July 2012 Philippine Supreme Court Decisions on Labor Law and Procedure

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

Dismissal; due process.  Due process requirement is met when there is simply an opportunity to be heard and to explain one’s side even if no hearing is conducted. An employee may be afforded ample opportunity to be heard by means of any method, verbal or written, whether in a hearing, conference or some other fair, just and reasonable way. After receiving the first notice apprising him of the charges against him, the employee may submit a written explanation (which may be in the form of a letter, memorandum, affidavit or position paper) and offer evidence in support thereof, like relevant company records and the sworn statements of his witnesses. For this purpose, he may prepare his explanation personally or with the assistance of a representative or counsel. He may also ask the employer to provide him copy of records material to his defense. His written explanation may also include a request that a formal hearing or conference be held. In such a case, the conduct of a formal hearing or conference becomes mandatory, just as it is where there exist substantial evidentiary disputes or where company rules or practice requires an actual hearing as part of employment pre-termination procedure.

Petitioner’s written response to the prerequisite notice provided her with an avenue to explain and defend her side and thus served the purpose of due process. That there was no hearing, investigation or right to appeal, which petitioner opined to be a violation of company policies, is of no moment since the record is bereft of any showing that there is an existing company policy that requires these procedures with respect to the termination of a CHR Director like petitioner or that company practice calls for the same. There was also no request for a formal hearing on the part of petitioner.  As she was served with a notice apprising her of the charges against her and also a subsequent notice informing her of the management’s decision to terminate her services after respondents found her written response to the first notice unsatisfactory, petitioner was clearly afforded her right to due process. Flordeliza Maria Reyes-Rayel vs. Philippine Luen Thai Holdings Corporation, et al. G.R. No. 174893, July 11, 2012.

Dismissal; loss of trust and confidence. An employer has a distinct prerogative and wider latitude of discretion in dismissing a managerial personnel who performs functions which by their nature require the employer’s full trust and confidence.As distinguished from a rank and file personnel, mere existence of a basis for believing that a managerial employee has breached the trust of the employer justifies dismissal. Loss of confidence as a ground for dismissal does not require proof beyond reasonable doubt as the law requires only that there be at least some basis to justify it.

Petitioner was L&T’s CHR Director for Manufacturing, which is a managerial position saddled with great responsibility. As such, she was directly responsible for managing her own departmental staff. Because of this, petitioner must enjoy the full trust and confidence of her superiors. However, petitioner delivered dismal performance and displayed poor work attitude, which constitute sufficient reasons for an employer to terminate an employee on the ground of loss of trust and confidence. First, records show that petitioner indeed unreasonably failed to effectively communicate with her immediate superior. Second, the affidavits of petitioner’s co-workers revealed her negative attitude and unprofessional behavior towards them and the company. Lastly, petitioner displayed inefficiency and ineptitude in her job as a CHR Director. Taking all these circumstances collectively, the Court is convinced that respondents have sufficient and valid reasons for terminating the services of petitioner as her continued employment would be patently inimical to respondents’ interest. Flordeliza Maria Reyes-Rayel vs. Philippine Luen Thai Holdings Corporation, et al. G.R. No. 174893, July 11, 2012.

Employee dismissal; validity of termination. Retrenchment is one of the authorized causes for the dismissal of employees recognized by the Labor Code. It is a management prerogative resorted to by employers to avoid or to minimize business losses. The Court has laid down the following standards that an employer should meet to justify retrenchment and to foil abuse, namely:

(a)    The expected losses should be substantial and not merely de minimis in extent;

(b)   The substantial losses apprehended must be reasonably imminent;

(c)    The retrenchment must be reasonably necessary and likely to effectively prevent the expected losses; and

(d)   The alleged losses, if already incurred, and the expected imminent losses sought to be forestalled must be proved by sufficient and convincing evidence

In termination cases, the burden of proving that the dismissal was for a valid or authorized cause rests upon the employer. The petitioner did not submit evidence of the losses to its business operations and the economic havoc it would thereby imminently sustain. It only claimed that respondent’s termination was due to its “present business/financial condition”. This bare statement fell short of the norm to show a valid retrenchment. Indeed, not every loss incurred or expected to be incurred by an employer can justify retrenchment. The employer must prove, among others, that the losses are substantial and that the retrenchment is reasonably necessary to avert such losses. Thus, by its failure to present sufficient and convincing evidence to prove that retrenchment was necessary, respondent’s termination due to retrenchment is not allowed. Legend Hotel [Manila], owned by Titatium Corporation, et al. vs. Hernani S. Realuyo, also known as Joey Roa. G.R. No. 153511, July 18, 2012.

Employee training; reimbursement. The Supreme Court recognized the right of PAL to recoup the costs of a pilot’s training in the form of service for a period of at least three (3) years. By carrying over the same stipulation setting the age of fifty-seven (57) years as the reckoning point when a pilot becomes disqualified to bid for a higher position in the present CBA, both PAL and ALPAP recognized that the company’s effort in sending pilots for training abroad is an investment which necessarily expects a reasonable return in the form of service for a period of at least three (3) years. This stipulation had been repeatedly adopted by the parties in the succeeding renewals of their CBA, thus validating the impression that it is a reasonable and acceptable term to both PAL and ALPAP. Consequently, the petitioner cannot conveniently disregard this stipulation by simply raising the absence of a contract expressly requiring the pilot to remain within PAL’s employ within a period of 3 years after he has been sent on training. The supposed absence of contract being raised by the petitioner cannot stand as the CBA clearly covered the petitioner’s obligation to render service to PAL within 3 years to enable it to recoup the costs of its investment. Bibiano C. Elegir vs. Philippine Airlines, Inc. G.R. No. 181995, July 16, 2012.

Employer-employee relationship; existence. The issue of whether or not an employer-employee relationship existed is essentially a question of fact. The factors that determine the issue include who has the power to select the employee, who pays the employee’s wages, who has the power to dismiss the employee, and who exercises control of the methods and results by which the work of the employee is accomplished. Although no particular form of evidence is required to prove the existence of the relationship, and any competent and relevant evidence to prove the relationship may be admitted, a finding that the relationship exists must nonetheless rest on substantial evidence, which is that amount of relevant evidence that a reasonable mind might accept as adequate to justify a conclusion.

A review of the circumstances reveals that respondent was, indeed, petitioner’s employee. He was undeniably employed as a pianist in petitioner’s Restaurant. First of all, petitioner actually wielded the power of selection at the time it entered into the service contract with respondent. The power of selection was firmly evidenced by, among others, the express written recommendation by petitioner’s restaurant manager, for the increase of his remuneration. Secondly, there is no denying that the remuneration denominated as talent fees was fixed on the basis of his talent and skill and the quality of the music he played during the hours of performance each night, taking into account the prevailing rate for similar talents in the entertainment industry. Respondent’s remuneration, albeit denominated as talent fees, was still considered as included in the term wagein the sense and context of the Labor Code, regardless of how petitioner chose to designate the remuneration. Thirdly, the petitioner has the power to dismiss respondent. The memorandum informing respondent of the discontinuance of his service because of the present business or financial condition of petitioner showed that the latter had the power to dismiss him from employment. Lastly, the power of the employer to control the work of the employee is considered the most significant determinant of the existence of an employer-employee relationship. This is the so-called control test, and is premised on whether the person for whom the services are performed reserves the right to control both the end achieved and the manner and means used to achieve that end. Respondent performed his work as a pianist under petitioner’s supervision and control. Petitioner’s control of both the end achieved and the manner and means used to achieve that end was demonstrated by the following, to wit: (1)He could not choose the time of his performance, which petitioners had fixed from 7:00 pm to 10:00 pm, three to six times a week; (2)He could not choose the place of his performance; (3) The restaurant’s manager required him at certain times to perform only Tagalog songs or music, or to wear barong Tagalog to conform to the Filipiniana motif; and (4)He was subjected to the rules on employees’ representation check and chits, a privilege granted to other employees. Legend Hotel [Manila], owned by Titatium Corporation, et al. vs. Hernani S. Realuyo, also known as Joey Roa. G.R. No. 153511, July 18, 2012.

Management prerogative; transfer of employees. An employer’s decision to transfer an employee, if made in good faith, is a valid exercise of a management prerogative, although it may result in personal inconvenience or hardship to the employee. Re-assignments made by management pending investigation of irregularities allegedly committed by an employee fall within the ambit of management prerogative. The purpose of reassignments is no different from that of preventive suspension which management could validly impose as a disciplinary measure for the protection of the company’s property pending investigation of any alleged malfeasance or misfeasance committed by the employee.

As the executive assistant of the president, petitioner undeniably occupied a sensitive position that required her employer’s utmost trust and confidence. Having lost his trust and confidence in petitioner, respondent Delfin had the right to transfer her to ensure that she would no longer have access to the companies’ confidential files. Although it is true that petitioner has yet to be proven guilty, respondents had the authority to reassign her, pending investigation. When petitioner was assigned to Cavite, there was an ongoing investigation of the charges filed against her. It is undisputed that she refused to fill up, for no justifiable reasons, the questionnaire distributed by her employer to determine who among those who had access to the confidential files was responsible for their taking. Furthermore, a witness had executed an Affidavit claiming that she found the missing files, and that her husband told her that it was petitioner who handed those files to him. Lastly, the person who supposedly received these documents from petitioner did not deny or rebuke the statements made by his wife. Josephine Ruiz vs. Wendel Osaka Realty Corp., et al. G.R. No. 189082, July 11, 2012.

Retirement Pay; collective bargaining agreement. Article 287 of the Labor Code provides that it is applicable only to a situation where (1) there is no CBA or other applicable employment contract providing for retirement benefits for an employee, or (2) there is a CBA or other applicable employment contract providing for retirement benefits for an employee, but it is below the requirement set by law. The rationale for the first situation is to prevent the absurd situation where an employee, deserving to receive retirement benefits, is denied to them through the nefarious scheme of employers to deprive employees of the benefits due them under existing labor laws. On the other hand, the second situation aims to prevent private contracts from derogating from the public law. The determining factor in choosing which retirement scheme to apply is still superiorityin terms of benefits provided. Thus, even if there is an existing CBA but the same does not provide for retirement benefits equal or superior to that which is provided under Article 287 of the Labor Code, the latter will apply.

There are two retirement schemes at point in this case: (1) Article 287 of the Labor Code, and; (2) the PAL-ALPAP Retirement Plan and the PAL Pilots’ Retirement Benefit Plan. The two retirement schemes are alternative in nature such that the retired pilot can only be entitled to that which provides for superior benefits. Comparing the benefits under the two (2) retirement schemes, it can readily be perceived that the 22.5 days worth of salary for every year of service provided under Article 287 of the Labor Code cannot match the 240% of salary or almost two and a half worth of monthly salary per year of service provided under the PAL Pilots’ Retirement Benefit Plan, which will be further added to the 125,000.00 to which the petitioner is entitled under the PAL-ALPAP Retirement Plan. Clearly then, it is to the petitioner’s advantage that PAL’s retirement plans were applied in the computation of his retirement benefits. Bibiano C. Elegir vs. Philippine Airlines, Inc. G.R. No. 181995, July 16, 2012.

Unjust enrichment. There is unjust enrichment when a person unjustly retains a benefit at the loss of another, or when a person retains the money or property of another against the fundamental principles of justice, equity and good conscience. Two conditions must concur: (1) a person is unjustly benefited; and (2) such benefit is derived at the expense of or with damages to another. The enrichment may consist of a patrimonial, physical, or moral advantage, so long as it is appreciable in money. It must have a correlative prejudice, disadvantage or injury to the plaintiff which may consist, not only of the loss of the property or the deprivation of its enjoyment, but also of the non-payment of compensation for a prestation or service rendered to the defendant without intent to donate on the part of the plaintiff, or the failure to acquire something that the latter would have obtained.

PAL invested a considerable amount of money in sending the petitioner abroad to undergo training to prepare him for his new appointment as B747-400 Captain. In the process, the petitioner acquired new knowledge and skills which effectively enriched his technical know-how. As all other investors, PAL expects a return on investment in the form of service by the petitioner for a period of 3 years, which is the estimated length of time within which the costs of the latter’s training can be fully recovered. The petitioner is, thus, expected to work for PAL and utilize whatever knowledge he had learned from the training for the benefit of the company. However, after only one (1) year of service, the petitioner opted to retire from service, leaving PAL stripped of a necessary manpower. Undeniably, the petitioner was enriched at the expense of PAL. After undergoing the training fully shouldered by PAL, he acquired a higher level of technical competence which, in the professional realm, translates to a higher compensation. Further, his training broadened his opportunities for a better employment as in fact he was able to transfer to another airline company immediately after he left PAL. To allow the petitioner to simply leave the company without reimbursing it for the proportionate amount of the expenses it incurred for his training will only magnify the financial disadvantage sustained by PAL. Reason and fairness dictate that he must return to the company a proportionate amount of the costs of his training. Bibiano C. Elegir vs. Philippine Airlines, Inc. G.R. No. 181995, July 16, 2012.

(Leslie thanks Leanne Herschel C. Que for assisting in the preparation of this post.)