• ROLANDO C.
RIVERA, Petitioner, and that any breach of the Undertaking or the
vs.
SOLIDBANK CORPORATION, Respondent.
FACTS: Petitioner had been working for Solidbank
Corporation since July 1, 1977. He was initially employed
as an Audit Clerk, then as Credit Investigator, Senior
Clerk, Assistant Accountant, and Assistant Manager.
Prior to his retirement, he became the Manager of the
Credit Investigation and Appraisal Division of the
Consumer’s Banking Group. In the meantime, Rivera and
his brother-in-law put up a poultry business in Cavite.
Solidbank offered a retirement program which Rivera
accepted. Rivera was entitled to receive the net amount
of P963,619.28, which he received.
(THE RELEASE WAIVER AND QUITCLAIM)
Subsequently, Solidbank required Rivera to sign an
undated Release, Waiver and Quitclaim, which was
notarized on March 1, 1995. Rivera acknowledged receipt
of the net proceeds of his separation and retirement
benefits and promised that “[he] would not, at any time,
in any manner whatsoever, directly or indirectly
engage in any unlawful activity prejudicial to the
interest of Solidbank, its parent, affiliate or subsidiary
companies, their stockholders, officers, directors,
agents or employees, and their successors-in-interest
and will not disclose any information concerning the
business of Solidbank, its manner or operation, its
plans, processes, or data of any kind.”
Aside from acknowledging that he had no cause of action
against Solidbank or its affiliate companies, Rivera
agreed that the bank may bring any action to seek an
award for damages resulting from his breach of the
Release, Waiver and Quitclaim, and that such award
would include the return of whatever sums paid to him by
virtue of his retirement.
(THE SEPARATE UN-NOTARIZED
UNDERTAKING)
Rivera was likewise required to sign an undated
Undertaking as a supplement to the Release, Waiver and
Quitclaim in favor of Solidbank in which he declared that
he received in full his entitlement under the law (salaries,
benefits, bonuses and other emoluments), including his
separation pay in accordance with the SRP. In this
Undertaking, he promised that “[he] will not seek
employment with a competitor bank or financial
institution within one (1) year from February 28, 1995,
provisions of the Release, Waiver and Quitclaim
would entitle Solidbank to a cause of action against
him before the appropriate courts of law. Unlike the
Release, Waiver and Quitclaim, the Undertaking was
not notarized.
On May 1, 1995, the Equitable Banking Corporation
(Equitable) employed Rivera as Manager of its Credit
Investigation and Appraisal Division of its Consumers’
Banking Group. Solidbank then, through a letter,
demanded the return of the all the monetary benefits he
received in consideration of the SRP within five (5) days
from receipt; otherwise, appropriate legal action would be
taken against him. Rivera refused.
RTC: Solidbank filed a complaint for Sum of Money with
Prayer for Writ of Preliminary Attachment.
SOLIDBANK alleged therein that in accepting
employment with a competitor bank for the same position
he held in Solidbank before his retirement, Rivera
violated his Undertaking under the SRP. Considering that
Rivera accepted employment with Equitable barely three
months after executing the Undertaking, it was clear that
he had no intention of honoring his commitment under
said deed.
In his Answer with Affirmative Defenses and
Counterclaim, Rivera admitted that he received the net
amount ofP963,619.28 as separation pay. However, the
employment ban provision in the Undertaking was never
conveyed to him until he was made to sign it on February
28, 1995. He emphasized that, prior to said date,
Solidbank never disclosed any condition to the retirement
scheme, nor did it impose such employment ban on the
bank officers and employees who had previously availed
of the SRP. He alleged that the undertaking not to “seek
employment with any competitor bank or financial
institution within one (1) year from February 28, 1995”
was void for being contrary to the Constitution, the law
and public policy, that it was unreasonable, arbitrary,
oppressive, discriminatory, cruel, unjust, inhuman, and
violative of his human rights. He further claimed that the
Undertaking was a contract of adhesion because it was
prepared solely by Solidbank without his participation;
considering his moral and economic disadvantage, it must
be liberally construed in his favor and strictly against the
bank.
BANK filed motion for summary judgment for lack of a
genuine issue. Rivera opposed.
1
RTC ORDERED RIVERA TO PAY back to
solidbank all his received benefits. The trial court
declared that there was no genuine issue as to a matter of
fact in the case since Rivera voluntarily executed the
Release, Waiver and Quitclaim, and the Undertaking. He
had a choice not to retire, but opted to do so under the
SRP, and, in fact, received the benefits under it.
According to the RTC, the prohibition incorporated in the
Undertaking was not unreasonable. To allow Rivera to be
excused from his undertakings in said deed and, at the
same time, benefit therefrom would be to allow him to
enrich himself at the expense of Solidbank. The RTC
ruled that Rivera had to return the P963,619.28 he
received from Solidbank, plus interest of 12% per annum
from May 23, 1998 until fully paid.
The CA declared that there was no genuine issue
regarding any material fact except as to the amount of
damages. It ratiocinated that the agreement between
Rivera and Solidbank was the law between them, and that
the interpretation of the stipulations therein could not be
left upon the whims of Rivera. According to the CA,
Rivera never denied signing the Release, Waiver, and
Quitclaim, including the Undertaking regarding the
employment prohibition. He even admitted joining
Equitable as an employee within the proscribed one-year
period. The alleged defenses of Rivera, the CA declared,
could not prevail over the admissions in his
pleadings.1avvphil.netMoreover, Rivera’s justification
for taking the job with Equitable, “dire necessity,” was
not an acceptable ground for annulling the Undertaking
since there were no earmarks of coercion, undue
influence, or fraud in its execution. Having executed the
said deed and thereafter receiving the benefits under the
SRP, he is deemed to have waived the right to assail the
same, hence, is estopped from insisting or retaining the
said amount of P963,619.28.
However, the CA ruled that the attachment made upon
Rivera’s family home was void, and, pursuant to the
mandate of Article 155, in relation to Article 153 of the
Family Code, must be discharged.
ISSUE: Whether the employment ban incorporated in the
Undertaking which petitioner executed upon his
retirement is unreasonable, oppressive, hence, contrary to
public policy.
(minor issue: WON the ruling of the RTC through
summary judgment was proper)
HELD: We agree with petitioner’s contention that the
issue as to whether the post-retirement competitive
employment ban incorporated in the Undertaking is
against public policy is a genuine issue of fact,
requiring the parties to present evidence to support
their respective claims. (summary judgment was wrong)
Article 1306 of the New Civil Code provides that the
contracting parties may establish such stipulations,
clauses, terms and conditions as they may deem
convenient, provided they are not contrary to law, morals,
good customs, public order or public policy. The freedom
of contract is both a constitutional and statutory right. A
contract is the law between the parties and courts have no
choice but to enforce such contract as long as it is not
contrary to law, morals, good customs and against public
policy.
On the other hand, retirement plans, in light of the
constitutional mandate of affording full protection to
labor, must be liberally construed in favor of the
employee, it being the general rule that pension or
retirement plans formulated by the employer are to be
construed against it. Retirement benefits, after all, are
intended to help the employee enjoy the remaining years
of his life, releasing him from the burden of worrying for
his financial support, and are a form of reward for being
loyal to the employer.
There is no factual basis for the trial court’s ruling, for
the simple reason that it rendered summary judgment
and thereby foreclosed the presentation of evidence by
the parties to prove whether the restrictive covenant is
reasonable or not. Moreover, on the face of the
Undertaking, the post-retirement competitive
employment ban is unreasonable because it has no
geographical limits; respondent is barred from
accepting any kind of employment in any competitive
bank within the proscribed period. Although the
period of one year may appear reasonable, the matter
of whether the restriction is reasonable or
unreasonable cannot be ascertained with finality
solely from the terms and conditions of the
Undertaking, or even in tandem with the Release,
Waiver and Quitclaim.
Undeniably, petitioner retired under the SRP and
received P963,619.28 from respondent.
However, petitioner is not proscribed, by waiver or
estoppel, from assailing the post-retirement
competitive employment ban since under Article 1409
of the New Civil Code, those contracts whose cause,
2
object or purpose is contrary to law, morals, good
customs, public order or public policy are inexistent
or void from the beginning. Estoppel cannot give
validity to an act that is prohibited by law or one that
is against public policy.
(Even if he received the amount for retirement, that does
not mean he was already estopped from questioning the
other provisions of the contract)
In Ferrazzini v. Gsell x x x There are two principal
grounds on which the doctrine is founded that a contract
in restraint of trade is void as against public policy.
1. The injury to the public by being deprived of the
restricted party’s industry;
2. The injury to the party himself by being
precluded from pursuing his occupation, and thus
being prevented from supporting himself and his
family.
In cases where an employee assails a contract containing
a provision prohibiting him or her from accepting
competitive employment as against public policy, the
employer has to adduce evidence to prove that the
restriction is reasonable and not greater than
necessary to protect the employer’s legitimate
business interests. The restraint may not be unduly harsh
or oppressive in curtailing the employee’s legitimate
efforts to earn a livelihood and must be reasonable in light
of sound public policy
On the assumption that the competitive employment
ban in the Undertaking is valid, petitioner is not
automatically entitled to return the P963,619.28 he
received from respondent. To reiterate, the terms of
the Undertaking clearly state that any breach by
petitioner of his promise would entitle respondent to a
cause of action for protection in the courts of law; as
such, restitution of the P963,619.28 will not follow as a
matter of course. Respondent is still burdened to
prove its entitlement to the aforesaid amount by
producing the best evidence of which its case is
susceptible.
Remanded to RTC
• STAR PAPER VS. SIMBOL
FACTS:
Simbol was employed by the company and met a co-
employee and they eventually had a relationship and got
married. Prior to the marriage, the manager advise the
couple that should they decide to get married, one of them
should resign pursuant to a company policy: 1) new
applicant will not be allowed to be hired if he/she has a
relative, up to 3rd degree of consanguinity, already
employed by the company. 2) if the two employees got
married, one of them should resign to preserve the policy
stated first. Simbol resigned.
ISSUE:
Whether or not the policy of the employer banning spouse
from working in the same company, a valid exercise of
management prerogative.
RULING:
No, it is not a valid exercise of management prerogative
and violates the rights of employees under the
constitution. The case at bar involves Article 136 of the
Labor Code which provides “it shall be unlawful for an
employer to require as a condition of employment or
continuation of employment that a woman employee shall
not get married, or to stipulate expressly or tacitly that
upon getting married, a woman employee shall be deemed
resigned or separated , or to actually dismiss, discharge ,
discriminate or otherwise prejudice a woman employee
merely by reason of her marriage.” The company policy
of Star Paper, to be upheld, must clearly establish the
requirement of reasonableness. In the case at bar, there
was no reasonable business necessity. Petitioners failed to
show how the marriage of Simbol, then a Sheeting
Machine Operator, to Alma Dayrit, then an employee of
the Repacking Section, could be detrimental to its
business operations. The questioned policy may not
facially violate Article 136 of the Labor Code but it
creates a disproportionate effect and under the disparate
impact theory, the only way it could pass judicial scrutiny
is a showing that it is reasonable despite the
discriminatory, albeit disproportionate, effect. Lastly, the
absence of a statute expressly prohibiting marital
discrimination in our jurisdiction cannot benefit the
petitioners.
3
 • DUNCAN VS. GLAXO CASE
FACTS:
Tecson was hired by Glaxo as a medical representative on
Oct. 24, 1995. Contract of employment signed by Tecson
stipulates, among others, that he agrees to study and abide
by the existing company rules; to disclose to management
any existing future relationship by consanguinity or
affinity with co-employees or employees with competing
drug companies and should management find that such
relationship poses a prossible conflict of interest, to resign
from the company. Company's Code of Employee
Conduct provides the same with stipulation that
management may transfer the employee to another
department in a non-counterchecking position or
preparation for employment outside of the company after
6 months.
Tecson was initially assigned to market Glaxo's products
in the Camarines Sur-Camarines Norte area and entered
into a romantic relationship with Betsy, an employee of
Astra, Glaxo's competition. Before getting married,
Tecson's District Manager reminded him several times of
the conflict of interest but marriage took place in Sept.
1998. In Jan. 1999, Tecson's superiors informed him of
conflict of intrest. Tecson asked for time to comply with
the condition (that either he or Betsy resign from their
respective positions). Unable to comply with condition,
Glaxo transferred Tecson to the Butuan-Surigao City-
Agusan del Sur sales area. After his request against
transfer was denied, Tecson brought the matter to Glaxo's
Grievance Committee and while pending, he continued to
act as medical representative in the Camarines Sur-
Camarines Norte sales area. On Nov. 15, 2000, the
National Conciliation and Mediation Board ruled that
Glaxo's policy was valid...
ISSUE:
Whether or not the policy of a pharmaceutical company
prohibiting its employees from marrying employees of
any competitor company is valid
RULING:
On Equal Protection
Glaxo has a right to guard its trade secrets, manufacturing
formulas, marketing strategies, and other confidential
programs and information from competitors. The
prohibition against pesonal or marital relationships with
employees of competitor companies upon Glaxo's
employees is reasonable under the circumstances because
relationships of that nature might compromise the
interests of the company. That Glaxo possesses the right
to protect its economic interest cannot be denied.
It is the settled principle that the commands of the equal
protection clause are addressed only to the state or those
acting under color of its authority. Corollarily, it has been
held in a long array of US Supreme Court decisions that
the equal protection clause erects to shield against merely
privately conduct, however, discriminatory or wrongful.
The company actually enforced the policy after repeated
requests to the employee to comply with the policy.
Indeed the application of the policy was made in an
impartial and even-handed manner, with due regard for
the lot of the employee.
On Constructive Dismissal
Constructive dismissal is defined as a quitting, an
involuntary resignation resorted to when continued
employment becomes impossible, unreasonable or
unlikely; when there is demotion in rank, or diminution in
pay; or when a clear discrimination, insensibility, or
disdain by an employer becomes unbearable to the
employee. None of these conditions are present in the
instant case.
• LEUS VS. ST. SCHOLASTICA’S COLLEGE
Pre-marital sexual relations between two consenting
adults who have no impediment to marry each other, and,
consequently, conceiving a child out of wedlock, gauged
from a purely public and secular view of morality, does
not amount to a disgraceful or immoral conduct under
Section 94(e) of the 1992 MRPS.
St. Scholastica College Westgrove (SSCW), a
Catholic school, hired Cheryll Santos Leus as one of its
non-teaching personnel. Leus got pregnant out of wedlock
and eventually married the father of her child.
Nevertheless, Leus was dismissed of her employment by
the reason that her conduct of having pre-marital sexual
relations was unbecoming of an employee of a Catholic
school.
ISSUE: Is pregnancy out of wedlock a valid ground for
termination of employment?
RULING:
No. Admittedly, Leusis employed in an
educational institution where the teachings and doctrines
4
of the Catholic Church, including that on pre-marital
sexual relations, is strictly upheld and taught to the
students. That her indiscretion, which resulted in her
pregnancy out of wedlock, is anathema to the doctrines of
the Catholic Church. However, viewed against the
prevailing norms of conduct, the petitioner’s conduct
cannot be considered as disgraceful or immoral; such
conduct is not denounced by public and secular morality.
It may be an unusual arrangement, but it certainly is not
disgraceful or immoral within the contemplation of the
law.
Accordingly, the labor tribunals erred in
upholding the validity of the Leus’ dismissal. The labor
tribunals arbitrarily relied solely on the circumstances
surrounding the petitioner’s pregnancy and its supposed
effect on SSCW and its students without evaluating
whether Leus’ conduct is indeed considered disgraceful
or immoral in view of the prevailing norms of conduct. In
this regard, the labor tribunals’ respective haphazard
evaluation of the evidence amounts to grave abuse of
discretion, which the Court will rectify.
• CHUA-QUA VS. CLAVE
FACTS:
This would have been just another illegal dismissal case
were it not for the controversial and unique situation that
the marriage of herein petitioner, then a classroom
teacher, to her student who was fourteen (14) years her
junior, was considered by the school authorities as
sufficient basis for terminating her services.
The case was about an affair and marriage of 30 years old
teacher Evelyn Chua in Tay Tung High School in Bacolod
City to her 16 years old student. The petitioner teacher
was suspended without pay and was terminated of his
employment “for Abusive and Unethical Conduct
Unbecoming of a Dignified School Teacher” which was
filed by a public respondent as a clearance for
termination.
ISSUE:
Was her dismissal valid?
Whether or not there is substantial evidence to prove that
the antecedent facts which culminated in the marriage
between petitioner and her student constitute immorality
and or grave misconduct?
RULING:
The Supreme Court declared the dismissal illegal saying:
“Private respondent [the school] utterly failed to show
that petitioner [30-year old lady teacher] took advantage
of her position to court her student [16-year old]. If the
two eventually fell in love, despite the disparity in their
ages and academic levels, this only lends substance to the
truism that the heart has reasons of its own which reason
does not know. But, definitely, yielding to this gentle and
universal emotion is not to be so casually equated with
immorality. The deviation of the circumstances of their
marriage from the usual societal pattern cannot be
considered as a defiance of contemporary social mores.”
Finding that there is no substantial evidence of the
imputed immoral acts, it follows that the alleged violation
of Code of Ethics governing school teachers would have
no basis. Private respondent utterly failed to show that
petitioner took advantage of her position to court her
student. The deviation of the circumstances of their
marriage from the usual societal pattern cannot be
considered as a defiance of contemporary social mores.
• INTERNATIONAL SCHOOL VS.
QUISUMBING
FACTS:
Private respondent International School, Inc. (School),
pursuant to PD 732, is a domestic educational institution
established primarily for dependents of foreign
diplomatic personnel and other temporary residents. The
decree authorizes the School to employ its own teaching
and management personnel selected by it either locally or
abroad, from Philippine or other nationalities, such
personnel being exempt from otherwise applicable laws
and regulations attending their employment, except laws
that have been or will be enacted for the protection of
employees. School hires both foreign and local teachers
as members of its faculty, classifying the same into two:
(1) foreign-hires and (2) local-hires.
The School grants foreign-hires certain benefits not
accorded local-hires. Foreign-hires are also paid a salary
rate 25% more than local-hires.
When negotiations for a new CBA were held on June
1995, petitioner ISAE, a legitimate labor union and the
collective bargaining representative of all faculty
members of the School, contested the difference in salary
5
rates between foreign and local-hires. This issue, as well
as the question of whether foreign-hires should be
included in the appropriate bargaining unit, eventually
caused a deadlock between the parties.
ISAE filed a notice of strike. Due to the failure to reach a
compromise in the NCMB, the matter reached the DOLE
which favored the School. Hence this petition.
ISSUE:
Whether the foreign-hires should be included in
bargaining unit of local- hires.
RULING:
NO. The Constitution, Article XIII, Section 3, specifically
provides that labor is entitled to “humane conditions of
work.” These conditions are not restricted to the physical
workplace – the factory, the office or the field – but
include as well the manner by which employers treat their
employees.
Discrimination, particularly in terms of wages, is frowned
upon by the Labor Code. Article 248 declares it an unfair
labor practice for an employer to discriminate in regard to
wages in order to encourage or discourage membership in
any labor organization.
The Constitution enjoins the State to “protect the rights of
workers and promote their welfare, In Section 18, Article
II of the constitution mandates “to afford labor full
protection”. The State has the right and duty to regulate
the relations between labor and capital. These relations
are not merely contractual but are so impressed with
public interest that labor contracts, collective bargaining
agreements included, must yield to the common good.
However, foreign-hires do not belong to the same
bargaining unit as the local-hires.
A bargaining unit is a group of employees of a given
employer, comprised of all or less than all of the entire
body of employees, consistent with equity to the
employer indicate to be the best suited to serve the
reciprocal rights and duties of the parties under the
collective bargaining provisions of the law.
The factors in determining the appropriate collective
bargaining unit are (1) the will of the employees (Globe
Doctrine); (2) affinity and unity of the employees’
interest, such as substantial similarity of work and duties,
or similarity of compensation and working conditions
(Substantial Mutual Interests Rule); (3) prior collective
bargaining history; and (4) similarity of employment
status. The basic test of an asserted bargaining unit’s
acceptability is whether or not it is fundamentally the
combination which will best assure to all employees the
exercise of their collective bargaining rights.
In the case at bar, it does not appear that foreign-hires
have indicated their intention to be grouped together with
local-hires for purposes of collective bargaining. The
collective bargaining history in the School also shows that
these groups were always treated separately. Foreign-
hires have limited tenure; local-hires enjoy security of
tenure. Although foreign-hires perform similar functions
under the same working conditions as the local-hires,
foreign-hires are accorded certain benefits not granted to
local-hires such as housing, transportation, shipping
costs, taxes and home leave travel allowances. These
benefits are reasonably related to their status as foreign-
hires, and justify the exclusion of the former from the
latter. To include foreign-hires in a bargaining unit with
local-hires would not assure either group the exercise of
their respective collective bargaining rights.
WHEREFORE, the petition is GIVEN DUE COURSE.
The petition is hereby GRANTED IN PART.
• ESCOBIN VS. NLRC
FACTS:
• PEFTOK Integrated Services, Inc., is a duly
licensed watchman and protective agency while
respondent UP-NDC Basilan Plantations, Inc. is a
corporation duly organized in accordance with law, and
the owner/possessor of lands principally planted to
rubber, coconut, citrus, coffee, and other fruit trees in
Lamitan, Province of Basilan.
• That complainants are bona fide members of the
Basilan Security Force Association hired by PISI to work
as guards in UP-NDC Basilan Plantation’s premises, for
the purpose of guarding and protecting plantation
property and installations from theft, pilferage, robbery,
trespass and other unlawful acts by strangers or third
persons, and plantation employees .
• Petitioners filed at the Regional Arbitration
Branch No. 09 in Zamboanga City a Complaint against
private respondents for illegal termination by way of
constructive dismissal.
6
• After conciliation proceedings failed to settle the
matter, the parties were ordered to submit their respective
position papers.
• Labor Arbiter rendered a Decision in favor of
petitioners, declaring the dismissal to be illegal for being
without just cause. On appeal, Respondent Commission
reversed the labor arbiter and denied Motion for
reconsideration.
ISSUE/S:
• Whether or not the NLRC acted with grave abuse
of discretion in ruling that petitioners committed willful
disobedience of lawful orders of their employer.
• Whether or not the NLRC acted with grave abuse
of discretion in ruling that petitioners abandoned their
work.
• Whether or not the NLRC acted with grave abuse
of discretion in reversing the finding of the labor arbiter
that petitioners were illegally dismissed by way of
constructive dismissal.
• Whether or not the NLRC acted with grave abuse
of discretion in denying recovery of backwages,
separation pay, damages, and attorney’s fees in favor of
petitioners.
HELD:
• I
o Respondent Commission committed grave abuse
of discretion in holding that petitioners were dismissed for
a just cause.
o The reasonableness and lawfulness of a rule,
order or instruction depend on the circumstances availing
in each case.
o Reasonableness pertains to the kind or character
of directives and commands and to the manner in which
they are made.
o In this case, the order to report to the Manila
office fails to meet this standard.
o First, it was grossly inconvenient for petitioners,
who were residents and heads of families residing in
Basilan, to commute to Manila.
o Second, petitioners were not provided with funds
to defray their transportation and living expenses.
o Third, private respondent argues that it sent
transportation money to petitioners. However, the
recipients of such funds are not parties in this case.
o Fourth, no reason was given by private
respondent company explaining why it had failed to
inform petitioners of their specific security assignments
prior to their departure from Basilan.
o This fact demonstrates that petitioners’ dismissal
was not commensurate to their insubordination which, we
reiterate, was neither willful nor intentional they very well
knew that petitioners were not receiving any salary while
they were on floating status and, thus, also knew that they
would hardly be able to comply with the directive to
report to Manila.
o In any event, dismissal was too harsh a penalty
for an infraction which appears, under the circumstances,
to be excusable.
• II
o This contention is untenable.
o Abandonment, as a just and valid cause for
dismissal, requires a deliberate, unjustified refusal of an
employee to resume his work, coupled with a clear
absence of any intention of returning to his work.
o No evidence was presented to establish that
petitioners relinquished their jobs.
o Denying they abandoned their work, petitioners
contend that it was private respondent agency which
deserted them by failing to communicate with them for
over two months, from February 1, 1991 to April 8, 1991
• III
o No constructive dismissal.
o Constructive discharge is an involuntary
resignation resorted to when continued employment is
rendered impossible, unreasonable or unlikely; when
there is a demotion in rank and/or a diminution in pay; or
when a clear discrimination, insensibility or disdain by an
employer becomes unbearable to the employee.
7
o In this particular case, petitioners were not
constructively dismissed; they were actually dismissed
without just and valid cause.
• IV
o The normal consequences of illegal dismissal are
reinstatement and payment of backwages.
o These remedies give life to the workers’
constitutional right to security of tenure.
o Separation pay is generally not awarded except in
instances where reinstatement is no longer feasible or
appropriate, as in this case.
o As a substitute for immediate and continued
reemployment, separation pay is meant to provide the
employee during the period that he is looking for another
employment.
o In this particular case, private respondent alleges
that there is no assignment in Basilan or Zamboanga
available to petitioners.
o Transfer to another post outside said areas would
have only given rise to the same problems as those
entailed by the original directive.
o Reinstatement presupposes that the previous
position from which the employee had been removed still
exists, or there is an unfilled position of a similar nature,
more or less, as the one previously occupied by the
employee.
o If no such position is available, reinstatement
becomes a legal impossibility.
• BLUE DAIRY CORP VS. NLRC
FACTS:
BLUE DAIRY CORPORATION, engaged in the
processing of dairy and chocolate products, juices and
vegetable hired Elvira R. Recalde as a food technologist
in its laboratory. Recalde accompanied Production
Manager Editha N. Nicolas in conducting a sensory
evaluation of vanilla syrup in one of the outlets of a client.
While on their way back to the office a post fell on the
company vehicle they were riding due to a raging typhoon
damaging the vehicle's windshield and side mirror. Later,
Recalde was transferred from the laboratory to the
vegetable processing section where she cored lettuce,
minced and repacked garlic and performed similar work,
and was restricted from entering the laboratory. She was
unhappy. She considered her new job humiliating and
menial. She later stopped reporting for work. The
following day she sent a letter to Blue Dairy Corporation
that she will no longer report for work because of their
drastic and oppressive action. Recalde then filed a
complaint against Blue Dairy Corporation for
constructive dismissal and non-payment of premium pay.
Petitioners contended that Recalde was given a less
sensitive assignment outside of the laboratory on account
of her dishonesty which resulted in loss of trust and
confidence. They seriously took into account the result of
the investigation that Recalde was actually scouting for a
new residence using company vehicle without prior
permission from the General Manager and during office
hours, in violation of par. IV, subpars. B and G, of the
company's General Rules and Regulation, to that effect
such act of dishonesty could even have merited dismissal
from employment had they adhered simply to
jurisprudential rule but took into account instead the spirit
of the approaching Christmas season. The Labor Arbiter
rule that petitioners were guilty of constructive dismissal
as he found
the justification for Recaldes transfer unreasonable.
Petitioners insist that the transfer of Recalde from the
laboratory to the vegetable processing section was
effected in the exercise of management prerogative.
ISSUE:
WHETHER OR NOT RECALDE’S TRANSFER WAS
UNREASONABLE.
HELD:
YES. It is the prerogative of management to transfer an
employee from one office to another within the business
establishment based on its assessment and perception of
the employees qualifications, aptitudes and competence,
and in order to ascertain where he can function with
maximum benefit to the company. This is a privilege
inherent in the employers right to control and manage his
enterprise effectively. The freedom of management to
conduct its business operations to achieve its purpose
cannot be denied. But, like other rights, there are limits
thereto. The managerial prerogative to transfer personnel
must be exercised without grave abuse of discretion,
bearing in mind the basic elements of justice and fair play.
Having the right should not be confused with the manner
in which that right is exercised.
8
 Thus, it cannot be used as a subterfuge by the
employer to rid himself of an undesirable worker. In
particular, the employer must be able to show that the
transfer is not unreasonable, inconvenient or prejudicial
to the employee; nor does it involve a demotion in rank or
a diminution of his salaries, privileges and other benefits.
Should the employer fail to overcome this burden of
proof, the employees transfer shall be tantamount to
constructive dismissal, which has been defined as a
quitting because continued employment is rendered
impossible, unreasonable or unlikely; as an offer
involving a demotion in rank and diminution in pay.
Likewise, constructive dismissal exists when an act of
clear discrimination, insensibility or disdain by an
employer has become so unbearable to the employee
leaving him with no option but to forego with his
continued employment
In the present case, petitioners failed to justify
Recaldes transfer from the position of food technologist
in the laboratory to a worker in the vegetable processing
section. In petitioners view, she was dishonest such that
they lost their trust and confidence in her. Yet, it does not
appear that Recalde was provided an opportunity to refute
the reason for the transfer. Nor was Recalde notified in
advance of her impending transfer which was, as we shall
elucidate later, a demotion in rank.
• DOSCH VS NLRC
FACTS:
Petitioner is an American citizen and the resident
Manager of Northwest Airlines, Inc. in the Philippines.
He had been with the respondent company for 11 years, 9
of which was served in the Philippines as Northwest
manager in Manila. On August 18, 1975 he received an
inter-office communication from R.C. Jenkins,
Northwest's Vice President for Orient Region based in
Tokyo, promoting him to the position of Director of
International Sales and transferring him to Northwest's
General Office in Minneapolis, U.S.A., effective the same
day. Petitioner, acknowledging receipt of the above
memo, expressed appreciation for the promotion and at
the same time regretted that for personal reasons and
reasons involving his family (living in the Philippines), he
is unable to accept a transfer from the Philippines.
On September 9, 1975, the Vice-President for the Orient
Region of Northwest advised petitioner that "in view of
the foregoing, your status as an employee of the company
ceased on the close of business on August 31, 1975" and
"the company therefore considers your letter of August
28, 1975, to be a resignation without notice." On
September 16, 1975, Northwest filed a Report on
Resignation of Managerial Employee i.e., Helmut Dosch
before the Department of Labor, copy thereof furnished
petitioner. The Report was contested by the petitioner and
the parties were conciliated by Regional Office No. IV,
Manila but failed to agree on a settlement. The case was
thus certified to the Executive Labor
Arbiter, National Labor Relations Commission, for
compulsory arbitration.
ISSUE:
Whether or not the petitioner is considered resigned from
his employment.
HELD:
The SC agree with the Labor Arbiter that petitioner did
not resign or relinquish his position as Manager-
Philippines, Indeed, the letter sent by petitioner to R.C.
Jenkins cannot be considered as a resignation as petitioner
indicated therein clearly that he preferred to remain as
Manager-Philippines of Northwest. The SC treated the
Jenkins letter as directing the promotion of the petitioner
from his position as Philippine manager to Director of
International Sales in Minneapolis, U.S.A. It is not merely
a transfer order alone but as the Solicitor General
correctly observes, "it is more in the nature of a promotion
that a transfer, the latter being merely incidental to such
promotion." The inter-office communication of Vice
President Jenkins is captioned "Transfer" but it is
basically and essentially a promotion for the nature of an
instrument is characterized not by the title given to it but
by its body and contents. The communication informed
the petitioner that effective August 18, 1975, he was to be
promoted to the position of Director of International
Sales, and his compensation would be upgraded and the
payroll accordingly adjusted.
Petitioner was, therefore, advanced to a higher position
and rank and his salary was increased and that is a
promotion. It has been held that promotion denotes a
scalar ascent of an officer or an employee to another
position, higher either in rank or salary.
9
A transfer is a movement from one position to another of
equivalent rank, level or salary, without break in the
service. Promotion, on the other hand, 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, Whereas,
promotion denotes a scalar ascent of a senior officer or
employee to another position, higher either in rank or
salary, transfer refers to lateral movement from one
position to another, of equivalent rank, level or salary.
There is no law that compels an employee to accept a
promotion, as a promotion is in the nature of a gift or a
reward, which a person has a right to refuse. When
petitioner refused to accept his promotion to Director of
International Sales, he was exercising a right and he
cannot be punished for it as qui jure suo utitur neminem
laedit. He who uses his own legal right injures no one.
Assuming for the sake of argument that the
communication or letter of Mr. Jenkins was basically a
transfer, under the particular and peculiar facts obtaining
in the case at bar, petitioner's inability or his refusal to be
transferred was not a valid cause for dismissal. While it
may be true that the right to transfer or reassign an
employee is an employer's exclusive right and the
prerogative of management, such right is not absolute.
The right of an employer to freely select or discharge his
employee is limited by the paramount police power for
the relations between capital and labor are not merely
contractual but impressed with public interest. And
neither capital nor labor shall act oppressively against
each other.
There can be no dispute that the constitutional guarantee
of security of tenure mandated under the Constitution
applies to all employees and laborers, whether in the
government service or in the private sector. The fact that
petitioner is a managerial employee does not by itself
exclude him from the protection of the constitutional
guarantee of security of tenure. Even a manager in a
private concern has the right to be secure in his position,
to decline a promotion where, although the promotion
carries an increase in his salary and rank but results in his
transfer to a new place of assignment or station and away
from his family. Such an order constitutes removal
without just cause and is illegal. Nor can the removal be
justified on the ground of loss of confidence as now
claimed by private respondent Northwest, insisting as it
does that by petitioner's alleged contumacious refusal to
obey the transfer order, said petitioner was guilty of
insubordination.
• LBC VS. MATEO
FACTS:
James Mateo, designated as a customer associate, was a
regular employee of LBC Express (LBC). His job was to
deliver and pick-up packages to and from LBC and its
customers. For this purpose, Mateo was assigned the use
of a Kawasaki motorcycle. One day, Mateo arrived at
LBC’s Escolta office, to drop off packages coming from
various LBC air posts. He parked his motorcycle directly
in front of the LBC office, switched off the engine and
took the key with him. However, he did not lock the
steering wheel because he allegedly was primarily
concerned with the packages, including a huge sum of
money that needed to be immediately secured inside the
LBC office. He returned promptly within three to five
minutes but the motorcycle was gone.
He immediately reported the loss to his superiors at LBC
and to the nearest police station. LBC, through its vice-
president, Niño, directed Mateo to appear in his office to
explain his side and for formal investigation. As directed,
Mateo appeared and presented his side. After
investigation, he received a notice of termination from
LBC. He was barred from reporting for work. Mateo
thereafter filed a complaint for illegal dismissal, payment
of back wages and reinstatement with damages.
Labor Arbiter and NLRC ruled in favor of LBC, but CA
ruled that Mateo was illegally dismissed.
LBC and Niño filed a petition to the Supreme Court
seeking for the reversal of the decision of the CA.
ISSUE:
1. Whether or not Mateo was grossly negligent in
the performance of his duties.
2. Whether or not the habituality mentioned in Art.
282 of labor code may be dispensed with.
HELD:
1. The court rule that he was grossly negligent in
leaving the motorcycle without locking it despite
clear instruction not to do so.
2. The substantial amount of loss suffered by the
company as a result of the negligent act justifies
dispensing the habituality requirement of the
Labor Code.
10
The services of a regular employee may be terminated
only for just or authorized causes, including gross and
habitual negligence under Article 282, paragraph (b) of
the Labor Code. Gross negligence is characterized by
want of even slight care, acting or omitting to act in a
situation where there is a duty to act, not inadvertently but
willfully and intentionally with a conscious indifference
to consequences insofar as other persons may be affected.
In this case, an employer cannot legally be compelled to
continue with the employment of a person admittedly
guilty of gross negligence in the performance of his
duties. This holds true especially if the employee’s
continued tenure is patently inimical to the employer’s
interest. What happened was not a simple case of
oversight and could not be attributed to a simple lapse of
judgment. No amount of good intent, or previous
conscientious performance of duty, can assuage the
damage Mateo caused LBC when he failed to exercise the
requisite degree of diligence required of him under the
circumstances.
• SANTOS VS. CA
• FASAP VS PAL
FACTS:
Cabin crew personnel were covered by the retrenchment
and demotion scheme of PAL due to financial distress
which is evidenced by proof of its claimed losses in a
petition for suspension of payments, as well as the Order
of the Securities and Exchange Commission (SEC)
approving the said petition for suspension of payments,
together with proof of summary of its debts and other
liabilities.
Exercising its management prerogative and sound
business judgment, it decided to cut its fleet of aircraft in
order to minimize its operating losses and rescue itself
from “total downfall;” which meant that a corresponding
company-wide reduction in manpower necessarily had to
be made. As a result, 5,000 PAL employees (including
the herein 1,400 cabin attendants) were retrenched.
PAL, however, gave a whole different reason for
retrenchment when the pilots went on strike. Accordingly,
what really brought about “the really perilous situation of
closure was that on June 5, 1998, the pilots went on strike,
ninety (90%) per cent of the pilots went on strike,
approximately six hundred (600).” These pilots’ strike
was so devastating x x x. Without any pilots no plane can
fly, your Honor, that is the stark reality of the situation,
and without airplanes flying, there would be no place for
employment of cabin attendants.
ISSUE:
Whether or not the strike, which PAL used as basis to
undertake the massive retrenchment under scrutiny, is an
authorized cause.
RULING:
The strike was a temporary occurrence that did not
necessitate the immediate and sweeping retrenchment of
1,400 cabin or flight attendants.
There was no reason to drastically implement a permanent
retrenchment scheme in response to a temporary strike,
which could have ended at any time, or remedied
promptly, if management acted with alacrity. Juxtaposed
with its failure to implement the required cost-cutting
measures, the retrenchment scheme was a knee-jerk
solution to a temporary problem that beset PAL at the
time.
PAL must still prove that it implemented cost-cutting
measures to obviate retrenchment, which under the law
should be the last resort. By PAL’s own admission,
however, the cabin personnel retrenchment scheme was
one of the first remedies it resorted to, even before it could
complete the proposed downsizing of its aircraft fleet.
The following elements under Article 283 of the Labor
Code must concur or be present, to wit:
(1) That retrenchment is reasonably necessary and
likely to prevent business losses which, if already
incurred, are not merely de minimis, but substantial,
serious, actual and real, or if only expected, are
reasonably imminent as perceived objectively and in good
faith by the employer;
(2) That the employer served written notice both to
the employees and to the Department of Labor and
Employment at least one month prior to the intended date
of retrenchment;
(3) That the employer pays the retrenched employees
separation pay equivalent to one (1) month pay or at least
one-half (½) month pay for every year of service,
whichever is higher;
11
(4) That the employer exercises its prerogative to
retrench employees in good faith for the advancement of
its interest and not to defeat or circumvent the employees’
right to security of tenure; and,
(5) That the employer uses fair and reasonable criteria
in ascertaining who would be dismissed and who would
be retained among the employees, such as status,
efficiency, seniority, physical fitness, age, and financial
hardship for certain workers.
In the absence of one element, the retrenchment scheme
becomes an irregular exercise of management
prerogative.
The retrenchment scheme under scrutiny was not
triggered directly by any financial difficulty PAL was
experiencing at the time, nor borne of an actual
implementation of its proposed downsizing of aircraft.
• SEBUGUERO
• CAPILI VS. NLRC
FACTS:
Herein respondents are licensed drivers of public utility
jeepneys and for the use of it for twelve hours they would
pay rent or so-called "boundary" per day. Upon
assumption of ownership of said jeepneys by herein
petitioners Capili, they and the other drivers similarly
situated were required to sign individually contracts of
lease of the jeepneys to formalize their lessor-lessee
relationship. However, having gathered the impression
that the signing of the contracts of lease was a condition
precedent before they could continue driving for
petitioners, all the drivers stopped plying their assigned
routes.
A complaint for illegal dismissal was filed before the La
bor Arbiter praying not for reinstatement
but for separation pay. Petitioners opposed the claim of
private respondents before the Labor Arbiter alleging that
the latter voluntarily abandoned their respective jobs
without any valid cause. The Labor Arbiter ruled that it
was just a misunderstanding and misappreciation of the
situation by both parties and directed to reinstate the
drivers to their former position without loss of seniority
rights and other benefits, but without back wages.
Upon appeal before the NLRC, the findings of the Labor
Arbiter that the case arose due to was upheld but ordered
the payment of their separation pay.
The Capilis contended that since there was a clear finding
of abandonment by the Labor Arbiter
consisting in the failure of private respondents to report
for work without justifiable reason,the award of
separation pay could not be warranted.
ISSUE:
Whether the NLRC acted with grave abuse of discretion
in awarding separation pay to private respondents.
DECISION:
The NLRC acted with grave abuse of discretion in
awarding separation pay to private respondents.
In the instant case, there was no dismissal at all.
Respondent NLRC affirmed the factual findings of the
Labor Arbiter that there was only a misunderstanding
between petitioners and private respondents which caused
the latter to stop reporting for work. The award of
separation pay cannot be justified solely because of the
existence of "strained relations" between the employer
and the employee. It must be given to the employee only
as an alternative to reinstatement emanating from illegal
dismissal. When there is no illegal dismissal, even if the
relations are strained, separation pay has no legal basis.
Besides, the doctrine on "strained relations" cannot be
applied indiscriminately since every labor dispute almost
invariably results in "strained relations;" otherwise,
reinstatement can never
bepossible simply because some hostility is engendered
between the parties as a result of their disagreement.
• AMPELOQUIO VS JAKA DISTRIBUTION
12