April 2012 Philippine Supreme Court Decisions on Labor Law and Procedure

Here are select April 2012 rulings of the Supreme Court of the Philippines on labor law and procedure:

Dismissal; due process. When the Labor Code speaks of procedural due process, the reference is usually to the two (2)-written notice rule envisaged in Section 2 (III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code. MGG Marine Services, Inc. v. NLRC tersely described the mechanics of what may be considered a two-part due process requirement which includes the two-notice rule, “x x x one, of the intention to dismiss, indicating therein his acts or omissions complained against, and two, notice of the decision to dismiss; and an opportunity to answer and rebut the charges against him, in between such notices.”

Here, the first and second notice requirements have not been properly observed. The adverted memo would have had constituted the “charge sheet,” sufficient to answer for the first notice requirement, but for the fact that there is no proof such letter had been sent to and received by him. Neither was there compliance with the imperatives of a hearing or conference. Suffice it to point out that the record is devoid of any showing of a hearing or conference having been conducted. And the written notice of termination itself did not indicate all the circumstances involving the charge to justify severance of employment. For violating petitioner’s right to due process, the Supreme Court ordered the payment to petitioner of the amount of P30,000 as nominal damages. Armando Ailing vs. Jose B. Feliciano, Manuel F. San Mateo III, et al., G.R. No. 185829. April 25, 2012.

Dismissal; just cause. In fine, an employee’s failure to meet sales or work quotas falls under the concept of gross inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for dismissal under Article 282 of the Code. However, in order for the quota imposed to be considered a valid productivity standard and thereby validate a dismissal, management’s prerogative of fixing the quota must be exercised in good faith for the advancement of its interest. The duty to prove good faith, however, rests with WWWEC as part of its burden to show that the dismissal was for a just cause. WWWEC must show that such quota was imposed in good faith. This WWWEC failed to do, perceptibly because it could not. The fact of the matter is that the alleged imposition of the quota was a desperate attempt to lend a semblance of validity to Aliling’s illegal dismissal. Armando Ailing vs. Jose B. Feliciano, Manuel F. San Mateo III, et al., G.R. No. 185829. April 25, 2012.

Dismissal; retrenchment. Retrenchment is a valid exercise of management prerogative subject to the strict requirements set by jurisprudence, to wit:

(1)  That the retrenchment is reasonably necessary and likely to prevent business losses which, if already incurred, are not merely de minimis, but substantial, serious, actual and real, or if only expected, are reasonably imminent as perceived objectively and in good faith by the employer;

(2)  That the employer served written notice both to the employees and to the Department of Labor and Employment at least one month prior to the intended date of retrenchment;

(3)  That the employer pays the retrenched employees separation pay equivalent to one month pay or at least ½ month pay for every year of service, whichever is higher;

(4)  That the employer exercises its prerogative to retrench employees in good faith for the advancement of its interest and not to defeat or circumvent the employees’ right to security of tenure; and

(5)  That the employer used fair and reasonable criteria in ascertaining who would be dismissed and who would be retained among the employees, such as status, x x x efficiency, seniority, physical fitness, age, and financial hardship for certain workers.

As aptly found by the NLRC and justly sustained by the CA, Petrocon exercised its prerogative to retrench its employees in good faith and the considerable reduction of work allotments of Petrocon by Saudi Aramco was sufficient basis for Petrocon to reduce the number of its personnel. As for the notice requirement, however, contrary to petitioner’s contention, proper notice to the DOLE within 30 days prior to the intended date of retrenchment is necessary and must be complied with despite the fact that respondent is an overseas Filipino worker. In the present case, although respondent was duly notified of his termination by Petrocon 30 days before its effectivity, no allegation or proof was advanced by petitioner to establish that Petrocon ever sent a notice to the DOLE 30 days before the respondent was terminated. Thus, this requirement of the law was not complied with. Despite the fact that respondent was employed by Petrocon as an OFW in Saudi Arabia, still both he and his employer are subject to the provisions of the Labor Code when applicable. The basic policy in this jurisdiction is that all Filipino workers, whether employed locally or overseas, enjoy the protective mantle of Philippine labor and social legislations (citing Philippine National Bank v. Cabansag, G.R. No. 157010, June 21, 2005, 460 SCRA 514, 518 and Royal Crown Internationale v. NLRC, G.R. No. 78085, October 16, 1989, 178 SCRA 569.) International Management Services/Marilyn C. Pascual vs. Roel P. Logarta, G.R. No. 163657, April 18, 2012.

Employee; probationary employee. The aforequoted Section 6 of the Implementing Rules of Book VI, Rule VIII-A of the Code specifically requires the employer to inform the probationary employee of such reasonable standards at the time of his engagement, not at any time later; else, the latter shall be considered a regular employee. Thus, pursuant to the explicit provision of Article 281 of the Labor Code, Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of the Labor Code and settled jurisprudence, petitioner Aliling is deemed a regular employee as of June 11, 2004, the date of his employment contract.

The letter-offer to Aliling states that the regularization standards or the performance norms to be used are still to be agreed upon by him and his supervisor. Moreover, Aliling was assigned to GX trucking sales, an activity entirely different to the Seafreight Sales for which he was originally hired and trained for. In the present case, there was no proof that Aliling was informed of the standards for his continued employment, such as the sales quota, at the time of his engagement. Armando Ailing vs. Jose B. Feliciano, Manuel F. San Mateo III, et al., G.R. No. 185829. April 25, 2012.

Employee; separation package. Article 283 of the Labor Code provides only the required minimum amount of separation pay, which employees dismissed for any of the authorized causes are entitled to receive. Employers, therefore, have the right to create plans, providing for separation pay in an amount over and above what is imposed by Article 283. There is nothing therein that prohibits employers and employees from contracting on the terms of employment, or from entering into agreements on employee benefits, so long as they do not violate the Labor Code or any other law, and are not contrary to morals, good customs, public order, or public policy.

Consequently, petitioners are not allowed to receive separation pay from both the Labor Code, on the one hand, and the New Gratuity Plan and the SSP, on the other, they would receive double compensation for the same cause (i.e., separation from the service due to redundancy). Ma. Corina C. Jiao, et al. vs. Global Business Bank, Inc., et al., G.R. No. 182331, April 18, 2012.

Employer-employee relationship. In determining the presence or absence of an employer-employee relationship, the Court has consistently looked for the following incidents, to wit:  (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer’s power to control the employee on the means and methods by which the work is accomplished. The last element, the so-called control test, is the most important element.

It can be deduced from the March 1996 affidavit of petitioner that respondents challenged his authority to deliver some 158 checks to SFC. Considering that petitioner contested respondents’ challenge by pointing to the existing arrangements between BCC and SFC, it should be clear that respondents did not exercise the power of control over petitioner, because he thereby acted for the benefit and in the interest of SFC more than of BCC. Charlie Jao vs. BCC Products Sales, Inc. and Terrance Ty, G.R. No. 163700, April 18, 2012.

Project employee; conversion into regular employee. In all the 38 projects where DMCI engaged Jamin’s services, the tasks he performed as a carpenter were indisputably necessary and desirable in DMCI’s construction business. He might not have been a member of a work pool since DMCI insisted that it does not maintain a work pool, but his continuous rehiring in 38 projects over a period of 31 years and the nature of his work unmistakably made him a regular employee. In Maraguinot, Jr. v. NLRC, 348 Phil. 580 (1998), the Court held that once a project or work pool employee has been: (1) continuously, as opposed to intermittently, rehired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee.

Surely, length of time is not the controlling test for project employment but it is vital in determining if the employee was hired for a specific undertaking or if it is tasked to perform functions vital, necessary and indispensable to the usual business or trade of the employer. Here, [private] respondent had been a project employee several times over. The nature of his employment ceased to be project-based when he was repeatedly re-hired due to the demands of petitioner’s business. D.M. Consunji, Inc. and/or David M. Consunji vs. Estelito, G.R. No. 192514, April 18, 2012.

Dismissal; willful disobedience. For willful disobedience to be a valid cause for dismissal, these two elements must concur: (1) the employee’s assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge.

The petitioner’s arbitrary defiance to Graphics, Inc.’s order for him to render overtime work constitutes willful disobedience. Because of his refusal to render overtime work, the company failed to meet its printing deadlines, resulting in losses to the company. The Supreme Court took into account the fact that petitioner was inclined to absent himself and to report late for work despite being previously penalized, and affirmed the CA’s ruling that the petitioner is indeed utterly defiant of the lawful orders and the reasonable work standards prescribed by his employer. The Court reiterated its previous rulings stating that an employer has the right to require the performance of overtime service in any of the situations contemplated under Article 89 of the Labor Code and an employee’s non-compliance is willful disobedience. Realda v. New Age Graphics, Inc. et. al. G.R. No. 192190, April 25, 2012.

Dismissal; inefficiency. The petitioner’s failure to observe Graphics, Inc.’s work standards constitutes inefficiency that is a valid cause for dismissal. Failure to observe prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal. Such inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to complete the same within the alloted reasonable period, or by producing unsatisfactory results. As the operator of Graphics, Inc.’s printer, he is mandated to check whether the colors that would be printed are in accordance with the client’s specifications and for him to do so, he must consult the General Manager and the color guide used by Graphics, Inc. before making a full run. The employee in this case failed to observe this simple procedure and proceeded to print without making sure that the colors were at par with the client’s demands. This resulted to delays in the delivery of output, client dissatisfaction, and additional costs to Graphics, Inc.. Realda v. New Age Graphics, Inc. et. al. G.R. No. 192190, April 25, 2012.

Dismissal; due process. In King of Kings Transport, Inc. v. Mamac, this Court laid down the manner by which the procedural due requirements of due process can be satisfied:

(1)          The first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable period.  “Reasonable opportunity” under the Omnibus Rules means every kind of assistance that management must accord to the employees to enable them to prepare adequately for their defense.  This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study the accusation against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint.  Moreover, in order to enable the employees to intelligently prepare their explanation and defenses, the notice should contain a detailed narration of the facts and circumstances that will serve as basis for the charge against the employees.  A general description of the charge will not suffice.  Lastly, the notice should specifically mention which company rules, if any, are violated and/or which among the grounds under Art. 282 is being charged against the employees.

(2)          After serving the first notice, the employers should schedule and conduct a hearing or conference wherein the employees will be given the opportunity to: (a) explain and clarify their defenses to the charge against them; (b) present evidence in support of their defenses; and (c) rebut the evidence presented against them by the management.  During the hearing or conference, the employees are given the chance to defend themselves personally, with the assistance of a representative or counsel of their choice.  Moreover, this conference or hearing could be used by the parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the employees a written notice of termination indicating that: (1) all circumstances involving the charge against the employees have been considered; and (2) grounds have been established to justify the severance of their employment.

Graphics, Inc. failed to afford the petitioner with a reasonable opportunity to be heard and defend itself. An administrative hearing set on the same day that the petitioner received the memorandum and the 24-hour period given to him to submit a written explanation is far from reasonable. Furthermore, there is no indication that Graphics, Inc. issued a second notice, informing the petitioner of his dismissal. Graphics, Inc. admitted that it decided to terminate the petitioner’s employment when he ceased to report for work after being served with the memorandum requiring him to explain and subsequent to his failure to submit a written explanation. However, there is nothing on record showing that Graphics, Inc. placed its decision to dismiss in writing and that a copy thereof was sent to the petitioner. Notwithstanding the existence of a just cause to terminate petitioner’s employment, respondent was ordered to pay P30,000 as nominal damages for violation of the employee’s right to due process. Realda v. New Age Graphics, Inc. et. al. G.R. No. 192190, April 25, 2012.

Dismissal; willful disobedience. Willful disobedience requires the concurrence of two elements: (1) the employee’s assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which he had been engaged to discharge. Both elements are present in this case.

First, at no point did the dismissed employees deny Kingspoint Express’ claim that they refused to comply with the directive for them to submit to a drug test or, at the very least, explain their refusal. This gives rise to the impression that their non-compliance is deliberate. The utter lack of reason or justification for their insubordination indicates that it was prompted by mere obstinacy, hence, willful thereby justifying their dismissal. Second, that the company’s order to undergo a drug test is necessary and relevant in the performance of petitioners’ functions as drivers of Kingspoint Express is obvious. As the NLRC correctly pointed out, drivers are indispensable to Kingspoint Express’ primary business of rendering door-to-door delivery services. It is common knowledge that the use of dangerous drugs has adverse effects on driving abilities that may render employees incapable of performing their duties. Not only are they acting against the interests of Kingspoint Express, they also pose a threat to the public. Kakampi and its members, et al. v. Kingspoint Express and Logistic and/or Mary Ann Co, G.R. No. 194813, April 25, 2012.

Dismissal; procedural due process requirements. While Kingspoint Express had reason to sever petitioners’ employment, this Court finds its supposed observance of the requirements of procedural due process pretentious. While Kingspoint Express required the dismissed employees to explain their refusal to submit to a drug test, the two (2) days afforded to them to do so cannot qualify as “reasonable opportunity”, which the Court construed in King of Kings Transport, Inc. v. Mamac as a period of at least five (5) calendar days from receipt of the notice.

Thus, even if a just cause exists for the dismissal of petitioners, Kingspoint Express is still liable to indemnify the dismissed employees, with the exception of Panuelos, Dizon and Dimabayao, who did not appeal the dismissal of their complaints, with nominal damages in the amount of P30,000.00. Kakampi and its members, et al. v. Kingspoint Express and Logistic and/or Mary Ann Co, G.R. No. 194813, April 25, 2012.

(Leslie thanks Rommel Lumagui for assisting in the preparation of this post.)