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G.R. No.

80587 February 8, 1989 On December 2, 1987, the court issued a restraining order as prayed for in the
WENPHIL CORPORATION, petitioner, petition enjoining the enforcement of the decision dated October 16, 1987 of
vs. public respondent NLRC upon petitioner posting a bond of P20,000.00.
NATIONAL LABOR RELATIONS COMMISSION AND ROBERTO MALLARE,
respondents. The theory of the petitioner is that on the aforesaid date, May 20, 1985, when
Renato B. Valdecantos & Associates for petitioner. private respondent and Barrameda had a misunderstanding about tending the
The Solicitor General for public respondent. Salad Bar, private respondent slapped Barrameda's cap, stepped on his foot and
Diego O. Untalan for private respondent. picked up the ice scooper and brandished it against the latter. Marijo B.
Kolimlim who was a management trainee tried to pacify private respondent but
he defied her so Kolimlim reported the incident to the assistant manager,
GANCAYCO, J.: Delilah C. Hermosura, who immediately asked private respondent to see her.
Private respondent refused to see Hermosura and it took the security guard to
Once again the dismissal of an employee without affording him due process is bring him to her. Private respondent then shouted and uttered profane words
brought to the attention of this Court by this petition. instead of making an explanation before her. He stated the matter should be
settled only by him and Barrameda. The following day Kolimlim and
Hermosura submitted a report on the incident and recommended the
Private respondent was hired by petitioner on January 18, 1984 as a crew imposition of the appropriate penalties on both. It was the store manager who
member at its Cubao Branch. He thereafter became the assistant head of the issued a report meting out the penalty of suspension on the two until further
Backroom department of the same branch. At about 2:30 P.M. on May 20, 1985 notice in the following morning. Later that day the Operations Manager issued a
private respondent had an altercation with a co-employee, Job Barrameda, as a memorandum advising Barrameda of one (1) week suspension and the
result of which he and Barrameda were suspended on the following morning dismissal of private respondent from the service.
and in the afternoon of the same day a memorandum was issued by the
Operations Manager advising private respondent of his dismissal from the
service in accordance with their Personnel Manual. The notice of dismissal was The main thrust of the petition is that under the Personnel Manual of petitioner
served on private respondent on May 25, 1985. which had been read and understood by private respondent, private
respondent waived his right to the investigation. It is provided therein that -
Thus private respondent filed a complaint against petitioner for unfair labor
practice, illegal suspension and illegal dismissal. After submitting their INVESTIGATION
respective position papers to the Labor Arbiter and as the hearing could not be
conducted due to repeated absence of counsel for respondent, the case was If the offense is punishable with a penalty higher than suspension for fifteen
submitted for resolution. Thereafter a decision was rendered by the Labor (15) days, upon the request of the erring employee, there shall be convened an
Arbiter on December 3, 1986 dismissing the complaint for lack of merit. investigation board composed of the following

Private respondent appealed to the National Labor Relations Commission 1. The Parlor Manager or Supervisor on duty when the incident occurred.
(NLRC) wherein in due course a decision was rendered on October 16, 1987
setting aside the appealed decision and ordering the reinstatement of private 2. The General Manager or the Assistant Manager.
respondent to his former position without loss of seniority and other related
benefits and one (1) year backwages without qualification and deduction.
The investigation board shall discuss the merits of the case
and shall issue a ruling, which shall be final and conclusive. (p. 3, Personnel
Hence the herein petition for certiorari with preliminary injunction and/or Manual: Emphasis supplied).
restraining order wherein petitioner alleges that the public respondent NLRC
committed a grave abuse of discretion in rendering its decision contrary to the
evidence on record.

1
From the foregoing it appears that an investigation shall only be conducted if Petitioner insists that private respondent was afforded due process but he
the offense committed by the employee is punishable with the penalty higher refused to avail of his right to the same; that when the matter was brought to
than suspension of fifteen (15) days and the erring employee requests for an the labor arbiter he was able to submit his position papers although the hearing
investigation of the incident. Petitioner alleges that private respondent not cannot proceed due to the non-appearance of his counsel; and that the private
having asked for an investigation he is thus deemed to have waived his right to respondent is guilty of serious misconduct in threatening or coercing a co-
the same. Petitioner avers that immediately after the incident when private employee which is a ground for dismissal under Article 283 of the Labor Code.
respondent was asked to see Hermosura, he was defiant and showed that he
was not interested to avail of an investigation. The failure of petitioner to give private respondent the benefit of a hearing
before he was dismissed constitutes an infringement of his constitutional right
The contention of petitioner is untenable. The incident happened on May 20, to due process of law and equal protection of the laws. 2 The standards of due
1985 and right then and there as afore repeated on the following day private process in judicial as well as administrative proceedings have long been
respondent was suspended in the morning and was dismissed from the service established. In its bare minimum due process of law simply means giving notice
in the afternoon. He received an official notice of his termination four (4) days and opportunity to be heard before judgment is rendered. 3
later.
The claim of petitioner that a formal investigation was not necessary because
The defiant attitude of private respondent immediately after the incident the incident which gave rise to the termination of private respondent was
amounted to insubordination. Nevertheless his refusal to explain his side under witnessed by his co- employees and supervisors is without merit. The basic
the circumstances cannot be considered as a waiver of his right to an requirement of due process is that which hears before it condemns, which
investigation. proceeds upon inquiry and renders judgment only after trial. 4

Although in the Personnel Manual of the petitioner, it states that an erring However, it is a matter of fact that when the private respondent filed a
employee must request for an investigation it does not thereby mean that complaint against petitioner he was afforded the right to an investigation by
petitioner is thereby relieved of the duty to conduct an investigation before the labor arbiter. He presented his position paper as did the petitioner. If no
dismissing private respondent. Indeed said provision of the Personnel Manual hearing was had, it was the fault of private respondent as his counsel failed to
of petitioner which may effectively deprive its employees of the right to due appear at the scheduled hearings. The labor arbiter concluded that the
process is clearly against the law and hence null and void. The security of dismissal of private respondent was for just cause. He was found guilty of grave
tenure of a laborer or employee is enshrined in the Constitution, the Labor misconduct and insubordination. This is borne by the sworn statements of
Code and other related laws. 1 witnesses. The Court is bound by this finding of the labor arbiter.

Under Section 1, Rule XIV of the Implementing Regulations of the Labor Code, it By the same token, the conclusion of the public respondent NLRC on appeal
is provided that "No worker shall be dismissed except for just or authorized that private respondent was not afforded due process before he was dismissed
cause provided by law and after due process." Sections 2, 5, 6, and 7 of the same is binding on this Court. Indeed, it is well taken and supported by the records.
rules require that before an employer may dismiss an employee the latter must However, it can not justify a ruling that private respondent should be reinstated
be given a written notice stating the particular act or omission constituting the with back wages as the public respondent NLRC so decreed. Although belatedly,
grounds thereof; that the employee may answer the allegations within a private respondent was afforded due process before the labor arbiter wherein
reasonable period; that the employer shall afford him ample opportunity to be the just cause of his dismissal bad been established. With such finding, it would
heard and to defend himself with the assistance of his representative, if he so be arbitrary and unfair to order his reinstatement with back wages.
desires; and that it is only then that the employer may dismiss the employee by
notifying him of the decision in writing stating clearly the reasons therefor. The Court holds that the policy of ordering the reinstatement to the service of
Such dismissal is without prejudice to the right of the employee to contest its an employee without loss of seniority and the payment of his wages during the
validity in the Regional Branch of the NLRC. period of his separation until his actual reinstatement but not exceeding three
(3) years without qualification or deduction, when it appears he was not

2
afforded due process, although his dismissal was found to be for just and G.R. No. 117040 January 27, 2000
authorized cause in an appropriate proceeding in the Ministry of Labor and
Employment, should be re-examined. It will be highly prejudicial to the RUBEN SERRANO, petitioner,
interests of the employer to impose on him the services of an employee who vs.
has been shown to be guilty of the charges that warranted his dismissal from NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT
employment. Indeed, it will demoralize the rank and file if the undeserving, if STORE, respondents.
not undesirable, remains in the service.
MENDOZA, J.:
Thus in the present case, where the private respondent, who appears to be of
violent temper, caused trouble during office hours and even defied his
superiors as they tried to pacify him, should not be rewarded with re- This is a Petition seeking review of the resolutions, dated March 30, 1994 and
employment and back wages. It may encourage him to do even worse and will August 26, 1994, of the National Labor Relations Commission (NLRC) which
render a mockery of the rules of discipline that employees are required to reversed the decision of the Labor Arbiter and dismissed petitioner Ruben
observe. Under the circumstances the dismissal of the private respondent for Serrano's complaint for illegal dismissal and denied his motion for
just cause should be maintained. He has no right to return to his former reconsideration. The facts are as follows:
employer.
Petitioner was hired by private respondent Isetann Department Store as a
However, the petitioner must nevertheless be held to account for failure to security checker to apprehend shoplifters and prevent pilferage of
extend to private respondent his right to an investigation before causing his merchandise.1 Initially hired on October 4, 1984 on contractual basis,
dismissal. The rule is explicit as above discussed. The dismissal of an employee petitioner eventually became a regular employee on April 4, 1985. In 1988, he
must be for just or authorized cause and after due process. 5 Petitioner became head of the Security Checkers Section of private respondent.2
committed an infraction of the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct an investigation as Sometime in 1991, as a cost-cutting measure, private respondent decided to
required by law before dismissing petitioner from employment. Considering phase out its entire security section and engage the services of an independent
the circumstances of this case petitioner must indemnify the private security agency. For this reason, it wrote petitioner the following
respondent the amount of P1,000.00. The measure of this award depends on memorandum:3
the facts of each case and the gravity of the omission committed by the
employer. October 11, 1991

WHEREFORE, the petition is GRANTED. The questioned decision of the public MR. RUBEN SERRANO
respondent NLRC dated October 16, 1987 for the reinstatement with back
wages of private respondent is REVERSED AND SET ASIDE, and the decision of
the labor arbiter dated December 3, 1986 dismissing the complaint is revived PRESENT
and affirmed, but with the modification that petitioner is ordered to indemnify
private respondent in the amount of P1,000.00. The restraining order issued by Dear Mr. Seranno,
this Court on December 2, 1987 is hereby made permanent and the bond
posted by petitioner is cancelled. This decision is immediately executory. In view of the retrenchment program of the company, we hereby
reiterate our verbal notice to you of your termination as Security
SO ORDERED. Section Head effective October 11, 1991.

Please secure your clearance from this office.

3
Very truly yours, reinstatement. (computed till promulgation only) based on his monthly salary
of P4,040.00/month at the time of his termination but limited to (3) three
[Sgd.] TERESITA A. VILLANUEVA years;
Human Resources Division Manager
(b) Ordering the Respondent to immediately reinstate the complainant to his
The loss of his employment prompted petitioner to file a complaint on former position as security section head or to a reasonably equivalent
December 3, 1991 for illegal dismissal, illegal layoff, unfair labor practice, supervisorial position in charges of security without loss of seniority rights,
underpayment of wages, and nonpayment of salary and overtime pay.4 privileges and benefits. This order is immediately executory even pending
appeal;
The parties were required to submit their position papers, on the basis of
which the Labor Arbiter defined the issues as follows:5 (c) Ordering the Respondent to pay complainant unpaid wages in the amount of
P2,020.73 and proportionate 13th month pay in the amount of P3,198.30;
Whether or not there is a valid ground for the dismissal of the complainant.
(d) Ordering the Respondent to pay complainant the amount of P7,995.91,
representing 10% attorney's fees based on the total judgment award of
Whether or not complainant is entitled to his monetary claims for P79,959.12.
underpayment of wages, nonpayment of salaries, 13th month pay for 1991 and
overtime pay.
All other claims of the complainant whether monetary or otherwise is hereby
dismissed for lack of merit.
Whether or not Respondent is guilty of unfair labor practice.
SO ORDERED.
Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a
decision finding petitioner to have been illegally dismissed. He ruled that
private respondent failed to establish that it had retrenched its security section Private respondent appealed to the NLRC which, in its resolution of March 30,
to prevent or minimize losses to its business; that private respondent failed to 1994; reversed the decision of the Labor Arbiter and ordered petitioner to be
accord due process to petitioner; that private respondent failed to use given separation pay equivalent to one month pay for every year of service,
reasonable standards in selecting employees whose employment would be unpaid salary, and proportionate 13th month pay. Petitioner filed a motion for
terminated; that private respondent had not shown that petitioner and other reconsideration, but his motion was denied.
employees in the security section were so inefficient so as to justify their
replacement by a security agency, or that "cost-saving devices [such as] secret The NLRC held that the phase-out of private respondent's security section and
video cameras (to monitor and prevent shoplifting) and secret code tags on the the hiring of an independent security agency constituted an exercise by private
merchandise" could not have been employed; instead, the day after petitioner's respondent of "[a] legitimate business decision whose wisdom we do not
dismissal, private respondent employed a safety and security supervisor with intend to inquire into and for which we cannot substitute our judgment"; that
duties and functions similar to those of petitioner.1âwphi1.nêt the distinction made by the Labor Arbiter between "retrenchment" and the
employment of cost-saving devices" under Art. 283 of the Labor Code was
Accordingly, the Labor Arbiter ordered:6 insignificant because the company official who wrote the dismissal letter
apparently used the term "retrenchment" in its "plain and ordinary sense: to
layoff or remove from one's job, regardless of the reason therefor"; that the rule
WHEREFORE, above premises considered, judgment is hereby decreed: of "reasonable criteria" in the selection of the employees to be retrenched did
not apply because all positions in the security section had been abolished; and
(a) Finding the dismissal of the complainant to be illegal and concomitantly, that the appointment of a safety and security supervisor referred to by
Respondent is ordered to pay complainant full backwages without qualification petitioner to prove bad faith on private respondent's part was of no moment
or deduction in the amount of P74,740.00 from the time of his dismissal until

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because the position had long been in existence and was separate from In contracting the services of Gemac Machineries, as part of the company's cost-
petitioner's position as head of the Security Checkers Section. saving program, the services rendered by the mechanics became redundant
and superfluous, and therefore properly terminable. The company merely
Hence this petition. Petitioner raises the following issue: exercised its business judgment or management prerogative. And in the
absence of any proof that the management abused its discretion or acted in a
malicious or arbitrary manner, the court will not interfere with the exercise of
IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE such prerogative.9
PRIVATE RESPONDENT TO REPLACE ITS CURRENT SECURITY
SECTION A VALID GROUND FOR THE DISMISSAL OF THE EMPLOYEES
CLASSED UNDER THE LATTER?7 In Asian Alcohol Corporation v. National Labor Relations Commission,10 the
Court likewise upheld the termination of employment of water pump tenders
and their replacement by independent contractors. It ruled that an employer's
Petitioner contends that abolition of private respondent's Security Checkers good faith in implementing a redundancy program is not necessarily put in
Section and the employment of an independent security agency do not fall doubt by the availment of the services of an independent contractor to replace
under any of the authorized causes for dismissal under Art. 283 of the Labor the services of the terminated employees to promote economy and efficiency.
Code.
Indeed, as we pointed out in another case, the "[management of a company]
Petitioner Laid Off for Cause cannot be denied the faculty of promoting efficiency and attaining economy by
a study of what units are essential for its operation. To it belongs the ultimate
Petitioner's contention has no merit. Art. 283 provides: determination of whether services should be performed by its personnel or
contracted to outside agencies . . . [While there] should be mutual consultation,
Closure of establishment and reduction of personnel. — The employer may also eventually deference is to be paid to what management decides."11
terminate the employment of any employee due to the installation of labor- Consequently, absent proof that management acted in a malicious or arbitrary
saving devices, redundancy, retrenchment to prevent losses or the closing or manner, the Court will not interfere with the exercise of judgment by an
cessation of operations of the establishment or undertaking unless the closing employer.12
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 In the case at bar, we have only the bare assertion of petitioner that, in
at least one (1) month before the intended date thereof. In case of termination abolishing the security section, private respondent's real purpose was to avoid
due to the installation of labor-saving devices or redundancy, the worker payment to the security checkers of the wage increases provided in the
affected thereby shall be entitled to a separation pay equivalent to at least one collective bargaining agreement approved in 1990.13 Such an assertion is not
(1) month pay or to at least one (1) month pay for every year of service, sufficient basis for concluding that the termination of petitioner's employment
whichever is higher. In case of retrenchment to prevent losses and in cases of was not a bona fide decision of management to obtain reasonable return from
closure or cessation of operations of establishment or undertaking not due to its investment, which is a right guaranteed to employers under the
serious business losses or financial reverses, the separation pay shall be Constitution.14 Indeed, that the phase-out of the security section constituted a
equivalent to at least one (1) month pay or at least one-half (1/2) month pay "legitimate business decision" is a factual finding of an administrative agency
for every year of service, whichever is higher. A fraction of at least six (6) which must be accorded respect and even finality by this Court since nothing
months shall be considered as one (1) whole year. can be found in the record which fairly detracts from such finding.15

In De Ocampo v. National Labor Relations Commission,8 this Court upheld the Accordingly, we hold that the termination of petitioner's services was for an
termination of employment of three mechanics in a transportation company authorized cause, i.e., redundancy. Hence, pursuant to Art. 283 of the Labor
and their replacement by a company rendering maintenance and repair Code, petitioner should be given separation pay at the rate of one month pay
services. It held: for every year of service.

5
Sanctions for Violations of the Notice Requirement he was not afforded due process, although his dismissal was found to be for just
and authorized cause in an appropriate proceeding in the Ministry of Labor and
Art. 283 also provides that to terminate the employment of an employee for any Employment, should be re-examined. It will be highly prejudicial to the
of the authorized causes the employer must serve "a written notice on the interests of the employer to impose on him the services of an employee who
workers and the Department of Labor and Employment at least one (1) month has been shown to be guilty of the charges that warranted his dismissal from
before the intended date thereof." In the case at bar, petitioner was given a employment. Indeed, it will demoralize the rank and file if the undeserving, if
notice of termination on October 11, 1991. On the same day, his services were not undesirable, remains in the service.
terminated. He was thus denied his right to be given written notice before the
termination of his employment, and the question is the appropriate sanction for xxx xxx xxx
the violation of petitioner's right.
However, the petitioner must nevertheless be held to account for
To be sure, this is not the first time this question has arisen. In Subuguero v. failure to extend to private respondent his right to an investigation before
NLRC,16 workers in a garment factory were temporarily laid off due to the causing his dismissal. The rule is explicit as above discussed. The dismissal of
cancellation of orders and a garment embargo. The Labor Arbiter found that an employee must be for just or authorized cause and after due process.
the workers had been illegally dismissed and ordered the company to pay Petitioner committed an infraction of the second requirement. Thus, it must be
separation pay and backwages. The NLRC, on the other hand, found that this imposed a sanction for its failure to give a formal notice and conduct an
was a case of retrenchment due to business losses and ordered the payment of investigation as required by law before dismissing petitioner from
separation pay without backwages. This Court sustained the NLRC's finding. employment. Considering the circumstances of this case petitioner must
However, as the company did not comply with the 30-day written notice in Art. indemnify the private respondent the amount of P1,000.00. The measure of this
283 of the Labor Code, the Court ordered the employer to pay the workers award depends on the facts of each case and the gravity of the omission
P2,000.00 each as indemnity. committed by the employer.

The decision followed the ruling in several cases involving dismissals which, The fines imposed for violations of the notice requirement have varied from
although based on any of the just causes under Art. 282,17 were effected P1,000.0022 to P2,000.0023 to P5,000.0024 to P10,000.00.25
without notice and hearing to the employee as required by the implementing
rules.18 As this Court said: "It is now settled that where the dismissal of one Need for Reexamining the Wenphil Doctrine
employee is in fact for a just and valid cause and is so proven to be but he is not
accorded his right to due process, i.e., he was not furnished the twin
requirements of notice and opportunity to be heard, the dismissal shall be Today, we once again consider the question of appropriate sanctions for
upheld but the employer must be sanctioned for non-compliance with the violations of the notice experience during the last decade or so with the
requirements of, or for failure to observe, due process."19 Wenphil doctrine. The number of cases involving dismissals without the
requisite notice to the employee, although effected for just or authorized
causes, suggest that the imposition of fine for violation of the notice
The rule reversed a long standing policy theretofore followed that even though requirement has not been effective in deterring violations of the notice
the dismissal is based on a just cause or the termination of employment is for requirement. Justice Panganiban finds the monetary sanctions "too
an authorized cause, the dismissal or termination is illegal if effected without insignificant, too niggardly, and sometimes even too late." On the other hand,
notice to the employee. The shift in doctrine took place in 1989 in Wenphil Justice Puno says there has in effect been fostered a policy of "dismiss now; pay
Corp. v. NLRC.20 In announcing the change, this Court said:21 later" which moneyed employers find more convenient to comply with than the
requirement to serve a 30-day written notice (in the case of termination of
The Court holds that the policy of ordering the reinstatement to the employment for an authorized cause under Arts. 283-284) or to give notice and
service of an employee without loss of seniority and the payment of his wages hearing (in the case of dismissals for just causes under Art. 282).
during the period of his separation until his actual reinstatement but not
exceeding three (3) years without qualification or deduction, when it appears

6
For this reason, they regard any dismissal or layoff without the requisite notice Justice Puno argues that an employer's failure to comply with the notice
to be null and void even though there are just or authorized cause for such requirement constitutes a denial of the employee's right to due process.
dismissal or layoff. Consequently, in their view, the employee concerned should Prescinding from this premise, he quotes the statement of Chief Justice
be reinstated and paid backwages. Concepcion Vda. de Cuaycong v. Vda. de Sengbengco26 that "acts of Congress, as
well as of the Executive, can deny due process only under the pain of nullity,
Validity of Petitioner's Layoff Not Affected by Lack of Notice and judicial proceedings suffering from the same flaw are subject to the same
sanction, any statutory provision to the contrary notwithstanding." Justice
Puno concludes that the dismissal of an employee without notice and hearing,
We agree with our esteemed colleagues, Justices Puno and Panganiban, that we even if for a just cause, as provided in Art. 282, or for an authorized cause, as
should rethink the sanction of fine for an employer's disregard of the notice provided in Arts. 283-284, is a nullity. Hence, even if just or authorized cause
requirement. We do not agree, however, that disregard of this requirement by exist, the employee should be reinstated with full back pay. On the other hand,
an employer renders the dismissal or termination of employment null and void. Justice Panganiban quotes from the statement in People v. Bocar27 that
Such a stance is actually a reversion to the discredited pre-Wenphil rule of "[w]here the denial of the fundamental right of due process is apparent, a
ordering an employee to be reinstated and paid backwages when it is shown decision rendered in disregard of that right is void for lack of jurisdiction."
that he has not been given notice and hearing although his dismissal or layoff is
later found to be for a just or authorized cause. Such rule was abandoned in
Wenphil because it is really unjust to require an employer to keep in his service Violation of Notice Requirement Not a Denial of Due Process
one who is guilty, for example, of an attempt on the life of the employer or the
latter's family, or when the employer is precisely retrenching in order to The cases cited by both Justices Puno and Panganiban refer, however, to the
prevent losses. denial of due process by the State, which is not the case here. There are three
reasons why, on the other hand, violation by the employer of the notice
The need is for a rule which, while recognizing the employee's right to notice requirement cannot be considered a denial of due process resulting in the
before he is dismissed or laid off, at the same time acknowledges the right of nullity of the employee's dismissal or layoff.
the employer to dismiss for any of the just causes enumerated in Art. 282 or to
terminate employment for any of the authorized causes mentioned in Arts. 283- The first is that the Due Process Clause of the Constitution is a limitation on
284. If the Wenphil rule imposing a fine on an employer who is found to have governmental powers. It does not apply to the exercise of private power, such
dismissed an employee for cause without prior notice is deemed ineffective in as the termination of employment under the Labor Code. This is plain from the
deterring employer violations of the notice requirement, the remedy is not to text of Art. III, §1 of the Constitution, viz.: "No person shall be deprived of life,
declare the dismissal void if there are just or valid grounds for such dismissal liberty, or property without due process of law. . . ." The reason is simple: Only
or if the termination is for an authorized cause. That would be to uphold the the State has authority to take the life, liberty, or property of the individual. The
right of the employee but deny the right of the employer to dismiss for cause. purpose of the Due Process Clause is to ensure that the exercise of this power is
Rather, the remedy is to order the payment to the employee of full backwages consistent with what are considered civilized methods.
from the time of his dismissal until the court finds that the dismissal was for a
just cause. But, otherwise, his dismissal must be upheld and he should not be The second reason is that notice and hearing are required under the Due
reinstated. This is because his dismissal is ineffectual. Process Clause before the power of organized society are brought to bear upon
the individual. This is obviously not the case of termination of employment
For the same reason, if an employee is laid off for any of the causes in Arts. 283- under Art. 283. Here the employee is not faced with an aspect of the adversary
284, i.e., installation of a labor-saving device, but the employer did not give him system. The purpose for requiring a 30-day written notice before an employee
and the DOLE a 30-day written notice of termination in advance, then the is laid off is not to afford him an opportunity to be heard on any charge against
termination of his employment should be considered ineffectual and he should him, for there is none. The purpose rather is to give him time to prepare for the
be paid backwages. However, the termination of his employment should not be eventual loss of his job and the DOLE an opportunity to determine whether
considered void but he should simply be paid separation pay as provided in Art. economic causes do exist justifying the termination of his employment.
283 in addition to backwages.

7
Even in cases of dismissal under Art. 282, the purpose for the requirement of This is also the case in termination of employment for a just cause under Art.
notice and hearing is not to comply with Due Process Clause of the Constitution. 282 (i.e., serious misconduct or willful disobedience by the employee of the
The time for notice and hearing is at the trial stage. Then that is the time we lawful orders of the employer, gross and habitual neglect of duties, fraud or
speak of notice and hearing as the essence of procedural due process. Thus, willful breach of trust of the employer, commission of crime against the
compliance by the employer with the notice requirement before he dismisses employer or the latter's immediate family or duly authorized representatives,
an employee does not foreclose the right of the latter to question the legality of or other analogous cases).
his dismissal. As Art. 277(b) provides, "Any decision taken by the employer
shall be without prejudice to the right of the worker to contest the validity or Justice Puno disputes this. He says that "statistics in the DOLE will prove that
legality of his dismissal by filing a complaint with the regional branch of the many cases have been won by employees before the grievance committees
National Labor Relations Commission." manned by impartial judges of the company." The grievance machinery is,
however, different because it is established by agreement of the employer and
Indeed, to contend that the notice requirement in the Labor Code is an aspect of the employees and composed of representatives from both sides. That is why,
due process is to overlook the fact that Art. 283 had its origin in Art. 302 of the in Batangas Laguna Tayabas Bus Co. ·v. Court of Appeals,31 which Justice Puno
Spanish Code of Commerce of 1882 which gave either party to the employer- cites, it was held that "Since the right of [an employee] to his labor is in itself a
employee relationship the right to terminate their relationship by giving notice property and that the labor agreement between him and [his employer] is the
to the other one month in advance. In lieu of notice, an employee could be laid law between the parties, his summary and arbitrary dismissal amounted to
off by paying him a mesada equivalent to his salary for one month.28 This deprivation of his property without due process of law." But here we are
provision was repealed by Art. 2270 of the Civil Code, which took effect on dealing with dismissals and layoffs by employers alone, without the
August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the intervention of any grievance machinery. Accordingly in Montemayor v. Araneta
Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the University Foundation,32 although a professor was dismissed without a hearing
law was amended by R.A. No. 1787 providing for the giving of advance notice or by his university, his dismissal for having made homosexual advances on a
the payment of compensation at the rate of one-half month for every year of student was sustained, it appearing that in the NLRC, the employee was fully
service.29 heard in his defense.

The Termination Pay Law was held not to be a substantive law but a regulatory Lack of Notice Only Makes Termination Ineffectual
measure, the purpose of which was to give the employer the opportunity to find
a replacement or substitute, and the employee the equal opportunity to look for Not all notice requirements are requirements of due process. Some are simply
another job or source of employment. Where the termination of employment part of a procedure to be followed before a right granted to a party can be
was for a just cause, no notice was required to be given to the, employee.30 It exercised. Others are simply an application of the Justinian precept, embodied
was only on September 4, 1981 that notice was required to be given even in the Civil Code,33 to act with justice, give everyone his due, and observe
where the dismissal or termination of an employee was for cause. This was honesty and good faith toward one's fellowmen. Such is the notice requirement
made in the rules issued by the then Minister of Labor and Employment to in Arts. 282-283. The consequence of the failure either of the employer or the
implement B.P. Blg. 130 which amended the Labor Code. And it was still much employee to live up to this precept is to make him liable in damages, not to
later when the notice requirement was embodied in the law with the render his act (dismissal or resignation, as the case may be) void. The measure
amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It cannot be that of damages is the amount of wages the employee should have received were it
the former regime denied due process to the employee. Otherwise, there should not for the termination of his employment without prior notice. If warranted,
now likewise be a rule that, in case an employee leaves his job without cause nominal and moral damages may also be awarded.
and without prior notice to his employer, his act should be void instead of
simply making him liable for damages.
We hold, therefore, that, with respect to Art. 283 of the Labor Code, the
employer's failure to comply with the notice requirement does not constitute a
The third reason why the notice requirement under Art. 283 can not be denial of due process but a mere failure to observe a procedure for the
considered a requirement of the Due Process Clause is that the employer termination of employment which makes the termination of employment
cannot really be expected to be entirely an impartial judge of his own cause. merely ineffectual. It is similar to the failure to observe the provisions of Art.

8
1592, in relation to Art. 1191, of the Civil Code34 in rescinding a contract for Court, was not proven. The dismissal was, therefore, illegal, not because there
the sale of immovable property. Under these provisions, while the power of a was a denial of due process, but because the dismissal was without cause. The
party to rescind a contract is implied in reciprocal obligations, nonetheless, in statement that the failure of management to comply with the notice
cases involving the sale of immovable property, the vendor cannot exercise this requirement "taints the dismissal with illegality" was merely a dictum thrown
power even though the vendee defaults in the payment of the price, except by in as additional grounds for holding the dismissal to be illegal.
bringing an action in court or giving notice of rescission by means of a notarial
demand.35 Consequently, a notice of rescission given in the letter of an Given the nature of the violation, therefore, the appropriate sanction for the
attorney has no legal effect, and the vendee can make payment even after the failure to give notice is the payment of backwages for the period when the
due date since no valid notice of rescission has been given.36 employee is considered not to have been effectively dismissed or his
employment terminated. The sanction is not the payment alone of nominal
Indeed, under the Labor Code, only the absence of a just cause for the damages as Justice Vitug contends.
termination of employment can make the dismissal of an employee illegal. This
is clear from Art. 279 which provides: Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal

Security of Tenure. — In cases of regular employment, the employer The refusal to look beyond the validity of the initial action taken by the
shall not terminate the services of an employee except for a just cause employer to terminate employment either for an authorized or just cause can
or when authorized by this Title. An employee who is unjustly result in an injustice to the employer. For not giving notice and hearing before
dismissed from work shall be entitled to reinstatement without loss of dismissing an employee, who is otherwise guilty of, say, theft, or even of an
seniority rights and other privileges and to his full backwages, attempt against the life of the employer, an employer will be forced to keep in
inclusive of allowances, and to his other benefits or their monetary his employ such guilty employee. This is unjust.
equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.37
It is true the Constitution regards labor as "a primary social economic force."40
But so does it declare that it "recognizes the indispensable role of the private
Thus, only if the termination of employment is not for any of the causes sector, encourages private enterprise, and provides incentives to needed
provided by law is it illegal and, therefore, the employee should be reinstated investment."41 The Constitution bids the State to "afford full protection to
and paid backwages. To contend, as Justices Puno and Panganiban do, that even labor."42 But it is equally true that "the law, in protecting the right's of the
if the termination is for a just or authorized cause the employee concerned laborer, authorizes neither oppression nor self-destruction of the employer."43
should be reinstated and paid backwages would be to amend Art. 279 by And it is oppression to compel the employer to continue in employment one
adding another ground for considering a dismissal illegal. What is more, it who is guilty or to force the employer to remain in operation when it is not
would ignore the fact that under Art. 285, if it is the employee who fails to give economically in his interest to do so.
a written notice to the employer that he is leaving the service of the latter, at
least one month in advance, his failure to comply with the legal requirement
does not result in making his resignation void but only in making him liable for In sum, we hold that if in proceedings for reinstatement under Art. 283, it is
damages.38 This disparity in legal treatment, which would result from the shown that the termination of employment was due to an authorized cause,
adoption of the theory of the minority cannot simply be explained by invoking then the employee concerned should not be ordered reinstated even though
resident Ramon Magsaysay's motto that "he who has less in life should have there is failure to comply with the 30-day notice requirement. Instead, he must
more in law." That would be a misapplication of this noble phrase originally be granted separation pay in accordance with Art. 283, to wit:
from Professor Thomas Reed Powell of the Harvard Law School.
In case of termination due to the installation of labor-saving devices
Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,39 in support of his or redundancy, the worker affected thereby shall be entitled to a
view that an illegal dismissal results not only from want of legal cause but also separation pay equivalent to at least his one (1) month pay or to at
from the failure to observe "due process." The Pepsi-Cola case actually involved least one month for every year of service, whichever is higher. In case
a dismissal for an alleged loss of trust and confidence which, as found by the of retrenchment to prevent losses and in cases of closures or cessation

9
of operations of establishment or undertaking not due to serious G.R. No. 158693 November 17, 2004
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 JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,
for every year of service, whichever is higher. A fraction of at least six vs.
months shall be considered one (1) whole year. NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME
IMPROVEMENTS, INC. and VICENTE ANGELES, respondents.
If the employee's separation is without cause, instead of being given separation
pay, he should be reinstated. In either case, whether he is reinstated or only
granted separation pay, he should be paid full backwages if he has been laid off
without written notice at least 30 days in advance.
DECISION
On the other hand, with respect to dismissals for cause under Art. 282, if it is
shown that the employee was dismissed for any of the just causes mentioned in
said Art. 282, then, in accordance with that article, he should not be reinstated.
However, he must be paid backwages from the time his employment was YNARES-SANTIAGO, J.:
terminated until it is determined that the termination of employment is for a
just cause because the failure to hear him before he is dismissed renders the This petition for review seeks to reverse the decision1 of the Court of Appeals
termination of his employment without legal effect. dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of
National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-
WHEREFORE, the petition is GRANTED and the resolution of the National Labor 00.
Relations Commission is MODIFIED by ordering private respondent Isetann
Department Store, Inc. to pay petitioner separation pay equivalent to one (1) Private respondent Riviera Home Improvements, Inc. is engaged in the
month pay for every year of service, his unpaid salary, and his proportionate business of selling and installing ornamental and construction materials. It
13th month pay and, in addition, full backwages from the time his employment employed petitioners Virgilio Agabon and Jenny Agabon as gypsum board and
was terminated on October 11, 1991 up to the time the decision herein cornice installers on January 2, 19922 until February 23, 1999 when they were
becomes final. For this purpose, this case is REMANDED to the Labor Arbiter dismissed for abandonment of work.
for computation of the separation pay, backwages, and other monetary awards
to petitioner.
Petitioners then filed a complaint for illegal dismissal and payment of money
claims3 and on December 28, 1999, the Labor Arbiter rendered a decision
SO ORDERED. declaring the dismissals illegal and ordered private respondent to pay the
monetary claims. The dispositive portion of the decision states:

WHEREFORE, premises considered, We find the termination of the


complainants illegal. Accordingly, respondent is hereby ordered to pay them
their backwages up to November 29, 1999 in the sum of:

1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93

10
and, in lieu of reinstatement to pay them their separation pay of one (1) Petitioners assert that they were dismissed because the private respondent
month for every year of service from date of hiring up to November 29, 1999. refused to give them assignments unless they agreed to work on a "pakyaw"
basis when they reported for duty on February 23, 1999. They did not agree on
Respondent is further ordered to pay the complainants their holiday pay and this arrangement because it would mean losing benefits as Social Security
service incentive leave pay for the years 1996, 1997 and 1998 as well as their System (SSS) members. Petitioners also claim that private respondent did not
premium pay for holidays and rest days and Virgilio Agabon's 13th month pay comply with the twin requirements of notice and hearing.8
differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00)
Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND Private respondent, on the other hand, maintained that petitioners were not
SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny dismissed but had abandoned their work.9 In fact, private respondent sent two
Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED letters to the last known addresses of the petitioners advising them to report
TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per for work. Private respondent's manager even talked to petitioner Virgilio
attached computation of Julieta C. Nicolas, OIC, Research and Computation Agabon by telephone sometime in June 1999 to tell him about the new
Unit, NCR. assignment at Pacific Plaza Towers involving 40,000 square meters of cornice
installation work. However, petitioners did not report for work because they
SO ORDERED.4 had subcontracted to perform installation work for another company.
Petitioners also demanded for an increase in their wage to P280.00 per day.
When this was not granted, petitioners stopped reporting for work and filed
On appeal, the NLRC reversed the Labor Arbiter because it found that the the illegal dismissal case.10
petitioners had abandoned their work, and were not entitled to backwages and
separation pay. The other money claims awarded by the Labor Arbiter were
also denied for lack of evidence.5 It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are
accorded not only respect but even finality if the findings are supported by
substantial evidence. This is especially so when such findings were affirmed by
Upon denial of their motion for reconsideration, petitioners filed a petition for the Court of Appeals.11 However, if the factual findings of the NLRC and the
certiorari with the Court of Appeals. Labor Arbiter are conflicting, as in this case, the reviewing court may delve into
the records and examine for itself the questioned findings.12
The Court of Appeals in turn ruled that the dismissal of the petitioners was not
illegal because they had abandoned their employment but ordered the payment Accordingly, the Court of Appeals, after a careful review of the facts, ruled that
of money claims. The dispositive portion of the decision reads: petitioners' dismissal was for a just cause. They had abandoned their
employment and were already working for another employer.
WHEREFORE, the decision of the National Labor Relations Commission is
REVERSED only insofar as it dismissed petitioner's money claims. Private To dismiss an employee, the law requires not only the existence of a just and
respondents are ordered to pay petitioners holiday pay for four (4) regular valid cause but also enjoins the employer to give the employee the opportunity
holidays in 1996, 1997, and 1998, as well as their service incentive leave pay to be heard and to defend himself.13 Article 282 of the Labor Code enumerates
for said years, and to pay the balance of petitioner Virgilio Agabon's 13th the just causes for termination by the employer: (a) serious misconduct or
month pay for 1998 in the amount of P2,150.00. willful disobedience by the employee of the lawful orders of his employer or
the latter's representative in connection with the employee's work; (b) gross
SO ORDERED.6 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 his duly
Hence, this petition for review on the sole issue of whether petitioners were authorized representative; (d) commission of a crime or offense by the
illegally dismissed.7 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.

11
Abandonment is the deliberate and unjustified refusal of an employee to Standards of due process: requirements of notice. – In all cases of termination of
resume his employment.14 It is a form of neglect of duty, hence, a just cause for employment, the following standards of due process shall be substantially
termination of employment by the employer.15 For a valid finding of observed:
abandonment, these two factors should be present: (1) the failure to report for
work or absence without valid or justifiable reason; and (2) a clear intention to I. For termination of employment based on just causes as defined in Article
sever employer-employee relationship, with the second as the more 282 of the Code:
determinative factor which is manifested by overt acts from which it may be
deduced that the employees has no more intention to work. The intent to
discontinue the employment must be shown by clear proof that it was (a) A written notice served on the employee specifying the ground or grounds
deliberate and unjustified.16 for termination, and giving to said employee reasonable opportunity within
which to explain his side;
In February 1999, petitioners were frequently absent having subcontracted for
an installation work for another company. Subcontracting for another company (b) A hearing or conference during which the employee concerned, with the
clearly showed the intention to sever the employer-employee relationship with assistance of counsel if the employee so desires, is given opportunity to
private respondent. This was not the first time they did this. In January 1996, respond to the charge, present his evidence or rebut the evidence presented
they did not report for work because they were working for another company. against him; and
Private respondent at that time warned petitioners that they would be
dismissed if this happened again. Petitioners disregarded the warning and (c) A written notice of termination served on the employee indicating that
exhibited a clear intention to sever their employer-employee relationship. The upon due consideration of all the circumstances, grounds have been
record of an employee is a relevant consideration in determining the penalty established to justify his termination.
that should be meted out to him.17
In case of termination, the foregoing notices shall be served on the employee's
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately last known address.
absented from work without leave or permission from his employer, for the
purpose of looking for a job elsewhere, is considered to have abandoned his Dismissals based on just causes contemplate acts or omissions attributable to
job. We should apply that rule with more reason here where petitioners were the employee while dismissals based on authorized causes involve grounds
absent because they were already working in another company. under the Labor Code which allow the employer to terminate employees. A
termination for an authorized cause requires payment of separation pay. When
The law imposes many obligations on the employer such as providing just the termination of employment is declared illegal, reinstatement and full
compensation to workers, observance of the procedural requirements of notice backwages are mandated under Article 279. If reinstatement is no longer
and hearing in the termination of employment. On the other hand, the law also possible where the dismissal was unjust, separation pay may be granted.
recognizes the right of the employer to expect from its workers not only good
performance, adequate work and diligence, but also good conduct19 and Procedurally, (1) if the dismissal is based on a just cause under Article 282, the
loyalty. The employer may not be compelled to continue to employ such employer must give the employee two written notices and a hearing or
persons whose continuance in the service will patently be inimical to his opportunity to be heard if requested by the employee before terminating the
interests.20 employment: a notice specifying the grounds for which dismissal is sought a
hearing or an opportunity to be heard and after hearing or opportunity to be
After establishing that the terminations were for a just and valid cause, we now heard, a notice of the decision to dismiss; and (2) if the dismissal is based on
determine if the procedures for dismissal were observed. authorized causes under Articles 283 and 284, the employer must give the
employee and the Department of Labor and Employment written notices 30
The procedure for terminating an employee is found in Book VI, Rule I, Section days prior to the effectivity of his separation.
2(d) of the Omnibus Rules Implementing the Labor Code:

12
From the foregoing rules four possible situations may be derived: (1) the termination under Article 282. The employee had a violent temper and caused
dismissal is for a just cause under Article 282 of the Labor Code, for an trouble during office hours, defying superiors who tried to pacify him. We
authorized cause under Article 283, or for health reasons under Article 284, concluded that reinstating the employee and awarding backwages "may
and due process was observed; (2) the dismissal is without just or authorized encourage him to do even worse and will render a mockery of the rules of
cause but due process was observed; (3) the dismissal is without just or discipline that employees are required to observe."24 We further held that:
authorized cause and there was no due process; and (4) the dismissal is for just
or authorized cause but due process was not observed. Under the circumstances, the dismissal of the private respondent for just cause
should be maintained. He has no right to return to his former employment.
In the first situation, the dismissal is undoubtedly valid and the employer will
not suffer any liability. However, the petitioner must nevertheless be held to account for failure to
extend to private respondent his right to an investigation before causing his
In the second and third situations where the dismissals are illegal, Article 279 dismissal. The rule is explicit as above discussed. The dismissal of an employee
mandates that the employee is entitled to reinstatement without loss of must be for just or authorized cause and after due process. Petitioner committed
seniority rights and other privileges and full backwages, inclusive of an infraction of the second requirement. Thus, it must be imposed a sanction
allowances, and other benefits or their monetary equivalent computed from the for its failure to give a formal notice and conduct an investigation as required
time the compensation was not paid up to the time of actual reinstatement. by law before dismissing petitioner from employment. Considering the
circumstances of this case petitioner must indemnify the private respondent
In the fourth situation, the dismissal should be upheld. While the procedural the amount of P1,000.00. The measure of this award depends on the facts of
infirmity cannot be cured, it should not invalidate the dismissal. However, the each case and the gravity of the omission committed by the employer.25
employer should be held liable for non-compliance with the procedural
requirements of due process. The rule thus evolved: where the employer had a valid reason to dismiss an
employee but did not follow the due process requirement, the dismissal may be
The present case squarely falls under the fourth situation. The dismissal should upheld but the employer will be penalized to pay an indemnity to the employee.
be upheld because it was established that the petitioners abandoned their jobs This became known as the Wenphil or Belated Due Process Rule.
to work for another company. Private respondent, however, did not follow the
notice requirements and instead argued that sending notices to the last known On January 27, 2000, in Serrano, the rule on the extent of the sanction was
addresses would have been useless because they did not reside there anymore. changed. We held that the violation by the employer of the notice requirement
Unfortunately for the private respondent, this is not a valid excuse because the in termination for just or authorized causes was not a denial of due process that
law mandates the twin notice requirements to the employee's last known will nullify the termination. However, the dismissal is ineffectual and the
address.21 Thus, it should be held liable for non-compliance with the procedural employer must pay full backwages from the time of termination until it is
requirements of due process. judicially declared that the dismissal was for a just or authorized cause.

A review and re-examination of the relevant legal principles is appropriate and The rationale for the re-examination of the Wenphil doctrine in Serrano was the
timely to clarify the various rulings on employment termination in the light of significant number of cases involving dismissals without requisite notices. We
Serrano v. National Labor Relations Commission.22 concluded that the imposition of penalty by way of damages for violation of the
notice requirement was not serving as a deterrent. Hence, we now required
Prior to 1989, the rule was that a dismissal or termination is illegal if the payment of full backwages from the time of dismissal until the time the Court
employee was not given any notice. In the 1989 case of Wenphil Corp. v. finds the dismissal was for a just or authorized cause.
National Labor Relations Commission,23 we reversed this long-standing rule
and held that the dismissed employee, although not given any notice and Serrano was confronting the practice of employers to "dismiss now and pay
hearing, was not entitled to reinstatement and backwages because the later" by imposing full backwages.
dismissal was for grave misconduct and insubordination, a just ground for

13
We believe, however, that the ruling in Serrano did not consider the full employees from being unjustly terminated without just cause after notice and
meaning of Article 279 of the Labor Code which states: hearing.

ART. 279. Security of Tenure. – In cases of regular employment, the employer In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a
shall not terminate the services of an employee except for a just cause or when just and valid cause but the employee was not accorded due process. The
authorized by this Title. An employee who is unjustly dismissed from work dismissal was upheld by the Court but the employer was sanctioned. The
shall be entitled to reinstatement without loss of seniority rights and other sanction should be in the nature of indemnification or penalty, and depends on
privileges and to his full backwages, inclusive of allowances, and to his other the facts of each case and the gravity of the omission committed by the
benefits or their monetary equivalent computed from the time his employer.
compensation was withheld from him up to the time of his actual
reinstatement. In Nath v. National Labor Relations Commission,29 it was ruled that even if the
employee was not given due process, the failure did not operate to eradicate
This means that the termination is illegal only if it is not for any of the justified the just causes for dismissal. The dismissal being for just cause, albeit without
or authorized causes provided by law. Payment of backwages and other due process, did not entitle the employee to reinstatement, backwages,
benefits, including reinstatement, is justified only if the employee was unjustly damages and attorney's fees.
dismissed.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v.
The fact that the Serrano ruling can cause unfairness and injustice which National Labor Relations Commission,30 which opinion he reiterated in Serrano,
elicited strong dissent has prompted us to revisit the doctrine. stated:

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution C. Where there is just cause for dismissal but due process has not been properly
embodies a system of rights based on moral principles so deeply imbedded in observed by an employer, it would not be right to order either the
the traditions and feelings of our people as to be deemed fundamental to a reinstatement of the dismissed employee or the payment of backwages to him.
civilized society as conceived by our entire history. Due process is that which In failing, however, to comply with the procedure prescribed by law in
comports with the deepest notions of what is fair and right and just.26 It is a terminating the services of the employee, the employer must be deemed to
constitutional restraint on the legislative as well as on the executive and have opted or, in any case, should be made liable, for the payment of separation
judicial powers of the government provided by the Bill of Rights. pay. It might be pointed out that the notice to be given and the hearing to be
conducted generally constitute the two-part due process requirement of law to
Due process under the Labor Code, like Constitutional due process, has two be accorded to the employee by the employer. Nevertheless, peculiar
aspects: substantive, i.e., the valid and authorized causes of employment circumstances might obtain in certain situations where to undertake the above
termination under the Labor Code; and procedural, i.e., the manner of dismissal. steps would be no more than a useless formality and where, accordingly, it
Procedural due process requirements for dismissal are found in the would not be imprudent to apply the res ipsa loquitur rule and award, in lieu of
Implementing Rules of P.D. 442, as amended, otherwise known as the Labor separation pay, nominal damages to the employee. x x x.31
Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department
Order Nos. 9 and 10.27 Breaches of these due process requirements violate the After carefully analyzing the consequences of the divergent doctrines in the law
Labor Code. Therefore statutory due process should be differentiated from on employment termination, we believe that in cases involving dismissals for
failure to comply with constitutional due process. cause but without observance of the twin requirements of notice and hearing,
the better rule is to abandon the Serrano doctrine and to follow Wenphil by
Constitutional due process protects the individual from the government and holding that the dismissal was for just cause but imposing sanctions on the
assures him of his rights in criminal, civil or administrative proceedings; while employer. Such sanctions, however, must be stiffer than that imposed in
statutory due process found in the Labor Code and Implementing Rules protects Wenphil. By doing so, this Court would be able to achieve a fair result by
dispensing justice not just to employees, but to employers as well.

14
The unfairness of declaring illegal or ineffectual dismissals for valid or This is not to say that the Court was wrong when it ruled the way it did in
authorized causes but not complying with statutory due process may have far- Wenphil, Serrano and related cases. Social justice is not based on rigid formulas
reaching consequences. set in stone. It has to allow for changing times and circumstances.

This would encourage frivolous suits, where even the most notorious violators Justice Isagani Cruz strongly asserts the need to apply a balanced approach to
of company policy are rewarded by invoking due process. This also creates labor-management relations and dispense justice with an even hand in every
absurd situations where there is a just or authorized cause for dismissal but a case:
procedural infirmity invalidates the termination. Let us take for example a case
where the employee is caught stealing or threatens the lives of his co- We have repeatedly stressed that social justice – or any justice for that matter –
employees or has become a criminal, who has fled and cannot be found, or is for the deserving, whether he be a millionaire in his mansion or a pauper in
where serious business losses demand that operations be ceased in less than a his hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in
month. Invalidating the dismissal would not serve public interest. It could also favor of the poor to whom the Constitution fittingly extends its sympathy and
discourage investments that can generate employment in the local economy. compassion. But never is it justified to give preference to the poor simply
because they are poor, or reject the rich simply because they are rich, for justice
The constitutional policy to provide full protection to labor is not meant to be a must always be served for the poor and the rich alike, according to the mandate
sword to oppress employers. The commitment of this Court to the cause of of the law.35
labor does not prevent us from sustaining the employer when it is in the right,
as in this case.32 Certainly, an employer should not be compelled to pay Justice in every case should only be for the deserving party. It should not be
employees for work not actually performed and in fact abandoned. presumed that every case of illegal dismissal would automatically be decided in
favor of labor, as management has rights that should be fully respected and
The employer should not be compelled to continue employing a person who is enforced by this Court. As interdependent and indispensable partners in
admittedly guilty of misfeasance or malfeasance and whose continued nation-building, labor and management need each other to foster productivity
employment is patently inimical to the employer. The law protecting the rights and economic growth; hence, the need to weigh and balance the rights and
of the laborer authorizes neither oppression nor self-destruction of the welfare of both the employee and employer.
employer.33
Where the dismissal is for a just cause, as in the instant case, the lack of
It must be stressed that in the present case, the petitioners committed a grave statutory due process should not nullify the dismissal, or render it illegal, or
offense, i.e., abandonment, which, if the requirements of due process were ineffectual. However, the employer should indemnify the employee for the
complied with, would undoubtedly result in a valid dismissal. violation of his statutory rights, as ruled in Reta v. National Labor Relations
Commission.36 The indemnity to be imposed should be stiffer to discourage the
An employee who is clearly guilty of conduct violative of Article 282 should not abhorrent practice of "dismiss now, pay later," which we sought to deter in the
be protected by the Social Justice Clause of the Constitution. Social justice, as Serrano ruling. The sanction should be in the nature of indemnification or
the term suggests, should be used only to correct an injustice. As the eminent penalty and should depend on the facts of each case, taking into special
Justice Jose P. Laurel observed, social justice must be founded on the consideration the gravity of the due process violation of the employer.
recognition of the necessity of interdependence among diverse units of a
society and of the protection that should be equally and evenly extended to all Under the Civil Code, nominal damages is adjudicated in order that a right of
groups as a combined force in our social and economic life, consistent with the the plaintiff, which has been violated or invaded by the defendant, may be
fundamental and paramount objective of the state of promoting the health, vindicated or recognized, and not for the purpose of indemnifying the plaintiff
comfort, and quiet of all persons, and of bringing about "the greatest good to for any loss suffered by him.37
the greatest number."34
As enunciated by this Court in Viernes v. National Labor Relations
Commissions,38 an employer is liable to pay indemnity in the form of nominal

15
damages to an employee who has been dismissed if, in effecting such dismissal, by private respondent that it does not operate during holidays and that it
the employer fails to comply with the requirements of due process. The Court, allows its employees 10 days leave with pay, other than being self-serving, do
after considering the circumstances therein, fixed the indemnity at P2,590.50, not constitute proof of payment. Consequently, it failed to discharge the onus
which was equivalent to the employee's one month salary. This indemnity is probandi thereby making it liable for such claims to the petitioners.
intended not to penalize the employer but to vindicate or recognize the
employee's right to statutory due process which was violated by the Anent the deduction of SSS loan and the value of the shoes from petitioner
employer.39 Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The
evident intention of Presidential Decree No. 851 is to grant an additional
The violation of the petitioners' right to statutory due process by the private income in the form of the 13th month pay to employees not already receiving
respondent warrants the payment of indemnity in the form of nominal the same43 so as "to further protect the level of real wages from the ravages of
damages. The amount of such damages is addressed to the sound discretion of world-wide inflation."44 Clearly, as additional income, the 13th month pay is
the court, taking into account the relevant circumstances.40 Considering the included in the definition of wage under Article 97(f) of the Labor Code, to wit:
prevailing circumstances in the case at bar, we deem it proper to fix it at
P30,000.00. We believe this form of damages would serve to deter employers (f) "Wage" paid to any employee shall mean the remuneration or
from future violations of the statutory due process rights of employees. At the earnings, however designated, capable of being expressed in terms of money
very least, it provides a vindication or recognition of this fundamental right whether fixed or ascertained on a time, task, piece , or commission basis, or
granted to the latter under the Labor Code and its Implementing Rules. other method of calculating the same, which is payable by an employer to an
employee under a written or unwritten contract of employment for work done
Private respondent claims that the Court of Appeals erred in holding that it or to be done, or for services rendered or to be rendered and includes the fair
failed to pay petitioners' holiday pay, service incentive leave pay and 13th and reasonable value, as determined by the Secretary of Labor, of board,
month pay. lodging, or other facilities customarily furnished by the employer to the
employee…"
We are not persuaded.
from which an employer is prohibited under Article 11345 of the same Code
We affirm the ruling of the appellate court on petitioners' money claims. from making any deductions without the employee's knowledge and consent.
Private respondent is liable for petitioners' holiday pay, service incentive leave In the instant case, private respondent failed to show that the deduction of the
pay and 13th month pay without deductions. SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th
month pay was authorized by the latter. The lack of authority to deduct is
further bolstered by the fact that petitioner Virgilio Agabon included the same
As a general rule, one who pleads payment has the burden of proving it. Even as one of his money claims against private respondent.
where the employee must allege non-payment, the general rule is that the
burden rests on the employer to prove payment, rather than on the employee
to prove non-payment. The reason for the rule is that the pertinent personnel The Court of Appeals properly reinstated the monetary claims awarded by the
files, payrolls, records, remittances and other similar documents – which will Labor Arbiter ordering the private respondent to pay each of the petitioners
show that overtime, differentials, service incentive leave and other claims of holiday pay for four regular holidays from 1996 to 1998, in the amount of
workers have been paid – are not in the possession of the worker but in the P6,520.00, service incentive leave pay for the same period in the amount of
custody and absolute control of the employer.41 P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998
in the amount of P2,150.00.
In the case at bar, if private respondent indeed paid petitioners' holiday pay
and service incentive leave pay, it could have easily presented documentary WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of
proofs of such monetary benefits to disprove the claims of the petitioners. But it the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding
did not, except with respect to the 13th month pay wherein it presented cash that petitioners' Jenny and Virgilio Agabon abandoned their work, and ordering
vouchers showing payments of the benefit in the years disputed.42 Allegations private respondent to pay each of the petitioners holiday pay for four regular

16
holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave G.R. No. 151378. March 28, 2005
pay for the same period in the amount of P3,255.00 and the balance of Virgilio
Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 is JAKA FOOD PROCESSING CORPORATION, Petitioners,
AFFIRMED with the MODIFICATION that private respondent Riviera Home vs.
Improvements, Inc. is further ORDERED to pay each of the petitioners the DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON
amount of P30,000.00 as nominal damages for non-compliance with statutory DOMINGO, RHOEL LESCANO and JONATHAN CAGABCAB, Respondents.
due process.
DECISION
No costs.
GARCIA, J.:
SO ORDERED.
Assailed and sought to be set aside in this appeal by way of a petition for review
on certiorari under rule 45 of the Rules of Court are the following issuances of
the Court of Appeals in CA-G.R. SP. No. 59847, to wit:

1. Decision dated 16 November 2001,1 reversing and setting aside an earlier


decision of the National Labor Relations Commission (NLRC); and

2. Resolution dated 8 January 2002,2 denying petitioner’s motion for


reconsideration.

The material facts may be briefly stated, as follows:

Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo,


Rhoel Lescano and Jonathan Cagabcab were earlier hired by petitioner JAKA
Foods Processing Corporation (JAKA, for short) until the latter terminated their
employment on August 29, 1997 because the corporation was "in dire financial
straits". It is not disputed, however, that the termination was effected without
JAKA complying with the requirement under Article 283 of the Labor Code
regarding the service of a written notice upon the employees and the
Department of Labor and Employment at least one (1) month before the
intended date of termination.

In time, respondents separately filed with the regional Arbitration Branch of


the National Labor Relations Commission (NLRC) complaints for illegal
dismissal, underpayment of wages and nonpayment of service incentive leave
and 13th month pay against JAKA and its HRD Manager, Rosana Castelo.

After due proceedings, the Labor Arbiter rendered a decision 3 declaring the
termination illegal and ordering JAKA and its HRD Manager to reinstate

17
respondents with full backwages, and separation pay if reinstatement is not As stated at the outset hereof, the Court of Appeals, in a decision dated
possible. More specifically the decision dispositively reads: November 16, 2000, applying the doctrine laid down by this Court in Serrano
vs. NLRC,7 reversed and set aside the NLRC’s decision of January 28, 2000, thus:
WHEREFORE, judgment is hereby rendered declaring as illegal the termination
of complainants and ordering respondents to reinstate them to their positions WHEREFORE, the decision dated January 28, 2000 of the National Labor
with full backwages which as of July 30, 1998 have already amounted to Relations Commission is REVERSED and SET ASIDE and another one entered
P339,768.00. Respondents are also ordered to pay complainants the amount of ordering respondent JAKA Foods Processing Corporation to pay petitioners
P2,775.00 representing the unpaid service incentive leave pay of Parohinog, separation pay equivalent to one (1) month salary, the proportionate 13th
Lescano and Cagabcab an the amount of P19,239.96 as payment for 1997 13th month pay and, in addition, full backwages from the time their employment
month pay as alluded in the above computation. was terminated on August 29, 1997 up to the time the Decision herein becomes
final.
If complainants could not be reinstated, respondents are ordered to pay them
separation pay equivalent to one month salary for very (sic) year of service. SO ORDERED.

SO ORDERED. This time, JAKA moved for a reconsideration but its motion was denied by the
appellate court in its resolution of January 8, 2002.
Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August
30, 1999,4 affirmed in toto that of the Labor Arbiter. Hence, JAKA’s present recourse, submitting, for our consideration, the following
issues:
JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out
with another decision dated January 28, 2000,5 this time modifying its earlier "I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED ‘FULL
decision, thus: BACKWAGES’ TO RESPONDENTS.

WHEREFORE, premises considered, the instant motion for reconsideration is II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED
hereby GRANTED and the challenged decision of this Commission [dated] 30 SEPARATION PAY TO RESPONDENTS".
August 1999 and the decision of the Labor Arbiter xxx are hereby modified by
reversing an setting aside the awards of backwages, service incentive leave pay. As we see it, there is only one question that requires resolution, i.e. what are the
Each of the complainants-appellees shall be entitled to a separation pay legal implications of a situation where an employee is dismissed for cause but
equivalent to one month. In addition, respondents-appellants is (sic) ordered to such dismissal was effected without the employer’s compliance with the notice
pay each of the complainants-appellees the sum of P2,000.00 as requirement under the Labor Code.
indemnification for its failure to observe due process in effecting the
retrenchment.
This, certainly, is not a case of first impression. In the very recent case of
Agabon vs. NLRC,8 we had the opportunity to resolve a similar question.
SO ORDERED. Therein, we found that the employees committed a grave offense, i.e.,
abandonment, which is a form of a neglect of duty which, in turn, is one of the
Their motion for reconsideration having been denied by the NLRC in its just causes enumerated under Article 282 of the Labor Code. In said case, we
resolution of April 28, 2000,6 respondents went to the Court of Appeals via a upheld the validity of the dismissal despite non-compliance with the notice
petition for certiorari, thereat docketed as CA-G.R. SP No. 59847. requirement of the Labor Code. However, we required the employer to pay the
dismissed employees the amount of P30,000.00, representing nominal damages
for non-compliance with statutory due process, thus:

18
"Where the dismissal is for a just cause, as in the instant case, the lack of devices, when he decides to cease business operations or when, as in this case,
statutory due process should not nullify the dismissal, or render it illegal, or he undertakes to implement a retrenchment program.
ineffectual. However, the employer should indemnify the employee for the
violation of his statutory rights, as ruled in Reta vs. National Labor Relations The clear-cut distinction between a dismissal for just cause under Article 282
Commission. The indemnity to be imposed should be stiffer to discourage the and a dismissal for authorized cause under Article 283 is further reinforced by
abhorrent practice of ‘dismiss now, pay later,’ which we sought to deter in the the fact that in the first, payment of separation pay, as a rule, is not required,
Serrano ruling. The sanction should be in the nature of indemnification or while in the second, the law requires payment of separation pay.9
penalty and should depend on the facts of each case, taking into special
consideration the gravity of the due process violation of the employer.
For these reasons, there ought to be a difference in treatment when the ground
for dismissal is one of the just causes under Article 282, and when based on one
xxx xxx xxx of the authorized causes under Article 283.

The violation of petitioners’ right to statutory due process by the private Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause
respondent warrants the payment of indemnity in the form of nominal under Article 282 but the employer failed to comply with the notice
damages. The amount of such damages is addressed to the sound discretion of requirement, the sanction to be imposed upon him should be tempered because
the court, taking into account the relevant circumstances. Considering the the dismissal process was, in effect, initiated by an act imputable to the
prevailing circumstances in the case at bar, we deem it proper to fix it at employee; and (2) if the dismissal is based on an authorized cause under Article
P30,000.00. We believe this form of damages would serve to deter employers 283 but the employer failed to comply with the notice requirement, the
from future violations of the statutory due process rights of employees. At the sanction should be stiffer because the dismissal process was initiated by the
very least, it provides a vindication or recognition of this fundamental right employer’s exercise of his management prerogative.
granted to the latter under the Labor Code and its Implementing Rules,"
(Emphasis supplied).
The records before us reveal that, indeed, JAKA was suffering from serious
business losses at the time it terminated respondents’ employment. As aptly
The difference between Agabon and the instant case is that in the former, the found by the NLRC:
dismissal was based on a just cause under Article 282 of the Labor Code while
in the present case, respondents were dismissed due to retrenchment, which is
one of the authorized causes under Article 283 of the same Code. "A careful study of the evidence presented by the respondent-appellant
corporation shows that the audited Financial Statement of the corporation for
the periods 1996, 1997 and 1998 were submitted by the respondent-appellant
At this point, we note that there are divergent implications of a dismissal for corporation, The Statement of Income and Deficit found in the Audited
just cause under Article 282, on one hand, and a dismissal for authorized cause Financial Statement of the respondent-appellant corporation clearly shows the
under Article 283, on the other. following in 1996, the deficit of the respondent-appellant corporation was
P188,218,419.00 or 94.11% of the stockholder’s [sic] equity which amounts to
A dismissal for just cause under Article 282 implies that the employee P200,000,000.00. In 1997 when the retrenchment program of respondent-
concerned has committed, or is guilty of, some violation against the employer, appellant corporation was undertaken, the deficit ballooned to
i.e. the employee has committed some serious misconduct, is guilty of some P247,222,569.00 or 123.61% of the stockholders’ equity, thus a capital
fraud against the employer, or, as in Agabon, he has neglected his duties. Thus, deficiency or impairment of equity ensued. In 1998, the deficit grew to
it can be said that the employee himself initiated the dismissal process. P355,794,897.00 or 177% of the stockholders’ equity. From 1996 to 1997, the
deficit grew by more that (sic) 31% while in 1998 the deficit grew by more than
On another breath, a dismissal for an authorized cause under Article 283 does 47%.
not necessarily imply delinquency or culpability on the part of the employee.
Instead, the dismissal process is initiated by the employer’s exercise of his The Statement of Income and Deficit of the respondent-appellant corporation
management prerogative, i.e. when the employer opts to install labor saving to prove its alleged losses was prepared by an independent auditor, SGV & Co.

19
It convincingly showed that the respondent-appellant corporation was in dire WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed
financial straits, which the complainants-appellees failed to dispute. The losses decision and resolution of the Court of Appeals respectively dated November
incurred by the respondent-appellant corporation are clearly substantial and 16, 2001 and January 8, 2002 are hereby SET ASIDE and a new one entered
sufficiently proven with clear and satisfactory evidence. Losses incurred were upholding the legality of the dismissal but ordering petitioner to pay each of the
adequately shown with respondent-appellant’s audited financial statement. respondents the amount of P50,000.00, representing nominal damages for non-
Having established the loss incurred by the respondent-appellant corporation, compliance with statutory due process.
it necessarily necessarily (sic) follows that the ground in support of
retrenchment existed at the time the complainants-appellees were terminated. SO ORDERED.
We cannot therefore sustain the findings of the Labor Arbiter that the alleged
losses of the respondent-appellant was [sic] not well substantiated by
substantial proofs. It is therefore logical for the corporation to implement a
retrenchment program to prevent further losses."10

Noteworthy it is, moreover, to state that herein respondents did not assail the
foregoing finding of the NLRC which, incidentally, was also affirmed by the
Court of Appeals.

It is, therefore, established that there was ground for respondents’ dismissal,
i.e., retrenchment, which is one of the authorized causes enumerated under
Article 283 of the Labor Code. Likewise, it is established that JAKA failed to
comply with the notice requirement under the same Article. Considering the
factual circumstances in the instant case and the above ratiocination, we,
therefore, deem it proper to fix the indemnity at P50,000.00.

We likewise find the Court of Appeals to have been in error when it ordered
JAKA to pay respondents separation pay equivalent to one (1) month salary for
every year of service. This is because in Reahs Corporation vs. NLRC,11 we made
the following declaration:

"The rule, therefore, is that in all cases of business closure or cessation of


operation or undertaking of the employer, the affected employee is entitled to
separation pay. This is consistent with the state policy of treating labor as a
primary social economic force, affording full protection to its rights as well as
its welfare. The exception is when the closure of business or cessation of
operations is due to serious business losses or financial reverses; duly
proved, in which case, the right of affected employees to separation pay is
lost for obvious reasons. xxx". (Emphasis supplied)

20
G.R. No. 172589 August 8, 2010 On 23 February 2003, Nacague went to Chong Hua Hospital in Cebu City to
JEFFREY NACAGUE, Petitioner, undergo a voluntary drug test. The drug test with Chong Hua Hospital yielded a
vs. negative result. Nacague submitted this test result to Sulpicio Lines.
SULPICIO LINES, INC., Respondent.
DECISION However, on 7 March 2003, Sulpicio Lines sent a memorandum to Nacague
CARPIO, J.: terminating him from the service. The memorandum reads:
The Case

This is a petition for review of the 23 January 2006 Decision and 19 April 2006 After a careful consideration of your case with the evidence available, including
Resolution of the Court of Appeals in CA-G.R. CEB SP No. 01065. In its 23 your explanation, and with the positive drug test result, management finds you
January 2006 Decision, the Court of Appeals dismissed the petition for culpable of grave misconduct and loss of trust and confidence.
certiorari filed by petitioner Jeffrey Nacague (Nacague) and affirmed the 21
March 2005 Decision and 31 May 2005 Resolution of the National Labor In view thereof, the company is constrained to terminate your employment
Relations Commission (NLRC) in NLRC Case No. V-000481-04. In its 19 April effective today, March 7, 2003.
2006 Resolution, the Court of Appeals denied Nacague’s motion for
reconsideration. Feeling aggrieved, Nacague filed a complaint for illegal suspension, illegal
dismissal and for reinstatement with backwages.
The Facts
On 12 November 2003, Labor Arbiter Ernesto F. Carreon rendered a decision in
On 15 June 1995, respondent Sulpicio Lines, Inc. (Sulpicio Lines) hired Nacague favor of Nacague and declared that Sulpicio Lines illegally dismissed Nacague.
as "hepe de viaje" or the representative of Sulpicio Lines on board its vessel The dispositive portion of the Labor Arbiter’s 12 November 2003 Decision
M/V Princess of the World (the ship). reads:

On 25 January 2003, Sulpicio Lines received an anonymous letter reporting the WHEREFORE, premises considered, judgment is hereby rendered ordering the
use of illegal drugs on board the ship. On 14 February 2003, Ceasar T. Chico, a respondent Sulpicio Lines, Inc. to pay complainant Jeffrey Nacague the
housekeeper on the ship, submitted a report regarding the drug paraphernalia following:
found inside the Mopalla Suite Room and the threat on his life made by Nacague
and Chief Mate Reynaldo Doroon after he found the drug paraphernalia.
Separation pay ₱75,600.00
On 15 February 2003, Sulpicio Lines sent a notice of investigation to Nacague Backwages ₱77,415.00
informing him of the charges against him for use of illegal drugs and
threatening a co-employee. Total ₱153,015.00

When the ship docked in the port of Manila on 18 February 2003, some crew
members of the ship, together with Nacague, were subjected to a random drug The other claims are dismissed for lack of merit.
test. They were taken to S.M. Lazo Medical Clinic (S.M. Lazo Clinic) and were
required to submit urine samples. The result of the random drug test revealed SO ORDERED.
that Nacague was positive for methamphetamine hydrochloride or shabu.
According to the Labor Arbiter, the termination of employment of employees
On 20 February 2003, Sulpicio Lines subjected Nacague to a formal found positive for using illegal drugs should not be exercised indiscriminately
investigation. Nacague denied using illegal drugs. and thoughtlessly. The Labor Arbiter agreed with Nacague that the drug test
result from S.M. Lazo Clinic was questionable because the clinic is not

21
accredited by the Dangerous Drug Board and not under its supervision. The Nacague filed a motion for reconsideration. In its 19 April 2006 Resolution, the
Labor Arbiter gave more weight to the drug test performed by Chong Hua Court of Appeals denied the motion.
Hospital because it was accredited by the Dangerous Drug Board. The Labor
Arbiter said that doubts must be resolved in favor of the employee. The Labor Hence, this petition.
Arbiter also ruled that reinstatement is no longer viable due to the strained
relations between Nacague and Sulpicio Lines and, thus, awarded separation
pay to Nacague. The Issue

Dissatisfied with the Labor Arbiter’s Decision, Sulpicio Lines appealed to the Nacague raises the sole issue of whether the Court of Appeals erred in ruling
NLRC. In its 21 March 2005 Decision, the NLRC reversed the Labor Arbiter’s that his termination from employment was valid.
decision and dismissed Nacague’s complaint for lack of merit.
The Ruling of the Court
According to the NLRC, since Nacague, who was performing a task involving
trust and confidence, was found positive for using illegal drugs, he was guilty of The petition is meritorious.
serious misconduct and loss of trust and confidence. The NLRC added that
Sulpicio Lines’ Code of Conduct specified that the penalty for the use and illegal Nacague maintains that the S.M. Lazo Clinic drug test was not credible because
possession of prohibited drugs is dismissal. The NLRC also said that there is a Sulpicio Lines failed to show that S.M. Lazo Clinic is an authorized drug testing
presumption that S.M. Lazo Clinic is an accredited drug testing center and that center. Nacague also alleges that the urine samples were gathered carelessly
it was incumbent upon Nacague to show otherwise. without proper labels to identify their owners and that S.M. Lazo Clinic did not
ask Nacague if he was taking any medication that might alter the results of the
Nacague filed a motion for reconsideration. In its 31 May 2005 Resolution, the drug test. Nacague adds that Republic Act No. 9165 (R.A. No. 9165) and the
NLRC denied Nacague’s motion. Department of Labor and Employment Order No. 53-03 (Department Order No.
53-03) require two drug tests — a screening test and a confirmatory test.
Nacague filed a petition for certiorari with the Court of Appeals. Nacague Nacague maintains that, since only a screening test was conducted, he was
alleged that the NLRC gravely abused its discretion when it declared that illegally dismissed based on an incomplete drug test. Nacague argues that
Sulpicio Lines validly terminated his employment. Sulpicio Lines failed to discharge its burden of proving that the termination of
his employment was legal.
The Ruling of the Court of Appeals
On the other hand, Sulpicio Lines questions the belated attempt of Nacague to
question the credibility of S.M. Lazo Clinic. Sulpicio Lines also argues that since
According to the Court of Appeals, Sulpicio Lines complied with both the Nacague knew that the residue of the drug would no longer be detectable in his
procedural and substantive requirements of the law when it terminated the body after five days, Nacague underwent another drug test with the Chong Hua
employment of Nacague. The Court of Appeals said that the positive result of Hospital. Sulpicio Lines insists that the most accurate drug test is the random
the S.M. Lazo Clinic drug test was the main basis of Sulpicio Lines in drug test conducted by S.M. Lazo Clinic and that the test with Chong Hua
terminating Nacague’s employment. The Court of Appeals declared that the Hospital was a "planned" test.
evidence presented by Sulpicio Lines was sufficient to justify the conclusion
that Nacague committed serious misconduct and a breach of trust and
confidence warranting his dismissal from employment. The Court of Appeals Under Article 279 of the Labor Code, an employer may terminate the services of
agreed with the NLRC that Nacague failed to prove his allegation that S.M. Lazo an employee for just causes or for authorized causes. Furthermore, under
Clinic lacks accreditation. On the procedural requirements, the Court of Appeals Article 277(b) of the Labor Code, the employer must send the employee who is
found that Sulpicio Lines complied with the twin-notice requirements and about to be terminated, a written notice stating the causes for termination and
conducted a formal hearing. must give the employee the opportunity to be heard and to defend himself.
Thus, to constitute valid dismissal from employment, two requisites must

22
concur: (1) the dismissal must be for a just or authorized cause; and (2) the turn positive. The employee concerned must be informed of the test results
employee must be afforded an opportunity to be heard and to defend himself. whether positive or negative. (Emphasis supplied)

Contrary to Sulpicio Lines’ allegation, Nacague was already questioning the In Social Justice Society v. Dangerous Drugs Board, we explained:
credibility of S.M. Lazo Clinic as early as the proceedings before the Labor
Arbiter. In fact, the Labor Arbiter declared that the S.M. Lazo Clinic drug test As to the mechanics of the test, the law specifies that the procedure shall
result was doubtful since it is not under the supervision of the Dangerous Drug employ two testing methods, i.e., the screening test and the confirmatory test,
Board. doubtless to ensure as much as possible the trustworthiness of the results. But
the more important consideration lies in the fact that the tests shall be
The NLRC and the Court of Appeals ruled that Sulpicio Lines validly terminated conducted by trained professionals in access-controlled laboratories monitored
Nacague’s employment because he was found guilty of using illegal drugs which by the Department of Health (DOH) to safeguard against results tampering and
constitutes serious misconduct and loss of trust and confidence. However, we to ensure an accurate chain of custody.
find that Sulpicio Lines failed to clearly show that Nacague was guilty of using
illegal drugs. We agree with the Labor Arbiter that the lack of accreditation of The law is clear that drug tests shall be performed only by authorized drug
S.M. Lazo Clinic made its drug test results doubtful. testing centers.1avvphi1 In this case, Sulpicio Lines failed to prove that S.M.
Lazo Clinic is an accredited drug testing center. Sulpicio Lines did not even
Section 36 of R.A. No. 9165 provides that drug tests shall be performed only by deny Nacague’s allegation that S.M. Lazo Clinic was not accredited. Also, only a
authorized drug testing centers. Moreover, Section 36 also prescribes that drug screening test was conducted to determine if Nacague was guilty of using illegal
testing shall consist of both the screening test and the confirmatory test. drugs. Sulpicio Lines did not confirm the positive result of the screening test
Section 36 of R.A. No. 9165 reads: with a confirmatory test. Sulpicio Lines failed to indubitably prove that Nacague
was guilty of using illegal drugs amounting to serious misconduct and loss of
SEC. 36. Authorized Drug Testing. Authorized drug testing shall be done by any trust and confidence. Sulpicio Lines failed to clearly show that it had a valid and
government forensic laboratories or by any of the drug testing laboratories legal cause for terminating Nacague’s employment. When the alleged valid
accredited and monitored by the DOH to safeguard the quality of test cause for the termination of employment is not clearly proven, as in this case,
results. The DOH shall take steps in setting the price of the drug test with DOH the law considers the matter a case of illegal dismissal.
accredited drug testing centers to further reduce the cost of such drug test. The
drug testing shall employ, among others, two (2) testing methods, the screening We agree with the Labor Arbiter that Nacague’s reinstatement is no longer
test which will determine the positive result as well as the type of drug used feasible due to strained relations between Nacague and Sulpicio Lines and that
and the confirmatory test which will confirm a positive screening test. x x x Nacague should instead be granted separation pay.
(Emphasis supplied)
WHEREFORE, we GRANT the petition. We SET ASIDE the 23 January 2006
Department Order No. 53-03 further provides: Decision and the 19 April 2006 Resolution of the Court of Appeals in CA-G.R.
Drug Testing Program for Officers and Employees CEB SP No. 01065. We REINSTATE the 12 November 2003 Decision of the
Labor Arbiter.
Drug testing shall conform with the procedures as prescribed by
the Department of Health (DOH) (www.doh.gov.ph). Only drug testing SO ORDERED.
centers accredited by the DOH shall be utilized. A list of accredited centers
may be accessed through the OSHC website (www.oshc.dole.gov.ph).

Drug testing shall consist of both the screening test and the
confirmatory test; the latter to be carried out should the screening test

23

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