder.
Am-Phils right to due
process 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-Phils 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 latters 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-Phils
motion for leave to admit supplemental rejoinder and, thereby, consider the
supplemental rejoinders 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
rejoinders admission rests on the labor arbiters 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 its
requirements
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 managements 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 companys 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 countrys 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 employers 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 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 requisites

for a valid retrenchment
Am-Phils 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 Padillas
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 Padillas 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.
Padillas quitclaim and release
does not negate his having been
illegally dismissed
It is of no consequence that Padilla ostensibly executed a quitclaim and
release in favor of Am-Phil. This courts 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.
DECISION
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
xxxx
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. RAMOS
Manager-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
15 - less than 21
21 - less than 26
26 - less than 31
31 and up

Retirement Benefit
Equivalent to
34 days pay per year of service
35 days pay per year of service
36 days pay per year of service
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 Resolution 31 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 the
CBA 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 Angus
is 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
STEWARDS ASSOCIATION OF
THE PHILIPPINES (FASAP),
Petitioner,
- versus Nachura,
Peralta, and
Bersamin,* JJ.
PHILIPPINE AIRLINES, INC.,
PATRIA CHIONG and COURT

G.R. No. 178083

Present:
Ynares-Santiago, J. (Chairperson),
Chico-Nazario,

Promulgated:

OF APPEALS,
Respondents.
October 2, 2009
x ---------------------------------------------------------------------------------------- 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 Arbiters 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 attorneys 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 19961998, 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 SECs 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, PALs 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 employeewide 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 airlines financial distress, and was a condition
sine qua non if PALs 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 PALs demise. The petition for rehabilitation and suspension of
payments was precisely intended to avoid PALs 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 PALs 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 PALs 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 PALs Amended and Restated Rehabilitation Plan, which
includes, among others, PALs 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 PALs 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.
xxxx
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.
xxxx
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 Courts
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 PALs 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
PALs 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.
xxxx
Likewise, no bad faith should be inferred from PALs 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, PALs 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 latters
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 PALs 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 personnels 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 NLRCs 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 years 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 PALs Motion for Reconsideration, FASAP asserts that

the issue is not centered on PALs 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.
xxxx
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
xx
This is about a bad faith retrenchment one which neither complied with
the legal prerequisites therefor nor observed the provisions of the PALFASAP 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 PALs 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 PALs 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 PALs 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.
Estrada, Mercedes
Hortaleza, Lita
Jimenez, Lolita
Aquino, Teresita

Oct. 27, 1969

Aug. 20, 1970
June 11, 1971
April 25, 1972
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 FASAPs 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 PALs
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. PALs
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 PALs 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 PALs earlier decision to
downsize its fleet of aircrafts. There is thus simply no basis to say that PAL
implemented retrenchment in the first instance.
xxxx

22.
Neither is there basis to FASAPs 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. FASAPs 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 PALs 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 managements 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.
xxxx
26.
FASAP then insists that the basic criterion to effect lay-off or
retrenchment is seniority. FASAP cites Article VII, Section 23 of the PALFASAP 1995-2000 CBA:
The term seniority whenever used in this Agreement shall be deemed to
mean a measure of a regular Cabin Attendants 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 PALFASAP 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, PALs 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 PALs 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.
xxxx
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 PALs case
does not really rest on the quitclaims. PALs case rests on the response that
we made on the first three (3) questions.
xxxx
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.
xxxx
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.
xxxx
ASSOCIATE JUSTICE DE CASTRO
You mentioned thatbefore 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. Its 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 PALs 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 costcutting 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 PALs 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 PALs 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 () 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 employers 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 employers 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 costcutting 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 PALs 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 attorneys 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, attorneys 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 attorneys 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 attorneys fees, the
so-called ordinary and extraordinary. In its ordinary concept, an attorneys
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, attorneys 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
attorneys fees is the one contemplated in Article 111 of the Labor Code,
which provides:
Art. 111. Attorneys fees. (a) In cases of unlawful withholding of wages,
the culpable party may be assessed attorneys 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 attorneys 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 Codes provisions and its
implementing regulations, the employees 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 attorneys 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 petitioners position paper. Considering
respondents limited legal services and the case involved is not
complicated, the award of P50,000.00 as attorneys 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
attorneys 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 respondents 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 attorneys 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 attorneys 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.