BASIC CONCEPTS IN LABOR RELATIONS set aside the National Labor Relations Commission's application of the principle of equipoise
39;s application of the principle of equipoise on the
1.
G.R. No. 207354, January 10, 2018
CHARLIE HUBILLA, JOEL NAYRE, NENITA A. TAN, PEDRO MAGALLANES, JR., ARNEL YUSON,
JANICE CABATBAT, JUDY PAPINA, VANESSA ESPIRITU, NOEMI YALUNG, GENALYN RESCOBILLO,
FIDEL ZAQUITA, NYL B. CALINGASAN, JANICE MIRADORA, EVANGELINE CHUA, ROSCHELLE
MISSION, MELANIE BALLESTEROS, MARILYN BACALSO, RENALYN ALCANTARA, FEDERICO B.
VIERNES, CHRISTOPHER B. YARES, ANA MARY R. AGUILAR, MELANIE SAN MARCOS, EMERLOVE
MONTE, CHONALYN LUCAS, THERESA MALI COSIO, MA. FE CERCARES, RUBELYN R. CLARO,
JONALYN M. YALUNG, MARY ANN V. MACANAG, RESLYN L. FLORES, CRISTEL C. ROQUE, TERESA G
MUNAR, SUSAN A. DELA CRUZ, SHEENA KAY P. DE VERA, ARLENE R. ANES, GINA B. BINIBINI,
CHERINE V. ZORILLA, MA. CRISTINE MAGTOTO, FRANCIS MARIE O. DE CASTRO, VANESSA R.
ESPIRITU, RACHELLE V. QUISTORIA, JULIE ANN ILAN, ANGELIE F. PANOTES, ANABEL PAYOS,
MELISSA M. PERLAS, MELANIE B. BERSES, BARVI ROSE PERALTA, RESIE AQUE, ROWENA RIVERA,
MELANIE M. DY, CHERYLYN CORO, RANELYN SUBONG, ANGELA SUBILLAGA, THELMA
BARTOLABAC, MICHELLE C. ILAGAN, PRECIOUS MAE DE GUZMAN, MARY CAROLINE COLINA,
FRELYN HIPOLITO, MYLINE A. CALLOS, JANETH B. SEMBILLO, LEA LYN F. FERRANCO, MAY C.
SANTOS, ROSELLE A. NOBLE, JENNIFER D. SUYOM, WARREN PETCHIE C. CAJES, ROWELYN F.
CATALAN, RIEZEL ANN A. ALEGRE, DEMETRIA B. PEREZ, GENALYN OSOC, JUVILYN N. NERI, JOY B.
PIMENTEL, AIRENE LAYON, MARY JOY TURQUEZA, MARY ANN VALENTIN, ROSIE L. NIEBRES,
MELCA MALLORCA, JOY CAGATCAGAT, DIANA CAMARO, MARIVEL DIJUMO, SHEILA DELA CRUZ,
ELIZABETH ARINGO, JENALYN G. DISMAYA, MELANIE G. TRIA, GRETCHEN D. MEJOS, and JANELIE
R. JIMENEZ, Petitioners
vs.
HSY MARKETING LTD., CO., WANTOFREE ORIENTAL TRADING, INC., COEN FASHION HOUSE AND
GENERAL MERCHANDISE, ASIA CONSUMER VALUE TRADING, INC., FABULOUS JEANS & SHIRT &
GENERAL MERCHANDISE, LSG MANUFACTURING CORPORATION, UNITE GENERAL
MERCHANDISE, ROSARIO Q. CO, LUCIA PUN LING YEUNG, and ALEXANDER ARQUEZA,
Respondents
DECISION
LEONEN, J.:
When the evidence in labor cases is in equipoise, doubt is resolved in favor of the employee.
This is a Petition for Review on Certiorari1 assailing the February 25, 2013 Decision2 and May 30, 2013
Resolution3 of the Court of Appeals in CA-G.R. SP No. 126522, which upheld the Labor Arbiter's
finding that the employees voluntarily terminated their employment. The assailed judgments also
1
ground that the employees failed to present any evidence in their favor.
HSY Marketing Ltd., Co., Wantofree Oriental Trading, Inc., Coen Fashion House and General
Merchandise, Asia Consumer Value Trading, Inc., Fabulous Jeans & Shirt & General Merchandise,
LSG Manufacturing Corporation, Unite General Merchandise, Rosario Q. Co, Lucia Pun Lin Yeung,
and Alexander Arqueza (respondents) are engaged in manufacturing and selling goods under the
brand Novo Jeans & Shirt & General Merchandise (Novo Jeans). 4
Sometime in May 2010 and June 2010, several Novo Jeans employees5 went to Raffy Tulfo's radio
program to air their grievances against their employers for alleged labor violations. They were
referred to the Department of Labor and Employment Camanava Regional Office. 6
These employees claimed that on June 7, 2010, they were not allowed to enter the Novo Jeans
branches they were employed in. They further averred that while Novo Jeans sent them a show
cause letter the next day, they were in truth already dismissed from employment. They sent a
demand letter on July 19, 2010 to amicably settle the case before the Department of Labor and
Employment but no settlement was reached. They alleged that upon learning that the Department
of Labor and Employment was not the proper forum to address their grievances, they decided to
file a notice of withdrawal and file their complaint with the Labor Arbiter. 7
On the other hand, Novo Jeans claimed that these employees voluntarily severed their
employment but that they filed complaints later with the Department of Labor and Employment.
They alleged that the employees' notice of withdrawal was not actually granted by the Department
of Labor and Employment but that the employees nonetheless filed their complaints before the
Labor Arbiter. 8
On May 31, 2011, Labor Arbiter Arden S. Anni rendered a Decision9 dismissing the complaints. He
found that other than the employees' bare allegations that they were dismissed from June 6 to 9,
2010, they did not present any other evidence showing that their employment was terminated or
that they were prevented from reporting for work. 10 The Labor Arbiter likewise ruled that the
employees voluntarily severed their employment since the airing of their grievances on Raffy
Tulfo's radio program "[was] enough reason for them not to report for work, simply because of a
possible disciplinary action by [Novo Jeans]." 11 The dispositive portion of the Labor Arbiter
Decision read:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered DISMISSING the above-
captioned consolidated cases for utter lack of merit and for forum-shopping.
SO ORDERED.12
The employees appealed to the National Labor Relations Commission.13
On June 25, 2012, the National Labor Relations Commission rendered a Decision 14 reversing that of
the Labor Arbiter and finding that the employees were illegally dismissed. It ruled that the
allegations of both parties "were unsubstantiated and thus [were] equipoised" and that "if doubt
exists between the evidence presented by the employer and that by the employee, the scales of
justice must be tilted in favor of the latter."15 The dispositive portion of the National Labor
Relations Commission Decision read:
WHEREFORE, premises considered, judgment is hereby rendered finding the appeal meritorious
with respect to the issue of illegal dismissal. Complainants-appellants' respective employers are
hereby found liable, jointly and severally, to pay complainants-appellants their backwages and
separation pay plus ten percent thereof as attorney's fees. Accordingly, the decision of the Labor
Arbiter dated May 31, 2011 is hereby MODIFIED. All other dispositions STANDS (sic) undisturbed.
The computation of the aforesaid awards is as follows:
....
TOTAL AWARD Php30,969,426.00
SO ORDERED.16
Novo Jeans moved for partial reconsideration17 but was denied by the National Labor Relations
Commission in its August 24, 2012 Resolution.18 Thus, it filed a Petition for Certiorari 19 with the
Court of Appeals.
On February 25, 2013, the Court of Appeals rendered a Decision20 reversing the Decision of the
National Labor Relations Commission and reinstating the Labor Arbiter Decision. The Court of
Appeals found that Novo Jeans' counsel, as the affiant, substantially complied with the verification
requirement even if his personal knowledge was based on facts relayed to him by his clients and on
authentic records since he was not privy to the antecedents of the case.21
The Court of Appeals stated that while the employees merely alleged that they were no longer
allowed to report to work on a particular day, Novo Jeans was able to present the First Notice of
Termination of Employment sent to them, asking them to explain their sudden absence from work
without proper authorization. It likewise found that the Notices of Termination of Employment
(Notices) did not indicate that the employees were dismissed or that they were prevented from
entering the stores. 22
According to the Court of Appeals, the equipoise rule was inapplicable in this case since it only
applied when the evidence between the parties was equally balanced. Considering that only Novo
Jeans was able to present proof of its claims, the Court of Appeals was inclined to rule in its
favor. 23 Thus, the Court of Appeals concluded that the case involved voluntary termination of
employment, not illegal dismissal.24 The dispositive portion of its Decision read:
2
WHEREFORE, in view of the foregoing, the instant Petition is hereby GRANTED. The assailed
Decision dated June 25, 2012 and Resolution dated August 24, 2012 rendered by the National Labor
Relations Commission in NLRC LAC No. 07-001930-11/NLRC NCR Cases No. 08-10645-10, 08-10649-10,
08-10655-10, 08-10660-10, 08- 10662-10, 08-10666-10 and 08-10670-10 are hereby REVERSED and SET
ASIDE. Corollarily, the Decision dated May 31, 2011 rendered by the Labor Arbiter is hereby
REINSTATED.
SO ORDERED.25
The employees filed a Motion for Reconsideration26 but it was denied in the Court of Appeals May
30, 2013 Resolution.27 Hence, this Petition28 was filed before this Court.
Petitioners point out that the Court of Appeals erred in not finding grave abuse of discretion,
considering that the petition filed before it was a special civil action for certiorari. They aver that
the Court of Appeals should not have used the special remedy of certiorari merely to re-evaluate
the findings of a quasi-judicial body absent any finding of grave abuse of discretion. 29
Petitioners likewise argue that respondents were unable to substantially comply with the
verification requirement before the Court of Appeals. They submit that respondents' counsel
would have been privy to the antecedents of the case so as to have personal knowledge and not
merely knowledge as relayed by his clients. 30 They add that respondents "deliberately withheld the
Annexes of the Position Paper of the Petitioners submitted to the Labor Arbiter[;] hence, said
Position Paper cannot be considered authentic."31
Petitioners assert that the Court of Appeals had no factual basis to rule in respondents' favor since
there was no evidence to prove that the Notices were sent to petitioners at their last known
addresses. The evidence on record merely showed sample letters of the Notices.32 Petitioners
maintain that this is a situation where the employees allege that they were prevented from
entering their work place and the employer alleges otherwise. They insist that if doubt exists
between the evidence presented by the employer and the evidence presented by the employees,
the doubt must be resolved in favor of the employees, consistent with the Labor Code's policy to
afford protection to labor. 33
On the other hand, respondents argue that a defect in the verification will not necessarily cause the
dismissal of the pleading and that they had sufficiently complied with the requirement when the
affiant attested that the petition was based on facts relayed by his clients and on authentic
records. 34 They also point out that only relevant and pertinent documents should be attached to
their pleadings before the courts; thus, the annexes of petitioner, not being relevant or pertinent,
need not be attached to their pleadings. 35
Respondents contend that the Court of Appeals recognized that the issue in their Petition
for Certiorari concerned the alleged grave abuse of discretion of the National Labor Relations
Commission and thoroughly discussed the issue in the assailed judgment. 36 They likewise submit
that the Court of Appeals may review factual findings of the National Labor Relations Commission
since the finding of grave abuse of discretion requires a re-examination of the sufficiency or
absence of evidence.37
Respondents maintain that the receipt of the Notices was admitted and recognized by the parties
before the Labor Arbiter and was never brought as an issue until the National Labor Relations
Commission made a finding that the Notices were never received.38 According to respondents,
petitioners were estopped from questioning the receipt of the Notices when they already admitted
to their receipt before the Labor Arbiter.39 They argue that the Labor Arbiter and the Court of
Appeals did not err in finding that the termination of employment was voluntary since petitioners
failed to present evidence of the fact of their dismissal. 40
The main issue before this Court is whether or not petitioners were illegally dismissed by
respondents. However, there are certain procedural issues that must first be addressed, in
particular: (1) whether or not the Court of Appeals may, in a petition for certiorari, review and re-
assess the factual findings of the National Labor Relations Commission; and (2) whether or not
verification based on facts relayed to the affiant by his clients is valid.
I
Before discussing the merits of the case, this Court takes this opportunity to clarify certain
doctrines regarding the review of factual findings by the Court of Appeals.
Factual findings of labor officials exercising quasi-judicial functions are accorded great respect and
even finality by the courts when the findings are supported by substantial evidence.41 Substantial
evidence is "the amount of relevant evidence which a reasonable mind might accept as adequate
to support a conclusion. "42 Thus, in labor cases, the issues in petitions for certiorari before the
Court of Appeals are limited only to whether the National Labor Relations Commission committed
grave abuse of discretion.
However, this does not mean that the Court of Appeals is conclusively bound by the findings of the
National Labor Relations Commission. If the findings are arrived at arbitrarily, without resort to any
substantial evidence, the National Labor Relations Commission is deemed to have gravely abused
its discretion:
However, this does not mean that the Court of Appeals is conclusively bound by the findings of the
National Labor Relations Commission. If the findings are arrived at arbitrarily, without resort to any
substantial evidence, the National Labor Relations Commission is deemed to have gravely abused
its discretion:
On this matter, the settled rule is that factual findings of labor officials, who are deemed to have
acquired expertise in matters within their jurisdiction, are generally accorded not only respect but
even finality by the courts when supported by substantial evidence, i.e., the amount of relevant
3
evidence which a reasonable mind might accept as adequate to support a conclusion. We
emphasize, nonetheless, that these findings are not infallible. When there is a showing that they
were arrived at arbitrarily or in disregard of the evidence on record, they may be examined by the
courts. The [Court of Appeals] can then grant a petition for certiorari if it finds that the [National
Labor Relations Commission], in its assailed decision or resolution, has made a factual finding that
is not supported by substantial evidence. It is within the jurisdiction of the [Court of Appeals],
whose jurisdiction over labor cases has been expanded to review the findings of the [National
Labor Relations Commission].43
The Court of Appeals may also review factual findings if quasi-judicial agencies' findings are
contradictory to its own findings. 44 Thus, it must re-examine the records to determine which
tribunal's findings were supported by the evidence.
In this instance, the Labor Arbiter and the National Labor Relations Commission made
contradictory factual findings. Thus, it was incumbent on the Court of Appeals to re-examine their
findings to resolve the issues before it. The Court of Appeals also found that the findings of the
National Labor Relations Commission were not supported by substantial evidence, and therefore,
were rendered in grave abuse of discretion.
Thus, in the determination of whether the National Labor Relations Commission committed grave
abuse of discretion, the Court of Appeals may re-examine facts and re-assess the evidence.
However, its findings may still be subject to review by this Court.
This Court notes that in cases when the Court of Appeals acts as an appellate court, it is still a trier
of facts. Questions of fact may still be raised by the parties. If the parties raise pure questions of
law, they may directly file with this Court. Moreover, contradictory factual findings between the
National Labor Relations Commission and the Court of Appeals do not automatically justify this
Court's review of the factual findings. They merely present a prima facie basis to pursue the action
before this Court. The need to review the Court of Appeals' factual findings must still be pleaded,
proved, and substantiated by the party alleging their inaccuracy. This Court likewise retains its full
discretion to review the factual findings.
II
All petitions for certiorari are required to be verified upon filing. 45 The contents of verification are
stated under Rule 7, Section 4 of the Rules of Court:
Section 4. Verification. Except when otherwise specifically required by law or rule, pleadings need
not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations
therein are true and correct of his personal knowledge or based on authentic records.
A pleading required to be verified which contains a verification based on "information and belief'',
or upon "knowledge, information and belief," or lacks a proper verification, shall be treated as an
unsigned pleading.
Thus, for a pleading to be verified, the affiant must attest that he or she has read the pleading and
that the allegations are true and correct based on his or her personal knowledge or on authentic
records. Otherwise, the pleading is treated as an unsigned pleading.
Shipside Incorporation v. Court of Appeals46required that the assurance should "not [be] the
product of the imagination or a matter of speculation, and that the pleading is filed in good
faith."47 However, verification is merely a formal, not jurisdictional, requirement. It will not result in
the outright dismissal of the case since courts may simply order the correction of a defective
verification.48
Petitioners argue that respondents' verification was invalid since it was not based on authentic
records, alleging that respondents' failure to attach petitioners' position paper annexes to their
Petition for Certiorari before the Court of Appeals made their records inauthentic. 49
A pleading may be verified by attesting that the allegations are based either on personal
knowledge and on authentic records, or on personal knowledge or on authentic records. The use
of either, however, is not subject to the affiant's whim but rather on the nature of the allegations
being attested to. Circumstances may require that the affiant attest that the allegations are based
only on personal knowledge or only on authentic records. Certainly, there can be situations where
the affiant must attest to the allegations being based on both personal knowledge and on
authentic records, thus:
A reading of the above-quoted Section 4 of Rule 7 indicates that a pleading may be verified under
either of the two given modes or under both. The veracity of the allegations in a pleading may be
affirmed based on either one's own personal knowledge or on authentic records, or both, as
warranted. The use of the [conjunction] "or" connotes that either source qualifies as a sufficient
basis for verification and, needless to state, the concurrence of both sources is more than
sufficient. Bearing both a disjunctive and conjunctive sense, this parallel legal signification avoids a
construction that will exclude the combination of the alternatives or bar the efficacy of any one of
the alternatives standing alone.
Contrary to petitioner's position, the range of permutation is not left to the pleader's liking, but is
dependent on the surrounding nature of the allegations which may warrant that a verification be
based either purely on personal knowledge, or entirely on authentic records, or on both sources.50
Authentic records may be the basis of verification if a substantial portion of the allegations in the
pleading is based on prior court proceedings.51 Here, the annexes that respondents allegedly failed
to attach are employee information, supporting documents, and work-related documents proving
that petitioners were employed by respondents. 52 The fact of petitioners' employment, however,
4
has not been disputed by respondents. These documents would not have been the "relevant and
pertinent"53 documents contemplated by the rules.
Petitioners likewise contend that respondents' Petition for Certiorari54 before the Court of Appeals
should not have been given due course since the verification55 signed by respondents' counsel,
Atty. Eller Roel I. Daclan (Atty. Daclan), attested that:
2. I caused the preparation of the foregoing petition and attest that, based upon facts relayed to
me by my clients and upon authentic records made available, all the allegations contained therein
are true and correct[.] 56
Thus, the issue on verification centers on whether the phrase "based upon facts relayed to me by
my clients" may be considered sufficient compliance. To resolve this issue, this Court must first
address whether respondents' counsel may sign the verification on their behalf.
The rules on compliance with the requirement of the verification and certification of non-forum
shopping were already sufficiently outlined in Altres v. Empleo, 57 where this Court stated:
For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential
pronouncements already reflected above respecting non-compliance with the requirements on, or
submission of defective, verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement on or submission of
defective verification, and noncompliance with the requirement on or submission of defective
certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not necessarily render the
pleading fatally defective. The court may order its submission or correction or act on the pleading if
the attending circumstances are such that strict compliance with the Rule may be dispensed with in
order that the ends of justice may be served thereby.
3) Verification is deemed substantially complied with when one who has ample knowledge to
swear to the truth of the allegations in the complaint or petition signs the verification, and when
matters alleged in the petition have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect therein, unlike
in verification, is generally not curable by its subsequent submission or correction thereof, unless
there is a need to relax the Rule on the ground of "substantial compliance" or presence of "special
circumstances or compelling reasons".
5) The certification against forum shopping must be signed by all the plaintiffs or petitioners in a
case; otherwise, those who did not sign will be dropped as parties to the case. Under reasonable or
justifiable circumstances, however, as when all the plaintiffs or petitioners share a common interest
and invoke a common cause of action or defense, the signature of only one of them in the
certification against forum shopping substantially complies with the Rule.
6) Finally, the certification against forum shopping must be executed by the party-pleader, not by
his counsel. If, however, for reasonable or justifiable reasons, the party-pleader is unable to sign, he
must execute a Special Power of Attorney designating his counsel of record to sign on his behalf. 58
The policy behind the requirement of verification is to guard against the filing of fraudulent
pleadings. Litigants run the risk of perjury59 if they sign the verification despite knowledge that the
stated allegations are not true or are products of mere speculation:
Verification is not an empty ritual or a meaningless formality. Its import must never be sacrificed in
the name of mere expedience or sheer caprice. For what is at stake is the matter of verity attested
by the sanctity of an oath to secure an assurance that the allegations in the pleading have been
made in good faith, or are true and correct and not merely speculative. 60
Thus, for verification to be valid, the affiant must have "ample knowledge to swear to the truth of
the allegations in the complaint or petition."61 Facts relayed to the counsel by the client would be
insufficient for counsel to swear to the truth of the allegations in a pleading. Otherwise, counsel
would be able to disclaim liability for any misrepresentation by the simple expediency of stating
that he or she was merely relaying facts with which he or she had no competency to attest to. For
this reason, the Rules of Court require no less than personal knowledge of the facts to sufficiently
verify a pleading.
Respondents' counsel, not having sufficient personal knowledge to attest to the allegations of the
pleading, was not able to validly verify the facts as stated. Therefore, respondents' Petition
for Certiorari before the Court of Appeals should have been considered as an unsigned pleading.
Respondents' certification of non-forum shopping is likewise defective. The certification of non-
forum shopping must be signed by the litigant, not his or her counsel. The litigant may, for
justifiable reasons, execute a special power of attorney to authorize his or her counsel to sign on
his or her behalf. 62 In this instance, the verification and certification against forum shopping63 was
contained in one ( 1) document and was signed by respondents' counsel, Atty. Daclan.
Corporations, not being natural persons, may authorize their lawyers through a Secretary's
Certificate to execute physical acts. Among these acts is the signing of documents, such as the
certification against forum shopping. A corporation's inability to perform physical acts is
considered as a justifiable reason to allow a person other than the litigant to sign the certification
against forum shopping.64 By the same reasoning, partnerships, being artificial entities, may also
authorize an agent to sign the certification on their behalf.
5
Respondents include three (3) corporations, one (1) partnership, and three (3) sole proprietorships.
Respondents LSG Manufacturing Corporation, Asia Consumer Value Trading, Inc., and Wantofree
Oriental Trading, Inc. submitted Secretary's Certificates65 authorizing Atty. Daclan to sign on their
behalf. On the other hand, respondent HSY Marketing Ltd., Co. submitted a Partnership
Certification.66 Meanwhile, respondents Alexander Arqueza (Arqueza), proprietor of Fabulous
Jeans and Shirt and General Merchandise, Rosario Q. Co (Co), proprietor of Unite General
Merchandise, and Lucia Pun Ling Yeung (Yeung), proprietor of Coen Fashion House & General
Merchandise, submitted Special Powers of Attorney67 on their behalf.
However, sole proprietorships, unlike corporations, have no separate legal personality from their
proprietors.68 They cannot claim the inability to do physical acts as a justifiable circumstance to
authorize their counsel to sign on their behalf. Since there was no other reason given for
authorizing their counsel to sign on their behalf, respondents Arqueza, Co, and Yeung's
certification against forum shopping is invalid.
While courts may simply order the resubmission of the verification or its subsequent correction, 69 a
defect in the certification of non-forum shopping is not curable 70 unless there are substantial
merits to the case.71
However, respondents' Petition for Certiorari before the Court of Appeals was unmeritorious. Thus,
its defective verification and certification of non-forum shopping should have merited its outright
dismissal.
III
When the evidence of the employer and the employee are in equipoise, doubts are resolved in
favor of labor.72 This is in line with the policy of the State to afford greater protection to labor. 73
Petitioners allege that they were illegally dismissed from service when they were prevented from
entering their work premises a day after airing their grievance in a radio show. On the other hand,
respondents deny this allegation and state that petitioners were never dismissed from
employment.
In illegal dismissal cases, the burden of proof is on the employer to prove that the employee was
dismissed for a valid cause and that the employee was afforded due process prior to the
dismissal. 74
Respondents allege that there was no dismissal since they sent petitioners a First Notice of
Termination of Employment, asking them to show cause why they should not be dismissed for their
continued absence from work. However, petitioners argue that this evidence should not be given
weight since there is no proof that they received this Notice.
Indeed, no evidence has been presented proving that each and every petitioner received a copy of
the First Notice of Termination of Employment.1âwphi1 There are no receiving copies or
acknowledgement receipts. What respondents presented were "Sample Letters of
Respondents"75 and not the actual Notices that were allegedly sent out.
While petitioners admitted that the Notices may have been sent, they have never actually admitted
to receiving any of them. In their Position Paper before the Labor Arbiter and in their Memorandum
of Appeal before the National Labor Relations Commission:
On June 7, 2010, all employees who went to complain against the respondent[ s] were not allowed
to enter the stores of respondent[s]. The next day, respondent[s] sent letter[s] to the employees
purporting to be a show cause letter but the truth of the matter is that all employees who went to
the office of Tulfo to complain against the respondent[ s] were already terminated[.]76
The lack of evidence of petitioners' receipts suggests that the Notices were an afterthought,
designed to free respondents from any liability without having to validly dismiss petitioners.
There is likewise no proof that petitioners abandoned their employment. To constitute
abandonment, the employer must prove that "first, the employee must have failed to report for
work or must have been absent without valid or justifiable reason; and second, [that] there must
have been a clear intention on the part of the employee to sever the employer-employee
relationship manifested by some overt act."77
Abandonment is essentially a matter of intent. It cannot be presumed from the occurrence of
certain equivocal acts. 78 There must be a positive and overt act signifying an employee's deliberate
intent to sever his or her employment. Thus, mere absence from work, even after a notice to
return, is insufficient to prove abandonment. 79 The employer must show that the employee
unjustifiably refused to report for work and that the employee deliberately intended to sever the
employer-employee relation. Furthermore, there must be a concurrence of these two (2)
elements.80 Absent this concurrence, there can be no abandonment.
Respondents have not presented any proof that petitioners intended to abandon their
employment. They merely alleged that petitioners have already voluntarily terminated their
employment due to their continued refusal to report for work. However, this is insufficient to
prove abandonment.
Where both parties in a labor case have not presented substantial evidence to prove their
allegations, the evidence is considered to be in equipoise. In such a case, the scales of justice are
tilted in favor of labor. Thus, petitioners are hereby considered to have been illegally dismissed.
This Court notes that had petitioners been able to substantially prove their dismissal, it would have
been rendered invalid not only for having been made without just cause81 but also for being in
violation of their constitutional rights. A laborer does not lose his or her right to freedom of
6
expression upon employment.82 This is "[a] political [right] essential to man's enjoyment of his [or
her] life, to his [or her] happiness, and to his [or her] full and complete fulfillment." 83 While the
Constitution and the courts recognize that employers have property rights that must also be
protected, the human rights of laborers are given primacy over these rights. Property rights may
prescribe. Human rights do not. 84
When laborers air out their grievances regarding their employment in a public forum, they do so in
the exercise of their right to free expression. They are "fighting for their very survival, utilizing only
the weapons afforded them by the Constitution-the untrammelled enjoyment of their basic human
rights."85 Freedom and social justice afford them these rights and it is the courts' duty to uphold
and protect their free exercise. Thus, dismissing employees merely on the basis that they
complained about their employer in a radio show is not only invalid, it is unconstitutional.
However, there not being sufficient proof that the dismissal was meant to suppress petitioners'
constitutional rights, this Court is constrained to limit its conclusions to that of illegal dismissal
under the Labor Code.
Petitioners were not dismissed under any of the causes mentioned in Article 279 [282]86 of the
Labor Code. They were not validly informed of the causes of their dismissal. Thus, their dismissal
was illegal.
An employee who is found to have been illegally dismissed is entitled to reinstatement without loss
of seniority rights and other privileges. 87 If reinstatement proves to be impossible due to the
strained relations between the parties, the illegally dismissed employee is entitled instead to
separation pay.88
WHEREFORE, the Petition is GRANTED. The February 25, 2013 Decision and May 30, 2013 Resolution
of the Court of Appeals in CA-G.R. SP No. 126522 are SET ASIDE. Respondents are DIRECTED to
reinstate petitioners to their former positions without loss of seniority rights or other privileges.
SO ORDERED.
SOCIAL JUSTICE
1.
G.R. No. 214230, February 10, 2016
SECURITY BANK SAVINGS CORPORATION (formerly PREMIERE DEVELOPMENT BANK)/HERMINIO
M. FAMATIGAN, JR., Petitioners,
vs.
CHARLES M. SINGSON, Respondent.
 DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 is the Decision2 dated May 21, 2014 of the Court of
Appeals (CA) in CA-G.R. SP No. 121053, which affirmed the Decision3 dated April 25, 2011 and the
Resolution4 dated June 17, 2011 of the National Labor Relations Commission (NLRC) in NLRC LAC
Case No. 08-001972-10, sustaining the award of separation pay by way of financial assistance to
respondent Charles M. Singson (respondent) despite having been dismissed for just cause.
The Facts
On November 25, 1985, respondent was initially employed by petitioner Premiere Development
Bank (now Security Bank Savings Corporation [SBSC]) as messenger until his promotion as loans
processor at its Sangandaan Branch. Thereafter, he was appointed as Acting Branch Accountant
and, in June 2007, as Acting Branch Manager. On March 26, 2008, he was assigned to its Quezon
Avenue Branch under the supervision of Branch Manager Corazon Pinero (Pinero) and held the
position of Customer Service Operations Head (CSOH) tasked with the safekeeping of its
checkbooks and other bank forms.5
On July 22, 2008, respondent received a show-cause memorandum6 from Ms. Ruby O. Go, head of
West Regional Operations, charging him of violating the bank's Code of Conduct when he
mishandled various checkbooks under his custody. The matter was referred to SBSC's Investigation
Committee which discovered, among others, that as of July 11, 2008, forty-one (41) pre-encoded
checkbooks of the Quezon Avenue Branch were missing.7
At the scheduled conference before the Investigating Committee, respondent readily admitted
having allowed the Branch Manager (i.e., Pinero) to bring out of the bank's premises the missing
checkbooks and other bank forms on the justification that the latter was a senior officer with
lengthy tenure and good reputation. He claimed that it was part of Pinero's marketing strategy to
procure more clients for the bank and that he did not receive any consideration for consenting to
such practice. He added that the reported missing checkbooks had been returned by Pinero to his
custody after the inventory. 8
Pending investigation, respondent was transferred to SBSC's Pedro Gil Branch. On September 30,
2008, he was again issued a memorandum9 directing him to explain his inaccurate reporting of
some Returned Checks and Other Cash Items (RCOCI) which amounted to P46,279.33. The said
uncovered amount was treated as an account receivable for his account. 10 A month thereafter,
respondent was again transferred and reassigned to another branch in Sampaloc,
Manila.11 Dismayed by his frequent transfer to different branches, respondent tendered his
resignation12 on November 10, 2008, effective thirty (30) days from submission. However, SBSC
rejected the same in view of its decision to terminate his employment on November 11, 2008 on the
ground of habitual neglect of duties. 13
7
Consequently, respondent instituted a complaint for illegal dismissal with prayer for backwages,
damages, and attorney's fees against SBSC and its President, Herminio M. Famatigan, Jr.
(petitioners), before the NLRC, docketed as NLRC-NCR Case No. 10-14683-09.14
For their part,15 petitioners maintained that respondent was validly dismissed for cause on the
ground of gross negligence in the performance of his duties when he repeatedly allowed Pinero to
bring outside the bank premises its pre-encoded checks and accountable forms in flagrant violation
of the bank's policies and procedures, and in failing to call Pinero's attention on the matter which
was tantamount to complicity and consent to the commission of said irregularity.16
The LA Ruling
In a Decision17 dated July 26, 2010, the Labor Arbiter (LA) dismissed the complaint and accordingly,
declared respondent to have been terminated from employment for a valid cause. The LA found
that respondent not only committed a violation of SBSC's Code of Conduct but also gross and
habitual neglect of duties when he repeatedly allowed Pinero to bring outside the bank premises
the checkbooks and bank forms despite knowledge of the bank's prohibition on the matter.
According to the LA, the fact that SBSC suffered no actual loss or damage did not in any way affect
the validity of his termination. This notwithstanding, the LA awarded respondent separation pay by
way of financial assistance in the amount of P218,500.00.
Aggrieved, petitioners appealed 18 to the NLRC, docketed as NLRC NCR Case No. 10-14683-09,
assailing the grant of financial assistance to respondent despite a finding that he was validly
dismissed.
The NLRC Ruling
In a Decision19 dated April 25, 2011, the NLRC affirmed the LA decision, ruling that the grant of
separation pay was justified on equitable grounds such as respondent's length of service, and that
the cause of his dismissal was not due to gross misconduct or that reflecting on his moral character
but rather, a weakness of disposition and grievous error in judgment. 20 It likewise observed that
respondent never repeated the act complained of when he was transferred to other branches.
Thus, it found the award of separation pay of one-half (Yi) month pay for every year of service to be
reasonable.
Petitioners moved for reconsideration21 which was likewise denied in a Resolution22 dated June 17,
2011, prompting them to elevate the matter to the CA on certiorari, docketed as CA-G.R. SP No.
121053.23
The CA Ruling
In a Decision24 dated May 21, 2014, the CA denied the petition and sustained the award of
separation pay.
The CA pointed out that separation pay may be allowed as a measure of social justice where an
employee was validly dismissed for causes other than serious misconduct or those reflecting on his
moral character. It held that since respondent's infractions involved violations of company policy
and habitual neglect of duties and not serious misconduct, and that his dismissal from work was
not reflective of his moral character, the NLRC committed no grave abuse of discretion in
sustaining the award of separation pay by way of financial assistance. It further concluded that
respondent did not commit a dishonest act since he readily admitted to the petitioners that he
allowed the Branch Manager to bring out the subject checkbooks. Moreover, it ruled that while
respondent acquiesced to the latter's marketing strategy that was contrary to the bank's rules and
regulations, there was no showing that his conduct was perpetrated with self-interest or for an
unlawful purpose.
Hence, this petition.
The Issue Before the Court
The essential issue for the Court's resolution is whether or not the CA erred in upholding the award
of separation pay as financial assistance to respondent despite having been validly dismissed.
The Court's Ruling
The petition is meritorious.
Separation pay is warranted when the cause for termination is not attributable to the employee's
fault, such as those provided in Articles 29825 and 29926 of the Labor Code, as well as in cases of
illegal dismissal where reinstatement is no longer feasible.27 On the other hand, an employee
dismissed for any of the just causes enumerated under Article 29728 of the same Code, being causes
attributable to the employee's fault, is not, as a general rule, entitled to separation pay. The non-
grant of such right to separation pay is premised on the reason that an erring employee should not
benefit from their wrongful acts.29 Under Section 7,30 Rule I, Book VI of the Omnibus Rules
Implementing the Labor Code, such dismissed employee is nonetheless entitled to whatever rights,
benefits, and privileges he may have under the applicable individual or collective agreement with
the employer or voluntary employer policy or practice.
As an exception, case law instructs that in certain circumstances, the grant of separation pay or
financial assistance to a legally dismissed employee has been allowed as a measure of social justice
or on grounds of equity. In Philippine Long Distance Telephone Co. v. NLRC (PLDT),31 the Court laid
down the parameters in awarding separation pay to dismissed employees based on social justice:
There should be no question that where it comes to such valid but not iniquitous causes as failure
to comply with work standards, the grant of separation pay to the dismissed employee may be
both just and compassionate, particularly if he has worked for some time with the company. x x x It
is not the employee's fault if he does not have the necessary aptitude for his work but on the other
8
hand the company cannot be required to maintain him just the same at the expense of the
efficiency of its operations. He too may be validly replaced. Under these and similar circumstances,
however, the award to the employee of separation pay would be sustainable under the social
justice policy even if the separation is for cause.
But where the cause of the separation is more serious than mere inefficiency, the generosity of the
law must be more discerning.1avvphi1 There is no doubt it is compassionate to give separation pay
to a salesman if he is dismissed for his inability to fill his quota but surely he does not deserve such
generosity if his offense is misappropriation of the receipts of his sales. This is no longer mere
incompetence but clear dishonesty. x x x.
We hold that henceforth separation pay shall be allowed as a measure of social justice only in
those instances where the employee is validly dismissed for causes other than serious misconduct
or those reflecting on his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with
a fellow worker, the employer may not be required to give the dismissed employee separation pay,
or financial assistance, or whatever other name it is called, on the ground of social justice.
A contrary rule would, as the petitioner correctly argues, have the effect, of rewarding rather than
punishing the erring employee for his offense. And we do not agree that the punishment is his
dismissal only and that the separation pay has nothing to do with the wrong he has committed. Of
course it has. Indeed, if the employee who steals from the company is granted separation pay even
as he is validly dismissed, it is not unlikely that he will commit a similar offense in his next
employment because he thinks he can expect a little leniency if he is again found out. This kind of
misplaced compassion is not going to do labor in general any good as it will encourage the
infiltration of its ranks by those who do not deserve the protection and concern of the
Constitution. 32 (Emphasis supplied)
Thus, in the PLDT case, the Court required that the grant of separation pay as financial assistance
given in light of social justice be allowed only when the dismissal: (a) was not for serious
misconduct; and (b) does not reflect on the moral character of the employee or would involve
moral turpitude.
However, in the later case of Toyota Motor Philippines Corporation Workers Association v. NLRC
(Toyota),33 the Court further excluded from the grant of separation pay based on social justice the
other instances listed under Article 282 (now 296) of the Labor Code, namely, willful
disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission
of a crime against the employer or his family. But with respect to analogous cases for termination
like inefficiency, drug use, and others, the social justice exception could be made to apply
depending on certain considerations, such as the length of service of the employee, the amount
involved, whether the act is the first offense, the performance of the employee, and the like. 34
Thus, in Central Philippines Bandag Retreaders, Inc. v. Diasnes,35 citing Toyota, the Court set aside the
award of separation pay as financial assistance to the dismissed employee in view of the gross and
habitual neglect of his duties, pointing out that the constitutional policy to provide full protection
to labor is not meant to be an instrument to oppress the employers:
To reiterate our ruling in Toyota, labor adjudicatory officials and the CA must demur the award of
separation pay based on social justice when an employee's dismissal is based on serious
misconduct or willful disobedience; gross and habitual neglect of duty; fraud or willful breach of
trust; or commission of a crime against the person of the employer or his immediate family -
grounds under Article 282 of the Labor Code that sanction dismissals of employees. They must be
most judicious and circumspect in awarding separation pay or financial assistance as the
constitutional policy to provide full protection to labor is not meant to be an instrument to oppress
the employers. The commitment of the Court to the cause of labor should not embarrass us from
sustaining the employers when they are right, as here. In fine, we should be more cautious in
awarding financial assistance to the undeserving and those who are unworthy of the liberality of
the law.36
Guided by the foregoing, the Court finds the CA to have erred in awarding separation pay.
To reiterate, the grant of separation pay to a dismissed employee is primarily determined by the
cause of the dismissal. In the case at bar, respondent's established act of repeatedly allowing
Branch Manager Pinero to bring the checkbooks and bank forms outside of the bank's premises in
violation of the company's rules and regulations had already been declared by the LA to be gross
and habitual neglect of duty under Article 282 of the Labor Code, which finding was not contested
on appeal by respondent. It was petitioners who interposed an appeal solely with respect to the
award of separation pay as financial assistance. As they aptly pointed out, the infractions, while not
clearly indicative of any wrongful intent, is, nonetheless, serious in nature when one considers the
employee's functions, rendering it inequitable to award separation pay based on social justice. As
the records show, respondent was the custodian of accountable bank forms in his assigned branch
and as such, was mandated to strictly comply with the monitoring procedure and disposition
thereof as a security measure to avoid the attendant high risk to the bank. Indeed, it is true that the
failure to observe the processes and risk preventive measures and worse, to take action and
address its violation, may subject the bank to regulatory sanction. It bears stressing that the
banking industry is imbued with public interest. Banks are required to possess not only ordinary
diligence in the conduct of its business but extraordinary diligence in the care of its accounts and
the interests of its stakeholders. The banking business is highly sensitive with a fiduciary duty
towards its client and the public in general, such that central measures must be strictly
observed. 37 It is undisputed that respondent failed to perform his duties diligently, and therefore,
not only violated established company policy but also put the bank's credibility and business at risk.
The excuse that his Branch Manager, Pinero, merely prompted him towards such ineptitude is of no
moment. He readily admitted that he violated established company policy against bringing out
checkbooks and bank forms, 38 which means that he was well aware of the fact that the same was
prohibited. Nevertheless, he still chose to, regardless of his superior's influence, disobey the same
not only once, but on numerous occasions. All throughout, there is no showing that he questioned
9
the acts of Branch Manager Pinero; neither did he take it upon himself to report said irregularities
to a higher authority. Hence, under these circumstances, the award of separation pay based on
social justice would be improper.
A similar ruling was reached in the case of Philippine National Bank v. Padao39 where the Court
disallowed the payment of separation pay as financial assistance to an employee, i.e., a credit
investigator in a bank, who has repeatedly failed to perform his duties which amounted to gross
and habitual neglect of duties under Article 282 (now 296) of the Labor Code:
The role that a credit investigator plays in the conduct of a bank's business cannot be
overestimated. The amount of loans to be extended by a bank depends upon the report of the
credit investigator on the collateral being offered. If a loan is not fairly secured, the bank is at the
mercy of the borrower who may just opt to have the collateral foreclosed. If the scheme is
repeated a hundredfold, it may lead to the collapse of the bank.
xxxx
Padao's repeated failure to discharge his duties as a credit investigator of the bank amounted to
gross and habitual neglect of duties under Article 282 (b) of the Labor Code. He not only failed to
perform what he was employed to do, but also did so repetitively and habitually, causing millions of
pesos in damage to PNB. Thus, PNB acted within the bounds of the law by meting out the penalty
of dismissal, which it deemed appropriate given the circumstances.
xxxx
However, Padao is not entitled to financial assistance. In Toyota Motor Phils. Corp. Workers
Association v. NLRC, the Court reaffirmed the general rule that separation pay shall be allowed as a
measure of social justice only in those instances where the employee is validly dismissed for
causes other than serious misconduct, willful disobedience, gross and habitual neglect of
duty, fraud or willful breach of trust, commission of a crime against the employer or his family, or
those reflecting on his moral character. These five grounds are just causes for dismissal as
provided in Article 282 of the Labor Code.40
Notably, respondent's long years of service and clean employment record will not justify the award
of separation pay in view of the gravity of the foregoing infractions. 41 Length of service is not a
bargaining chip that can simply be stacked against the employer. 42 As ruled in Central Pangasinan
Electric Cooperative, Inc. v. NLRC:43
Although long years of service might generally be considered for the award of separation benefits
or some form of financial assistance to mitigate the effects of termination, this case is not the
appropriate instance for generosity under the Labor Code nor under our prior decisions. The fact
that private respondent served petitioner for more than twenty years with no negative record prior
to his dismissal, in our view of this case, does not call for such award of benefits, since his violation
reflects a regrettable lack of loyalty and worse, betrayal of the company. If an employee's length of
service is to be regarded as a justification for moderating the penalty of dismissal, such gesture will
actually become a prize for disloyalty, distorting the meaning of social justice and undermining the
efforts of labor to cleanse its ranks ofundesirables.44
All told, the Court finds that the award of separation pay to respondent as a measure of social
justice is riot warranted in this case. A contrary ruling would effectively reward respondent for his
negligent acts instead of punishing him for his offense, in observation of the principle of equity.
WHEREFORE, the petition is GRANTED. The Decision dated May 21, 2014 of the Court of Appeals in
CA-G.R. SP No. 121053 is hereby REVERSED and SET ASIDE deleting the award of separation pay in
favor of Charles M. Singson.
SO ORDERED.
SOCIAL JUSTICE
2.
G.R. No. 190187, September 28, 2016
THE PHILIPPINE GEOTHERMAL, INC. EMPLOYEES UNION, Petitioner, v. UNOCAL PHILIPPINES, INC.
(NOW KNOWN AS CHEVRON GEOTHERMAL PHILIPPINES HOLDINGS, INC.), Respondent.
DECISION
LEONEN, J.:
The merger of a corporation with another does not operate to dismiss the employees of the
corporation absorbed by the surviving corporation. This is in keeping with the nature and effects of
a merger as provided under law and the constitutional policy protecting the rights of labor. The
employment of the absorbed employees subsists. Necessarily, these absorbed employees are not
entitled to separation pay on account of such merger in the absence of any other ground for its
award.
This resolves a Petition for Review on Certiorari1 filed by Philippine Geothermal, Inc. Employees
Union (Union) assailing the Decision2 dated July 23, 2009 and the Resolution3 dated November 9,
2009 of the Court of Appeals Eighth Division in Unocal Philippines, Inc. (now known as Chevron
Geothermal Philippines Holdings, inc.) v. The Philippine Geothermal, Inc. Employees Union. The
assailed Decision granted Unocal Philippines, Inc.'s (Unocal Philippines) appeal and reversed the
Secretary of Labor's award of separation benefits to the Union. The award was granted on the
premise that the merger of Unocal Philippines' parent corporation with another corporation
impliedly terminated the employment of the Union's members. The assailed Resolution denied the
Union's Motion for Reconsideration.
Philippine Geothermal, Inc. Employees Union is a legitimate labor union that stands as the
bargaining agent of the rank-and-file employees of Unocal Philippines.4chanrobleslaw
Unocal Philippines, formerly known as Philippine Geothermal, Inc., is a foreign corporation
incorporated under the laws of the State of California, United States of America, licensed to do
business in the Philippines for the "exploration and development of geothermal resources as
alternative sources of energy."5 It is a wholly owned subsidiary of Union Oil Company of California
(Unocal California),6 which, in turn, is a wholly owned subsidiary of Union Oil Corporation (Unocal
Corporation).7 Unocal Philippines operates two (2) geothermal steam fields in Tiwi, Albay and
Makiling, Banahaw, Laguna, owned by the National Power Corporation.8chanrobleslaw
On April 4, 2005, Unocal Corporation executed an Agreement and Plan of Merger (Merger
Agreement) with Chevron Texaco Corporation (Chevron) and Blue Merger Sub, Inc. (Blue
Merger).9 Blue Merger is a wholly owned subsidiary of Chevron.10 Under the Merger Agreement,
Unocal Corporation merged with Blue Merger, and Blue Merger became the surviving
corporation.11 Chevron then became the parent corporation of the merged corporations:12 After the
merger, Blue Merger, as the surviving corporation, changed its name to Unocal
Corporation.13chanrobleslaw
On January 31, 2006, Unocal Philippines executed a Collective Bargaining Agreement with the
Union.14chanrobleslaw
However, on October 20, 2006, the Union wrote Unocal Philippines asking for the separation
benefits provided for under the Collective Bargaining Agreement. According to the Union, the
Merger Agreement of Unocal Corporation, Blue Merger, and Chevron resulted in the closure and
cessation of operations of Unocal Philippines and the implied dismissal of its
employees.15chanrobleslaw
Unocal Philippines refused the Union's request and asserted that the employee-members were not
terminated and that the merger did not result in its closure or the cessation of its
operations.16chanrobleslaw
As Unocal Philippines and the Union were unable to agree, they decided to submit the matter to
the Department of Labor and Employment's Administrative Intervention for Dispute Avoidance
Program.17 However, they were unable to arrive at "a mutually acceptable
agreement."18chanrobleslaw
On November 24, 2006, the Union claimed that Unocal Philippines was guilty of unfair labor
practice and filed a Notice of Strike.19 Later, the Union withdrew its Notice of
Strike.20chanrobleslaw
On February 5, 2007, the parties agreed to submit their dispute for voluntary arbitration before the
10
Department of Labor and Employment, with the Secretary of Labor and Employment as Voluntary
Arbitrator.21 The case, entitled In Re: Labor Dispute at Philippines, Inc./Chevron, was docketed as OS-
VA-2007-04.22chanrobleslaw
After the parties submitted their respective position papers, the Secretary of Labor rendered the
Decision23 on January 15, 2008 ruling that the Union's members were impliedly terminated from
employment as a result of the Merger Agreement. The Secretary of Labor found that the merger
resulted in new contracts and a new employer for the Union's members. The new contracts
allegedly required the employees' consent; otherwise, there was no employment contract to speak
of.24 Thus, the Secretary of Labor awarded the Union separation pay under the Collective
Bargaining Agreement.25cralawred The dispositive portion of the Decision
reads:ChanRoblesVirtualawlibrary
WHEREFORE, this Office rules that Unocal and Chevron merged into one corporate entity and the
employees were impliedly terminated from employment. Accordingly, they are entitled to the
separation benefits provided under ARTICLE XII, SECTION 2 and ANNEX "B" of the collective
bargaining [agreement] between UNOCAL PHILIPPINES, INC. and the PHILIPPINE GEOTHERMAL,
INC. EMPLOYEES UNION.
Pursuant to Section 7, Rule XIX of Department Order No. 40-03, series of 2003, this Decision shall
be final and executory after ten (10) calendar days from receipt hereof and it shall not be subject of
a motion for reconsideration.
SO ORDERED.26 (Emphasis in the original)
Unocal Philippines filed before the Court of Appeals a Petition for Review27 questioning the
Secretary of Labor's Decision. Unocal Philippines claimed that the Union was not entitled to
separation benefits given that Unocal Philippines was not a party to the merger, 28 that it never
closed nor ceased its business, and that it did not terminate its employees after the merger. 29 It
asserted that its operations continued in the same manner, and with the same manpower
complement.30 Likewise, the employees kept their tenure intact and experienced no changes in
their salaries and benefits.31chanrobleslaw
In the Decision32 dated July 23, 2009, the Court of Appeals granted the appeal of Unocal Philippines
and reversed the Decision of the Secretary of Labor.33 It held that Unocal Philippines has a separate
and distinct juridical personality from its parent company, Unocal Corporation, which was the party
that entered into the Merger Agreement.34 The Court of Appeals ruled that Unocal Philippines
remained undissolved and its employees were unaffected by the merger.35 It found that this was
evidenced by the Union's assumption of its role as the duly recognized bargaining representative of
all rank-and-file employees a few months after the merger.36chanrobleslaw
Moreover, the Court of Appeals found that although Unocal Corporation became a part of
Chevron, Unocal Philippines still remained as a wholly owned subsidiary of Unocal California after
the merger.37 It ruled that in any case, the Collective Bargaining Agreement only provided for the
payment of separation pay if a reduction in workforce results from redundancy, retrenchment or
11
installation of labor-saving devices, or closure and cessation of operations, all of which did not
occur in this case.38chanrobleslaw
The Court of Appeals also pointed out that the Union's members merely wanted to discontinue
their employment with Unocal Philippines, but there was nothing in the Labor Code nor in the
parties' Collective Bargaining Agreement that would sanction the payment of separation pay to
those who no longer wanted to work for Unocal Philippines as a result of the merger.39 The
dispositive portion of the Decision reads:ChanRoblesVirtualawlibrary
WHEREFORE, premises considered, the Decision dated 15 January 2008, of the Department of
Labor and Employment (DOLE) in OS-VA-2007-04 is hereby REVERSED and SET ASIDE.
SO ORDERED.40 (Emphasis in the original)
On November 9, 2009, the Court of Appeals denied the Union's Motion for
Reconsideration.41chanrobleslaw
Hence, this Petition42 was filed.
Petitioner Philippine Geothermal, Inc. Employees Union claims that respondent Unocal Philippines,
Inc. changed its theory of the case when, in the proceedings before the Secretary of Labor, it
claimed that it entered into a merger and not a sale, but later, in its appeal before the Court of
Appeals, argued that it was not a party to the merger.43 Petitioner asserts that the Court of Appeals
erred in allowing respondent to change its theory of the case on appeal and in deciding the case on
the basis of this changed theory.44chanrobleslaw
Petitioner further claims that the Court of Appeals erred in reversing the Decision of the Secretary
of Labor, who properly ruled that petitioner's members are entitled to separation pay. 45 It claims
that the merger resulted in (a) "the severance of the juridical tie that existed between the
employees and its original employer, Unocal Corporation,"46 and (b) the implied termination of the
employment of the Union's members, who had the right to waive their continued employment
with the absorbing corporation.47 Petitioner insists that the the "cessation of operations"
contemplated in the Collective Bargaining Agreement and the Memorandum of Agreement must
be liberally interpreted to include mergers,48 and that doubts must be resolved in favor of
labor.49chanrobleslaw
In the Resolution50 dated January 27, 2010, this Court directed respondent to comment on the
Petition.
Respondent filed its Comment51 on March 26, 2010. It argues that it did not change its theory on
appeal. It insists that it has been consistent in arguing before the Secretary of Labor and the Court
of Appeals that it was never a party to the merger between Unocal Corporation and Blue Merger as
it has always stated that it was Unocal Corporation who entered into the Merger
Agreement.52 Respondent argues that even assuming that it did change its theory on appeal, it may
do so as an exception to the rule since "a party may change [its] legal theory when its factual bases
would not require the presentation of further evidence by the adverse party in order to meet the
issue raised in the new theory."53 It posits that the alleged new theory would still be based on the
evidence presented before the Secretary of Labor, hence, petitioner was.not placed at a
disadvantage.54chanrobleslaw
Respondent further argues that in any case, petitioner's members still did not lose their
employment as to warrant the award of separation pay.55 The Memorandum of Agreement, the
Collective Bargaining Agreement, and the contemporaenous acts of the parties show that
respondent shall pay separation pay only in case the employees actually lose their jobs due to
redundancy, retrenchment or installation of labor-saving devices, or closure and cessation of
operation.56 As these circumstances did not occur, respondent cannot grant petitioner's members
separation pay.
Petitioner filed its Reply57 on July 6, 2010. It insists that respondent never claimed before the
Secretary of Labor that it was not covered by the merger.58 It maintains that respondent only
insisted on this argument when it obtained the unfavorable decision from the Secretary of
Labor.59 Moreover, the Secretary of Labor was correct in ruling that, indeed, there was a cessation
of operations of respondent when it merged with Chevron.60chanrobleslaw
We resolve the following issues:
chanRoblesvirtualLawlibraryFirst, whether respondent changed the theory of its case on appeal;
Second, whether the Merger Agreement executed by Unocal Corporation, Blue Merger, and
Chevron resulted in the termination of the employment of petitioner's members;
and cralawlawlibrary
Lastly, whether petitioner's members are entitled to separation benefits.
As regards the first issue, we rule that respondent did, indeed, change the theory of its case on
appeal.
In its Petition before the Court of Appeals, respondent asserted that it was not a party to the
merger as it was a subsidiary of Unocal California and, thus, had a separate and distinct personality
from Unocal Corporation.
However, the following statement can be found in respondent's Position Paper in the proceedings
before the Secretary of Labor:ChanRoblesVirtualawlibrary
3. . . . Following the merger, Blue Merger Sub Inc. which as above stated is a wholly owned subsidiary
of Chevron Corporation changed its name to Unocal Corporation retaining Unocal Philippines, Inc. as
its Philippine Branch to continue to operate the aforenamed geothermal plants as, in
fact[.]61 (Emphasis supplied)
Respondent alleges that it is a branch of Unocal Coiporation. Claiming that it is a branch is
inconsistent with its allegation (on appeal) that it is a subsidiary of another corporation. A branch
and a subsidiary differ in its corporate existence: a branch is not a legally independent unit, while a
subsidiary has a separate and distinct personality from its parent corporation.
12
In Philippine Deposit Insurance Corp. v. Citibank:62
The Court begins by examining the manner by which a foreign corporation can establish its
presence in the Philippines. It may choose to incorporate its own subsidiary as a domestic
corporation, in which case such subsidiary would have its own separate and independent legal
personality to conduct business in the country. In the alternative, it may create a branch in the
Philippines, which would not be a legally independent unit, and simply obtain a license to do business
in the Philippines.63 (Emphasis supplied, citations omitted)
Respondent likewise made the following assertions in its Position Paper in the proceedings before
the Secretary of Labor:ChanRoblesVirtualawlibrary
Based on the facts of this case, the Honorable Secretary of Labor would certainly appreciate
that the business transaction entered into by respondent employer was in law and in fact, a merger.
Hence, there is no basis to the union's claim.
....
. . . In the present case, it is clear that the surviving corporation, i.e. Unocal Philippines Inc. has
continued the business and operations of the absorbed corporation in an unchanged manner, and
using the same employees with their tenure intact and under the same terms and conditions of
employment.64 (Emphasis supplied)
These statements reveal that not only did respondent fail to assert that it was not a party to the
Merger Agreement, but it also referred to itself as the party who entered into the transaction and
became the surviving corporation in the merger. Thus, the claim that respondent is not a party to
the merger is a new allegation raised for the first time on appeal before the Court of Appeals.
Raising a factual question for the first time on appeal is not allowed. In Tan v. Commission on
Elections:65
The aforementioned issue is now raised only for the first time on appeal before this Court. Settled
is the rule that issues not raised in the proceedings below (COMELEC en banc) cannot be raised for
the first time on appeal. Fairness and due process dictate that evidence and issues not presented
below cannot be taken up for the first time on appeal.
Thus, in Matugas v. Commission on Elections, we reiterated this rule,
saying:ChanRoblesVirtualawlibrary
The rule in appellate procedure is that a factual question may not be raised for the first time on
appeal, and documents forming no part of the proofs before the appellate court will not be
considered in disposing of the issues of" an action. This is true whether the decision elevated for
review originated from a regular court or an administrative agency or quasi-judicial body, and
whether it was rendered in a civil case, a special proceeding, or a criminal case. Piecemeal
presentation of evidence is simply not in accord with orderly justice.
Moreover, in Vda. De Gualberto v. Go, we also held:ChanRoblesVirtualawlibrary
In Labor Congress of the Philippines v. NLRC, we have made it clear that "to allow fresh issues on
appeal is violative of the rudiments of fair play, justice and due process." Likewise, in Orosa v. Court
of Appeals, the Court disallowed it because "it would be offensive to the basic rule of fair play,
justice and due process if it considered [the] issue[s] raised for the first time on appeal." We cannot
take an opposite stance in the present case.66 (Citations omitted)
Respondent did state that Unocal Corporation was the party to the Merger Agreement with Blue
Merger and Chevron. Nonetheless, it did not use this allegation to argue that it had a separate and
distinct personality from Unocal Corporation and is, thus, not a party to the Merger Agreement.
Respondent only raised this argument in its appeal before the Court of Appeals.
Respondent's contention that it falls within the exception to the rule likewise does not lie.
Respondent cites Quasha Ancheta Pena and Nolasco Law Office v. LCN Construction Corp.67 and
claims that it falls within the exception since it did not present any additional evidence on the
matter:ChanRoblesVirtualawlibrary
In the interest of justice and within the sound discretion of the appellate court, a party may change
his legal theory on appeal, only when the factual bases thereof would not require presentation of
any further evidence by the adverse party in order to enable it to properly meet the issue raised in
the new theory.68chanroblesvirtuallawlibrary
However, this paragraph states that it is the adverse party that should no longer be required to
present additional evidence to contest the new claim, and not the party presenting the new theory
on appeal. Thus, it does not matter that respondent no longer presented additional evidence to
support its new claim. The petitioner, as the adverse party, should not have to present further
evidence on the matter before the new issue may be considered. However, the issue of whether
respondent is a party to the Merger Agreement may be proven otherwise by petitioner, through
the presentation of evidence that respondent is merely a branch and not a subsidiary of Unocal
Corporation. Thus, respondent's new allegation does not fall under the exception to the rule.
Petitioner was denied the opportunity to present evidence to disprove respondent's new claim.
Therefore, the Court of Appeals erred in taking into consideration this argument.
As to the remaining issues, we rule in favor of respondent and dismiss the Petition.
Both the Secretary of Labor and the Court of Appeals found that what was entered into by Unocal
Corporation, Blue Merger, and Chevron is a merger. The primary issue is what the effects of this
merger on respondent's employees are.
We find that, whether or not respondent is a party to the Merger Agreement, there is no implied
dismissal of its employees as a consequence of the merger.
A merger is a consolidation of two or more corporations, which results in one or more corporations
being absorbed into one surviving corporation.69 The separate existence of the absorbed
corporation ceases, and the surviving corporation "retains its identity and takes over the rights,
privileges, franchises, properties, claims, liabilities and obligations of the absorbed
corporation(s)."70chanrobleslaw
If respondent is a subsidiary of Unocal California, which, in turn, is a subsidiary of Unocal
Corporation, then the merger of Unocal Corporation with Blue Merger and Chevron does not affect
respondent or any of its employees. Respondent has a separate and distinct personality from its
13
parent corporation.
Nonetheless, if respondent is indeed a party to the merger, the merger still does not result in the
dismissal of its employees.
The effects of a merger are provided under Section 80 of the Corporation
Code:ChanRoblesVirtualawlibrary
SEC. 80. Effects of merger or consolidation. — The merger or consolidation, as provided in the
preceding sections shall have the following effects:
chanRoblesvirtualLawlibrary
1. The constituent corporations shall become a single corporation which, in case of merger, shall be
the surviving corporation designated in the plan of merger; and, in case of consolidation, shall be
the consolidated corporation designated in the plan of consolidation;
2. The separate existence of the constituent corporations shall cease, except that of the surviving
or the consolidated corporation;
3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities
and powers and shall be subject to all the duties and liabilities of a corporation organized under this
Code;
4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights,
privileges, immunities and franchises of each of the constituent corporations; and all property, real or
personal, and all receivables due on whatever account, including subscriptions to shares and other
choses in action, and all and every other interest of, or belonging to, or due to each constituent
corporation, shall be taken and deemed to be transferred to and vested in such surviving or
consolidated corporation without further act or deed; and
5. The surviving or the consolidated corporation shall be responsible and liable for all the liabilities and
obligations of each of the constituent corporations in the same manner as if such surviving or
consolidated corporation had itself incurred such liabilities or obligations; and any claim, action or
proceeding pending by or against any of such constituent corporations may be prosecuted by or
against the surviving or consolidated corporation, as the case may be. Neither the rights of creditors
nor any lien upon the property of any of such constituent corporations shall be impaired by such
merger or consolidation. (Emphasis supplied)
Although this provision does not explicitly state the merger's effect on the employees of the
absorbed corporation, Bank of the Philippine Islands v. BPI Employees Union-Davao Chapter-
Federation of Unions in BPI Unibank71 has ruled that the surviving corporation automatically assumes
the employment contracts of the absorbed corporation, such that the absorbed corporation's
employees become part of the manpower complement of the surviving corporation,
thus:ChanRoblesVirtualawlibrary
Taking a second look on this point, we have come to agree with Justice Brion's view that it is more
in keeping with the dictates of social justice and the State policy of according full protection to labor
to deem employment contracts as automatically assumed by the surviving corporation in a merger,
even in the absence of an express stipulation in the articles of merger or the merger plan. In his
dissenting opinion, Justice Brion reasoned that:ChanRoblesVirtualawlibrary
To my mind, due consideration of Section 80 of the Corporation Code, the constitutionally declared
policies on work, labor and employment, and the specific FEBTC-BPI situation — i.e., a merger with
complete "body and soul" transfer of all that FEBTC embodied and possessed and where both
participating banks were willing (albeit by deed, not by their written agreement) to provide for the
affected human resources by recognizing continuity of employment — should point this Court to a
declaration that in a complete merger situation where there is total takeover by one corporation
over another and there is silence in the merger agreement on what the fate of the human resource
complement shall be, the latter should not be left in legal limbo and should be properly provided
for, by compelling the surviving entity to absorb these employees. This is what Section 80 of the
Corporation Code commands, as the surviving corporation has the legal obligation to assume all
the obligations and liabilities of the merged constituent corporation.
Not to be forgotten is that the affected employees managed, operated and worked on the
transferred assets and properties as their means of livelihood; they constituted a basic component
of their corporation during its existence. In a merger and consolidation situation, they cannot be
treated without consideration of the applicable constitutional declarations and directives, or,
worse, be simply disregarded. If they are so treated, it is up to this Court to read and interpret the
law so that they are treated in accordance with the legal requirements of mergers and
consolidation, read in light of the social justice, economic and social provisions of our
Constitution. Hence, there is a need for the surviving corporation to take responsibility for the
affected employees and to absorb them into its workforce where no appropriate provision for the
merged corporation's human resources component is made in the Merger Plan.72 (Emphasis supplied,
citations omitted)
The rationale for this ruling is anchored on the nature and effects of a merger as provided under
Section 80 of the Corporation Code, as well as the policies on work and labor enshrined in the
Constitution.73chanrobleslaw
To reiterate, Section 80 of the Corporation Code provides that the surviving corporation shall
possess all the rights, privileges, properties, and receivables due of the absorbed corporation.
Moreover, all interests of, belonging to, or due to the absorbed corporation "shall be taken and
deemed to be transferred to and vested in such surviving or consolidated corporation without
further act or deed."74 The surviving corporation likewise acquires all the liabilities and obligations
of the absorbed corporation as if it had itself incurred these liabilities or
obligations.75chanrobleslaw
This acquisition of all assets, interests, and liabilities of the absorbed corporation necessarily
includes the rights and obligations of the absorbed corporation under its employment contracts.
Consequently, the surviving corporation becomes bound by the employment contracts entered
into by the absorbed corporation. These employment contracts are not terminated. They subsist
unless their termination is allowed by law.
This interpretation is consistent with the consitutional provisions and policies on work and labor,
which provides:ChanRoblesVirtualawlibrary
14
ARTICLE II
....
State Policies
....
SECTION 18. The State affirms labor as a primary social economic force. It shall protect the rights of
workers and promote their welfare.
....
ARTICLE XIII
....
Labor
SECTION 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and
negotiations, and peaceful concerted activities, including the right to strike in accordance with law.
They shall be entitled to security of tenure, humane conditions of work, and a living wage. They
shall also participate in policy and decision-making processes affecting their rights and benefits as
may be provided by law.
The State shall promote the principle of shared responsibility between workers and employers and
the preferential use of voluntary modes in settling disputes, including conciliation, and shall
enforce their mutual compliance therewith to foster industrial peace.
The State shall regulate the relations between workers and employers, recognizing the right of
labor to its just share in the fruits of production and the right of enterprises to reasonable returns
on investments, and to expansion and growth.
These constitutional provisions ensure that workers' rights are protected as they are imbued with
public interest. They likewise prevent an interpretation of any law, rule, or agreement, which may
violate worker's rights acquired during their employment.
Associate Justice Arturo D. Brion's Dissenting Opinion in Bank of the Philippine Islands v. BPI
Employees Union-Davao Chapter-Federation of Unions in BPI Unibank76 was similarly premised on the
constitutional protection afforded to labor and the public interest carried by employment
contracts:ChanRoblesVirtualawlibrary
An employment contract or contract of service essentially has value because it embodies work —
the means of adding value to basic raw materials and the processes for producing goods, materials
and services that become the lifeblood of corporations and, ultimately, of the nation. Viewed from
this perspective, the employment contract or contract of service is not an ordinary agreement that
can be viewed in strictly contractual sense. It embodies work and production and carries with it a
very significant element of public interest; thus, the Constitution, no less, accords full recognition
and protection to workers and their contribution to production.
....
These constitutional statements and directives, aside from telling us to consider work, labor and
employment beyond purely contractual terms, also provide us directions on how our
considerations should be made, i.e., with an eye on the interests they represent — the individual,
the corporate, and more importantly, the national.77chanroblesvirtuallawlibrary
Associate Justice Brion likewise discussed the nature of a merger agreement vis-a-vis the
employment contracts:ChanRoblesVirtualawlibrary
This recognition is not to objectify the workers as assets and liabilities, but to recognize — using
the spirit of the law and constitutional standards — their necessary involvement and need to be
provided for in a merger situation. Neither does this step, directly impacting on the employees'
individual employment contracts, detract from the in personam character of these contracts. For in
a merger situation, no change of employer is involved; the change is in the internal personality of
the employer rather than through the introduction of a new employer which would have novated
the contract. This conclusion proceeds from the nature of a merger as a corporate development
regulated by law and the merger's implementation through the parties' merger agreement.
....
In the BPI-FEBTC situation, these employment contracts are part of the obligations that the
merging parties have to account and make provisions for under the Constitution and the
Corporation Code; in the absence of any clear agreement, these employment contracts subsist,
subject to the right of the employees to reject them as they cannot be compelled to render service
but can only be made to answer in damages if the rejection constitutes a breach. In other words, in
mergers and consolidations, these contracts should be held to be continuing, unless rejected by the
employees themselves or declared by the merging parties to be subject to the authorized causes for
termination of employment under Sections 282 and 283 of the Labor Code. In this sense, the merging
parties' control and business decision on how employees shall be affected, in the same manner that
the affected employees' decision on whether to abide by the merger or to opt out, remain
unsullied.78 (Emphasis in the original)
Senior Associate Justice Antonio T. Carpio's Dissenting Opinion79 likewise discusses the
constitutional and legal right to security of tenure as basis for ruling that the employment contracts
of the absorbed corporation subsist in case of a merger:ChanRoblesVirtualawlibrary
Upon merger, BPI, as the surviving entity, absorbs FEBTC and continues the combined business of
the two banks. BPI assumes the legal personality of FEBTC, and automatically acquires FEBTC s
rights, privileges and powers, as well as its liabilities and obligations.
....
15
Among the obligations and liabilities of FEBTC is to continue the employment of FEBTC employees.
These employees have already acquired certain employment status, tenure, salary and benefits.
They are regular employees of FEBTC. Since after the merger, BPI has continued the business of
FEBTC, FEBTC's obligation to these employees is assumed by BPI, and BPI becomes duty-bound to
continue the employment of these FEBTC employees.
Under Article 279 of the Labor Code, regular employees acquire security of tenure, and hence, may
not be terminated by the employer except upon legal grounds. . . . Without any of these legal
grounds, the employer cannot validly terminate the employment of regular employees; otherwise,
the employees' right to security of tenure would be violated.
The merger of two corporations does not authorize the surviving corporation to terminate the
employees of the absorbed corporation in the absence of just or authorized causes as provided in
Articles 282 and 283 of the Labor Code. . . . Once an employee becomes permanent, he is protected
by the security of tenure clause in the Constitution, and he can be terminated only for just or
authorized causes as provided by law.80chanroblesvirtuallawlibrary
These theories were dissents to the Decision in Bank of the Philippine Islands. However, in the
Resolution resolving the Motion for Reconsideration in that case, this Court found it necessary to
interpret Section 80 of the Corporation Code and the constitutional provisions on labor as to
strengthen the "judicial protection of the right to security of tenure of employees affected by a
merger and [avoid] confusion regarding the status of various-benefits."81 Thus, this Court ruled that
the surviving corporation automatically assumes the employment contracts of the absorbed
corporation. The absorbed corporation's employees are not impliedly dismissed, but become part
of the manpower complement of the surviving corporation.82chanrobleslaw
The merger of Unocal Corporation with Blue Merger and Chevron does not result in an implied
termination of the employment of petitioner's members. Assuming respondent is a party to the
merger, its employment contracts are deemed to subsist and continue by "the combined operation
of the Corporation Code and the Labor Code under the backdrop of the labor and social justice
provisions of the Constitution."83chanrobleslaw
Petitioner insists that this is contrary to its freedom to contract, considering its members did not
enter into employment contracts with the surviving corporation. However, petitioner is not
precluded from leaving the surviving corporation. Although the absorbed employees are retained
as employees of the merged corporation, the employer retains the right to terminate their
employment for a just or authorized cause. Likewise, the employees are not precluded from
severing their employment through resignation or retirement. The freedom to contract and the
prohibition against involuntary servitude is still, thus, preserved in this sense.84 This is the manner
by which the consent of the employees is considered by the law.
Hence, assuming respondent is a party to the merger, the merger still does not operate to effect a
termination of the employment of respondent's employees. Should they be unhappy with the
surviving corporation, the employees may retire or resign from employment.
Given these considerations, we rule that petitioner is not entitled to the separation benefits it
claims from respondent.
Separation benefits are not granted to petitioner by law in case of voluntary resignation, 85 or by
any contract it entered into with respondent.
The Collective Bargaining Agreement86 between petitioner and respondent
provides:ChanRoblesVirtualawlibrary
Article XII
RESPONSIBILITIES OF THE PARTIES AND INDUSTRIAL PEACE
....
Section 2. ADDITIONAL RESPONSIBILITIES
....
In the event of closure, cessation of operations, retrenchment, redundancy or installation of labor
saving devices, the COMPANY will pay just and fair compensation for those who will be separated
from the COMPANY. The separation benefit is covered under a MEMORANDUM OF AGREEMENT as
agreed upon by both parties and shall serve as a part of this agreement (Annex
B).87chanroblesvirtuallawlibrary
Likewise, the Memorandum of Agreement88 dated November 1, 2005 betweeen petitioner and
respondent states:ChanRoblesVirtualawlibrary
WITHESSETH: That
WHEREAS, the COMPANY and the UNION recognize the possibility that UNOCAL PHILIPPINES, INC.
may undergo at its discretion reduction in workforce as a result of redundancy, retrenchment or
installation of labor saving devices, or closure and cessation of operations.
WHEREAS, the COMPANY and the UNION agree that should any of the above-cited conditions
occur that may directly affect the tenure of existing employees, the rights of the employees should
be respected and that the COMPANY will pay just and fair compensation for those who will be
separated from the COMPANY;
In view of the foregoing and in consideration of industrial peace and this covenant, the parties
hereby agree as follows:
chanRoblesvirtualLawlibrary. . . .
2. The COMPANY will provide the following separation benefits for all regular and probationary
employees in the event that they lose their jobs as a result of the conditions cited above;
16
a. Separation Pay: 2.5 months multiplied by the current monthly base pay plus monthly
equivalent of the 13th month and 14th month pay multiplied by the number of years
service.89
Merger is not one of the circumstances where the employees may claim separation pay. The only
instances where separation pay may be awarded to petitioner are: (a) reduction in workforce as a
result of redundancy; (b) retrenchment or installation of labor-saving devices; or (c) closure and
cessation of operations.
Redundancy has been defined by this Court as follows:ChanRoblesVirtualawlibrary
[W]e believe that redundancy, for purposes of our Labor Code, exists where the services of an
employee are in excess of what is reasonably demanded by the actual requirements of the
enterprise. Succinctly put, a position is redundant where it is superfluous, and superfluity of a
position or positions may be the outcome of a number of factors, such as overhiring of workers,
decreased volume of business, or dropping of a particular product line or service activity previously
manufactured or undertaken by the enterprise. The employer has no legal obligation to keep in its
payroll more employees than are necessary for the operation of its business. 90 (Citations omitted)
Retrenchment, on the other hand, is the reduction of personnel to save on costs on salaries and
wages due to a considerable decline in the volume of business.91chanrobleslaw
Cessation and closure of business contemplates the stopping of business operations of the
employer whether on the employer's prerogative or on account of severe business
losses.92chanrobleslaw
None of these instances are present here. The terms do not provide that a merger is one of the
instances where petitioner may claim separation benefits for its members. Neither can these
circumstances be interpreted as to contemplate a merger with another corporation. In any case, if
title parties intended that petitioner ought to be granted separation pay in case of a merger, it
should have been explicitly provided for in the contract. Absent this express intention, petitioner
cannot claim separation pay.
On the contention that petitioner must be awarded the separation pay in the interest of social
justice, this Court has held that this award is granted only under the following exceptional cases: (1)
the dismissal of the employee was not for serious misconduct; and (2) it did not reflect on the
moral character of the employee.93chanrobleslaw
In this case, there is no dismissal of the employees on account of the merger. Petitioner does not
deny that respondent actually continued its normal course of operations after the merger, and that
its members, as employees, resumed their work with their tenure, salaries, wages, and other
benefits intact. Petitioner was even able to execute with respondent, after the merger, the
Collective Bargaining Agreement from which it anchors its claims.
Given these circumstances, petitioner is not entitled to separation pay. Although the policy of the
state is to rule in favor of labor in light of the social justice provisions under the Constitution, this
Court cannot unduly trample upon the rights of management, which are likewise entitled to
respect in the interest of fair play.
WHEREFORE, the Decision dated July 23, 2009 and the Resolution dated November 9, 2009 of the
Court of Appeals in CA-G.R. SP No. 102184 are AFFIRMED. The Petition for Review
is DENIED considering that no reversible error was committed by the Court of Appeals.
SO ORDERED.
SOCIAL JUSTICE
3.
G.R. No. 195614, January 10, 2018
DIGITAL TELECOMMUNICATIONS PHILS., INC./JOHN GOKONGWEI, JR., Petitioner
vs.
NEILSON M. AYAPANA, Respondent
DECISION
MARTIRES, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the 7 October
2010 Decision1 and 4 February 2011 Resolution2 rendered by the Court of Appeals (CA) in CA-G.R. SP
No. 112160. The CA affirmed with modification the 29 June 2009 Decision 3 and 28 October 2009
Resolution4 of the National Labor Relations Commission (NLRC) in NLRC LAC Case No. 05-001831-08,
which declared Neilson M. Ayapana (respondent) to have been illegally dismissed.
THE FACTS
Digital Telecommunications Philippines, Inc. (petitioner or company) hired respondent as Key
Accounts Manager for its telecommunication products and services in the areas of Quezon,
Marinduque, and Laguna provinces, with a monthly basic pay of ₱13,100.00. Respondent was
tasked, among others, to offer and sell DIGITEL's foreign exchange (FEX) line to prospective
customers.
On 6 September 2006, respondent successfully offered two (2) FEX lines for Atimonan, Quezon, to
Estela Lim (Lim), the owner of Star Lala Group of Companies (Star Lala). He received from Lim the
total amount of ₱7,000.00 (the subject amount) for the two lines, for which he issued two (2)
official receipts. Respondent, however, did not remit the subject amount to petitioner on the same
date.
17
On 7 September 2006, petitioner's sales team, which included respondent, held a meeting during
which respondent learned, from his immediate superior, that there was no available FEX line in
Atimonan, Quezon; and that it was not possible to have a FEX line in the area due to technical
constraints. On the same day, respondent retrieved from Lim the two (2) official receipts issued to
the latter and replaced them with an acknowledgment receipt.
On 23 November 2006, Teresita Cielo (Cielo), secretary of Lim, went to petitioner's business office
to pay bills and to ask for the refund of the subject amount.1avvphi1 Upon verification by Myra
Santiago (Santiago), petitioner's customer representative, she found that there was no existing
application for the said service under the name of Star Lala Group of Companies.
When Santiago found that respondent was the sales person handling Lim's transaction, she
informed respondent of Cielo's request for refund on that same day; but it was only on 28
November 2006, or five (5) days from said notice, that respondent was able to make the refund.
On 29 November 2006, petitioner issued a Notice to Explain5 to respondent, asking him to explain:
why he offered an inexistent FEX line; why he withdrew the official receipts issued to Lim and
replaced them with an acknowledgment receipt; why he did not immediately remit the proceeds of
the transaction to petitioner's business center; and why he retained the subject amount for 84
days.
On 30 November 2006, respondent submitted a written response.6 He explained that he was not
aware of the unavailability of the Atimonan line at the time he offered it to Lim; that he retrieved
the official receipts to avoid explaining the late remittance to the treasury department because, at
the time, Lim was still undecided whether to take up respondent's alternative offer of subscribing
to a FEX line in Lucena until such time that an Atimonan line could become available; that he issued
the acknowledgment receipt as proof that the subject amount is in his possession; that prior to 23
November 2006, he made several attempts to obtain Cielo's advice as to the return of the subject
amount, to no avail; and that after being informed of Cielo's request on 23 November 2006, he
went to Star Lala's office, which was closed, and thereafter tried to obtain Cielo's address in order
to return the money, to no avail. According to respondent, he handed the subject amount to
Santiago after she informed him that Cielo would retrieve the money from her.
On 4 December 2006, petitioner sent a Notice of Offense7 to respondent, scheduling his
administrative hearing and requesting his presence there.
On 19 January 2007, petitioner issued a Notice of Dismissal8 finding respondent guilty of "breach by
the employee of the trust and confidence reposed in him by management or by a company
representative" under petitioner's disciplinary rules, which merited dismissal for the first offense.
Aggrieved, respondent filed a complaint for illegal dismissal. The Labor Arbiter dismissed the
complaint, ruling that substantial evidence exists that respondent was involved in an event that
justified petitioner's loss of trust and confidence in him, and therefore, he was validly dismissed
from employment.9 Respondent then appealed to the NLRC.
The NLRC Ruling
The NLRC reversed and set aside the decision of the Labor Arbiter. It ruled that respondent was
merely guilty of imprudence and not of bad faith or malice. The NLRC found that dismissal was too
harsh a penalty, especially since respondent appeared to have a clean record except for the Notice
of Final Warning10 issued to him by petitioner on 17 October 2005. The NLRC also considered in
respondent's favor the certificates of commendation issued to him for being the most outstanding
account manager in 2001 and 2002, as well as the service award he received in 2006. Consequently,
it ordered the petitioner to pay respondent separation pay in the amount of ₱78,600.00 computed
at one-month pay for every year of service, viz:
WHEREFORE, the appeal filed by complainant is GRANTED IN PART. The Decision of Labor Arbiter
Melchisedek A. Guan dated March 6, 2008 is REVERSED and SET ASIDE, and a NEW ONE rendered
finding dismissal a harsh penalty and ordering respondents to pay complainant separation pay in
the sum of ₱78,600.00 as computed above.
SO ORDERED.11
Respondent thereafter filed a motion for reconsideration, which was denied by the NLRC.
Unsatisfied with the decision, respondent appealed to the CA.
The CA Ruling
The CA affirmed the NLRC ruling with modification that petitioner was further ordered to pay full
back wages inclusive of allowances and other benefits or their monetary equivalent, viz:
WHEREFORE, premises considered, the Decision dated June 29, 2009 of the National Labor
Relations Commission (NLRC) in NLRC LAC Case No. 05-001831-08 is AFFIRMED with MODIFICATION
that private respondent DIGITEL is ordered to pay petitioner separation pay and full back wages
inclusive of allowances and other benefits or their monetary equivalent from January 19, 2007 up to
the finality of this Decision.
SO ORDERED.12
The CA held that respondent's dismissal was not valid because neglect of duty, as a just cause for
dismissal, must not only be gross but also habitual. An isolated act of negligence cannot be ground
for dismissal, and respondent was found negligent in only one instance.
18
Aggrieved, petitioner filed a motion for reconsideration, which was denied by the CA. Hence, this
petition.
ISSUES
Petitioner raises the following issues:
I.
THE COURT OF APPEALS ERRED IN AFFIRMING THE NLRC'S FINDING THAT NO JUST CAUSE EXISTS
TO WARRANT RESPONDENT AYAPANA'S DISMISSAL DESPITE THE LAW AND EVIDENCE TO THE
CONTRARY.
II.
THE COURT OF APPEALS ERRED IN AW ARD ING BACK WAGES AND SEPARATION PAY TO
RESPONDENT AYAPANA DESPITE LACK OF LEGAL BASIS.
Simply put, this Court is tasked to consider whether the CA correctly held that respondent's
dismissal was invalid and that he is entitled to full back wages and separation pay.
DISCUSSION
Incipiently, this Court addresses respondent's contention that petitioner can no longer raise the
issue on the validity of his dismissal since it has failed to file a motion for reconsideration from the
NLRC's decision, thus, it is bound by the NLRC's finding on this issue.
Respondent errs. It is settled that the entire case becomes open to review, and the Court can
review matters not specifically raised or assigned as error by the parties, if their consideration is
necessary in arriving at a just resolution of the case.13
The issue of whether respondent was validly dismissed, though ruled upon by the NLRC without an
appeal from petitioner, is pivotal in determining respondent's entitlement to back wages and
separation pay, which was raised by respondent in his appeal to the CA. It is clearly necessary to
arriving at a just disposition of the controversy. Thus, it was proper for the CA to pass upon said
issue, and for petitioner to interpose an appeal therefrom.
Now to the primary issue at bar: was respondent validly dismissed? The Court rules in the
affirmative.
Respondent held a position of trust and confidence and committed an act that justified petitioner's
loss of trust and confidence.
A perusal of the notice of dismissal issued by petitioner to respondent shows that the ground relied
upon by the former was the latter's breach of the trust and confidence reposed in him by the
company, contrary to the ruling of the CA, which based its decision on gross and habitual neglect, a
separate ground under Article 29?14 of the Labor Code.
The willful breach by the employee of the trust reposed in him by his employer or the latter's duly
authorized representative is a just cause for dismissal.1âwphi1 However, the validity of a dismissal
based on this ground is premised upon the concurrence of these conditions: (1) the employee
concerned must be holding a position of trust and confidence; and (2) there must be a willful act
that would justify the loss of trust and confidence.15
The first requisite is certainly present. In a number of cases, this Court has held that rank-and-file
employees who are routinely charged with the care and custody of the employer's money or
property are classified as occupying positions of trust and confidence.16 In Philippine Plaza Holdings,
Inc. v. Episcope, 17 the Court held that a service attendant tasked to attend to dining guests, handle
their bills, and receive their payments for transmittal to the cashier is an employee occupying a
position of trust and confidence and is thus expected to act with utmost honesty and fidelity. 18
It is not disputed that respondent was tasked to solicit subscribers for petitioner's FEX line and, in
the course thereof, collect money for subscriptions and issue official receipts therefor, as was the
case in the transaction subject of this controversy. Being involved in the handling of the company's
funds, respondent undeniably occupies a position of trust and confidence.
The records likewise reveal that the second requisite is present. It must be emphasized that a
finding that an employer's trust and confidence has been breached by the employee must be
supported by substantial evidence,19 or such amount of relevant evidence which a reasonable mind
might accept as adequate to justify a conclusion. It must not be based on the employer's whims or
caprices or suspicions; otherwise, the employee would eternally remain at the mercy of the
employer.20
The totality of the circumstances in the case at bar supports a conclusion that respondent's
dismissal was based on substantial evidence that he had willfully breached the trust reposed upon
him by petitioner, and that petitioner was not actuated by mere whim or capriciousness.
It is uncontroverted that respondent took part in a series of irregularities relative to his transaction
with Lim, to wit:
First, he offered an inexistent FEX line to Lim, for which he received a subscription payment of
₱7,000.00. Even granting he did not know that the Atimonan line was unavailable at the time he
offered the same to Lim, he was remiss in not ascertaining its availability before he concluded his
transaction with Lim and received from her the subscription payment. As an employee admittedly
tasked with soliciting subscribers for the Company's FEX line, it was an integral part of his functions
to ensure that the lines he offered to potential subscribers were valid and subsisting.
19
Second, it is not disputed that respondent was required and expected to immediately remit the
proceeds acquired in the course of his sales transactions; which he failed to do in Lim's case,
without sufficient explanation for such lapse.
Third, respondent readily admits that when he came to know of the Atimonan line's unavailability,
he did not immediately effect a refund nor inform management of his decision to retain the money
supposedly pending Lim's decision to acquire another line. Instead, he retrieved the official receipts
from Lim and issued an acknowledgment receipt.
Respondent contends that he could not be imputed with any reckless, willful, or deliberate act of
breaching petitioner's trust and confidence because he was of the honest belief that the Atimonan
line was existent when he offered it to Lim; that he retained the money pursuant to an oral
agreement between him and Lim, wherein he gave her time to contemplate the option of obtaining
a refund or availing of another FEX line pending the availability of the Atimonan line; and that he
issued the acknowledgment receipt as evidence that the sum collected was in his possession.
Respondent's arguments are misplaced. Even if this Court were to concede that he was merely
negligent in offering an FEX line whose existence he did not ascertain first, his acts subsequent to
being aware of the Atimonan line's unavailability indubitably manifests willfulness and
deliberateness. In his response to petitioner's notice to explain, respondent admitted he came to
know of the Atimonan line's unavailability during their team's 7 September 2006 meeting when he
was informed by his superior, Rene Rico (Rico). When respondent inquired from Rico if it was
possible that the Atimonan line would be available in the near future, the latter answered in the
negative.21 It therefore reeked of underhandedness that petitioner still gave Lim the option to avail
of a different FEX line until such time that the Atimonan line would become available, when he
already knew at the time that the Company was not even contemplating such service. There is also
no showing that he disclosed the full extent of Rico's response to Lim.
Respondent's act of retrieving and cancelling the official receipts without petitioner's knowledge
or conformity was also highly irregular and prejudicial to the company, as its cancellation has tax
and reportorial implications that may result in liability.
Moreover, respondent admitted that the reason he cancelled the official receipts was to conceal
from the treasury department the fact of late remittance.22 Notably, petitioner also failed to
explain why he did not at least inform management about his oral agreement with Lim, considering
that the company could incur liability arising from his continued retention of the subscription
money. Lim's consent to such retention is immaterial, because the duty to remit the proceeds or at
least disclose any action relative to funds acquired for the availment of the company's services was
mandatory to the company.
Third, respondent retained the subject amount from 6 September 2006 to 28 November 2006,
offering no sufficient explanation for this prolonged period of retention, other than to insist that
he was allowed to do so by Lim. However, as discussed earlier, this does not explain why
respondent would withhold from the company information regarding company funds or a
potentially contentious transaction, if he had truly acted in good faith. As borne by the records, it
was only on 23 November 2006 that the petitioner, through its customer representative Santiago,
became aware of such retention. Moreover, while respondent claims that he issued an
acknowledgment receipt as proof that he possessed the money and would return it as soon as Lim
signified her desire for a refund, it is curious that he was only able to return the subject amount on
28 November 2006, or five (5) days after being told by Santiago to refund it on 23 November 2006.
All the above circumstances militated against respondent's claim of good faith and clearly
established an act that justified the Company's loss of trust and confidence in him. In Bristol Myers
Squibb (Phils.), Inc. v. Baban, 23 the Court held that "as a general rule, employers are allowed a wider
latitude of discretion in terminating the services of employees who perform functions by which
their nature require the employer's full trust and confidence. Mere existence of basis for believing
that the employee has breached the trust and confidence of the employer is sufficient and does
not require proof beyond reasonable doubt."24
Furthermore, no bad faith or ill will could be imputed to the company in dismissing respondent
because the latter was apprised of the charges against him and was given an opportunity to submit
a written explanation, which he complied with. A hearing was also conducted.
It must be remembered that the discipline, dismissal, and recall of employees are management
prerogatives, limited only by those imposed by labor laws and dictated by the principles of equity
and social justice.25 This Court finds that petitioner exercised its management prerogatives
consistent with these principles.
Even with a finding that respondent was validly dismissed, separation pay may be granted as a
measure of social justice.
Generally, an employee dismissed for any of the just causes under Article 297 is not entitled to
separation pay. By way of exception, the Court has allowed the grant of separation pay based on
equity and as a measure of social justice, as long as the dismissal was for causes other than serious
conduct or those manifesting moral depravity.26
This Court is mindful of the new rule it established in Toyota v. NLRC,27 where the Court held that "in
addition to serious misconduct, in dismissals based on other grounds under Art. 28228 like willful
disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and commission
of a crime against the employer or his family, separation pay should not be conceded to the
dismissed employee."29 However, the Court also recognizes that some cases merit a relaxation of
this rule, taking into consideration their peculiar circumstances.
Here, while it is clear that respondent's act constitutes a willful breach of trust and confidence that
justified his dismissal, it also appears that he was primarily actuated by zealousness in acquiring and
retaining subscribers rather than any intent to misappropriate company funds; as he admitted in his
20
response to the notice to explain that offering an alternative FEX line to Lim was part of his
strategy to ensure her subscription.
The lack of moral depravity on respondent's part is also shown by the following circumstances: (1)
he was the recipient of certificates of commendation30 from petitioner in the years 2001 and 2002,
for being an outstanding account manager, as well as of a service award in 2006 for continuous
service to the company; (2) he was granted promotional increases31 in 2002, 2004, and 2005, as well
as a merit increase32 in 2003; (3) he has served the company from 16 February 2001 to 19 January
2007 with only one other known infraction embodied in a notice of final warning that petitioner
failed to expound on; and (4) based on Cielo's Salaysay,33 Lim did allow respondent to retain the
subject amount for a time, even though, as discussed earlier, this is immaterial to determining
whether his act justified his dismissal, since he had an independent duty to disclose material
agreements or transactions to petitioner.
To be sure, his zealousness was manifested through acts that showed an inordinate lapse of
judgment warranting his dismissal in accordance with management prerogative, but this Court
considers in his favor the above circumstances in granting him separation pay in the amount of one
(1) month pay for every year of service.34
WHEREFORE, premises considered, the petition is GRANTED. The assailed 7 October 2010 Decision
and 4 February 2011 Resolution of the Court of Appeals in CA-G.R. SP No. 112160,
are REVERSED and SET ASIDE. The Decision of the Labor Arbiter dismissing respondent Neilson M.
Ayapana's complaint for illegal dismissal and other monetary claims
is REINSTATED with MODIFICATION that respondent should be paid separation pay equivalent to
one month of his latest salary for every year of service.
SO ORDERED.
SOCIAL JUSTICE
4.
January 13, 2016
G.R. No. 177680
JENNIFER C. LAGAHIT, Petitioner,
vs.
PACIFIC CONCORD CONTAINER LINES/MONETTE CUENCA (BRANCH MANAGER), Respondents.
DECISION
BERSAMIN, J.: The petitioner immediately tried to contact Cuenca, but the latter refused to take her calls. On the
same day, the petitioner learned from clients and friends that the respondents had disseminated
We resolve the appeal of petitioner Jennifer Lagahit from the decision promulgated on May 10, notices, flyers and memos informing all clients of Pacific Concord that she was no longer connected
2006,1 whereby the Court of Appeals (CA) disposed in CA-G.R. SP No. 00991 entitled Pacific Concord with the company as of November 8, 2002.9 Pacific Concord also caused the publication of the
Container Lines and Monette Cuenca v. National Labor Relations Commission, Fourth Division, and notice to the public in the Sunstar Daily issue of December 15, 2002.10
Jennifer Lagahit, as follows:
On November 13, 2002, the petitioner sent a letter to Pacific Concord,11 which reads as follows:
WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the assailed Decision
dated December 15, 2004 promulgated by the National Labor Relations Commission, Fourth November 13, 2002
Division, Cebu City, in NLRC Case No. V-000529-2003/RAB Case No. VII-11-2271-2002, as well as the
Resolution dated May 25, 2005 are hereby REVERSED and SET ASIDE. Petitioner is ORDERED to pay Branch Manager
private respondent the amount of P25,000.00 as nominal damages. Further, the preliminary
injunction issued by this Court is likewise made permanent.
PACIFIC CONCORD CONTAINER LINES, INC.
N&N Building A.C. Cortes Mandaue City
No pronouncement as to costs.
Attention: Monette Cuenca
SO ORDERED.2
Madam,
Antecedents
In connection with your text message and flyers advising me that you have terminated my
In February 2000, respondent Pacific Concord Container Lines (Pacific Concord), a domestic employment, please arrange and expedite settlement of all benefits due to me under the law.
corporation engaged in cargo forwarding,3 hired the petitioner as an Account Executive/Marketing
Assistant.4 In January 2002, Pacific Concord promoted her as a sales manager with the monthly
In as much as the facts of my termination has not been formally detailed to me, I believe I was
salary rate of P25,000.00, and provided her with a brand new Toyota Altis plus gasoline
deprived of the due process that would have given me the chance to formally present my side. It
allowance.5 On November 8, 2002, she reported for work at 9:00 a.m. and left the company
startled me at first but I have accepted my fate. However, we both have names and reputations to
premises at around 10:30 a.m. to make client calls. At 1:14 p.m. of that day, she received the
protect. Factual incidents made as basis of my termination can help us mutually clear our names. 12
following text message from respondent Monette Cuenca, to wit:

Thank you,
TODAY U R OFFICIALY NT CONNECTED WITH US.
Sender: MONETTE
+639173215330 (Sgd)
Sent: 8-Nov-2002 JENNIFER LAGAHIT
13:14:016
Cuenca replied to the letter on November 25, 2002,13 advising the petitioner thusly:
Cuenca also sent a text message to Roy Lagahit, the petitioner’s husband, as follows:
25 November 2002
IBALIK KARON DAYON ANG AUTO OG PALIHUG LANG
KO OG KUHA SA NYONG BUTANG OG DI NAKO MO TO : MS. JENNIFER C. LAGAHIT
STORYA NI JENIFER. IL WAIT7 FM : PACIFIC CONCORD CONTAINER LINES, INC. CEBU BRANCH
Sender: MONETTE RE : UNCOLLECTED ACCOUNTS
+639173215330
Sent: 8-Nov-2002 Herewith is the list of your uncollected accounts as of November 22, 2002.
12:50:548
21
Kindly take note that you have personally guaranteed the above accounts. Moreover, you have WHEREFORE, VIEWED FROM THE FOREGOING, judgment is hereby rendered declaring
reported it as your income and you have already availed the commission due for the above herein respondents GUILTY of ILLEGALLY DISMISSING complainant from her employment.
shipments. Consequently, respondents PACIFIC CONCORD CONTAINER LINES/MONEETTE [sic] CUENCA are
hereby ordered to pay, jointly and severally, complainant JENNIFER C. LAGAHIT with the following:
We are therefore holding the release of the monies due to you until we can collect the above
accounts. a. Separation Pay P 25,000.00
b. Backwages P175,000.00
xxxx
TOTAL=============== P200,000.00
VVVVVVVVV
(Sgd)
MONETTE G. CUENCA
within
Branch ten (10) days from receipt hereof, through the Cashier of this Arbitration Branch.
Manager

On November 26, 2002, the petitioner filed her complaint for constructive dismissal in the Regional Other claims are DISMISSED for lack of merit.1âwphi1
Arbitration Branch of the National Labor Relations Commission (NLRC) in Cebu City. 14
SO ORDERED.23
In their position paper,15 the respondents denied having terminated the petitioner despite the fact
that there were valid grounds to do so. They insisted that the petitioner had betrayed the trust and Ruling of the NLRC
confidence reposed in her when she: (a) used the company-issued vehicle for her own personal
interest; (b) failed to achieve her sales quota, and to enhance and develop the Sales Department; On appeal, the NLRC affirmed the ruling of the Labor Arbiter with modification, viz.:
(c) enticed her marketing assistant, Jo Ann Otrera, to resign and join her in transferring to another
forwarding company; (d) applied for other employment during office hours and using company
WHEREFORE, the Decision dated June 9, 2002 of the Labor Arbiter is MODIFIED by AFFIRMING his
resources; (e) solicited and offered the services of Seajet International, Inc. during her employment
finding that the respondents are guilty of illegally dismissing the complainant from her
with Pacific Concord; (f) received a personal commission from Wesport Line, Inc. for container
employment, but MODIFYING his award for separation pay computed at one (1) month salary for
shipments; and (g) illegally manipulated and diverted several containers to Seajet International.16
every year of service, a fraction of at least six (6) months being considered one (1) year from the
complainant’s first day of employment in February 2000 UNTIL THE FINALITY OF THIS DECISION;
The respondents claimed that Pacific Concord even issued at one time a memorandum to the and backwages starting November 8, 2002 UNTIL THE FINALITY OF THIS DECISION.
petitioner17 to cite her insubordination in refusing to participate in the company’s teambuilding
activity; that in the two meetings held on September 27, 200218 and October 9, 2002,19 she was
The appeal of the respondents is dismissed for lack of merit.
afforded the chance to explain her side on the reports that she was looking for other employment,
but she dismissed the reports as mere speculations and assured them of her loyalty; that although
valid grounds to terminate the petitioner already existed, they did not dismiss her; and that she xxxx
voluntarily resigned on November 13, 2002 after probably sensing that the management had gotten
wind of her anomalous transactions.20 They submitted affidavits to support their allegations.21 SO ORDERED.24

Ruling of the Labor Arbiter
Labor Arbiter Julie C. Rendoque rendered a decision on June 9, 2003, declaring that the
respondents were not able to prove that the petitioner had committed acts constituting betrayal
of trust; that they had not informed her prior to her dismissal of the offenses she had supposedly
committed;22 and that owing to the illegality of the dismissal, they were liable for backwages and
separation pay, to wit:
The NLRC found that the respondents did not observe due process in terminating the services of
the petitioner; and rejected their claim that she had resigned on November 13, 2002. 25
The respondents filed their motion for reconsideration,26 but the NLRC denied their motion on May
25, 2005.27
Decision of the CA

22
On May 10, 2006, the CA promulgated its decision granting the respondents’ petition for certiorari,
and annulling the decision of the NLRC. It pronounced that there were sufficient justifications to
terminate the petitioner’s services for disloyalty and willful breach of trust, viz.:
In the present case, it is clear that Lagahit deliberately committed successive acts which translated
to blatant disloyalty and willful breach of the trust reposed upon her by Pacific, and acts which, in
the final reckoning are obviously detrimental to the material interest of the company under which
she is employed. From January 2002, Lagahit was found to have committed a series of willful acts
which may reasonably and expectedly arouse Pacific’s distrust and a consequent finding of
Lagahit’s unfitness to continue her employment, thus: (a) Lagahit has been persistent in applying
for employment in other competing cargoforwarding companies; (b) Lagahit even enticed her
Marketing Assistant to join her quest to find anoher job outside Pacific and at a competing
company at that; (c) Lagahit rendered actual services at competing companies for a fee and
commission while she was still under the employee of Pacific and was regularly receiving salary
therefrom; and (d) Lagahit brought and referred prospective shipping clients to other
cargoforwarding corporations. Verily, the commission of the foregoing acts vividly demonstrated,
not only, Lagahit’s disloyalty and unfaithfulness to her employer, but likewise her blatant
ingratitude to the company from which she derives her regular source of livelihood, considering
that, incidentally, the performance of these disloyal and inimical acts commenced when Lagahit
was just newly promoted to the higher post of Sales Manager at Pacific.
xxxx
Lagahit is not an ordinary rank-and-file employee of Pacific, but contrarily, is by far an employee
authorized to formulate significant company plans and policies, and whose designation and basic
functions, on its face, betrays the fact that too much trust and confidence was indeed reposed
upon her. As borne by the records, Lagahit occupies the responsible post of Sales Manager, and as
such her basic functions, inter alia, consists [sic] of the following: (1) formulation of strategic action
and marketing plans to make the Pacific Sales Department successful, (2) implementation of
marketing strategies to help Pacific Sales team achieve its periodic target, (3) direct transaction
with various shipping clients, and (4) in having a free hand in dealing with various shipping lines.
Quite significantly, Lagahit was given sensitive and responsible functions that goes deep into the
financial success, or otherwise ruin, of Pacific, which is more than a clear testament to the fact her
position is accorded with trust and confidence.
Such being the case, Lagahit owes it to herself and to Pacific to work religiously and with undivided
time and attention to promote the latter’s business interests. Unfortunately, such was not the
case. As it turned out, Lagahit made a consistent attempt to seek employment at other cargo
forwarding companies that directly compete with the business of Pacific, obviously, constituting a
willful breach of trust consequentially resulting to Pacific’s loss of confidence in Lagahit’s loyalty
and efficacy. Worse, Lagahit conducted her job applications during office hours when she should
have been rendering her services for Pacific. Furthermore, the height of her disloyalty exhibited its
face when Lagahit begun to actually render services and refer prospective shipping clients to other
23
competing cargo-forwarding companies for a fee and commission, at the same time employed with
Pacific and receiving regular salary therefrom.28
Nonetheless, the CA held that despite the existence of a valid cause to terminate her employment
Pacific Concord was liable for nominal damages of P25,000.00 for denying the petitioner’s right to
due process.29
The CA denied the petitioner’s motion for reconsideration on March 30, 2007.30 Hence, this appeal.
Issues
The petitioner imputes the following errors to the CA, namely:
I
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN GIVING UNDUE WEIGHT
AND CREDENCE TO THE RESPONDENTS’ LATEST DEFENSE, THEREBY DISTURBING THE FINDINGS
OF FACT OF THE LABOR ARBITER AND NLRC WHO SHARE THE SAME FINDINGS;
II
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN FINDING MS. LAGAHIT TO
HAVE BEEN VALIDLY DISMISSED ON THE GROUND OF LOSS OF TRUST AND CONFIDENCE;
III
PETITIONER IS ENTITLED TO HER CLAIMS FOR SEPARATION PAY AND BACKWAGES31
The petitioner argues that the CA erroneously concluded that she had been dismissed considering
that the respondents had initially denied her having dismissed her, and claimed instead that she
had voluntarily resigned; that the Labor Arbiter and the NLRC had correctly concluded that she had
not resigned, but had been illegally terminated without substantive and procedural due
process;32 and that the evidence adduced against her that the CA relied upon to sufficiently
establish her breach of trust were speculative and hearsay.33
In contrast, the respondents aver that:(a) the petitioner occupied a position of trust and
confidence that she breached by working for, serving, and soliciting clients in behalf of competing
cargo-forwarding companies using the respondents’ resources;34 (b) she had not explained her
meetings, job applications and moonlighting with competing companies;35 (c) the sworn
statements narrating her breach of trust and disloyalty to the company submitted by the
respondents substantially justified her dismissal on the ground of loss of trust and
confidence;36 and (d) her resignation letter confirmed that she no longer desired to work for the
company considering that she succeeded in landing a job with Seajet Lines in just three days after
her resignation.37
Did the petitioner resign as sales manager of Pacific Concord? Did Pacific Concord have sufficient
grounds to terminate her for breach of trust and confidence under Article 282 38 of the Labor Code?
Ruling of the Court
We find merit in the appeal.
I
Lagahit did not resign from her employment
On the first issue, we find in favor of the petitioner.
In cases of unlawful dismissal, the employer bears the burden of proving that the termination was
for a valid or authorized cause, but before the employer is expected to discharge its burden of
proving that the dismissal was legal, the employee must first establish by substantial evidence the
fact of her dismissal from employment.39 In this case, the petitioner proved the overt acts
committed by the respondents in abruptly terminating her employment through the text messages
sent by Cuenca to the petitioner and her husband, as well as the notices distributed to the clients
and published in the Sun Star. It is notable that the respondents did not deny or controvert her
evidence on the matter. Thereby, she showed Pacific Concord’s resolve to terminate her
employment effective November 8, 2002.
On the other hand, the respondents’ insistence that the petitioner had resigned was bereft of
factual support. As a rule, the employer who interposes the resignation of the employee as a
defense should prove that the employee voluntarily resigned.40 A valid resignation is the voluntary
act of an employee who finds herself in a situation where she believes that personal reasons
cannot be sacrificed in favor of the exigency of the service and that she has no other choice but to
disassociate herself from employment.41 The resignation must be unconditional and with a clear
intention to relinquish the position.42 Consequently, the circumstances surrounding the alleged
resignation must be consistent with the employee’s intent to give up the employment. 43 In this
connection, the acts of the employee before and after the resignation are considered to determine
whether or not she intended, in fact, to relinquish the employment.44
The facts and circumstances before and after the petitioner’s severance from her employment on
November 8, 2002 did not show her resolute intention to relinquish her job. Indeed, it would be
unfounded to infer the intention to relinquish from her November 13, 2002 letter, which, to us, was
not a resignation letter due to the absence therefrom of anything evincing her desire to sever the
employer-employee relationship. The letter instead presented her as a defenseless employee
unjustly terminated for unknown reasons who had been made the subject of notices and flyers
24
informing the public of her unexpected termination. It also depicted her as an employee meekly
accepting her unexpected fate and requesting the payment of her backwages and accrued benefits
just to be done with the employer.
For sure, to conclude that the petitioner resigned because of her letter of November 13, 2002 is
absurd in light of the respondents having insisted that she had been terminated from her
employment earlier on November 8, 2002. In that regard, every resignation presupposes the
existence of the employer-employee relationship; hence, there can be no valid resignation after the
fact of termination of the employment simply because the employee had no employer-employee
relationship to relinquish.
II
Lagahit did not breach her employer’s trust;
her dismissal was, therefore, illegal
Having settled the issue of the dismissal in the petitioner’s favor, we next resolve whether or not
the CA correctly ruled the petitioner’s dismissal as justified on the ground of breach of trust and
confidence.
The petitioner assails the CA for upholding her termination based on speculations and hearsay, and
for entirely disregarding the factual findings in her favor of the LA and the NLRC. 45 In contrast, the
respondents maintain that the allegation of disloyalty against her was substantiated by the
affidavits they had submitted that the CA relied on to sustain the validity of her dismissal.46
We agree with the petitioner.
To justify the dismissal of an employee, the employer must, as a rule, prove that the dismissal was
for a just cause, and that the employee was afforded due process prior to dismissal. As a
complementary principle, the employer has the onus of proving the validity of the dismissal with
clear, accurate, consistent, and convincing evidence.47 The employer’s case succeeds or fails on the
strength of its evidence, not on the weakness of that adduced by the employee, in keeping with
the principle that the scales of justice should be tilted in favor of the latter in case of doubt in the
evidence presented by them.48
In its decision, the CA recognized the wide latitude of discretion given to the management in
terminating managers for breach of trust and confidence. It declared Pacific Concord to have
justifiably resorted to terminating the petitioner’s employment as a measure of self-preservation in
view of her repeated acts of disloyalty that were prejudicial to its interest.49
The CA was thereby gravely mistaken.
Article 282(c)50 of the Labor Code authorizes an employer to dismiss an employee for committing
fraud, or for willful breach of the trust reposed by the employer. However, loss of confidence is
never intended to provide the employer with a blank check for terminating its employee. 51 For this
to be a valid ground for the termination of the employee, the employer must establish that: (1) the
employee must be holding a position of trust and confidence; and (2) the act complained against
would justify the loss of trust and confidence.52
There are two classes of employees vested with trust and confidence. To the first class belong the
managerial employees or those vested with the powers or prerogatives to lay down management
policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or
effectively recommend such managerial actions. The second class includes those who in the normal
and routine exercise of their functions regularly handle significant amounts of money or property.
Cashiers, auditors, and property custodians are some of the employees in the second class.53
The petitioner discharged the following duties and responsibilities as sales manager, to wit:
SALES MANAGER
Job Description
- Promotes services being offered by the company
- Must generate new accounts for the company
- Responsible for motivating the Sales Team to hit their respective QUOTA and TARGET
- Responsible for the Strategic Planning and Action Plan for the Sales Department
- Should submit Production Report on a weekly basis for the Sales Department specifying each
sales contribution for the week
- Responsible in inspiring and developing confidence of the Sales Team
- Responsible in promoting, formulating, implementing market strategy that will help achieve the
target of the Sales Department
- Coordinates regularly with the Sales people on their day to day activities regarding rates and
operational matters
- Keeps track all sales transactions, assist the sales people in their problem regarding rates and
operational matters
- Gathers and provides sales leads, replied to agents’ inquiries regarding sales matters
25
- Transacts rates and other related cargo needs with the shipping lines
- Promotes and maintains good relations with clients
- Prepares quotation to the clients for intended shipments
- Performs other tasks, duties and responsibilities as may be assigned from time to time
- Reports directly to the Branch Manager54
Her position as sales manager did not immediately make the petitioner a managerial employee. The
actual work that she performed, not her job title, determined whether she was a managerial
employee vested with trust and confidence.55 Her employment as sales manager was directly
related with the sales of cargo forwarding services of Pacific Concord, and had nothing to do with
the implementation of the management’s rules and policies. As such, the position of sales manager
came under the second class of employees vested with trust and confidence. Therein was the flaw
in the CA’s assailed decision. Although the mere existence of the basis for believing that the
managerial employee breached the trust reposed by the employer would normally suffice to justify
a dismissal,56 we should desist from applying this norm against the petitioner who was not a
managerial employee.
At any rate, the employer must present clear and convincing proof of an actual breach of duty
committed by the employee by establishing the facts and incidents upon which the loss of
confidence in the employee may fairly be made to rest.57 The required amount of evidence for
doing so is substantial proof. With these guidelines in mind, we cannot hold that the evidence
submitted by the respondents (consisting of the three affidavits) sufficiently established the
disloyalty of the petitioner. The affidavits did not show how she had betrayed her employer’s trust.
Specifically, the affidavit of Russell B. Noel58 only stated that she and her husband Roy had met
over lunch with Garcia Imports and a certain Wilbur of Sea-Jet International Forwarder in the first
week of November 2002. To conclude that such lunch caused Pacific Concord to lose its trust in the
petitioner would be arbitrary. Similarly, the affidavit of Mark Anthony G. Lim59 was inconclusive.
Therein affiant Lim deposed:
1. That I was present when Ms. Vivian Veloso, former Branch Manager of Westport Line Inc.,
disclosed to Ms. Monette Cuenca and Ms. Mitzie Ibona on November 11, 2002 at the office of
Admiral Overseas Shipping Corp., where she is presently employed with, that Ms. Jennifer C.
Lagahit received a personal commission or rebate for the full container shipments moved via
Westport Line Inc. in the amount of USD 50.00 per container.60
The foregoing statement was bereft of the particulars about how the petitioner had entered into
the transaction, as well as about the prejudice that Pacific Concord had suffered from her receipt of
the commission. Also, that this information was made known to Cuenca three days after she had
already terminated the petitioner belied the relevance of the information to the termination.
In her affidavit,61 Jo Ann Otrera declared that the petitioner had called other forwarding companies
to inquire about any vacant positions, and that the petitioner had enticed her to transfer to another
company. However, such declarations did not provide the sufficient basis to warrant the
respondents’ loss of confidence in the petitioner. We stress that although her supposedly frantic
search for gainful employment opportunities elsewhere should be considered as inappropriate for
being made during office hours, the same did not constitute willful breach of trust and confidence
of the employer. The loss of trust and confidence contemplated under Article 282(c) of the Labor
Code is not ordinary but willful breach of trust. Verily, the breach of trust is willful if it is intentional,
knowing, deliberate and without justifiable excuse, as distinguished from an act done carelessly,
thoughtlessly, heedlessly or inadvertently.62 Most importantly, the cause of the loss of trust must
be work-related as to expose the employee as unfit to continue working for the employer.63
Considering that the petitioner’s duties related to the sales of forwarding services offered by
Pacific Concord, her calling other forwarding companies to inquire for vacant positions did not
breach the trust reposed in her as sales manager. Such act, being at worst a simple act of
indiscretion, did not constitute the betrayal of trust that merited the extreme penalty of dismissal
from employment. We remind that dismissal is a penalty of last resort, to be meted only after
having appreciated and evaluated all the relevant circumstances with the goal of ensuring that the
ground for dismissal was not only serious but true.64
WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS
ASIDE the decision promulgated on May 10, 2006 by the Court of Appeals; REINSTATES the
decision of the National Labor Relations Commission rendered on December 15, 2004 subject to
the MODIFICATION that the total monetary awards shall earn interest at the rate of 6% per
annum from the finality of this decision until full satisfaction; and ORDERS the respondents to pay
the costs of suit.
SO ORDERED.
SOCIAL JUSTICE
5.
G.R. No. 222219, October 03, 2018
REYNALDO S. GERALDO, Petitioner, v. THE BILL SENDER CORPORATION/MS. LOURDES NER
CANDO, Respondents.
DECISION
PERALTA, J.:
26
Before the Court is a petition for review on certiorari under Rule 45 of the Rules of Court seeking to
reverse and set aside the Decision1 dated August 7, 2014 and the Resolution2 dated September 28,
2015 of the Court of Appeals (CA) in CA-G.R. SP No. 131235.
The antecedent facts are as follows:
On June 20, 1997, respondent The Bill Sender Corporation, engaged in the business of delivering
bills and other mail matters for and in behalf of their customers, employed petitioner Reynaldo S.
Geraldo as a delivery/messenger man to deliver the bills of its client, the Philippine Long Distance
Telephone Company (PLDT). He was paid on a "per-piece basis," the amount of his salary
depending on the number of bills he delivered. On February 6, 2012, Geraldo filed a complaint for
illegal dismissal alleging that on August 7, 2011, the company's operations manager, Mr. Nicolas
Constantino, suddenly informed him that his employment was being terminated because he failed
to deliver certain bills. He explained that he was not the messenger assigned to deliver the said bills
but the manager refused to reconsider and proceeded with his termination. Thus, he claims that his
dismissal was illegal for being done without the required due process under the law and that the
company and its president, respondent Lourdes Ner Cando, be held liable for his monetary claims. 3
For its part, the company countered that Geraldo was not a full time employee but only a piece-rate
worker as he reported to work only as he pleased and that it was a usual practice for messengers
to transfer from one company to another to similarly deliver bills and mail matters. As such, he
would only be given bills to deliver if he reports to work, otherwise, the bills would be assigned to
other messengers. Moreover, contrary to Geraldo's claims, the company asserts that he was not
illegally dismissed for he was the one who abandoned his job when he no longer reported for work.
Thus, the burden was on him to substantiate his claims for illegal dismissal. 4
On November 29, 2012, the Labor Arbiter (LA) held that contrary to the company's assertion, the
burden of proving that the dismissal of an employee is for just cause rests on the employer,
without distinction whether the employer admits or does not admit the dismissal, pursuant to
Article 277(b) of the Labor Code. It also ruled that Geraldo is considered as a regular employee of
the company because he was doing work that is usually necessary and desirable to the trade or
business thereof. Moreover, even if the performance of his job is not continuous or is merely
intermittent, since he has been performing the same for more than a year, the law deems the
repeated and continuing need thereof as sufficient evidence of the necessity, if not
indispensability, of his work to the company's business. In addition, the LA found that the company
failed to substantiate its contention that Geraldo was employed with another company and that he
abandoned his job. But even if it was true that he abandoned his job, it was incumbent on the
company to send him a notice ordering him to report to work and to explain his absences as
mandated by Sections 2 and 5, Book V, Rule XIV of the Labor Code. Finding that Geraldo was
illegally dismissed, the LA ordered the company to pay him separation pay, service incentive leave
pay, and attorney's fees in the aggregate amount of P352,214.13.5
In a Decision6 dated May 9, 2013, the National Labor Relations Commission (NLRC) affirmed the LA
ruling with clarification that the computation of backwages must be from the time of his dismissal
up to the finality of the NLRC Decision. According to the NLRC, the company failed to discharge the
burden of proving a deliberate and unjustified refusal of Geraldo to resume his employment
without any intention of returning as well as to observe the twin-notice requirement to insure that
due process has been accorded to him. Moreover, said commission also rejected the company's
claim that Geraldo abandoned his job since he filed his complaint only after seven (7) months from
the alleged dismissal for the lapse of time between the dismissal of an employee for abandonment
and the filing of the complaint is not a material indicium of abandonment.7
On August 7, 2014, however, the CA set aside the NLRC Decision. According to the appellate court,
since Geraldo was paid on a per piece basis, he was hired on a per-result basis, and as such, he was
not an employee of the company. The absence of an employer-employee relationship was further
highlighted by the fact that messengers would habitually transfer from one messengerial company
to another depending on the availability of mail matters. Thus, since Geraldo was not an employee
of the company, there was no basis in awarding separation pay, backwages, 13th month pay, service
incentive leave pay, and attorney's fees.8 Thereafter, in a Resolution dated September 28, 2015, the
CA further denied Geraldo's Motion for Reconsideration.
Aggrieved, Geraldo filed the instant petition on November 26, 2015 invoking the following
arguments:
I.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT DISMISSED THE
COMPLAINT ON THE GROUND THAT PETITIONER BEING A PIECE-RATE EMPLOYEE IS NOT AN
EMPLOYEE OF RESPONDENT AND NOT ENTITLED TO SECURITY OF TENURE ON THE BASIS OF THE
ALLEGATIONS THAT PETITIONER WAS PAID ON A PER PIECE BASIS.
II.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT DISMISSED THE
COMPLAINT AND SET ASIDE THE MONETARY AWARD FOR BACKWAGES, SEPARATION PAY,
SERVICE INCENTIVE LEAVE, 13TH MONTH PAY AND ATTORNEY'S FEES WITHOUTH BASES IN FACT
AND IN LAW.
IIII.
THE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT RULED THAT THE
OFFICERS OF RESPONDENT CORPORATION ARE NOT LIABLE FOR THE MONETARY CLAIMS OF
PETITIONER.
In his petition, Geraldo posits that the existence of an employer-employee relationship cannot be
denied and as a regular employee, he is entitled to a security of tenure. According to him, his being
a piece-rate employee is just a manner of payment of his compensation and not the basis of his
regularity of work. The regular nature of his work, moreover, is shown by the fact that the same is
usually necessary and desirable to the nature of the company's business, which is the delivery of
bills and other mail matters for and in behalf of its customers. Geraldo further claims that since he
27
was illegally dismissed, for his employment was terminated without due process of law, he is
entitled to his monetary claims as correctly awarded by the LA, and that Cando, as President of the
company, should be held solidarily liable therefor. The mere fact that he was illegally dismissed,
underpaid and deprived of his 13th month pay and service incentive leave pay constitutes bad faith
on Cando's part as president of said company. As such, she cannot escape personal liability. 9
The petition is partially meritorious.
The issue of whether Geraldo was, indeed, illegally dismissed depends upon the nature of his
relationship with the company. Article 280 of the Labor Code describes a regular employee as one
who is either (1) engaged to perform activities which are necessary or desirable in the usual
business or trade of the employer; and (2) those casual employees who have rendered at least one
year of service, whether continuous or broken, with respect to the activity in which he is employed.
In Integrated Contractor and Plumbing Works, Inc. v. National Labor Relations Commission,10 we held
that the test to determine whether employment is regular or not is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or
trade of the employer. If the employee has been performing the job for at least one year, even if
the performance is not continuous or merely intermittent, the law deems the repeated and
continuing need for its performance as sufficient evidence of the necessity, if not indispensability,
of that activity to the business.
In the instant case, it is undisputed that the company was engaged in the business of delivering bills
and other mail matters for and in behalf of their customers, and that Geraldo was engaged as a
delivery/messenger man tasked to deliver bills of the company's clients. Clearly, the company
cannot deny the fact that Geraldo was performing activities necessary or desirable in its usual
business or trade for without his services, its fundamental purpose of delivering bills cannot be
accomplished. On this basis alone, the law deems Geraldo as a regular employee of the company.
But even considering that he is not a full time employee as the company insists, the law still deems
his employment as regular due to the fact that he had been performing the activities for more than
one year. In fact, counting the number of years from the time he was engaged by the company on
June 20, 1997 up to the time his services were terminated on August 7, 2011 reveals that he has
been delivering mail matters for the company for more than fourteen (14) years. Without question,
this amount of time that is well beyond a decade sufficiently discharges the requirement of the law.
While length of time may not be the controlling test to determine if an employee is indeed a regular
employee, it is vital in establishing if he was hired to perform tasks which are necessary and
indispensable to the usual business or trade of the employer.11
The Court, moreover, cannot subscribe to the company's contention that Geraldo is not a regular
employee but merely a piece-rate worker since his salary depends on the number of bills he is able
to deliver. In Hacienda Leddy/Ricardo Gamboa, Jr. v. Villegas,12 We held that the payment on a piece-
rate basis does not negate regular employment. The term "wage" is broadly defined in Article 97 of
the Labor Code as remuneration or earnings, capable of being expressed in terms of money
whether fixed or ascertained on a time, task, piece or commission basis. Payment by the piece is
just a method of compensation and does not define the essence of the relations. Thus, the fact that
Geraldo is paid on the basis of his productivity does not render his employment as contractual. It
must be remembered that notwithstanding any agreements to the contrary, what determines
whether a certain employment is regular is not the will and word of the employer, to which the
desperate worker often accedes, much less the procedure of hiring the employee or the manner of
paying his salary. It is the nature of the activities performed in relation to the particular business or
trades considering all circumstances, and in some cases the length of time of its performance and
its continued existence.13
Having established that Geraldo was a regular employee of the company, it becomes incumbent
upon the latter to show that he was dismissed in accordance with the requirements of the law for
the rule is long and well settled that, in illegal dismissal cases like the one at bench, the burden of
proof is upon the employer to prove that the employee's termination from service is for a just and
valid cause.14 Here, the company claims that Geraldo was not illegally dismissed for he was the one
who abandoned his job when he no longer reported for work. The Court, however, finds that apart
from this self-serving allegation, the company failed to adduce proof of overt acts on the part of
Geraldo showing his intention to abandon his work. Time and again, the Court has held that to
justify a finding of abandonment of work, there must be proof of a deliberate and unjustified
refusal on the part of an employee to resume his employment. The burden of proof is on the
employer to show an unequivocal intent on the part of the employee to discontinue employment.
Mere absence is not sufficient. It must be accompanied by manifest acts unerringly pointing to the
fact that the employee simply does not want to work anymore. Hence, it bears emphasis that the
fact that Geraldo filed the instant illegal dismissal complaint negates any intention on his part to
sever his employment with the company. The records reveal that he even sought permission to
return to work but was rejected by the company. Contrary to the company's assertion, moreover,
the mere lapse of seven (7) months from Geraldo's alleged dismissal to the filing of his complaint is
not a material indication of abandonment, considering that the complaint was filed within a
reasonable period during the three (3)-year period provided under Article 291 of the Labor Code.15
It must be noted, however, that respondent Cando cannot be held personally and solidarity liable
with the company for the monetary claims of Geraldo. As a general rule, a corporate officer cannot
be held liable for acts done in his official capacity because a corporation, by legal fiction, has a
personality separate and distinct from its officers, stockholders, and members. To pierce this
fictional veil, it must be shown that the corporate personality was used to perpetuate fraud or an
illegal act, or to evade an existing obligation, or to confuse a legitimate issue. In illegal dismissal
cases, corporate officers may be held solidarily liable with the corporation if the termination was
done with malice or bad faith.17 To hold a director or officer personally liable for corporate
obligations, two requisites must concur, to wit: (1) the complaint must allege that the director or
officer assented to the patently unlawful acts of the corporation, or that the director or officer was
guilty of gross negligence or bad faith; and (2) there must be proof that the director or officer
acted in bad faith.18 In the instant case, however, there is no showing that Cando, as President of
the company, was guilty of malice or bad faith in terminating the employment of Geraldo. Thus, she
should not be held personally liable for his monetary claims.
WHEREFORE, premises considered, the instant petition is PARTIALLY GRANTED. The assailed
Decision dated August 7, 2014 and Resolution dated September 28, 2015 of the Court of Appeals in
CA-G.R. SP No. 131235 are REVERSED and SET ASIDE. The Decision dated May 9, 2013 of the National
Labor Relations Commission is REINSTATED with the MODIFICATION that Lourdes Ner Cando is
absolved of any personal liability as regards the money claims awarded to petitioner.
SO ORDERED.

Apart from the absence of just and valid cause in the termination of Geraldo's employment, the
Court rules that his dismissal was also done without the observance of due process required by
law. It has long been settled in labor law that in terminating the services of an employee, the
employer must first furnish the employee with two (2) written notices: (a) notice which apprises
the employee of the particular acts or omissions for which his/her dismissal is sought; and (b)
subsequent notice which informs the employee of the employer's decision to dismiss him/her. 16 The
company in the present case, however, failed to show its compliance with the twin notice rule. In
fact, in its Comment, it even expressly admitted its failure to serve Geraldo with any written notice,
merely insisting that its oral notice should be considered substantial compliance with the law.

In view of the foregoing premises, therefore, the Court is convinced that Geraldo, a regular
employee entitled to security of tenure, was illegally dismissed from his employment due to the
failure of the company to comply with the substantial and procedural requirements of the law.
Thus, We sustain the award of the LA and the NLRC of separation pay, in lieu of reinstatement,
attorney's fees, as well as Geraldo's monetary claims of 13th month pay and service incentive leave
pay in view of the failure of the company to adduce evidence to show that Geraldo has been paid
said benefits.

28