1

1.

PRIMO E. CAONG, JR., ALEXANDER J. TRESQUIO, and LORIANO
D. DALUYON,
Petitioners,
- versus -

AVELINO REGUALOS,
Respondent
Facts:
Petitioners Primo E. Caong, Jr. (Caong), Alexander J. Tresquio
(Tresquio), and Loriano D. Daluyon (Daluyon) were employed by respondent
Avelino Regualos under a boundary agreement, as drivers of his brand-new
jeepneys. On November 4, 2001 a meeting was conducted by respondent.
During the said meeting, respondent informed his employees, including
petitioners, to strictly comply with the policy regarding remittances and warned
them that they would not be allowed to take out the jeepneys if they did not
remit the full amount of the boundary. Despite the said reminder given by the
respondent, Daluyon, Tresquio and Caong failed to remit the entire amount of
boundary on November 7, 8, 9, 2001, respectively, and when they returned
for work after their rest day, respondent barred them from driving because of
the deficiency in the boundary payment. They pleaded with the respondent to
allow them to drive but to no avail. Thus, they filed an illegal dismissal case
against the respondent. During the mandatory conference, respondent
manifested that petitioners were not dismissed and that they could drive
his jeepneys once they paid their arrears. Petitioners, however, refused to do
so. On March 31, 2003, the Labor Arbiter decided the case in favor of
respondent. Petitioners appealed the decision to the National Labor Relations
Commission (NLRC). In its resolution
]
dated March 31, 2004, the NLRC
agreed with the Labor Arbiter and dismissed the appeal. It also denied
petitioners motion for reconsideration.
Forthwith, petitioners filed a petition for certiorari with the CA.

In its Decision

dated December 14, 2006, the CA found no grave
abuse of discretion on the part of the NLRC. According to the CA, the
employer-employee relationship of the parties has not been severed, but
merely suspended when respondent refused to allow petitioners to drive
the jeepneys while there were unpaid boundary obligations. The CA pointed
out that the fact that it was within the power of petitioners to return to work is
proof that there was no termination of employment. The condition that
petitioners should first pay their arrears only for the period of November 5-9,
2001 before they can be readmitted to work is neither impossible nor
unreasonable if their total unpaid boundary obligations and the need to
sustain the financial viability of the employers enterprisewhich would
ultimately redound to the benefit of the employeesare taken into
consideration.

The CA went on to rule that petitioners were not denied their right to
due process. It pointed out that the case does not involve a termination of
employment; hence, the strict application of the twin-notice rule is not
warranted. According to the CA, what is important is that petitioners were
given the opportunity to be heard. The meeting conducted by respondent on
November 4, 2001 served as sufficient notice to petitioners. During the said
meeting, respondent informed his employees, including petitioners, to strictly
comply with the policy regarding remittances and warned them that they
would not be allowed to take out the jeepneys if they did not remit the full
amount of the boundary.

Issue:

Whether or not the petitioners were illegally dismissed by the respondent and
that such dismissal was made in violation of the due process requirements of
the law.

Held:

The petition is without merit.
The Labor Arbiter, the NLRC, and the CA uniformly declared that petitioners
were not dismissed from employment but merely suspended pending
payment of their arrears. We have no reason to deviate from such
findings. Indeed, petitioners suspension cannot be categorized as dismissal,
considering that there was no intent on the part of respondent to sever the
employer-employee relationship between him and petitioners. In fact, it was
made clear that petitioners could put an end to the suspension if they only pay
their recent arrears. As it was, the suspension dragged on for years because
of petitioners stubborn refusal to pay. It is acknowledged that an employer
has free rein and enjoys wide latitude of discretion to regulate all
aspects of employment, including the prerogative to instil discipline on
his employees and to impose penalties, including dismissal, if
warranted, upon erring employees. This is a management prerogative.
Indeed, the manner in which management conducts its own affairs to achieve
its purpose is within the managements discretion. The only limitation on the
exercise of management prerogative is that the policies, rules, and
regulations on work-related activities of the employees must always be fair
and reasonable, and the corresponding penalties, when prescribed,
commensurate to the offense involved and to the degree of the infraction.

Petitioners concern relates to the implementation of the policy, which is
another matter. A company policy must be implemented in such manner as
will accord social justice and compassion to the employee. In case of
noncompliance with the company policy, the employer must consider the
surrounding circumstances and the reasons why the employee failed to
comply. When the circumstances merit the relaxation of the application of the
policy, then its noncompliance must be excused.

In the case at bench, private respondent, upon finding that
petitioners had consistently failed to remit the full amount of the
boundary, conducted a meeting on November 4, 2001 informing
them to strictly comply with the policy regarding their remittances
and warned them to discontinue driving if they still failed to remit
the full amount of the boundary.


WHEREFORE, premises considered, the petition is DENIED. The
Court of Appeals Decision dated December 14, 2006 and Resolution dated
July 16, 2007 are AFFIRMED.


2.
G.R. No.181881
Briccio Ricky A. Pollo, petitioner
vs.
Chairperson Karina Constantino-David, Director IV Raquel De Guzman
Buensalida, Director IV Lydia A. Castillo, Director III Engelbert Anthony D.
Unite and the Civil Service Commision, respondents

[This case involves a search of office computer assigned to a government
employee who was then charged administratively and was eventually
dismissed from the service. The employees personal files stored in the
computer were used by the government employer as evidence of his
misconduct.]

FACTS:

On January 3, 2007, an anonymous letter-complaint was received by
the respondent Civil Service Commission (CSC) Chairperson alleging that the
chief of the Mamamayan muna hindi mamaya na division of Civil Service
Commission Regional Office No. IV (CSC-ROIV) has been lawyering for
public officials with pending cases in the CSC. Chairperson David immediately
formed a team with background in information technology and issued a
memorandum directing them to back up all the files in the computers found in
the [CSC-ROIV] Mamamayan Muna (PALD) and Legal divisions.

The team proceeded at once to the CSC-ROIV office and backed
up all files in the hard disk of computers at the Public Assistance and Liaison
Division (PALD) and the Legal Services Division. This was witnessed by
several employees. At around 10:00 p.m. of the same day, the investigating
team finished their task. The next day, all the computers in the PALD were
sealed and secured. The diskettes containing the back-up files sourced from
the hard disk of PALD and LSD computers were then turned over to
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Chairperson David. It was found that most of the files in the 17 diskettes
containing files copied from the computer assigned to and being used by the
petitioner, numbering about 40 to 42 documents, were draft pleadings or
letters in connection with administrative cases in the CSC and other tribunals.
Chairperson David thus issued a Show-Cause Order requiring the petitioner
to submit his explanation or counter-affidavit within five days from notice.

Petitioner filed his Comment, denying that he is the person referred
to in the anonymous letter-complaint. He asserted that he had protested the
unlawful taking of his computer done while he was on leave, citing the letter
dated January 8, 2007 in which he informed Director Castillo of CSC-ROIV
that the files in his computer were his personal files and those of his sister,
relatives, friends and some associates and that he is not authorizing their
sealing, copying, duplicating and printing as these would violate his
constitutional right to privacy and protection against self-incrimination and
warrantless search and seizure. He pointed out that though government
property, the temporary use and ownership of the computer issued under a
Memorandum of Receipt is ceded to the employee who may exercise all
attributes of ownership, including its use for personal purposes. In view of the
illegal search, the files/documents copied from his computer without his
consent [are] thus inadmissible as evidence, being fruits of a poisonous tree.

The CSC found prima facie case against the petitioner and charged
him with Dishonesty, Grave Misconduct, Conduct Prejudicial to the Best
Interest of the Service and Violation of R.A. No. 6713 (Code of Conduct
and Ethical Standards for Public Officials and Employees). Petitioner then
filed an Omnibus Motion (For Reconsideration, to Dismiss and/or to Defer)
assailing the formal charge as without basis having proceeded from an illegal
search, which is beyond the authority of the CSC Chairman, such power
pertaining solely to the court. The CSC denied this omnibus motion.

On March 14, 2007, petitioner filed an Urgent Petition before the
Court of Appeals (CA) assailing both the January 11, 2007 Show-Cause
Order and February 26, 2007 Resolution as having been issued with grave
abuse of discretion amounting to excess or total absence of jurisdiction.
On July 24, 2007, the CSC issued a Resolution finding
petitioner GUILTY of Dishonesty, Grave Misconduct, Conduct Prejudicial
to the Best Interest of the Service and Violation of Republic Act 6713. He
is meted the penalty of DISMISSAL FROM THE SERVICE with all its
accessory penalties. This Resolution was also brought to the CA by herein
petitioner.

By a Decision dated October 11, 2007, the CA dismissed the
petitioners petition for certiorari after finding no grave abuse of discretion
committed by respondents CSC officials. His motion for reconsideration
having been denied by the CA, petitioner brought this appeal before the
Supreme Court.

II. THE ISSUE

Was the search conducted on petitioners office computer and the
copying of his personal files without his knowledge and consent alleged as
a transgression on his constitutional right to privacy lawful? [Note that in the
discussion,management prerogative will be tackled as well.]

III. THE RULING

[The Supreme Court DENIED the petition and AFFIRMED the CA,
which in turn upheld the CSC resolution dismissing the petitioner from service.
The High Tribunal held that the search on petitioners office computer and the
copying of his personal files were both LAWFUL and DID NOT VIOLATE his
constitutional right to privacy.]

The Supreme Court held that the search made by the Civil Service
Commission (CSC) in office-issued computer of a public employee did not
violate Section 2, Article III of the 1987 Constitution since it passed the two-
fold test:
a. the employee cannot have any reasonable expectation of privacy
under the circumstances; and
b. the inception and scope of the intrusion made by the CSC was
reasonable.
Citing the American case of O'Connor vs. Ortega, the Court held that public
employees' expectations of privacy in their offices, desks and file cabinets
may be reduced by virtue of actual office practices and procedures, and/or by
legitimate regulation. In addition, the Court likewise referred to its ruling
in Social Justice Society vs. Dangerous Drugs Board, et al.which stated that
the employees' privacy interest in an office is to a large extent circumscribed
by the company's work policies, the collective bargaining agreement, if any,
entered into by management and the bargaining unit, and the inherent right of
the employer to maintain discipline and efficiency in the workplace. Their
privacy expectation in a regulated office environment is, in fine, reduced; and
a degree of impingement upon such privacy has been upheld.
In the case, Pollo, who was under investigation for moonlighting as an
advocate for and on behalf of public employees facing complaints before the
CSC, failed to prove that he had an actual (subjective) expectation of privacy
either in his office or in the government-issued computer which contained his
personal files. He did not allege that he had a separate enclosed office which
he did not share with anyone, or that his office was always locked and not
open to other employees or visitors. Neither did he allege that he used a
password or adopted any means to prevent other people from accessing his
computer files.
IN DEPTH:
(1) NO, the petitioner had no reasonable expectation of privacy in
his office and computer files.

Petitioner failed to prove that he had an actual (subjective)
expectation of privacy either in his office or government-issued computer
which contained his personal files. Petitioner did not allege that he had a
separate enclosed office which he did not share with anyone, or that his office
was always locked and not open to other employees or visitors. Neither did
he allege that he used passwords or adopted any means to prevent other
employees from accessing his computer files. On the contrary, he submits
that being in the public assistance office of the CSC-ROIV, he normally would
have visitors in his office like friends, associates and even unknown people,
whom he even allowed to use his computer which to him seemed a trivial
request. He described his office as full of people, his friends, unknown
people and that in the past 22 years he had been discharging his functions at
the PALD, he is personally assisting incoming clients, receiving documents,
drafting cases on appeals, in charge of accomplishment report, Mamamayan
Muna Program, Public Sector Unionism, Correction of name, accreditation of
service, and hardly had any time for himself alone, that in fact he stays in the
office as a paying customer. Under this scenario, it can hardly be deduced
that petitioner had such expectation of privacy that society would recognize as
reasonable.

Moreover, even assuming arguendo, in the absence of allegation or
proof of the aforementioned factual circumstances, that petitioner had at least
a subjective expectation of privacy in his computer as he claims, such is
negated by the presence of policy regulating the use of office computers
[CSC Office Memorandum No. 10, S. 2002 Computer Use Policy (CUP)], as
in Simons. The CSC in this case had implemented a policy that put its
employees on notice that they have no expectation of privacy
in anything they create, store, send or receive on the office computers, and
that the CSC may monitor the use of the computer resources using both
automated or human means. This implies that on-the-spot inspections may
be done to ensure that the computer resources were used only for such
legitimate business purposes.

(2) YES, the search authorized by the respondent CSC Chair, which
involved the copying of the contents of the hard drive on petitioners
computer, was reasonable in its inception and scope.

The search of petitioners computer files was conducted in
connection with investigation of work-related misconduct prompted by an
anonymous letter-complaint addressed to Chairperson David regarding
anomalies in the CSC-ROIV where the head of the Mamamayan Muna Hindi
Mamaya Na division is supposedly lawyering for individuals with pending
cases in the CSC. A search by a government employer of an employees
office is justified at inception when there are reasonable grounds for
suspecting that it will turn up evidence that the employee is guilty of work-
related misconduct.

Under the facts obtaining, the search conducted on petitioners
computer was justified at its inception and scope. We quote with approval the
CSCs discussion on the reasonableness of its actions, consistent as it were
with the guidelines established by OConnor:

Even conceding for a moment that there is no such administrative
policy, there is no doubt in the mind of the Commission that the search of
Pollos computer has successfully passed the test of reasonableness for
warrantless searches in the workplace as enunciated in the above-discussed
American authorities. It bears emphasis that the Commission pursued the
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search in its capacity as a government employer and that it was
undertaken in connection with an investigation involving a work-related
misconduct, one of the circumstances exempted from the warrant
requirement. At the inception of the search, a complaint was received
recounting that a certain division chief in the CSCRO No. IV was lawyering
for parties having pending cases with the said regional office or in the
Commission. The nature of the imputation was serious, as it was
grievously disturbing. If, indeed, a CSC employee was found to be furtively
engaged in the practice of lawyering for parties with pending cases before
the Commission would be a highly repugnant scenario, then such a case
would have shattering repercussions. It would undeniably cast clouds of
doubt upon the institutional integrity of the Commission as a quasi-judicial
agency, and in the process, render it less effective in fulfilling its mandate as
an impartial and objective dispenser of administrative justice. It is settled that
a court or an administrative tribunal must not only be actually impartial but
must be seen to be so, otherwise the general public would not have any trust
and confidence in it.

Considering the damaging nature of the accusation, the
Commission had to act fast, if only to arrest or limit any possible adverse
consequence or fall-out. Thus, on the same date that the complaint was
received, a search was forthwith conducted involving the computer resources
in the concerned regional office. That it was the computers that were
subjected to the search was justified since these furnished the easiest
means for an employee to encode and store documents. Indeed, the
computers would be a likely starting point in ferreting out incriminating
evidence. Concomitantly, the ephemeral nature of computer files, that is,
they could easily be destroyed at a click of a button, necessitated
drastic and immediate action. Pointedly, to impose the need to comply with
the probable cause requirement would invariably defeat the purpose of the
wok-related investigation.

Thus, petitioners claim of violation of his constitutional right to
privacy must necessarily fail. His other argument invoking the privacy of
communication and correspondence under Section 3(1), Article III of
the 1987 Constitution is also untenable considering the recognition accorded
to certain legitimate intrusions into the privacy of employees in the
government workplace under the aforecited authorities. We likewise find no
merit in his contention that OConnor and Simons are not relevant because
the present case does not involve a criminal offense like child pornography.
As already mentioned, the search of petitioners computer was justified there
being reasonable ground for suspecting that the files stored therein
would yield incriminating evidence relevant to the investigation being
conducted by CSC as government employer of such misconduct subject
of the anonymous complaint. This situation clearly falls under the
exception to the warrantless requirement in administrative searches defined
in OConnor.
FYI - Guidelines in the use computers by employees:
The CSC had a policy regulating the use of office computers which stated,
among others:
1. The computers are the property of the CSC and may be used only
for legitimate purposes.
2. No expectation of privacy. Users except the Members of the CSC,
shall not have an expectation of privacy in anything they create,
store, send, or receive on the computers.
3. Waiver of privacy rights. Users expressly waive any right to privacy
in anything they create, store, send, or receive on the computer
through the internet or any other computer network. Users
understand that the CSC may use human or automated means to
monitor the use of its computers.
4. Non-exclusivity of computer resources. A computer resource is not
a personal property or for the exclusive use of a User to whom a
memorandum of receipt has been issued.
5. Passwords do not imply privacy. Use of passwords to gain access
to the computer system or to encode particular files or messages
does not imply that Users have an expectation of privacy in the
material they create or receive on the computer system.
With regard to the second test, the Court held that the search was justified at
inception and scope since there was reasonable ground for suspecting that it
will turn up evidence that the employee was guilty of work-related misconduct.
***** Note: While the Bill of Rights of the 1987 Philippine Constitution could
only be used against the State, it is still a good corporate practice to make it
known to the rank-and-file that the management has the prerogative to
inspect the digital workstations of their employees.

Ayan lang talaga yung management prerogative sa case, if they have control
since constitutional right is deemed violated.

4. G.R. No. 159730
NORKIS TRADING CO., INC.; MANUEL GASPAR ALBOS, JR. (Senior Vice
President of Norkis)
VS. MELVIN GNILO

Constructive Dismissal Invalid Practice of Management Prerogative

Gnilo was the Credit and Collection Manager of Magna Financial Services
Group, sister company of Norkis Trading (Albay and Catanduanes branches).
In 2000, it was found out that Gnilo forwarded monthly collection reports
without checking the same. The overstated reports about his area of
management misled the management into believing that Gnilos area
obtained a favourable collection efficiency.
Gnilo was charged by the company with negligence of basic duties and
responsibilities resulting in loss of trust and confidence and laxity in directing
and supervising his subordinates. He was placed under a 15-day suspension
without pay and other privileges. He was subsequently assigned as
marketing assistant of the companys senior VP Albos.

LA: dismissed Gnilos petition for illegal suspension, constructive dismissal,
and non payment of allowances and privileges
: overstated reports for more than 6 months- sufficient breach of trust and
confidence (valid ground for termination)
: transfer of Gnilo- inherent prerogative of employer

NLRC: reversed LA
: his transfer constitutes constructive dismissal
: 15 day suspension- valid exercise of management prerogative
: transfer of position- demotion in rank form manager to a mere
rank and file employee- constructive dismissal- illegal

Norkis Tradings petition: inherent prerogative as employer, Gnilo was weak
in the financial aspect of operation but was good in marketing
: Gnilos previous and current position in the company is of equal
rank and has the same level of authority.
: no demotion since his new position is more encompassing and
vital to the company[Marketing Asst. -scope of work is wider, all over Luzon]
[Credit and collection Manager: 2 braches only]; same salary

ISSUE: Whether or not the transfer of Gnilo from being a Collections Manager
to a Marketing Assistant constitutes constructive dismissal

HELD: Yes.
SC: Norkis Tradings petition denied; CA decision AFFIRMED
RATIO:
While the transfer of Gnilo did not result in the reduction of his salary, there
was a reduction in his duties and responsibilities which amounted to a
demotion tantamount to a constructive dismissal.

As Credit and Collection Manager, Gnilo was clothed with all the duties and
responsibilities of a managerial employee. He has discretionary powers. On
the other hand, the work of a Marketing Assistant is clerical in nature, which
does not involve the exercise of any discretion. Such job entails mere data
gathering on vital marketing information. He became a mere staff member in
the office of the Senior Vice-President for Marketing. There is also reduction
in benefit (issuance of company car). Petitioner requested for the position of
sales engineer or the like but he was given a lower position instead.
While petitioners have the prerogative to transfer respondent to another position,
such transfer should be done without diminution of rank and benefits. The alleged
overstated collection reports of three NICs under respondent's supervision submitted
in 1997, were already mentioned in the IAP report of the 1999 incident for which
respondent was meted the penalty of 15- day suspension without salary, travel and
transportation allowance; thus, the same could no longer be used to justify his
transfer. Moreover, respondent's demotion, which was a punitive action, was, in
effect, a second penalty for the same negligent act of respondent.

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Notes:

The prerogative of the management to transfer an employee from one office to
another within the business establishment is valid [PROVISO: that there is no
demotion in rank or diminution of his salary, benefits and other privileges and the
action is not motivated by discrimination, made in bad faith, or effected as a form of
punishment or demotion without sufficient cause]

The privilege (management prerogative) is inherent in the right of employers to
control and manage their enterprises effectively.

The right of employees to security of tenure does not give them vested rights to their
positions to the extent of depriving management of its prerogative to change their
assignments or to transfer them.

Managerial prerogatives, however, are subject to limitations provided by law,
collective bargaining agreements, and general principles of fair play and justice.

Constructive dismissal is defined as a quitting because continued employment is
rendered impossible, unreasonable or unlikely; when there is a demotion in rank or a
diminution of pay.

Constructive dismissal exists when an act of clear discrimination, insensibility or
disdain by an employer becomes unbearable to the employee, leaving him with no
option but to forego his continued employment.

A transfer is defined as a movement from one position to another which is of
equivalent rank, level or salary, without break in service.

Promotion is the advancement from one position to another with an increase in
duties and responsibilities as authorized by law, and usually accompanied by an
increase in salary.

Demotion involves a situation in which an employee is relegated to a subordinate or
less important position constituting a reduction to a lower grade or rank, with a
corresponding decrease in duties and responsibilities, and usually accompanied by a
decrease in salary.

-30-


7.
(Management Prerogative)

G.R. No. 168654 March 25, 2009
ZAYBER JOHN B. PROTACIO, Petitioner, vs. LAYA MANANGHAYA &
CO. and/or MARIO MANANGHAYA, Respondents

TINGA, J.:

FACTS:
Respondent KPMG Mananghaya & Co. hired petitioner Zayber John B.
Protacio as Tax Manager in 1996. He was subsequently promoted as Senior
Tax Manager then as Tax Principal in 1 October 1997. However, petitioner
resigned effective 30 September 1999. On 1 December 1999, petitioner sent
a letter to responded firm demanding the immediate payment of his 13
th

month pay, the cash commutation of his leave credits and the issuance of his
1999 Certificate of Income Tax Withheld on Compensation. He sent two more
demand letters for the payment of his reimbursement claims under pain of a
legal action.

Respondent firm failed to act upon the demand letters. Thus, on 15 December
1999, petitioner filed before the NLRC a complaint for the non-issuance of
petitioners W-2 tax form for 1999 and the non-payment of the following
benefits: 1) cash equivalent of petitioners leave credits in the amount of
P55,467.60; 2) proportionate 13
th
month pay for 1999; 3) reimbursement
claims of P19,012; and 4) lump sum pay for the FY 1999 of P674,756.7. He
also sought moral and exemplary damages and attorneys fees.

During the pendency of the case, respondent firm on three occasions sent
check payments to petitioner in the following amounts: 1) P17,250 13
th
month
pay; 2) P54,824.18 cash equivalent of his leave credits and reimbursement
claims; and 3) P10,762.57 refund of taxes withheld on his vacation leave
credits. Petitioner acknowledged the receipt of the 13
th
month pay but
disputed the computation of the cash value of his vacation leave credits and
reimbursement claims.

The Labor Arbiter rendered a decision, ordering respondent to pay
complainant the following: P12,681 reimbursement claims; P28,407.08 for
underpayment of cash equivalent of the unused leave credits; P573,000 year-
end lump sum payment for 1999, and; 10% of total judgment awards way of
attorneys fees.

The Labor Arbiter held that the respondent firm had erroneously based the
computation of the cash equivalent of the leave credits on a basic pay of
P61,000. He held that evidence showed that petitioners monthly basic salary
was P95,000 inclusive of the other benefits that were deemed included and
integrated in the basic salary and that respondent firm had computed
petitioners 13
th
month pay based on a monthly basic pay of P95,000, thus the
cash commutation of the leave credits should also be based on this figure.

The Labor Arbiter also ruled that petitioner was entitled to a year-end
payment of P573,000 on the basis of the company policy of granting yearly
lump sum payments to petitioner during all the years of service and that
respondent firm had failed to give petitioner the same benefit for 1999 without
any explanation.

Respondent firm appealed to the NLRC which rendered a judgment affirming
its earlier ruling with the modification that complainant is only entitled to
receive P2,301 as reimbursement claims. The award of P12,681 was set
aside for lack of basis while affirming the findings on the issues of lump sum
payments and cash equivalents of leave credits. After being denied by NLRC
its petition for reconsideration, respondent elevated the matter to the Court of
Appeals.

The CA further reduced total money award to petitioner to P2,301 for
reimbursement claims, P9,8012.83 for underpayment of cash equivalent of
unused leave credits, and P10,000 attorneys fees.
With respect to the award of the year-end lump sum, the CA held that while
the lump sum payment which petitioner was entitled, the payment thereof was
contingent upon the financial position of the firm. Petitioner brought the matter
to the Supreme Court.

ISSUE:
Whether or not petitioner is entitled to the year-end lump sum as part of his
compensation package.

RULING:
The evidence on record establishes that aside from the basic monthly
compensation, petitioner received a yearly lump sum amount during the first
two years of his employment, with payments made to him after the annual net
incomes of the firm had been determined. Thus, the amounts thereof varied
and were dependent on the firms cash position and financial performance. In
one of the letters of Mananghaya to petitioner, the amount was referred to as
petitioners share in the incentive compensation program.

While the amount was drawn from the annual net income of the firm, the
distribution to non-partners of employees of the firm was not a profit-sharing
arrangement contrary to CAs finding. The payment to non-partners like the
petitioner was discretionary on the part of the chairman and managing
chairman coming from their authority to fix compensation of any employee
based on a share in the partnerships net income. The distribution being
merely discretionary, the year-end lump sum payment may properly be
considered as a year-end bonus or incentive. Contrary to petitioners claim,
the granting of the year-end lump sum amount was payable only after the
firms annual net income and cash position were determined.

A bonus is a gratuity, or act of liberality of the giver. It is something given in
addition to what is ordinarily received by or strictly due the recipient. A bonus
is granted and paid to an employee for his industry and loyalty which
contributed to the success of the employers business and made possible the
realization of profits. Generally, a bonus is not a demandable and enforceable
obligation. It is so only when it is made part of the wage or salary or
compensation. When considered as part of the compensation and therefore
demandable and enforceable, the amount is usually fixed. If the amount
would be dependent upon the realization of profits, the bonus is also not
demandable and enforceable.

Thus, petitioners claim that the year-end lump sum represented the balance
of his total compensation package is incorrect. The fact remains that the
amount paid to petitioner on the two occasions varied and were always
dependent upon the firms financial position.

In Philippine Duplicators, Inc. v. NLRC, the Court held that if the bonus is paid
only if profits are realized or a certain amount of productivity achieved, it
cannot be considered part of wages. Only when the employer promises and
5
agrees to give without any conditions imposed for its payment, does the
bonus become part of the wage.

The granting of the bonus is basically a management prerogative which
cannot be enforced upon the employer who may not be obliged to assume the
onerous burden of granting bonuses or other benefits aside from the
employees basic salaries or wages. Respondents had consistently
maintained that petitioner was not entitled to the bonus as a matter of right.
The payment of the year-end lump sum bonus based upon the firms
productivity or the individual performance of tis employees was well within
respondent firms prerogative. Thus, respondent was also justified in declining
to give the bonus to petitioner on account of the latters unsatisfactory
performance. The granting of the year-end lump sum bonus was discretionary
and conditional, thus, petitioner may not question the basis for the granting of
a mere privilege.

The monthly compensation of P71,250 used as base figure by the CA is
totally without basis. As correctly held by the Labor Arbiter and the NLRC, the
evidence on record reveals that petitioner was receiving a monthly
compensation of P95,000 consisting of a basic salary of P61,000, advance
incentive pay of P15,000, transportation allowance of P15,000, and
representation allowance of P4,000, totalling to P95,000 and are all deemed
part of petitioners monthly compensation package, and as such, should be
the basis in the cash commutation of his leave credits. These allowances
were customarily furnished by respondent firm and regularly received by the
petitioner on top of the basic monthly pay of P61,000. Moreover, respondent
firms act of paying petitioner a 13
th
month pay at the rate of P95,000 was as
admission that petitioners basic monthly salary was P95,000.

The Court was also perplexed on the use of the CA, the Labor Arbiter and the
NLRC of a 30-working day divisor instead of 26 days which petitioner insists
and which even the respondent firm used in the cash commutation of leave
credits. The reliance of CA on Section 2, Rule IV, Book III of the Implementing
Rules of Labor Code in using the 30-day working divisor is inapplicable to the
instant case because it referred to the computation of holiday pay for monthly-
paid employees.

Thus, with a monthly compensation of P95,000 and using a 26-working day
divisor, petitioners daily rate is P3,653.85. Based on this rate, petitioners
cash equivalent of his leave credits of 23.5 is P85,865.48. Since he has
already received the amount of P46,009.67, a balance of P39,855.80 remains
payable to petitioner.

Wherefore, the instant petition for review on certiorari is partly granted. The
Decision of the CA is affirmed with the modification that respondents are
liable for the underpayment of the cash equivalent of petitioners leave credits
in the amount of P39,855.80.

Prota
cio
KPMG LA NLR
C
CA SC
13
TH
mo-
pay
P71,250
(based
on P95K
rate)

Cash
equivalent
of leave
credits
(23.5)
55,46
7.6
54,824.1
8 (of w/c
P46,009.
67 cash
equiv. of
leave
credits)
10,762.5
7 (refund)
28,407.0
8
(95K/30
days x
23.5-
46,009.6
7)
Affir
med
LA
9,802.83
(71,250/3
0 day-
divisorx2
3.5-
46,009.6
7)
39,855.8
(95K/26
days x 23.5
=
85,865.48-
46,009.67)
Reimburse
ment
claims
19,01
2.0
12,681 2,30
1
Affirmed
NLRC
Affirmed CA
Year-end
lump sum
674,7
56.7
X 573,000 Affir
med
LA
X Affirmed CA
Exemplary
damages/
Atty.s fees
10% of
total
award
10K Affirmed CA





12.
ELMER M. MENDOZA, petitioner, vs. RURAL BANK OF LUCBAN,
respondent.
Facts:
The Board of Directors of Rural Bank of Lucban Inc. issued Board
Resolution Nos. 99-52 and 99-53. Board Resolution No. 99-52 states that in
line with the policy of the bank to familiarize bank employees with the various
phases of bank operations and further strengthen the existing internal control
system all officers and employees are subject to reshuffle of assignments.
Moreover, it does not preclude the transfer of assignment of bank officers and
employees from the branch office to the head office and vice-versa. Pursuant
to Board Resolution No. 99-53 some branch employees are reshuffled to new
assignment without changes in their compensation and benefits, one of which
is petitioner Elmer Mendoza who was reshuffled from Appraiser to Clerk
Meralco collection.
Petitioner Elmer sent a letter to Alejo B. Daya, the banks board
chairman to express his opinion on the reshuffle. He claimed that the reshuffle
was deemed to be a demotion without legal basis. In her reply, Daya said that
it was never the intention of the management to down grade his position in
the bank considering that his due compensation as bank appraiser is
maintained and no future reduction was intended.
As such, petitioner submitted to the banks Tayabas branch
manager a letter for a leave of absence from work. Afterwhich, he again
submitted a letter asking for another leave of absence for twenty days. While
on his second leave of absence, petitioner filed a complaint for illegal
dismissal against the Rural Bank of Lucban. Petitioner argues that he was
compelled to file an action for constructive dismissal, because he had been
demoted from appraiser to clerk and not given any work to do, while his table
had been placed near the toilet and eventually removed. He adds that the
reshuffling of employees was done in bad faith, because it was designed
primarily to force him to resign.
Issue:
Whether or not the reshuffling of private respondent employees was done in
bad faith and can be made as the basis of a finding of constructive dismissal?
Held:
No. The petition has no merit. Constructive dismissal is defined as
an involuntary resignation resorted to when continued employment is
rendered impossible, unreasonable or unlikely; when there is a demotion in
rank or a diminution of pay; or when a clear discrimination, insensibility or
disdain by an employer becomes unbearable to the employee. In the case at
bar, the reshuffling of its employees was done in good faith and cannot be
made the basis of a finding of constructive dismissal.
In the pursuit of its legitimate business interest, management has
the prerogative to transfer or assign employees from one office or area of
operation to another provided there is no demotion in rank or diminution of
salary, benefits, and other privileges; and the action is not motivated by
discrimination, made in bad faith, or effected as a form of punishment or
demotion without sufficient cause. This privilege is inherent in the right of
employers to control and manage their enterprise effectively. The right of
employees to security of tenure does not give them vested rights to their
positions to the extent of depriving management of its prerogative to change
their assignments or to transfer them.
There appears no justification for denying an employer the right to
transfer employees to expand their competence and maximize their full
potential for the advancement of the establishment. Petitioner was not singled
out; other employees were also reassigned without their express consent.
Neither was there any demotion in the rank of petitioner; or any diminution of
his salary, privileges and other benefits.
The law protects both the welfare of employees and the
prerogatives of management. Courts will not interfere with business
judgments of employers, provided they do not violate the law, collective
bargaining agreements, and general principles of fair play and justice. The
transfer of personnel from one area of operation to another is inherently a
managerial prerogative that shall be upheld if exercised in good faith for the
purpose of advancing business interests, not of defeating or circumventing
the rights of employees.