Serrano vs. NLRC / ISETANN - GR No.

117040 Case Digest

FACTS:
Serrano was a regular employee of Isetann Department Store as the
head of Security Checker. In 1991, as a cost-cutting measure, Isetann
phased out its entire security section and engaged the services of an
independent security agency. Petitioner filed a complaint for illegal
dismissal among others. Labor arbiter ruled in his favor as Isetann
failed to establish that it had retrenched its security section to prevent
or minimize losses to its business; that private respondent failed to
accord due process to petitioner; that private respondent failed to use
reasonable standards in selecting employees whose employment
would be terminated. NLRC reversed the decision and ordered
petitioner
to
be
given
separation
pay.

Serrano v NLRC [G.R. No. 117040, January 27, 2000]

FACTS: Petitioner was hired by the Respondent Isetann Department
Store as a security checker to apprehend shoplifters. As a cost-cutting
measure, private respondent decided to phase out its security section
engage the services of an independent security agency. Petitioner was
then terminated prompting him to file a complaint for illegal dismissal.
NLRC ordered petitioner to be given separation pay holding that the
phase-out of the security section was a legitimate business decision.
However, respondent was denied the right to be given written notice
before
termination
of
his
employment.
ISSUE: What is the effect of violation of the notice requirement when
termination
is
based
on
an
authorized
cause?

ISSUE:
Whether or not the hiring of an independent security agency by the
private respondent to replace its current security section a valid ground
for the dismissal of the employees classed under the latter.
RULING:
An employers good faith in implementing a redundancy program is not
necessarily put in doubt by the availment of the services of an
independent contractor to replace the services of the terminated
employees to promote economy and efficiency. Absent proof that
management acted in a malicious or arbitrary manner, the Court will
not interfere with the exercise of judgment by an employer.
If termination of employment is not for any of the cause provided by
law, it is illegal and the employee should be reinstated and paid
backwages. To contend that even if the termination is for a just cause,
the employee concerned should be reinstated and paid backwages
would be to amend Art 279 by adding another ground for considering
dismissal
illegal.
If it is shown that the employee was dismissed for any of the causes
mentioned in Art 282, the in accordance with that article, he should not
be reinstated but must be paid backwages from the time his
employment was terminated until it is determined that the termination
of employment is for a just cause because the failure to hear him
before he is dismissed renders the termination without legal effect.

HELD: The Wenphil doctrine stated that it was unjust to require an

employer to reinstate an employee if, although termination is made
with cause, if due process was not satisfied. The remedy was to order
the payment to the employees of full backwages from the time of his
dismissal until the court finds that the dismissal was for a just cause.
But his dismissal must be upheld and he should not be reinstated. This
is because the dismissal is ineffectual. In termination of employment
under Art. 283, the violation of notice requirements is not a denial of
due process as the purpose is not to afford the employee an
opportunity to be heard on any charge against him for there is none.
The purpose is to give him time to prepare for the eventual loss of his
job and the DOLE to determine whether economic causes do exist
justifying the termination of his employment. With respect to Art. 283,
the employers failure to comply with the notice requirement does not
constitute a denial of due process but a mere failure to observe a
procedure for the termination of employment which makes the
termination
of
employment
merely
ineffectual.
If the employees separation is without cause, instead of being given
separation pay, he should be reinstated. In either case, whether he is
reinstated or given separation pay, he should be paid full backwages if
he has been laid off without written notice at least 30 days in advance.
With respect to dismissals under 282, if he was dismissed for any of
the just causes in 282, he should not be reinstated. However, he must
be paid backwages from the time his employment was terminated until
it is determined that the termination is for a just cause because the
failure to hear him renders the termination of his employment
without legal effect.

Serrano v. NLRC

SERRANO V. NATIONAL LABOR RELATIONS COMMISSION AND ISETANN DEPARTMENT STORE

27 January 2000 | Mendoza | Special civil action in the SC, Certiorari
FACTS
Ruben Serrano was hired by Isetann Dept. Store as a security checker
1984 Contractual; 1985 Regular; 1988 Head of Security Checkers
In 1991, as a cost-cutting measure, Isetann decided to phase out the entire security sectionand engage the services of an independent security agency.
Isetann sent a memoto Serrano on 11 Oct 1991, reiterating their verbal notice of termination effective on the same day.
Serrano filed a complainton 3 Dec 1991 for illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, nonpayment of salary and
overtime pay
Labor Arbiter held that Serrano was illegally dismissed

Failed to establish that the cause of retrenchment is to minimize losses

Did not accord due process to Serrano
Did not use reasonable standards in selecting employees to be terminated
Did not show employees inefficiency so as to justify their replacement
The day after Serranos dismissal, Isetann hired another person as a safety and security supervisor
Isetann ordered to pay backwages, reinstatement, unpaid wages, 13th month pay, attorneys fees
NLRC reversed Labor Arbiters decision upon Isetanns appeal

Phase-out of security section, hiring of agency is a legitimate business decision

Labor Arbiters distinction between retrenchment and employment of cost-saving devices insignificant
Reasonable criteria does not apply because the entire Security Section was abolished
No bad faith in appointing a supervisor because it was separate from Serranos position as Security Checkers head
Isetann ordered to give separation pay, unpaid salary, 13th month pay
Serranos MfR denied
ISSUE AND HOLDING
WON the abolition of the Security Checkers section and the employment of an independent security agency falls under any of the authorized causes for
dismissal under Article 283 of the Labor Code YES, authorized cause is redundancy; Serrano should be given separation pay at the rate of one-month
pay for every year of service (Art. 283)
DISCUSSION
Art. 283 provides that one month before intended date, written notice must be served on the workers and DOLE
Authorized causes under Art. 283 (Closure of establishment and reduction of personnel)
Installation of labor-saving devices
Redundancy

Separation pay at the rate of at least one-month pay or one-month

pay for every year of service (whichever is higher)

Retrenchment to prevent losses

Separation pay at the rate of at least one-month pay or half-month

pay for every year of service (whichever is higher)

Closing or cessation of operations

Absent proof that management acted in a malicious or arbitrary manner, the Court will not interfere with the employers exercise of judgment.
That the phase-out constituted a legitimate business decision is a factual finding of NLRC.
History of policies
When
there
is
just
cause
but
Before:
The shift took place in Wenphil Corp. v. NLRC

no
due
Dismissal

process

(requirements

of

notice
is

and

opportunity

to

be

heard)
illegal

Highly prejudicial to the employers interests to reinstate an employee who has been shown to be guilty of the charges that warranted his
dismissal
Dismissal must be for just or authorized cause and after due process

Now: Dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of, or for failure to observe, due process
(Sebuguero v. NLRC)

Fines imposed range from P1,000 to P10,000

ReexaminingWenphil doctrine

J. Panganiban Monetary sanctions are too insignificant, niggardly, late

J. Puno Dismiss now, pay later policy convenient for moneyed employers
In their opinion, such dismissal is void and employee should be reinstated and paid backwages

Remedy pay full backwages from dismissal until determination that dismissal was for a just cause BUT STILL, dismissal must be upheld
Why violation of the notice requirement cannot be considered a denial of due process resulting
Due process clause is a limitation on governmental powers and DOES NOT APPLY to the exercise of private power
a.
Only
the
state
has
authority
to
take
b. Purpose of clause is to ensure that the exercise of this power is consistent with civilized methods

life,

in

the

nullity

of

liberty,

dismissal

property

Notice and hearing are required under the due process clause before the power of the organized society is brought to bear upon the individual
a. This is NOT the case of termination of employee no adversary system here (there is no charge against the employee)
b. Purpose of 30-day written notice is to give employee time to prepare for the eventual job loss, and for DOLE to determine WON economic causes
exist
to
justify
his
termination
c. Even in cases of dismissal under Article 282[1], purpose of notice and hearing is NOT to comply with the due process clause in the
Constitution; Compliance with notice requirement does not foreclose right of employee to question the legality of his dismissal
d. History of related laws
1.
2.
3.
4.
5.

Art. 302 of Spanish Code of Commerce employee/employer can terminate relationship by giving one month notice; in lieu of notice, mesada
(one month pay) could be given to employee
NCC 2270 repealed Art. 302 of Spanish Code of Commerce
RA 1052 (Termination Pay Law) revived mesada
RA 1787 amended RA 1052 by providing for giving of advance notice or payment of compensation (1/2 month per year of service)
Rules implementing BP 130, RA 6715 (amending NCC 277(b) notice required even when the dismissal was for cause

Employer CANNOT be expected to be an impartial judge of his own cause

Also the case for termination for a just cause under Article 282
J. Puno disputes this as he says that many cases have been won by employees before grievance committees manned by impartial judges of the
company
Grievance machinery is DIFFERENT established by agreement of employer, employees and is composed of representatives from both sides
If
the
violation
of
the
notice
requirement
is
not
a
denial
of
due
process,
Mere failure to observe a procedure for the termination of employment, which makes the termination merely ineffectual
What
makes
a
dismissal
Only the absence of a just cause for termination as provided in Article 279

of

Basis

Authorized
cause

Notice

Reinstat
e

Kind of pay

Art.
283

Separation pay, backwages

an

employee

what

is

it?

illegal?

Art.
283

Backwages

Art.
282

Backwages from termination until it is

determined that there is just cause

DISPOSITIVE PORTION
Petition granted. NLRC resolution modified. Isetann is ordered to:

Pay separation pay equivalent to one month pay per year of service
Unpaid salary
Proportionate 13thmonth pay
Full backwages from termination until this decision becomes final
Case remanded to Labor Arbiter to determine computation of monetary awards to Serrano.
OPINIONS [2]
Separate Opinion Bellosillo

Prefers to call indemnity or penalty as disturbance compensation

Proposes that amount of the award be uniform and rational and not arbitrary
Dissenting Opinion Puno

Wenphil did not change ruling that violation of the pre-dismissal notice requirement is an infringement of due process
Submits a return to the pre-Wenphil rule where a reasonless violation of the notice requirement makes the dismissal illegal and results in the
employees reinstatement

One undesirable effect of Wenphil is to compel employees to seek relief against illegal dismissals with DOLE (whereas before, a remedy can
be sought before the employer) and oftentimes, they do not know why they were dismissed in the first place

Dilution of the rule has been abused by employers who followed the dismiss now, pay later strategy

An employee under Article 283 has a stronger claim to the right to a pre-dismissal notice and hearing (rather than post facto dismissal hearing)

Disagrees with majority opinion that due process requirement does not apply to the exercise of private power; private due process is a settled
norm in administrative law
Separate Opinion Vitug

A just or authorized cause and a written notice are required concurrently but not equipollent in their consequence in terminating an employeremployee relationship
Where there is no just or authorized cause, reinstatement and payment of backwages would be proper. Damages might also be awarded if
dismissal is attended by bad faith of employer. Separation pay can substitute for reinstatement if such reinstatement is not feasible.
Employer must be made to pay corresponding damages for failure to comply with notice requirement
Separate Opinion Panganiban

Notice requirement finds basis not only in the Labor Code but also in the due process clause of the Constitution
When the employee is dismissed without due process, he is illegally dismissed. He is entitled to backwages and reinstatement.
The Labor Code grants the dismissed employee the right to be notified as well as the right to be heard.

[1] Causes under Article 282 are (1) serious misconduct or willful disobedience, (2) gross and habitual neglect of duties, (3) fraud or breach of trust, (4)
commission of crime against employer or immediate family member or authorized representatives, and (5) other analogous causes.
[2] For this part, I will only take note of discussions different from what has been presented in the majority opinion.

AGABON vs. NLRC, November 17, 2004

By Atty. Golda Benjamin

Facts:
Virgilio and Jenny Agabon were cornice installers of Riviera Home Improvements, a company engaged in the business of selling ornamental
construction materials.

They were employed from January 2, 1992 until February 23, 1999, when they were dismissed for abandonment of work.

The Agabons filed a complaint for illegal dismissal before the LA, who ruled in their favor. The NLRC reversed on appeal. The CA sustained the
NLRCs decision

The Agabons further appealed to the SC, disputing the finding of abandonment, and claiming that the company did not comply with the twin
requirements of notice and hearing.

Issue: WON the Agabons were illegally dismissed

Held: NO

Ratio:
Substantive due process (EEs must be dismissed for just or authorized cause): SC upheld the finding of abandonment, because the act of the
Agabons in seeking employment elsewhere clearly showed a deliberate intent to sever the ER-EE relationship.

Procedural due process (for just cause, there must be a written notice informing him of grounds for termination, a hearing or opportunity to be heard,
and a final notice of termination stating the grounds therefor): There was no due process because ER did not send the requisite notices to the last known
address of the EEs. ER only gave a flimsy excuse that the notice would be useless because the EEs no longer lived there. This is not a valid excuse,
they should have still sent a notice as mandated by law.

Before the Agabon case, the doctrine in Serrano v.NLRC (GR No. 117040, 27 January 2000) was
followed. It states that termination due to authorized cause without giving the notice required under the Labor Code is not a violation of due process. It is
valid although declared irregular / ineffectual. He shall however be entitled to SEPARATION PAY AND BACKWAGES.
Agabon v. NLRC, 17 November 2004 modifies Serrano
Dismissal for an authorized or just cause, w/o procedural due process is not an illegal dismissal
which warrants backwages; employee entitled only to nominal damages. The Court interpreted Art. 279 to the effect that termination is illegal only if it is
not for any of the justified or authorized causes provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if the
employee was unjustly dismissed. The Court decided to follow Wenphil that where the dismissal is for a just cause, the lack of statutory due process
should not nullify the dismissal or render it illegal. However, the employer should indemnify the employee for the violation of his rights. The indemnity
should be stiffer than that provided in Wenphil to discourage the abhorrent practice of dismiss now, pay later. The indemnity should be in the form of
nominal damages, which is adjudicated in order that a right of plaintiff, which has been violated by the defendant, may be vindicated.

http://www.pinoylawyer.org/t132-non-compliance-with-due-process-requirements