A.
Also, PDI is did not violate procedural process due to the fact the Magtibay was on a
1.
Philippine Daily Inquirer v. Magtibay
Facts:
Philippine Daily Inquirer, Inc. (PDI) hired Leon Magtibay (Magtibay) as a contractual
worker for 5 months. After the expiration of the said contract, PDI hired him again with a
probationary period of 6 months. A week before the end of the second contract, PDI handed
him his termination letter due to failure in meeting company standards.
Magtibay then filed a complaint for illegal dismissal before the Labor Arbiter stating that
he has now become a regular employee by working for more than 6 months. The PDI union
supported him stating unfair labor practice. Saying that he did not know he was supposed to
follow company standards and that he was not given due process in his termination.
PDI explained that his 5-month contract should not be included with his 6-month contract
allowing him to be considered a regular employee, and that he was in fact given an
orientation on what the company standards were. The Labor Arbiter agreed with PDI and
dismissed his complaint and acquitted PDI of illegal dismissal and unfair labor
practice.
When the case was brought to the NLRC, it reversed the Arbiter’s decision and charged
PDI with illegal dismissal due to the fact that Magtibay was now considered a regular
employee. Also, Magtibay was not told that he must abide by company standards.
The Court of Appeals agreed with the NLRC. PDI filed a motion for reconsideration to no
avail.
Issue:
Whether or not a probationary employees’ failure to follow company standards is ground for
illegal dismissal. WON PDI is liable for violating procedural due process in terminating
Magtibay.
Ruling:
The NLRC and CA’s decisions were reversed and set aside thereby reinstating the Labor
Arbiter’s decision to acquit PDI of illegal dismissal and unfair labor practice.
The SC ruled that company standards are meant to be followed even if an employee is not
made aware of them. It is inherent that company standards are always in effect and
employees, probationary or regular, are expected to meet them.
probationary period and was not up to company standards. Reason is that a probationary has
the duty to prove his worth to the employer to become a permanent employee. The due
process here is in the constant observance and evaluation of Magtibay’s performance, in
which he failed by violating certain company rules and regulations.
2.
LANDTEX VS.CA
 Landtex, a sole proprietorship owned by Alex Go and managed by William Go, is a
business enterprise engaged in the manufacture of garments.
 Ayson worked in Landtex as a knitting operator. He was an officer of Landtex
Industries Workers Union – Federation of Free Workers (union) which had an existing
(CBA) with Landtex.
 Ayson received a letter from Landtex which stated that Ayson committed acts contrary
to company policies. The letter required Ayson to explain in writing within 24 hours
from receipt why no disciplinary action should be taken against him for spreading
damaging rumors about the personal life of an unspecified person, and for having an
altercation with one of the company’s owners when he was asked to submit an ID
picture.
 Ayson replied in writing that he could not defend himself from the charge of spreading
damaging rumors because Landtex’s letter failed to state what rumors he was supposed
to have spread. Ayson further explained that he merely replied in a loud voice to the
company owner’s request because he was carrying textiles. Ayson then apologized for
his actions.
 Landtex decided to conduct an investigation in view of Ayson’s denials.
 In the first meeting , Ayson was informed that there were witnesses who could testify
that he spread rumors about the personal life of William Go and his family.
 Ayson denied that he spread rumors and requested for another meeting so that he could
hear the alleged witnesses and defend himself. Ayson further requested that the next
investigation be held at Landtex’s Mauban office because he and the union officers
accompanying him suffer salary deductions for their attendance of investigations during
office hours. Another meeting was scheduled, but Ayson was unable to attend it and
 went home early because he allegedly needed to look after his child. 2nd meeting took
place.
 In a letter, Landtex terminated Ayson’s services effective 30 June 1996 because of
Ayson’s lack of cooperation during the investigations. Despite this notice, Ayson still
reported for work until 6 July 1996.
 The union president requested Landtex for a formal dialogue regarding Ayson’s case.
 Landtex reaffirmed its decision to terminate Ayson in meetings with the union. Landtex
and the union agreed to refer the matter to a third party in accordance with the
provisions of law and of the CBA. Landtex expected Ayson to refer the issue to the
(NCMB) for the selection of a voluntary arbitrator. Ayson and the union, however, filed
a complaint before the labor arbiter.
 LA ruled in favor of Ayson. NLRC reversed case falls under VA.
 Landtex merely imposed a disciplinary measure when it terminated Ayson’s
employment.
 CA sustained the jurisdiction of the labor arbiter and modified the award in favor of
Ayson
The Issues
Landtex and William Go raise the following issues before this Court:
Whether the NLRC correctly ruled that jurisdiction over the subject matter of the instant
case pertains exclusively to the voluntary arbitrator considering that the existing CBA
provides that “a grievance is one that arises from the interpretation or implementation of
this agreement, including disciplinary action imposed on any covered employee”; and the
parties have undergone the grievance machinery of the collective bargaining agreement
Whether the instant case concerns enforcement and implementation of company personnel
policy and that the issue therein was timely raised
Whether there is a valid ground for termination of the employment of Ayson
Whether Ayson is entitled to backwages and separation pay
Whether the appellate court committed grave and patent abuse of discretion and errors of
law in setting aside the decision of the NLRC
Held: Affirmed.
The Labor Arbiter’s Jurisdiction
Petitioner alleged that Ayson’s termination merely enforced Landtex’s personnel policy
against misconduct. They further claim that the union’s request for a formal dialogue
signified the initiation of the grievance procedure outlined in the CBA. Landtex and William
Go even assert that because of Ayson’s failure to submit his claim before the NCMB, he is
barred from seeking relief from a forum other than that provided in the CBA.
We agree with Ayson and the union and affirm the rulings of the labor arbiter and the
appellate court.
Article 261 of the Labor Code provides that voluntary arbitrators shall have original and
exclusive jurisdiction to hear and decide all unresolved grievances arising from the
interpretation or implementation of the Collective Bargaining Agreement and those arising
from the interpretation or enforcement of company personnel policies. On the other hand, a
reading of Article 217 in conjunction with Article 262 shows that termination disputes fall
under the jurisdiction of the labor arbiter unless the union and the company agree that
termination disputes should be submitted to voluntary arbitration. Such agreement should be
clear and unequivocal. Existing law is an intrinsic part of a valid contract without need for
the parties to expressly refer to it. Thus, the original and exclusive jurisdiction of the labor
arbiter over unfair labor practices, termination disputes, and claims for damages cannot be
arrogated into the powers of voluntary arbitrators in the absence of an express agreement
between the union and the company.
In the present case, the CBA between Landtex and the union does not clearly state that
termination disputes, as opposed to mere disciplinary actions, are covered by the CBA. The
CBA defined a grievance as “one that arises from the interpretation or implementation of
this Agreement, including disciplinary action imposed on any covered employee.” The CBA
did not explicitly state that termination disputes should be submitted to the grievance
machinery.
We find nothing in the records which shows that the meetings between the union and
Landtex already constitute the grievance machinery as mandated by the CBA. The meetings
happened only after the effectivity of Ayson’s termination. The meetings did not comply
with the requisite number of participants. The CBA mandated that there should be three
representatives each from the union and Landtex but there were seven union members and
two Landtex representatives who attended the meetings. More importantly, there was
nothing in the minutes that shows that the attendees constituted a Management-Employee
Committee.
Finally, the appellate court is correct in stating that if Landtex really believed that the labor
arbiter did not have jurisdiction over the present case, then Landtex should have filed a
motion to dismiss. Instead of filing a motion to dismiss, Landtex participated in the
proceedings before the labor arbiter. Had Landtex immediately filed a motion to dismiss, the
labor arbiter would have determined the issue outright before proceeding with hearing the
case. In the present case, Landtex raised the issue of jurisdiction only after the labor arbiter
required the parties to submit their position papers.
Validity of Ayson’s Dismissal
The requisites for a valid dismissal are:
(1) The dismissal must be for any of the causes expressed in Article 282 of the
Labor Code, and;
(2) the opportunity to be heard and to defend oneself.
Upon reading the records of the case, we cannot deduce any proof of Landtex and William
Go’s accusations againstAyson. Moreover, the NLRC did not make any pronouncement as to
whether Ayson was dismissed for a just cause. The appellate court and the labor arbiter were
one in ruling that there was no just cause in Ayson’sdismissal.
We quote the labor arbiter’s factual findings with approval:
We have painstakingly read the records of this case and, sadly, this Office
finds no shred of evidence to show that indeed [Ayson] had been spreading
“news and gossips” or that he ever shouted at Mr. Go and engaged Mr. Go in
a heated argument.
No affidavit of either the security guard who claimed to be one of the
drinking group who heard the alleged malicious news or gossips or that of
Mr. and Mrs. Go who had been the subject of [Ayson’s] alleged shouting has
been presented if only to substantiate [Landtex and William Go’s] self-
serving claims.
Procedural due process in the dismissal of employees requires notice and hearing. The
employer must furnish the employee two written notices before termination may be effected.
The first notice apprises the employee of the particular acts or omissions for which his
dismissal is sought, while the second notice informs the employee of the employer’s
decision to dismiss him. In the present case, Landtex more than complied with the two-
notice rule.
The requirement of a hearing, on the other hand, is complied with as long as there was an
opportunity to be heard, and not necessarily that an actual hearing was conducted. In the
present case, Landtex scheduled three meetings before terminating Ayson. However,
Landtex failed to understand the law’s purpose in requiring the opportunity to be heard.
Landtex scheduled meetings with Ayson but these meetings were not free from arbitrariness.
Ayson could not adequately defend himself from Landtex’s and William Go’s accusations.
No witness was ever presented against Ayson, hence Ayson could not test the veracity of
their claims.
Unsubstantiated suspicions, accusations, and conclusions of the employer are not sufficient
to justify an employee’s dismissal. The employer must prove by substantial evidence the
facts and incidents upon which the accusations are made.
We ruled that the mere conduct of an investigation and the statements of the company’s
security guard are not enough to establish the validity of the charge of wrongdoing against
the dismissed employees. It is not enough for an employer who wishes to dismiss an
employee to charge him with wrongdoing. The validity of the charge must be established in
a manner consistent with due process. A suspicion or belief no matter how sincerely felt
cannot substitute for factual findings carefully established through an orderly procedure.
3.
Peñaflor vs. Outdoor Clothing Manufacturing Corp.
G.R. No. 177114, April 13, 2010
Facts:
Peñaflor was hired as probationary HRD Manager of Outdoor Clothing on September 2,
1999. On March 13, 2000, more than six months from the time he was hired, Peñaflor
learned that Outdoor Clothing’s President, Nathaniel Syfu (Syfu), appointed Edwin
Buenaobra (Buenaobra) as the concurrent HRD and Accounting Manager. After enduring
what he claimed as discriminatory treatment at work, Peñaflor considered the appointment
of Buenaobra to his position as the last straw, and thus filed his irrevocable resignation from
Outdoor Clothing effective at the close of office hours on March 15, 2000. He thereafter
filed an illegal dismissal complaint with the labor arbiter claiming that he had been
constructively dismissed. The labor arbiter agreed with Peñaflor and issued a decision in his
favour.
 On appeal, the National Labor Relations Commission (NLRC) reversed the labor arbiter’s
ruling. When Peñaflor questioned the NLRC’s decision before the CA, the appellate court
affirmed the NLRC’s decision. Hence, Peñaflor filed a petition for review on certiorari with
the Court.
Issue:
Was Peñaflor constructively dismissed?
Ruling:
Yes. While the letter states that Peñaflor’s resignation was irrevocable, it does not
necessarily signify that it was also voluntarily executed. Precisely because of the attendant
hostile and discriminatory working environment, Peñaflor decided to permanently sever his
ties with Outdoor Clothing. This falls squarely within the concept of constructive dismissal
that jurisprudence defines, among others, as involuntarily resignation due to the harsh,
hostile, and unfavorable conditions set by the employer. It arises when a clear
discrimination, insensibility, or disdain by an employer exists and has become unbearable to
the employee. The gauge for constructive dismissal is whether a reasonable person in the
employee’s position would feel compelled to give up his employment under the prevailing
circumstances. With the appointment of Buenaobra to the position he then still
occupied, Peñaflor felt that he was being eased out and this perception made him decide to
leave the company.
The fact of filing a resignation letter alone does not shift the burden of proving that the
employee’s dismissal was for a just and valid cause from the employer to the employee.
In Mora v. Avesco [G.R. No. 177414, November 14, 2008, 571 SCRA 226], the Court ruled
that should the employer interpose the defense of resignation, it is still incumbent upon the
employer to prove that the employee voluntarily resigned.
B.
1.
a.
Azcor Manufacturing vs. NLRC (303 SCRA 26)
July 27, 2010
Facts: Capulso filed with the Labor Arbiter a complaint for constructive illegal dismissal.
He alleged that he worked for Azcor as ceramics worker for more than 2 years. Then, due to
asthma, he filed a leave of absence. Upon returning to work, he was not permitted to do so.
He later on amended his complaint and impleaded Filipinas Paso as additional respondent.
On the other hand, Azcor contends that Capulso validly resigned from the company, as
evidenced by a letter of resignation, for which Capulso then sought employment from
Filipinas Paso, from which he also resigned. The Labor Arbiter dismissed the case. On
appeal to the NLRC, it adjudged in favor of Capulso holding Filipinas Paso and Azcor
solidarily liable. Hence, this petition with the SC.
Issue: Whether or not Filipinas Paso may be held jointly and severally liable with Azcor for
back wages of Capulso.
Held: Yes. The doctrine that a corporation is a legal entity or a person in law distinct from
the persons composing it is merely a legal fiction for purposes of convenience and to
subserve the ends of justice. This fiction cannot be extended to a point beyond its reason
and policy. Where, as in this case, the corporate fiction was used as a means to perpetrate a
social injustice or as a vehicle to evade obligations or confuse the legitimate issues, it would
be discarded and the 2 corporations would be merged as one, the first being merely
considered as the instrumentality, agency, conduit, or adjunct of the other.
In the case at bar, there was much confusion as to the identity of Capulso’s employer, but,
for sure, it was Filipinas Paso and Azcor’s own making. First, Capulso had no knowledge
that he was already working under Filipinas Paso since he continued to retain his Azcor ID.
Second, his pay slips contained the name of Azcor giving the impression that Azcor was
paying his salary. Third, he was paid the same salary and he performed the same kind of
job, in the same work area, in the same location, using the same tools and under the same
supervisor.
b.
Talam vs. NLRC
G. R. 1755040, April 6, 2010
Facts:
The respondent, The Software Factory, Inc. (TSFI), is a domestic corporation engaged in
providing information technology and computer consultancy to the public. In April 2001, it
employed Talam as a full-time programmer. In the latter part of 2001 and in 2002, TSFI
suffered financial reverses. Its external financial auditor advised that it cut on its payroll
expenses which accounted for 41% of its total operating costs. TSFI heeded the advice and
decided to retrench some of its employees, using as basis its employees' service income and
contribution margins to the company. TSFI found that Talam was one of two employees
with the least or with no income contribution for the year 2002. Consequently, respondents
verbally informed Talam that his services with the company would be terminated thirty (30)
days after September 27, 2002.
On November 29, 2002, Talam questioned the legality of his separation from the service
through a complaint for illegal dismissal and illegal deduction, with claims for service
incentive leave pay, damages and attorney's fees against TSFI. Talam alleged before the
Labor Arbiter that his dismissal from employment was illegal because the company did not
comply with the requisites under Article 283 of the Labor Code for a valid retrenchment
action. On October 28, 2003, Executive Labor Arbiter rendered a decision declaring Talam's
dismissal illegal. The Arbiter held that while it is TSFI's right to reduce its workforce to
prevent losses, it failed to present evidence that the company adopted a retrenchment
program and there was also no evidence showing clearly that Talam should be retrenched.
TSFI appealed to the NLRC. In a Decision, the NLRC set aside the labor arbiter's ruling
and dismissed Talam's complaint without prejudice, for improper venue. TSFI moved for
reconsideration of the NLRC resolution which was partially granted. This time, the NLRC
deleted the award of backwages and 13th month pay, but ordered the company to pay Talam
P30,000.00 as nominal damages for violating his right to procedural due process, citing
Jaka Food Processing Corp. v. Darwin Pacot, et al., where the Court held that although the
complainant's dismissal was based on an authorized cause, nominal damages were awarded
because of the respondent's failure to comply with the notice requirement. The NLRC ruled
that the non-observance of the notice requirement will not invalidate Talam's separation on
the ground of retrenchment; thus, the award of full backwages was not proper. Talam moved
for reconsideration, but the NLRC denied the motion. Talam thereafter sought relief from the
CA through a petition for certiorari under Rule 65 of the Rules of Court, charging the NLRC
with grave abuse of discretion for its resolutions of September 27, 2005 and January 31,
2006. In particular, Talam questioned the deletion of the award to him of backwages and
13th month pay.
The CA denied the petition for lack of merit. It found Talam's separation from the service by
reason of retrenchment to be valid. However, while it acknowledged that TSFI was suffering
from financial losses as confirmed by the report of independent external auditor, it ruled that
the company failed to give Talam the notice required by law. The CA opined that although
the law mandated that the written notice of termination of employment for authorized causes
should be served at least one month before the effective date of the termination, the
employment contract should prevail because it does not violate the minimum requirement
under Article 283 of the Labor Code. Even if Article 283 were to be followed, the CA
added, TSFI still failed to comply with the notice requirement considering that the notices to
Talam and to DOLE were for less than thirty (30) days.
Although Talam's dismissal was due to a cause authorized by law, the CA deemed TSFI
liable for nominal damages for violation of Talam's right to procedural due process. The
appellate court affirmed with modification the assailed NLRC decision. It increased to
P50,000.00 the nominal damages of P30,000.00 awarded by the NLRC. Talam moved for
reconsideration of the decision, but the CA denied the motion. Hence, the present recourse
to the Court.
Issue:
Is the dismissal valid?
Ruling:
Yes. Talam was not an unlettered employee; he was an information technology consultant
and must have been fully aware of the consequences of what he was entering into. The
quitclaim was a voluntary act as there is no showing that he was coerced into executing the
instrument; he received a valuable consideration for his less than two years of service with
the company. Thus, from all indications, the release and quitclaim was a valid and binding
undertaking that should have been recognized by the labor authorities and the CA. While the
law frowns upon releases and quitclaims executed by employees who are inveigled or
pressured into signing them by unscrupulous employers seeking to evade their legal
responsibilities, a legitimate waiver representing a voluntary settlement of a laborer’s claims
should be respected by the courts as the law between the parties. In the Court’s
view, Talam’s release and quitclaim fall into the category of legitimate waivers as defined by
the Court.
With Talam’s voluntary execution of the release and quitclaim, the Court found the filing of
the illegal dismissal case tainted with bad faith. Neither can TSFI be made to answer for
failure to afford Talam procedural due process. The release and quitclaim, in the Court’s
mind, erased whatever infirmities there might have been in the notice of termination
as Talam had already voluntarily accepted his dismissal through the release and quitclaim.
As such, the written notice became academic; the notice, after all, is merely a protective
measure put in place by law and serves no useful purpose after protection has been assured.
The Court thus finds no basis for the conclusion that TSFI violated procedural due process
and should pay nominal damages.
The CA committed no reversible error in affirming the NLRC ruling that Talam was validly
dismissed on the ground of retrenchment.
First. The decision to retrench had a basis; it was not simulated nor resorted to for the
purpose of getting rid of employees. The decision was upon the recommendation of the
company’s external auditor Leah A. Villanueva, as contained in her letter to the TSFI Board
of Directors in October 2002. As the CA noted, the standard proof of a company’s financial
standing is its financial statements duly audited by credible external auditors. We see
nothing in the records which impugns Villanueva's assessment of the financial condition of
TSFI at the time material to the case.
Second. The cost-cutting measure recommended involved reduction of TSFI’s payroll
expense account which, as the auditor found, makes up 41% of the company’s total
operating expenses. Talam insinuates that the share in the company’s operating costs of
personnel expenses is misleading, contending that the bulk of the expense goes into
management fees. While this may be so, it cannot be denied that the management group is
still part of the personnel component of the company, and absent any showing of bad faith,
the choice of who should be retrenched must be conceded to the company for as long as
there exists a basis for it.
In the present case, we note that the auditor suggested that TSFI “review the contribution
margin per consultant and compensation packages of personnel in the executive and support
group.” Again, absent any showing of bad faith, we cannot fault the company for choosing
the option of looking at the margins of contribution of the consultants to the income of the
company as primary retrenchment standard. It is just unfortunate that based on this
yardstick, Talam came out as one of two consultants with very high negative contribution
margins and was therefore chosen for retrenchment.
Third. Talam was dismissed due to a cause authorized by law – retrenchment to prevent
losses. At the time of Talam’s dismissal, TSFI’s financial condition, as found by the external
auditor, showed that it was not just expecting losses, it already suffered a net income loss of
P2,474,418.00 and retained earnings deficit of P7,424,250.00 for the period ending
December 31, 2002.
Fourth. TSFI resorted to other measures to abate its losses. It claimed that during the
crises period, it used as an office a small-room (a mere cubicle) with only a two-person
support staff; it reduced the salaries of its employees by as much as 30%. This submission
by the company is substantiated by the schedule of Operating Expenses for the year ended
December 31, 2002 and September 30, 2002. A quick glance at the schedule readily shows a
reduction of TSFI’s operating expenses across the board. The schedule indicates a
substantial decrease in the operating expenses. On the whole, we find that TSFI satisfied the
requisites for a valid retrenchment.
2.
a.
i.
Bibiana Farms and Mills v. Arturo Lado
G.R. No. 157861, February 2, 2010
Facts:
Respondent was a warehouseman for the Petitioner, acting as empty sacks controller among
other functions. On one occasion, a customer transacted with the Petitioner’s cashier for the
purchase of 3,000 pieces of empty sacks. The cashier gave a note to the customer and
instructed the latter to show said note to the warehouseman. The note contained instructions
as to how many sacks were to be loaded. After showing the note to the Respondent (the
warehouseman), the latter loaded the said sacks for the customer, but despite the cashier’s
instruction, the Respondent loaded a total of 3,400 sacks instead of just 3,000; and if not for
the cashier’s timely inspection, the 400 sack excess would have been brought by the
customer without payment.
The next day, the Petitioner’s General Operations Manager issued two (2) memoranda
directing Respondent to submit his written explanation on the release of sacks contrary to
the cashier’s instructions. After submitting his explanation, another memorandum was issued
Manager informing him that he is being placed under preventive suspension pending
investigation. Another notice was sent to his house informing him of the date of the
investigation but Respondent’s house maid refused to accept it. On September 11, 1998, an
investigation was conducted, but before a decision can be made on the investigation,
Respondent filed, a complaint for illegal preventive suspension against the Petitioner. A few
days after, Respondent received a Notice of Termination dismissing him from the service the
grounds being "serious misconduct, dishonesty, willful breach of trust, fraud, loss of
confidence and other grounds". Aggrieved, Respondent filed another case for illegal
termination. Both cases were consolidated.
Issue:
Was the termination valid?
Ruling:
Yes. Under the Labor Code, the requirements for the lawful dismissal of an employee are
two-fold: substantive and procedural. Not only must the dismissal be for a just or authorized
cause, the basic requirements of procedural due process – notice and hearing – must likewise
be observed. Without the concurrence of the two, the termination is illegal.
On the just cause issue, Respondent was no ordinary rank-and-file employee. As
warehouseman, his duties involved the handling of incoming and outgoing materials. He
had, as the Arbiter noted, access to company property; tasked to closely monitor and handle
company property, especially the outflow of sacks to avoid or minimize losses. In other
words, Respondent held a position of trust and confidence. When he disregarded the
cashier’s note, Respondent violated company procedures, laying the company open to the
possibility of loss. This is a serious misconduct for which he should be held accountable.
On the issue of procedural due process, the essence of due process is the opportunity to be
heard; it is the denial of this opportunity that constitutes violation of due process of law. The
respondent was given the opportunity to be heard when a proper notice of investigation was
sent to him, although the notice did not reach him for reasons outside the petitioner’s
control. He was not also totally unheard on the matter as he was able to explain his side
through the two (2) explanation letters he submitted.
ii.
Caltex vs. Agad
G.R. 162017, APRIL 23, 2010
Facts:
Petitioner Caltex Philippines, Inc. (Caltex) employed respondent Hermie G. Agad (Agad) as
Depot Superintendent-A on a probationary basis for six months. On 28 February 1984,
Agad became a regular employee. After Agad had served for two years since 1990 as
Superintendent of the Tacloban Bulk Depot (Depot) in Leyte, Caltex transferred Agad to
Bauan Bulk Depot in Batangas effective 16 May 1992. To transfer his belongings from
Leyte to Batangas, Agad secured the carpentry services of Alfredo Delda (Delda), the owner
of A.A. Delda Engineering Services (Delda Services) for the construction of two crates.
Agad paid Delda P15,500, evidenced by Official Receipt and submitted the receipt and
Caltex reimbursed him the said amount.
Caltex conducted its regular audit of employees’ account and expenses. The company
auditor of Caltex verified the crating expense incurred by Agad with Delda. Delda alleged
that he was forced by Agad to issue the official receipt in order to get a favorable
recommendation from the incoming superintendent of the Depot.
In another audit report, the company auditor declared that 190 pieces of 11 kg. liquefied
petroleum gas (LPG) cylinders from the Depot were allegedly withdrawn when Agad was
still depot superintendent In a Confidential Memorandum, Agad was informed of his
dismissal on the grounds of serious misconduct and loss of trust and confidence. The LA
held that there were no just causes for Agad’s termination of employment. The NLRC
reversed the decision of the LA and held that there existed just causes which justified Agad’s
dismissal. Agad filed a Motion for Reconsideration which was denied. He then filed a
petition for certiorari under Rule 65 with the CA for the nullification of the decision of the
NLRC. The CA modified the judgment of the NLRC and ruled in favor of Agad. Caltex filed
a Motion for Reconsideration which was denied. Hence, the instant petition.
Issue:
Did Caltex legally terminate Agad’s employment on just causes?
Ruling:
The findings of the CA and National Labor Relations Commission (NLRC) establish the
following: (1) Agad’s request for withdrawal of the 190 cylinders of LPG as stated in a
Memorandum dated 12 February 1992 cannot be given credence since the Memorandum
pertains to the replacement of the scrap materials due to Boy Bato consisting of 3,000
kilograms of black iron plates and not to the subject LPG cylinders; (2) Agad did not
observe Caltex’s rules and regulations when he transferred the said cylinders to Millanes’
compound without the RMRD form as required under Caltex’s Field Accounting Manual;
(3) Agad gave specific instructions to Millanes to sell the cylinders without bidding to third
parties in violation of company rules; (4) Agad failed to submit the periodic inventory
report of the LPG cylinders to the accounting department; (5) Agad did not remit the
proceeds of the sale of the LPG cylinders; and (6) even if considered as scrap materials, the
LPG cylinders still had monetary value which Agad cannot appropriate for himself
without Caltex’s consent.
Considering these findings, it is clear that Agad committed a serious infraction amounting to
theft of company property. This act is akin to serious misconduct or willful disobedience by
the employee of the lawful orders of his employer in connection with his work, a just cause
for termination of employment recognized under Article 282(a) of the Labor Code.
Misconduct has been defined as a transgression of some established and definite rule of
action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent
and not mere error in judgment. To be serious, the misconduct must be of such grave and
aggravated character.
b.
Talam vs. NLRC
G. R. 1755040, April 6, 2010
Facts:
The respondent, The Software Factory, Inc. (TSFI), is a domestic corporation engaged in
providing information technology and computer consultancy to the public. In April 2001, it
employed Talam as a full-time programmer. In the latter part of 2001 and in 2002, TSFI
suffered financial reverses. Its external financial auditor advised that it cut on its payroll
expenses which accounted for 41% of its total operating costs. TSFI heeded the advice and
decided to retrench some of its employees, using as basis its employees' service income and
contribution margins to the company. TSFI found that Talam was one of two employees
with the least or with no income contribution for the year 2002. Consequently, respondents
verbally informed Talam that his services with the company would be terminated thirty (30)
days after September 27, 2002.
On November 29, 2002, Talam questioned the legality of his separation from the service
through a complaint for illegal dismissal and illegal deduction, with claims for service
incentive leave pay, damages and attorney's fees against TSFI. Talam alleged before the
Labor Arbiter that his dismissal from employment was illegal because the company did not
comply with the requisites under Article 283 of the Labor Code for a valid retrenchment
action. On October 28, 2003, Executive Labor Arbiter rendered a decision declaring Talam's
dismissal illegal. The Arbiter held that while it is TSFI's right to reduce its workforce to
prevent losses, it failed to present evidence that the company adopted a retrenchment
program and there was also no evidence showing clearly that Talam should be retrenched.
TSFI appealed to the NLRC. In a Decision, the NLRC set aside the labor arbiter's ruling
and dismissed Talam's complaint without prejudice, for improper venue. TSFI moved for
reconsideration of the NLRC resolution which was partially granted. This time, the NLRC
deleted the award of backwages and 13th month pay, but ordered the company to pay Talam
P30,000.00 as nominal damages for violating his right to procedural due process, citing
Jaka Food Processing Corp. v. Darwin Pacot, et al., where the Court held that although the
complainant's dismissal was based on an authorized cause, nominal damages were awarded
because of the respondent's failure to comply with the notice requirement. The NLRC ruled
that the non-observance of the notice requirement will not invalidate Talam's separation on
the ground of retrenchment; thus, the award of full backwages was not proper. Talam moved
for reconsideration, but the NLRC denied the motion. Talam thereafter sought relief from the
CA through a petition for certiorari under Rule 65 of the Rules of Court, charging the NLRC
with grave abuse of discretion for its resolutions of September 27, 2005 and January 31,
2006. In particular, Talam questioned the deletion of the award to him of backwages and
13th month pay.
The CA denied the petition for lack of merit. It found Talam's separation from the service by
reason of retrenchment to be valid. However, while it acknowledged that TSFI was suffering
from financial losses as confirmed by the report of independent external auditor, it ruled that
the company failed to give Talam the notice required by law. The CA opined that although
the law mandated that the written notice of termination of employment for authorized causes
should be served at least one month before the effective date of the termination, the
employment contract should prevail because it does not violate the minimum requirement
under Article 283 of the Labor Code. Even if Article 283 were to be followed, the CA
added, TSFI still failed to comply with the notice requirement considering that the notices to
Talam and to DOLE were for less than thirty (30) days.
Although Talam's dismissal was due to a cause authorized by law, the CA deemed TSFI
liable for nominal damages for violation of Talam's right to procedural due process. The
appellate court affirmed with modification the assailed NLRC decision. It increased to
P50,000.00 the nominal damages of P30,000.00 awarded by the NLRC. Talam moved for
reconsideration of the decision, but the CA denied the motion. Hence, the present recourse
to the Court.
Issue:
Is the dismissal valid?
Ruling:
Yes. Talam was not an unlettered employee; he was an information technology consultant
and must have been fully aware of the consequences of what he was entering into. The
quitclaim was a voluntary act as there is no showing that he was coerced into executing the
instrument; he received a valuable consideration for his less than two years of service with
the company. Thus, from all indications, the release and quitclaim was a valid and binding
undertaking that should have been recognized by the labor authorities and the CA. While the
law frowns upon releases and quitclaims executed by employees who are inveigled or
pressured into signing them by unscrupulous employers seeking to evade their legal
responsibilities, a legitimate waiver representing a voluntary settlement of a laborer’s claims
should be respected by the courts as the law between the parties. In the Court’s
view, Talam’s release and quitclaim fall into the category of legitimate waivers as defined by
the Court.
With Talam’s voluntary execution of the release and quitclaim, the Court found the filing of
the illegal dismissal case tainted with bad faith. Neither can TSFI be made to answer for
failure to afford Talam procedural due process. The release and quitclaim, in the Court’s
mind, erased whatever infirmities there might have been in the notice of termination
as Talam had already voluntarily accepted his dismissal through the release and quitclaim.
As such, the written notice became academic; the notice, after all, is merely a protective
measure put in place by law and serves no useful purpose after protection has been assured.
The Court thus finds no basis for the conclusion that TSFI violated procedural due process
and should pay nominal damages.
The CA committed no reversible error in affirming the NLRC ruling that Talam was validly
dismissed on the ground of retrenchment.
First. The decision to retrench had a basis; it was not simulated nor resorted to for the
purpose of getting rid of employees. The decision was upon the recommendation of the
company’s external auditor Leah A. Villanueva, as contained in her letter to the TSFI Board
of Directors in October 2002. As the CA noted, the standard proof of a company’s financial
standing is its financial statements duly audited by credible external auditors. We see
nothing in the records which impugns Villanueva's assessment of the financial condition of
TSFI at the time material to the case.
Second. The cost-cutting measure recommended involved reduction of TSFI’s payroll
expense account which, as the auditor found, makes up 41% of the company’s total
operating expenses. Talam insinuates that the share in the company’s operating costs of
personnel expenses is misleading, contending that the bulk of the expense goes into
management fees. While this may be so, it cannot be denied that the management group is
still part of the personnel component of the company, and absent any showing of bad faith,
the choice of who should be retrenched must be conceded to the company for as long as
there exists a basis for it.
In the present case, we note that the auditor suggested that TSFI “review the contribution
margin per consultant and compensation packages of personnel in the executive and support
group.” Again, absent any showing of bad faith, we cannot fault the company for choosing
the option of looking at the margins of contribution of the consultants to the income of the
company as primary retrenchment standard. It is just unfortunate that based on this
yardstick, Talam came out as one of two consultants with very high negative contribution
margins and was therefore chosen for retrenchment.
Third. Talam was dismissed due to a cause authorized by law – retrenchment to prevent
losses. At the time of Talam’s dismissal, TSFI’s financial condition, as found by the external
auditor, showed that it was not just expecting losses, it already suffered a net income loss of
P2,474,418.00 and retained earnings deficit of P7,424,250.00 for the period ending
December 31, 2002.
Fourth. TSFI resorted to other measures to abate its losses. It claimed that during the
crises period, it used as an office a small-room (a mere cubicle) with only a two-person
support staff; it reduced the salaries of its employees by as much as 30%. This submission
by the company is substantiated by the schedule of Operating Expenses for the year ended
December 31, 2002 and September 30, 2002. A quick glance at the schedule readily shows a
reduction of TSFI’s operating expenses across the board. The schedule indicates a
substantial decrease in the operating expenses. On the whole, we find that TSFI satisfied the
requisites for a valid retrenchment.
C.
AGABON VS. NATIONAL LABOR RELATIONS COMMISSION
G.R. No. 158693. November 17, 2004
Facts: Private respondent Riviera Home Improvements, Inc. is engaged in the business of
selling and installing ornamental and construction materials. It employed petitioner Virgilio
Agabon and Jenny Agabon as gypsum board and cornice installers on January 2, 1992 until
February 23, 1999 when they were dismissed for abandonment of work. Petitioners then
filed a complaint for illegal dismissal. The Labor Arbiter rendered a decision declaring the
dismissal illegal. On appeal, the NLRC reversed the decision because it found that the
petitioners had abandoned their work and were not entitled to backwages and separation pay.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal
because they had abandoned their employment.
Issue: Whether or not petitioners were illegally dismissed.
Held: The dismissal should be upheld because it was established that the petitioners
abandoned their jobs to work for another company. Private respondent, however, did not
follow the notice requirements and instead argued that sending notices to the last known
addresses would have been useless because they did not reside there anymore. Unfortunately
for the private respondent, this is not a valid excuse because the law mandates the twin
notice requirements to the employee’s last known address. Thus, it should be held liable for
non-compliance with the procedural requirements of due process.
When the dismissal is for a just cause, the lack of statutory due process should not nullify
the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify
the employee for the violation of his statutory rights.
D.
1.
Golden Ace Builders and Arnold Azul vs. Jose A. Talde G.R. No. 187200; 5 May 2010
Facts: In 1990, Golden Ace Builders hired Jose A. Talde (Talde) as a carpenter. In February
1999, the owner-manager, Arnold Azul, stopped giving Talde work assignment due allegedly
to the unavailability of construction projects. Consequently, Talde filed a complaint for
illegal dismissal.
The Labor Arbiter ruled in Talde’s favor and ordered his immediate reinstatement without
loss of seniority rights, with payment of full backwages as well as premium pay for rest
days, service incentive leave pay and 13th month pay. The company brought the case to the
National Labor Relations Commission (NLRC) for review. Pending such appeal, the
company advised Talde to report for work within 10 days from notice. Talde, however,
manifested to the Labor Arbiter that due to actual animosity between him and the company
and threats to his life and his family’s safety, he opted for payment of separation pay. The
company denied there was such an animosity. The NLRC later dismissed the company’s
appeal. The company’s appeal to the Court of Appeals was likewise dismissed. The Court of
Appeals’ decision attained finality.
The monetary award, as recomputed by the NLRC’s Fiscal Examiner, was approved by the
Labor Arbiter who thereupon issued the writ of execution. The company questioned the re-
computation before the NLRC, arguing that since Talde refused to report back to work as the
company advised, he should be deemed to have abandoned the same, thus, the re-
computation should not be beyond 15 May 2001, the day he manifested his refusal to be
reinstated.
The NLRC vacated the re-computation, holding that since Talde did not appeal the Labor
Arbiter’s decision granting him only reinstatement and backwages, not separation pay in lieu
of reinstatement, he may not be afforded affirmative relief, and since he refused to go back
to work, he may recover backwages only up to 20 May 2001, the day he was supposed to
return to the job site. When Talde’s motion for reconsideration was denied by the NLRC, he
filed a petition for certiorari with the Court of Appeals.
The Court of Appeals set aside the NLRC findings and held that Talde was entitled to both
backwages and separation pay, even if separation pay was not granted by the Labor Arbiter,
in view of the strained relations between the parties. Consequently, the company filed a
petition for review on certiorari before the Supreme Court.
Issue: (1) Whether or not Talde was entitled to separation pay in lieu of actual reinstatement
on account of strained relations between him and the company; and (2) Up to what date
should Talde’s backwages be computed?
Held: An illegally dismissed employee is entitled to two reliefs: backwages and
reinstatement. The two reliefs are separate and distinct. When reinstatement is no longer
feasible because of strained relations between the employee and the employer, separation
pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages. In effect,
an illegally dismissed employee is entitled to either reinstatement, if viable, or separation
pay if reinstatement is nolonger viable, and backwages. (Citing Macasero vs. Southern
Industrial Gases Philippines, G.R. No. 178524; 30 January 2009)
Under the doctrine of strained relations, the payment of separation pay is considered an
acceptable alternative to reinstatement when the latter option is no longer desirable or viable.
On one hand, such payment liberates the employee from what could be a highly oppressive
work environment. On the other hand, it releases the employer from the grossly unpalatable
obligation of maintaining in its employ a worker it could no longer trust.
Strained relations must be demonstrated as a fact and must be supported by substantial
evidence showing that the relationship between the employer and the employee is indeed
strained as a necessary consequence of the judicial controversy. In this case, the Labor
Arbiter found that actual animosity existed between the owner-manager Azul and Talde as a
result of the filing of the illegal dismissal case. Such finding, especially when affirmed by
the appellate court as in the case at bar, is binding upon the Supreme Court, consistent with
the prevailing rules that the Supreme Court will not try facts anew and that findings of facts
of quasi-judicial bodies are accorded great respect, even finality.
Thus, Talde was entitled to backwages and separation pay as his reinstatement had been
rendered impossible due to strained relations. His backwages must be computed from the
time he was unjustly dismissed until his actual reinstatement, or from February 1999 until 30
June 2005 when his reinstatement was rendered impossible without fault on his part.
The Court of Appeals erroneously computed his separation pay from 1990 (when he was
hired) to 1999 (when he was unjustly dismissed), covering a period of 8 years. He must be
considered to have been in the service of the company not only until 1999, but until 30 June
2005, the day he is deemed to have been actually separated (his reinstatement having been
rendered impossible) from the company, or for a total of 15 years.
Ponente: J. Conchita Carpio Morales Vote: 5-0
2.
Daniel P. Javellana, Jr. vs. Albino Belen / Albino Belen vs. Daniel P. Javellana, Jr. and
Javellana farms
G.R. No. 181913, G.R. No. 182158, March 5, 2010
Facts:
Petitioner Albino Belen filed a complaint against respondents Javellana Farms, Inc. and
Daniel Javellana, Jr. for illegal dismissal and underpayment or non-payment of salaries,
overtime pay, holiday pay, service incentive leave pay (SILP), 13th month pay, premium pay
for holiday, and rest day as well as for moral and exemplary damages and attorney's fees.
Petitioner alleged that respondent Javellana hired him as company driver on January 31,
1994and assigned him the tasks of picking up and delivering live hogs, feeds, and lime
stones used for cleaning the pigpens. On August 20, 1999, respondent Javellana suddenly
fired petitioner, which prompted petitioner to file a complaint. Respondent Javellana on the
other hand claimed that he hired petitioner not as a company driver but as a family driver.
The Labor Arbiter found petitioner Belen to be a company driver as evidenced by the pay
slips that the farm issued to him and awarded him backwages, separation pay, 13th month
pay, SILP, holiday pay, salary differential, and attorney's fees. On appeal, the National Labor
Relations Commission (NLRC) declared Belen as a family driver. The NLRC also found
Belen to have been illegally dismissed. But since he was but a family driver, the NLRC
deleted the award of backwages and separation pay and instead ordered Javellana to pay him
15 days salary by way of indemnity pursuant to Article 149 of the Labor Code. Aggrieved,
petitioner elevated the matter to the CA, the CA held Belen as a company driver since,
aside from driving respondent Javellana and his family, he also did jobs that were needed in
Javellana's business operations, such as hauling and delivering live hogs, feeds, and lime
stones for the pig pens.The CA also said that Javellana's abrupt dismissal of Belen for an
isolated case of neglect of duty was unjustified.
Issue:
Should the monetary award in his favor run until the finality of the decision in his case?
Ruling:
Yes. As provided in Art. 279 of the Labor Code, the law intends the award of backwages and
similar benefits to accumulate past the date of the Labor Arbiter's decision until the
dismissed employee is actually reinstated. But if, as in this case, reinstatement is no longer
possible, this Court has consistently ruled that backwages shall be computed from the time
of illegal dismissal until the date the decision becomes final.

The parties filed separate petitions before this Court. The petition in G.R. 181913, filed by
respondent Javellana, questioned the CA's finding of illegality of dismissal while the petition
in G.R. 182158, filed by petitioner Belen, challenged the amounts of money claims awarded
to him. The Court denied the first with finality in its resolution of September 22, 2008; the
second is the subject of the present case. Consequently, Belen should be entitled to
backwages from August 20, 1999, when he was dismissed, to September 22, 2008, when the
judgment for unjust dismissal in G.R. 181913 became final.In his separation pay, technically
the computation of separation pay would end on the day he was dismissed on August 20,
1999 when he supposedly ceased to render service and his wages ended. But, since Belen
was entitled to collect backwages until the judgment for illegal dismissal in his favor became
final, here on September 22, 2008, the computation of his separation pay should also end on
that date.

Further, since the monetary awards remained unpaid even after it became final on September
22, 2008, it is but fair that respondent Javellana be required to pay 12% interest per annum
on those awards from September 22, 2008 until they are paid.