Labor Law (Batch2)

7/28/2019 Labor Law (Batch2)

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Republic of the Philippines

SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 170734 May 14, 2008

ARCO METAL PRODUCTS, CO., INC., and MRS. SALVADOR UY, petitioners,

vs.

SAMAHAN NG MGA MANGGAGAWA SA ARCO METAL-NAFLU (SAMARM-NAFLU), respondent.

D E C I S I O N

TINGA,J.:

This treats of the Petition for Review1of the Resolution2and Decision3of the Court of Appeals dated 9

December 2005 and 29 September 2005, respectively in CA-G.R. SP No. 85089 entitled

Samahan ng mga Manggagawa sa Arco Metal-NAFLU (SAMARM-NAFLU) v. Arco Metal Products Co., Inc.

and/or Mr. Salvador Uy/Accredited Voluntary Arbitrator Apron M. Mangabat,4which ruled that the

13th

month pay, vacation leave and sick leave conversion to cash shall be paid in full to the employees of

petitioner regardless of the actual service they rendered within a year.

Petitioner is a company engaged in the manufacture of metal products, whereas respondent is the labor

union of petitioners rank and file employees. Sometime in December 2003, petitioner paid the

13th month pay, bonus, and leave encashment of three union members in amounts proportional to the

service they actually rendered in a year, which is less than a full twelve (12) months. The employees were:

1. Rante Lamadrid Sickness 27 August 2003 to 27 February 2004

2. Alberto Gamban Suspension 10 June 2003 to 1 July 2003

3. Rodelio Collantes Sickness August 2003 to February 2004

Respondent protested the prorated scheme, claiming that on several occasions petitioner did not prorate

the payment of the same benefits to seven (7) employees who had not served for the full 12 months. The

payments were made in 1992, 1993, 1994, 1996, 1999, 2003, and 2004. According to respondent, the

prorated payment violates the rule against diminution of benefits under Article 100 of the Labor Code.

Thus, they filed a complaint before the National Conciliation and Mediation Board (NCMB). The parties

submitted the case for voluntary arbitration.

The voluntary arbitrator, Apron M. Mangabat, ruled in favor of petitioner and found that the giving of thecontested benefits in full, irrespective of the actual service rendered within one year has not ripened into

a practice. He noted the affidavit of Joselito Baingan, manufacturing group head of petitioner, which

states that the giving in full of the benefit was a mere error. He also interpreted the phrase "for each year

of service" found in the pertinent CBA provisions to mean that an employee must have rendered one year

of service in order to be entitled to the full benefits provided in the CBA.5

Unsatisfied, respondent filed a Petition for Review6under Rule 43 before the Court of Appeals, imputing

serious error to Mangabats conclusion. The Court of Appeals ruled that the CBA did not intend to

foreclose the application of prorated payments of leave benefits to covered employees. The appellate

court found that petitioner, however, had an existing voluntary practice of paying the aforesaid benefits
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in full to its employees, thereby rejecting the claim that petitioner erred in paying full benefits to its seven

employees. The appellate court noted that aside from the affidavit of petitioners officer, it has not

presented any evidence in support of its position that it has no voluntary practice of granting the

contested benefits in full and without regard to the service actually rendered within the year. It also

questioned why it took petitioner eleven (11) years before it was able to discover the alleged error. The

dispositive portion of the courts decision reads:

WHEREFORE, premises considered, the instant petition is hereby GRANTED and the Decision of Accredited

Voluntary Arbiter Apron M. Mangabat in NCMB-NCR Case No. PM-12-345-03, dated June 18, 2004 ishereby AFFIRMED WITH MODIFICATION in that the 13

thmonth pay, bonus, vacation leave and sick leave

conversions to cash shall be paid to the employees in full, irrespective of the actual service rendered

within a year.7

Petitioner moved for the reconsideration of the decision but its motion was denied, hence this petition.

Petitioner submits that the Court of Appeals erred when it ruled that the grant of 13th month pay, bonus,

and leave encashment in full regardless of actual service rendered constitutes voluntary employer

practice and, consequently, the prorated payment of the said benefits does not constitute diminution of

benefits under Article 100 of the Labor Code.8

The petition ultimately fails.

First, we determine whether the intent of the CBA provisions is to grant full benefits regardless of service

actually rendered by an employee to the company. According to petitioner, there is a one-year cutoff in

the entitlement to the benefits provided in the CBA which is evident from the wording of its pertinent

provisions as well as of the existing law.

We agree with petitioner on the first issue. The applicable CBA provisions read:

ARTICLE XIV-VACATION LEAVE

Section 1. Employees/workers covered by this agreement who have rendered at least one (1) year of

service shall be entitled to sixteen (16) days vacation leave with pay for each year of service. Unused

leaves shall not be cumulative but shall be converted into its cash equivalent and shall become due andpayable every 1st Saturday of December of each year.

However, if the 1st Saturday of December falls in December 1, November 30 (Friday) being a holiday, the

management will give the cash conversion of leaves in November 29.

Section 2. In case of resignation or retirement of an employee, his vacation leave shall be paid

proportionately to his days of service rendered during the year.

ARTICLE XV-SICK LEAVE


service shall be entitled to sixteen (16) days of sick leave with pay for each year of service. Unused sickleave shall not be cumulative but shall be converted into its cash equivalent and shall become due and

payable every 1st Saturday of December of each year.

Section 2. Sick Leave will only be granted to actual sickness duly certified by the Company physician or by

a licensed physician.

Section 3. All commutable earned leaves will be paid proportionately upon retirement or separation.

ARTICLE XVI EMERGENCY LEAVE, ETC.

Section 1. The Company shall grant six (6) days emergency leave to employees covered by this agreement
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and if unused shall be converted into cash and become due and payable on the 1st

Saturday of December

each year.


service shall be entitled to seven (7) days of Paternity Leave with pay in case the married employees

legitimate spouse gave birth. Said benefit shall be non-cumulative and non-commutative and shall be

deemed in compliance with the law on the same.

Section 3. Maternity leaves for married female employees shall be in accordance with the SSS Law plus a

cash grant of P1,500.00 per month.

x x x

ARTICLE XVIII- 13TH

MONTH PAY & BONUS

Section 1. The Company shall grant 13 th Month Pay to all employees covered by this agreement. The basis

of computing such pay shall be the basic salary per day of the employee multiplied by 30 and shall

become due and payable every 1st Saturday of December.

Section 2. The Company shall grant a bonus to all employees as practiced which shall be distributed on

the 2nd Saturday of December.

Section 3. That the Company further grants the amount of Two Thousand Five Hundred Pesos (P2,500.00)

as signing bonus plus a free CBA Booklet.9(Underscoring ours)

There is no doubt that in order to be entitled to the full monetization of sixteen (16) days of vacation and

sick leave, one must have rendered at least one year of service. The clear wording of the provisions does

not allow any other interpretation. Anent the 13th month pay and bonus, we agree with the findings of

Mangabat that the CBA provisions did not give any meaning different from that given by the law, thus it

should be computed at 1/12 of the total compensation which an employee receives for the whole

calendar year. The bonus is also equivalent to the amount of the 13th month pay given, or in proportion to

the actual service rendered by an employee within the year.

On the second issue, however, petitioner founders.

As a general rule, in petitions for review under Rule 45, the Court, not being a trier of facts, does not

normally embark on a re-examination of the evidence presented by the contending parties during the trial

of the case considering that the findings of facts of the Court of Appeals are conclusive and binding on the

Court.10The rule, however, admits of several exceptions, one of which is when the findings of the Court of

Appeals are contrary to that of the lower tribunals. Such is the case here, as the factual conclusions of the

Court of Appeals differ from that of the voluntary arbitrator.

Petitioner granted, in several instances, full benefits to employees who have not served a full year, thus:

Name Reason Duration

1. Percival Bernas Sickness July 1992 to November 1992

2. Cezar Montero Sickness 21 Dec. 1992 to February 1993

3. Wilson Sayod Sickness May 1994 to July 1994

4. Nomer Becina Suspension 1 Sept. 1996 to 5 Oct. 1996


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5. Ronnie Licuan Sickness 8 Nov. 1999 to 9 Dec. 1999

6. Guilbert Villaruel Sickness 23 Aug. 2002 to 4 Feb. 2003

7. Melandro Moque Sickness 29 Aug. 2003 to 30 Sept. 200311

Petitioner claims that its full payment of benefits regardless of the length of service to the company does

not constitute voluntary employer practice. It points out that the payments had been erroneously made

and they occurred in isolated cases in the years 1992, 1993, 1994, 1999, 2002 and 2003. According to

petitioner, it was only in 2003 that the accounting department discovered the error "when there were

already three (3) employees involved with prolonged absences and the error was corrected by

implementing the pro-rata payment of benefits pursuant to law and their existing CBA."12It adds that the

seven earlier cases of full payment of benefits went unnoticed considering the proportion of one

employee concerned (per year) vis vis the 170 employees of the company. Petitioner describes the

situation as a "clear oversight" which should not be taken against it.13To further bolster its case,

petitioner argues that for a grant of a benefit to be considered a practice, it should have been practiced

over a long period of time and must be shown to be consistent, deliberate and intentional, which is not

what happened in this case. Petitioner tries to make a case out of the fact that the CBA has not been

modified to incorporate the giving of full benefits regardless of the length of service, proof that the grant

has not ripened into company practice.

We disagree.

Any benefit and supplement being enjoyed by employees cannot be reduced, diminished, discontinued or

eliminated by the employer.14

The principle of non-diminution of benefits is founded on the

Constitutional mandate to "protect the rights of workers and promote their welfare,"15

and "to afford

labor full protection."16

Said mandate in turn is the basis of Article 4 of the Labor Code which states that

"all doubts in the implementation and interpretation of this Code, including its implementing rules and

regulations shall be rendered in favor of labor." Jurisprudence is replete with cases which recognize the

right of employees to benefits which were voluntarily given by the employer and which ripened into

company practice. Thus in Davao Fruits Corporation v. Associated Labor Unions, et al.17where an

employer had freely and continuously included in the computation of the 13 th month pay those items that

were expressly excluded by the law, we held that the act which was favorable to the employees though

not conforming to law had thus ripened into a practice and could not be withdrawn, reduced, diminished,

discontinued or eliminated. In Sevilla Trading Company v. Semana,18we ruled that the employers act of

including non-basic benefits in the computation of the 13th month pay was a voluntary act and had

ripened into a company practice which cannot be peremptorily withdrawn. Meanwhile in Davao

Integrated Port Stevedoring Services v. Abarquez,19the Court ordered the payment of the cash equivalent

of the unenjoyed sick leave benefits to its intermittent workers after finding that said workers had

received these benefits for almost four years until the grant was stopped due to a different interpretation

of the CBA provisions. We held that the employer cannot unilaterally withdraw the existing privilege of

commutation or conversion to cash given to said workers, and as also noted that the employer had in fact

granted and paid said cash equivalent of the unenjoyed portion of the sick leave benefits to someintermittent workers.

In the years 1992, 1993, 1994, 1999, 2002 and 2003, petitioner had adopted a policy of freely, voluntarily

and consistently granting full benefits to its employees regardless of the length of service rendered. True,

there were only a total of seven employees who benefited from such a practice, but it was an established

practice nonetheless. Jurisprudence has not laid down any rule specifying a minimum number of years

within which a company practice must be exercised in order to constitute voluntary company

practice.20

Thus, it can be six (6) years,21

three (3) years,22

or even as short as two (2) years.23

Petitioner

cannot shirk away from its responsibility by merely claiming that it was a mistake or an error, supported

only by an affidavit of its manufacturing group head portions of which read:
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5. 13th

month pay, bonus, and cash conversion of unused/earned vacation leave, sick leave and

emergency leave are computed and paid in full to employees who rendered services to the company for

the entire year and proportionately to those employees who rendered service to the company for a

period less than one (1) year or twelve (12) months in accordance with the CBA provision relative thereto.

6. It was never the intention much less the policy of the management to grant the aforesaid benefits to

the employees in full regardless of whether or not the employee has rendered services to the company

for the entire year, otherwise, it would be unjust and inequitable not only to the company but to other

employees as well.

24

In cases involving money claims of employees, the employer has the burden of proving that the

employees did receive the wages and benefits and that the same were paid in accordance with law.25

Indeed, if petitioner wants to prove that it merely erred in giving full benefits, it could have easily

presented other proofs, such as the names of other employees who did not fully serve for one year and

thus were given prorated benefits. Experientially, a perfect attendance in the workplace is always the goal

but it is seldom achieved. There must have been other employees who had reported for work less than a

full year and who, as a consequence received only prorated benefits. This could have easily bolstered

petitioners theory of mistake/error, but sadly, no evidence to that effect was presented.

IN VIEW HEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. SP No. 85089

dated 29 September 2005 is and its Resolution dated 9 December 2005 are hereby AFFIRMED.

SO ORDERED.


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SUPREME COURT

Manila

THIRD DIVISION

G.R. No. 148256 November 17, 2004

ADELINO FELIX, petitioner,vs.

NATIONAL LABOR RELATIONS COMMISSION (NLRC) 3RD DIVISION and REPUBLIC ASAHI GLASS

CORPORATION, respondents.

D E C I S I O N

CARPIO MORALES,J.:

From the Court of Appeals Decision1of May 21, 2001 affirming that of the National Labor Relations Commission which

dismissed petitioner Adelino Felix's complaint for illegal dismissal against Republic Asahi Glass Corporation (the

company), petitioner comes to this Court on a petition for review on certiorari.

Petitioner was hired by the company on October 1, 1980 as a Cadet Engineer. In 1983 he became a supervisor, a position

he held until January 1992.2In January 1992, he was designated as Marketing Officer II, a position at the company's

Fabricated Glass Division Marketing (FGD Marketing).3

FGD Marketing promotes market expansion, solicits purchase orders, monitors inventory and update of records, finds

sources of automotive laminated glass products, regularly visits customers' warehouse and production line, receives

customers' complaints, and initiates the return of vacated wooden crates in customers' warehouses.4It likewise

coordinates with other departments of the company including the Production Planning Control Department for the

scheduling of tempered glass production, the Logistics Department for delivery requirements and schedule, and the

Credit and Collection Department for establishment of credit lines and terms for new customers.5

Sometime in 1992, petitioner was offered a chance to train and qualify for the position of Assistant Manager but as he

was content with his position as Marketing Officer II, he declined and waived the opportunity to the one who was next-

in-line.6

As Marketing Officer II of the FGD Marketing, the bulk of petitioner's functions related to sales, which required him to

perform his duties away from the principal place of business of the company.7He handled the accounts of Philippine

Automotive Manufacturing Corporation (PAMCOR), Universal Motors Corporation (UMC), Honda Cars Philippines, Inc.,

and Francisco Motors Corporation (FMC) and reported directly to the Manager of FGD Marketing, Ms. Marilyn

Encinares.8

By petitioner's claim, sometime in July 1994, he was asked by certain officers of the company, particularly Ms. Encinares

and Mr. Roberto G. Agustin, Assistant Vice President, Manpower Technical Services, to resign and accept a separation

package, failing which he would be terminated for loss of confidence.9
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Petitioner, however, refused to resign and accept separation benefits, drawing the officers of the company to, by his

claim, start harassing him.10

Thus, he was not given work11

and another employee, Mr. Elmer Tacata, was assigned to

take over his post and function.12

And one morning, he found on his desk a newspaper clipping of a job opening for a

"Tempering Glass Supervisor" in the Middle East.13

Unable to withstand the manner by which he was being treated by the company, he, through his lawyer, warned it by

letter of August 16, 1994 about the illegality of its actions. The letter reads:

Gentlemen:

I am writing in behalf of my client, MR. ADELINO L. FELIX, your Marketing Officer, Fabricated Glass Division.

It appears that you have been unlawfully compelling him to voluntarily resign with a separation package otherwise you

will terminate him due to alleged loss of trust and confidence.

I have also been informed that no formal charges have been officially furnished him which constitute[s] your alleged

grounds for termination. My client is also being subjected to undue mental torture because you deliberately refuse to

assign any tasks to him these past few weeks despite his being always present at work.

I need not tell you that what you have been doing to my client is illegal and malicious. You are hereby put on notice thatunless the necessary rectifications are made to the wrong done to my client, we shall file the necessary legal action/s

against you for the redress of his grievances, impleading in the intended case/s your responsible officers.14

Upon receipt of petitioner's letter also on August 16, 1994, the company transferred him from his position as Marketing

Officer II of the FGD Marketing to Supervisor IV of the Technical Services Division (TSD).15And replying to petitioner's

letter, the company emphasized that given the series of irresponsible and inefficient acts he had committed which

justified the initiation of an administrative proceeding against him,16

it instead offered him a separation package upon

his resignation in order to give him an opportunity to opt for a graceful exit17

. The company went on to declare that it

had finally decided to initiate disciplinary action against him in view of, in the main, his irresponsibility in sending the

August 16, 1994 letter which pre-empted management prerogatives.18

Thus the company, by letter of September 27, 1994, directed petitioner to explain in writing within 48 hours from

receipt thereof why his services should not be terminated for loss of trust and confidence, viz:

Dear Mr. Felix:

At the outset, you are reminded that you held a position of trust and confidence as a Marketing Officer of the Fabricated

Glass Division.

On various dates and occasions, you breached the trust reposed in you by the Management in that you committed,

among other(s), the following:

1. Absence Without Leave (AWOL) for six (6) working days from May 29 to June 5, 1992.

2. Lingering unnecessarily or killing time at the place of customers. Worse, engaging employees and officers of [the]

customers in argument[s] and quarrel[s] to the extent that you were interfering in their functions and antagonizing

them.

3. Going to or visiting UMC (Mandaluyong) only when called upon to do so.

4. Always not attending the regular morning meetings at FGD Production Office.
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The over-all assessment of customers you have dealt with is that you are an irresponsible and ineffective representative

of the Company. As a customary management functions (sic), and considering that you are an officer, your case has

been discussed, and necessarily your transfer or even your voluntary resignation and other probabilities were

mentioned unofficially and informally. In other words, by your own acts, you constrained Management to evaluate you

at this stage.

Management then expected you to act as an officer. Instead you wrote that letter dated 12 August 1994 and followed

by the letter of your lawyer dated 16 August 1994. These letters are both premature and designed to pre-empt

Management prerogative. This merely confirms your irresponsibility. Your action is unworthy of being a trusted officer

of the company.

Management has come to the conclusion that you can no longer be vested with functions that are central to the

effective operations of the Company. In short, it has lost its confidence in you.

You are hereby directed to explain in writing within 48 hours from receipt hereof why your services should not be

terminated for loss of trust and confidence and therefore, for cause. You may engage the advice of your counsel, if you

desire, in preparing your explanation. Your failure to submit your explanation in writing within the period required shall

be construed as a waiver on your part and the Management will proceed to act accordingly.19(Underscoring and

emphasis supplied)

By letter of September 28, 1994, petitioner denied the charges against him. He explained that his absence for 6 days

from May 29 to June 5, 1992 was occasioned by some problems at home which he had to personally attend to,

information for which absence he relayed to his office; and that upon reporting for work, he submitted a written

explanation to Ms. Encinares who accepted it as shown by her signature on his admission slip.20

On the charge that he was "lingering unnecessarily or killing time at the place of customers," he, denying the same,

proffered that he valued his work and would not do anything to jeopardize his employment in the company which had

given him a good source of income for the past 14 years.21

Likewise denying the charge that he visited the UMC plant only when called upon to do so, petitioner proffered that hemade it a point to regularly visit the plant, and when technical problems arose, he attended to them immediately.

22

On the charge that he had not attended the daily 3 minutes meeting23at the FGD Production Office, petitioner, denying

the same, explained that the Warehouse and Production Department preferred to talk to only one person and if there

were matters or concerns that needed to be addressed by the FGD Marketing, he coursed them through Engr. Raymond

Santayana who was chosen to act as the representative during those meetings.24

Petitioner attributed the company's harassment against him to his being a member of the supervisory union then being

formed.25

The company subsequently terminated petitioner's services for loss of trust and confidence by letter of September 30,1994 reading:

Dear Mr. Felix:

We received on 29 September your letter explanation dated 28 September 1994.

A perusal of your letter-explanation shows that you have not actually clarified much less satisfied management why it

should not lose its trust and confidence reposed in you as an officer of the company. You did not even respond to the
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finding of Management that you were "irresponsible and ineffective representative of the Company" which is

disappointing to say the least.

It is amusing but also disappointing that you, like an ordinary rank and filer (sic), is now trying to hide under the skirt of

"unionism" to cover your shortcomings. We are not aware of the formation of any such supervisory union. The stand of

the Company in unionism is clear. Unionism has nothing to do with your case and you know that.

We regret to advise you therefore that the Company is terminating your services for loss of trust and confidence and

therefore for cause effective upon receipt hereof. You are further directed to turn over all papers, documents and other

property of the Company to your department head.

For your compliance.26

(Underscoring supplied)

Petitioner thus lodged on October 10, 1994 a complaint for illegal dismissal.27

Petitioner claims that he was terminated because of his active participation in the formation of a supervisory union, and

that the so-called "due process" afforded to him was a sham because the company had decided to terminate his

employment before his receipt of the September 27, 1994 show-cause letter.28

To support his claim, petitioner referred

to a circular dated August 15, 1994 sent by the company to its clients, informing them that petitioner had been relieved

of his position as Marketing Officer II effective August 1, 1994.29

On the other hand, the company denied that it harassed petitioner and that he was dismissed for his union activities,30

it

maintaining that aside from the 4 grounds it stated in its September 27, 1994 show-cause letter to him, he had incurred

frequent absences as early as in 1991 which were not due to emergency reasons but to his personal endeavors such as

attending to his duties as barangay kagawad, or to his "palayan" or piggery or "palaisdaan."31

Additionally, it complained

that petitioner did not utilize company time effectively as he would go home directly after making calls on customers

even if there remained 3 or 4 hours of company time.32

To substantiate its claim that petitioner was dismissed for cause, the company submitted the following documentary

evidence.

1. A letter sent to petitioner by M.S. Encinares dated June 16, 1992 regarding the six (6) days vacation leave from May

29 to June 5, 1992.33

2. A memorandum dated March 11, 1994 prepared by M.S. Encinares regarding petitioner's absence in the daily three

(3) minute meeting of the Marketing Associates and Staff with the Production Group.34

3. A report dated August 18, 1994 submitted by M.S. Encinares on a meeting held by Francisco Motors Corp. (FMC) with

its suppliers including Republic Glass Asahi Company, citing the report35

of Elmer Tacata, the company's representative

to the meeting, that FMC complained of delayed deliveries and irregular visits of the company representative.36

4. A report dated September 19, 1994 prepared by N.B. Galpa on his trip to Nissan Motors, FMC, Universal Motors,

PAMCOR and Honda Cars Philippines about some of its products being rejected and returned due to scratches,

distortion, "chipping and no-hole," mispacking and handling procedure.37

5. Affidavit of M.S. Encinares dated November 15, 1995 on petitioner's work ethics and behavior.38

Relying on the documentary evidence submitted by the company, the Labor Arbiter, by Decision of October 16, 1996,

dismissed petitioner's complaint in this wise:
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In the present case, sufficient factual basis has been established to justify the dismissal of complainant on the ground of

loss of trust and confidence, Complainant's six-day absence without official leave had been properly documented by the

Company in a letter dated 16 June 1992 (Annex "B", Respondent's Position Paper). Complainant's negative attitude

towards the daily 3-minute meetings among the FGD Staff was likewise documented in a memorandum dated 11 March

1994 prepared by M.S. Encinares (Annex "C", Position Paper). His inefficiency and lack of sense of responsibility in

relation to customer service have likewise been documented in several inter-office reports on problems and complaints

from accounts handled by complainant. In a report dated 18 August 1994 submitted by M.S. Encinares regarding the

account of Francisco Motors Corporation ("FMC") which was the responsibility of complainant, FMC's complaints aboutdelayed deliveries and irregular visits of RAGC representative were put on record (Annex "B" Reply Position Paper). The

aforementioned report dated 18 August 1994 is based on the minutes of a meeting of suppliers which includes the

Company, held on 17 August 1994 called by FMC to discuss said problems of delayed deliveries and irregular visits

(Annex "C", Reply Position Paper). As to the other accounts handled by complainant, complaints on these accounts,

regarding rejected glasses and returns due to scratches, distortion, chipping and no-hole, mispacking and handling

procedure, were documented in a report dated 19 September 1994 prepared by N.B. Galpa (Annex "D", Reply Position

Paper). The said reports were further substantiated by Marilyn S. Encinares, Manager, Fabricated Glass Division-

Marketing in her affidavit executed on 15 November 1995.39(Underscoring supplied)

On appeal, the National Labor Relations Commission (NLRC), quoting extensively from the Decision of the Labor Arbiter,

dismissed petitioner's complaint for lack of merit by Decision40of March 20, 1998. Petitioner moved for reconsideration

of the decision, but it was denied in a resolution41

of May 7, 1998.

Undaunted, petitioner filed a petition for certiorari with this Court which referred it to the Court of Appeals in

accordance with St. Martin Funeral Homes v. NLRC42

By Decision of May 21, 2001, the Court of Appeals upheld the dismissal of petitioner's complaint, it holding that

petitioner performed the function of a salesman and in the position he was holding, loss of trust and confidence is a

valid cause for dismissal.

Hence, the present petition.

The issue boils down to whether the company's loss of trust and confidence in petitioner is founded on facts established

by substantial and competent evidence.43

The petition is impressed with merit.

Undoubtedly, the rule is that high respect is accorded to the findings of fact of quasi-judicial agencies, more so in the

case at bar where both the Labor Arbiter and the NLRC share the same findings. The rule is not, however, without

exceptions one of which is when the findings of fact of the labor officials on which the conclusion was based are not

supported by substantial evidence.44The same holds true when it is perceived that far too much is concluded, inferred

or deduced from bare facts adduced in evidence.

45

It is noted that petitioner's appeal to the NLRC raised serious errors in the findings of fact of the Labor Arbiter. The NLRC

failed, however, to address them, it rendering an 8-page decision 7 pages of which quoted in full the decision of the

Labor Arbiter.

Unlike in other cases where the complainant has the burden of proof to discharge its allegations, the burden of

establishing facts as bases for an employer's loss of confidence in an employee facts which reasonably generate belief

by the employer that the employee was connected with some misconduct and the nature of his participation therein is

such as to render him unworthy of trust and confidence demanded of his position is on the employer.46

Should the
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employer fail in discharging this onus, the dismissal of the employee cannot be sustained. This is consonant with the

constitutional guarantee of security of tenure, as implemented in what is now Sec. 279 of the Labor Code, as amended.47

The employer's evidence, although not required to be of such degree as that required in criminal cases, i.e., proof

beyond reasonable doubt, must be substantial it must clearly and convincingly establish the facts upon which loss of

confidence in the employee may be made to rest.48

In the case at bar, the company failed to discharge this burden.

The company complained of petitioner having incurred 6 days of absence without leave from May 29 to June 5, 1992.

This complaint had earlier been the subject of a letter49addressed to petitioner dated June 16, 1992 wherein Ms.

Encinares advised him that communicating through the telephone of a leave of absence is inappropriate. While

petitioner's written explanation for his absence discloses a conflict of interest between his employment with the

company and his operation of his rice plantation, he therein made a commitment to improve his over-all performance

and reporting habits, drawing the company to conditionally approve his 6 days leave and charge the same to his

vacation leave.50

The records do not disclose that petitioner incurred any further absences without leave. More importantly, except for

that incident in 1992, the company failed to show that there were instances during the 14 years that petitioner had

been employed that he incurred absences without leave.

The propriety of petitioner's 6 days of absence having priorly been threshed out by the parties, the company may no

longer ask petitioner to, more than two years later by letter of September 27, 1994, re-explain his absence and use the

same to justify his dismissal.

As for the charge that petitioner had not been attending the daily 3 minutes meeting of the FGD Marketing, the inter-

office correspondence dated March 11, 1994 shows that "the deliberate failure of [petitioner] in attending the meeting

could be attributed to that argument between [him and] AAN (A.A. Naval) . . . that occurred last January 28, 1994 over

the present system of PAMCOR in handling local development of glass components."51

It bears noting, however, that the

company took no action on the matter, nor warned petitioner that his attendance in the meetings was mandatory. Itwas several months later or on September 27, 1994 when the company first called his attention to it and used it as a

basis for dismissing him. It is thus deemed to have overlooked his absence in the daily meetings.

A company is expected to call the attention of an employee to any undesirable act or omission within a reasonable time

In the case at bar, the failure of the company to timely take any disciplinary action against petitioner undermines its

claim that petitioner's continued absence in the meetings rendered him unfit for continued employment with it.

That the company hastily dismissed petitioner is clearly apparent. As petitioner argued, he was not given adequate time

to prepare for his defense, but was peremptorily dismissed, even without any formal investigation or hearing.52

It is settled that where the employee denies the charges against him, a hearing is necessary to thresh out any doubt. Thefailure of the company to give petitioner, who denied the charges against him, the benefit of a hearing and an

investigation before his termination constitutes an infringement of his constitutional right to due process. So Roche

(Philippines) v. National Labor Relations Commission53instructs:

In denying that they have deprived the right of Villareal to due process, the petitioners pointed out that he was

informed of the charges against him and he was given the opportunity to explain his side. Citing Associated Citizen's

Bank v. Ople [103 SCRA 130 (1981)], the petitioners attempted to substantiate their argument by mentioning that this

Court had previously done away with the holding of a hearing in order to comply with the constitutional requirement of

due process.
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However, the circumstances obtaining in the above-cited case bears no resemblance to the case at bar. The former

contemplates a situation where the employee admits his guilt and all his admissions are corroborated by documentary

evidence. Such is not the case in the present controversy where Villareal never admitted the commission of the offense

he was being charged of. The records do not indubitably show that Villareal was actually in Cebu City on that day. A

hearing was, therefore, necessary to thresh out all doubts as to the conflicting allegations of De la Cruz and Villareal. The

failure of petitioner to give private respondent the benefit of a hearing and an investigation before his termination

constitutes an infringement of his constitutional right to due process of law [BLTB Bus Co. v. Court of Appeals, 71 SCRA

470 (1976); see also Batas Pambansa Blg. 130].54


As for the other two charges that petitioner as a field officer unnecessarily lingered or killed time at the place of clients

and engaged them in arguments and quarrels, and that he visited UMC (Mandaluyong) only when called upon to do so

the company failed to substantiate the same.

Except for the mere allegation of petitioner's manager55

that its clients have been complaining of petitioner's work

attitude and performance, there is no concrete evidence to show the same.

The inter-office memoranda relied upon by the Labor Arbiter were accomplished only after petitioner's counsel sent the

August 16, 1994 cautioning the company that petitioner could not be legally compelled to voluntarily resign and accept

a separation package.

It bears emphasis that the matter of determining whether the cause for dismissing an employee is justified on the

ground of loss of confidence cannot be left entirely to the employer. Impartial tribunals do not rely only on the

statement made by the employer that there is "loss of confidence" unless duly proved or sufficiently substantiated.56

The report57

of Ms. Encinares dated August 18, 1994, citing a report58

of Elmer Tacata, that FMC had been complaining

about lack of visiting company representative and delayed deliveries for the month of August cannot be attributed to

petitioner.

As explained by petitioner, during the later part of July 1994, right after he refused to resign, he was not given work. He

could not thus transact business with clients since another employee, Tacata, was assigned to take over his post andfunction.

59In his report, Tacata stated that "FMC noted that some suppliers fail to obtain their Delivery Authorization

causing delays in their deliveries."60

He hastened to add, however, that the suppliers who attended the FMC meeting

included other companies like Transworld Rubber and UE Automotive Manufacturing.61

Tacata's statement that "Arnel Deunida [Supply Superintendent of FMC] requested that our customer service and QA

Staffs resume their regular visits to FMC to inspect and evaluate glass rejects"62

in fact gives credence to the allegation

of petitioner that he regularly visited his client and it was only in late July 1994 that he could no longer do so, Tacata

having taken over his position.

Instead of exercising prudence in examining the evidence, the Labor Arbiter hastily attributed fault to petitioner, viz:

xxx As to the other accounts handled by complainant, complaints on these accounts, regarding rejected glasses and

returns due to scratches, distortion, chipping and no-hole, mispacking and handling procedure, were documented in a

report dated 19 September 1994 prepared by N.B. Galpa (Annex "D" Reply Position Paper).63

Nowhere, however, in the report64

submitted by N.B. Galpa on his trip to the companies whose accounts were formerly

handled by petitioner (Nissan Motors, FMC, Universal Motors, PAMCOR and Honda Cars) is it shown that petitioner was

directly responsible for the rejected or rejected other glasses and items. The report shows that the alleged defects in the

returned items, like those returned to PAMCOR, consisted of scratches 12 pcs., distortion 2, chipping 1, and no hole
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1; for Honda Cars, deep scratch (WS) 1 pc., no bolt (SR3 FD) 1 pc., broken (SR4 FD) 1pc.65These defects are not,

however, uncommon in a business dealing in glasses.

To attribute these product returns to petitioner and conclude that he is inefficient and irresponsible is unfounded. For as

of September 19, 1994, when N.B. Galpa submitted his report, petitioner had long been divested of responsibility over

these accounts. In any event, even if the returned items were part of those previously delivered during the period when

petitioner was still handling those accounts, the complaints pertain to the quality of the goods delivered or defects

caused by mishandling. These complaints should then have been properly directed to the Production Planning and

Control Department or the Logistics Department which were tasked to manage product quality and delivery. As

admitted by the company, petitioner's function at the FGD Marketing was confined to sales.

That the N.B. Galpa report66which was accomplished a month after petitioner was officially transferred from the FGD

Marketing to the Technical Services Division, still contained a complaint by FMC that the company "has not been in

constant contact with FMC, and in fact [was] ignoring [its] request to settle the issue about F-1300 RQ (deep double

curve, but within Specs). . ."67

indicates that it was directed against the company. Such notwithstanding, the Labor

Arbiter regarded all the complaints contained in the report as proof of petitioner's inefficiency and irresponsibility.

Absent any standard of performance upon which petitioner was rated on the job, loss of confidence has no basis.

Ms. Encinares' accusatory affidavits and inter-office memoranda are then not only self-serving but baseless. Accusation

cannot take the place of proof.68

At all events, even if all the allegations-charges set forth in the September 27, 1994 letter of the company to petitioner

are true, they are not of such nature which merit the penalty of dismissal, given petitioner's service for 14 years.

Dismissal is unduly harsh and grossly disproportionate to the charges. This rule on proportionality that the penalty

imposed should be commensurate to the gravity of his offense has been observed in a number of cases.69

In labor-management relations, there can be no higher penalty than dismissal from employment. Dismissal severs

employment ties and could well be the economic death sentence of an employee. Dismissal prejudices the socio-

economic well being of the employee's family and threatens the industrial peace. Due to its far reaching implications,our Labor Code decrees that an employee cannot be dismissed, except for the most serious causes. The overly concern

of our laws for the welfare of employees is in accord with the social justice philosophy of our

Constitution.70


While Article 282 of the Labor Code provides that an employer may terminate an employee based on fraud or willful

breach of the trust reposed in him by his employer or duly authorized representative, loss of trust and confidence as a

just cause for dismissal was never intended to provide employers with a carte blanche for terminating employees. Such

a vague, all-encompassing pretext as loss of confidence, if unqualifiedly given imprimatur by this Court, could readily

reduce to barren the constitutional guarantee of security of tenure.71As explained in Dela Cruz v. NLRC:72

It is of course settled that an employee may terminate the services of an employee due to loss of trust and confidence.

However, the loss must be based not on ordinary breach by the latter of the trust reposed in him by the former, but, in

the language of Article 28[2]c of the Labor Code, on willful breach. A breach is willful if it is done intentionally, knowingly

and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or

inadvertently. Elsewhere stated, it must rest on substantial grounds and not on the employer's arbitrariness, whims,

caprice or suspicion; otherwise, the employee would eternally remain at the mercy of the employer. It should be

genuine and not simulated; nor should it appear as a mere afterthought to justify earlier action taken in bad faith or a

subterfuge for causes which are improper, illegal of unjustified. It has never been intended to afford an occasion for
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abuse because of its subjective nature. There must therefore be an actual breach of duty committed by the employee

which must be established by substantial evidence.73(Citations omitted; Emphasis and underscoring supplied)

There being no basis in law or in fact justifying petitioner's dismissal on the basis of loss of trust and confidence, his

dismissal was illegal.

WHEREFORE, the petition is GRANTED. The challenged decision of the appellate court is hereby SET ASIDE and a new

one entered:

(1) DECLARING illegal and void petitioner's dismissal from the service of the company, and

(2) ORDERING the company to pay petitioner full back wages from the time he was dismissed from the service until the

finality of this decision; and separation pay, equivalent to one month salary for every year of service, computed from the

time petitioner was first employed and until the finality of this decision, reinstatement being no longer possible due to

strained relations of the parties.

SO ORDERED.
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SUPREME COURT

Manila

SECOND DIVISION

G.R. No. 156515 October 19, 2004

CHINA BANKING CORPORATION, petitioner,vs.

MARIANO M. BORROMEO, respondent.

D E C I S I O N

CALLEJO, SR.,J.:

Before the Court is the petition for review on certiorari filed by China Banking Corporation seeking the reversal of the

Decision1 dated July 19, 2002 of the Court of Appeals in CA-G.R. SP No. 57365, remanding to the Labor Arbiter for

further hearings the complaint for payment of separation pay, mid-year bonus, profit share and damages filed by

respondent Mariano M. Borromeo against the petitioner Bank. Likewise, sought to be reversed is the appellate courtsResolution dated January 6, 2003, denying the petitioner Banks motion for reconsideration.

The factual antecedents of the case are as follows:

Respondent Mariano M. Borromeo joined the petitioner Bank on June 1, 1989 as Manager assigned at the latters

Regional Office in Cebu City. He then had the rank of Manager Level I. Subsequently, the respondent was laterally

transferred to Cagayan de Oro City as Branch Manager of the petitioner Banks branch thereat.

For the years 1989 and 1990, the respondent received a "highly satisfactory" performance rating and was given the

corresponding profit sharing/p>erformance bonus. From 1991 up to 1995, he consistently received a "very good"

performance rating for each of the said years and again received the corresponding profit sharing/p>erformance bonus.Moreover, in 1992, he was promoted from Manager Level I to Manager Level II. In 1994, he was promoted to Senior

Manager Level I. Then again, in 1995, he was promoted to Senior Manager Level II. Finally, in 1996, with a "highly

satisfactory" performance rating, the respondent was promoted to the position of Assistant Vice-President, Branch

Banking Group for the Mindanao area effective October 16, 1996. Each promotion had the corresponding increase in the

respondents salary as well as in the benefits he received from the petitioner Bank.

However, prior to his last promotion and then unknown to the petitioner Bank, the respondent, without authority from

the Executive Committee or Board of Directors, approved several DAUD/BP accommodations amounting toP2,441,375 in

favor of Joel Maniwan, with Edmundo Ramos as surety. DAUD/BP is the acronym for checks "Drawn Against Uncollected

Deposits/Bills Purchased." Such checks, which are not sufficiently funded by cash, are generally not honored by banks.Further, a DAUD/BP accommodation is a credit accommodation granted to a few and select bank clients through the

withdrawal of uncollected or uncleared check deposits from their current account. Under the petitioner Banks standard

operating procedures, DAUD/BP accommodations may be granted only by a bank officer upon express authority from its

Executive Committee or Board of Directors.

As a result of the DAUD/BP accommodations in favor of Maniwan, a total of ten out-of-town checks (7 PCIB checks and 3

UCPB checks) of various dates amounting to P2,441,375 were returned unpaid from September 20, 1996 to October 17,

1996. Each of the returned checks was stamped with the notation "Payment Stopped/Account Closed."


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On October 8, 1996, the respondent wrote a Memorandum to the petitioner Banks senior management requesting for

the grant of a P2.4 million loan to Maniwan. The memorandum stated that the loan was "to regularize/liquidate

subjects (referring to Maniwan) DAUD availments." It was only then that the petitioner Bank came to know of the

DAUD/BP accommodations in favor of Maniwan. The petitioner Bank further learned that these DAUD/BP

accommodations exceeded the limit granted to clients, were granted without proper prior approval and already past

due. Acting on this information, Samuel L. Chiong, the petitioner Banks First Vice- President and Head-Visayas

Mindanao Division, in his Memorandum dated November 19, 1996 for the respondent, sought clarification from the

latter on the following matters:

1) When DAUD/BP accommodations were allowed, what efforts, if any, were made to establish the identity and/or

legitimacy of the alleged broker or drawers of the checks accommodated?

2) Did the branch follow and comply with operating procedure which require that all checks accommodated for

DAUD/BP should be previously verified with the drawee bank and history if not outright balances determined if enough

to cover the checks?

3) How did the accommodations reach P2,441,375.00 when our records indicate that the borrowers B/p>-DAUD line is

only for P500,000.00? When did the accommodations start exceeding the limit of P500,000.00 and under whose

authority?

4) When did the accommodated checks start bouncing?

5) What is the status of these checks now and what has the branch done so far to protect/ensure collectibility of the

returned checks?

6) What about client Joel Maniwan and surety Edmund Ramos, what steps have they done to pay the checks returned?2

In reply thereto, the respondent, in his Letter dated December 5, 1996, answered the foregoing queries in seriatim and

explained, thus:

1. None

2. No

3. The accommodations reach P2.4 million upon the request of Mr. Edmund Ramos, surety, and this request was

subsequently approved by undersigned. The excess accommodations started in July 96 without higher management

approval.

4. Checks started bouncing on September 20, 1996.

5. Checks have remained unpaid. The branch sent demand letters to Messrs. Maniwan and Ramos and referred the

matter to our Legal Dept. for filing of appropriate legal action.

6. Mr. Maniwan, thru his lawyer, Atty. Oscar Musni has signified their intention to settle by Feb. 1997.

Justification for lapses committed (Item nos. 1 to 3).

The account was personally endorsed and referred to us by Mr. Edmund Ramos, Branch Manager of Metrobank,

Divisoria Br., Cagayan de Oro City. In fact, the CASA account was opened jointly as &/or (Maniwan &/or Ramos). Mr.

Ramos gave us his full assurance that the checks that we intend to purchase are the same drawee that Metrobank has

been purchasing for the past one (1) year already. He even disclosed that these checks were verified by his own branch

accountant and that Mr. Maniwans loan account was being co-maked by Mr. Elbert Tan Yao Tin, son of Jose Tan Yao Tin


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of CIFC. To show his sincerity, Mr. Ramos signed as surety for Mr. Maniwan forP2.5MM. Corollary to this, Mr. Ramos

applied for a loan with us mortgaging his house, lot and duplex with an estimated market value of P4.508MM. The

branch, therefore, is not totally negligent as officer to officer bank checking was done. In fact, it is also for the very same

reason that other banks granted DAUD to subject account and, likewise, the checks returned unpaid, namely:

Solidbank P1.8 Million

Allied Bank .8

Far East Bank 2.0

MBTC 5.0

The attached letter of Mr. Ramos dated 19 Nov. 1996 will speak for itself. Further to this, undersigned conferred with

the acting BOH VSYap if these checks are legitimate 3rd party checks.

On the other hand, Atty. Musni continues to insist that Mr. Maniwan was gypped by a broker in the total amount

of P10.00 Million.

Undersigned accepts full responsibility for committing an error in judgment, lapses in control and abuse of discretion by

relying solely on the word, assurance, surety and REM of Mr. Edmund Ramos, a friend and a co-bank officer. I am now

ready to face the consequence of my action.3

In another Letter dated April 8, 1997, the respondent notified Chiong of his intention to resign from the petitioner Bank

and apologized "for all the trouble I have caused because of the Maniwan case."4

The respondent, however, vehemently

denied benefiting therefrom. In his Letter dated April 30, 1997, the respondent formally tendered his irrevocable

resignation effective May 31, 1997.5

In the Memorandum dated May 23, 1997 addressed to the respondent, Nancy D. Yang, the petitioner Banks SeniorVice-President and Head-Branch Banking Group, informed the former that his approval of the DAUD/BP

accommodations in favor of Maniwan without authority and/or approval of higher management violated the petitioner

Banks Code of Ethics. As such, he was directed to restitute the amount ofP1,507,736.79 representing 90% of the total

loss of P1,675,263.10 incurred by the petitioner Bank. However, in view of his resignation and considering the years of

service in the petitioner Bank, the management earmarked only P836,637.08 from the respondents total separation

benefits or pay. The memorandum addressed to the respondent stated:

After a careful review and evaluation of the facts surrounding the above case, the following have been conclusively

established:

1. The branch granted various BP/DAUD accommodations to clients Joel Maniwan/Edmundo Ramos in excess of

approved lines through the following out-of-town checks which were returned for the reason "Payment

Stopped/Account Closed":

1. PCIB Cebu Check No. 86256 P251,816.00

2. PCIB Cebu Check No. 86261 235,880.00

3. PCIB Cebu Check No. 8215 241,443.00

4. UCPB Tagbilaran Check No. 277,630.00


18/40

5. PCIB Bogo, Cebu Check No. 6117 267,418.00

6. UCPB Tagbilaran Check No. 216070 197,467.00

7. UCPB Tagbilaran Check No. 216073 263,920.00




2. The foregoing checks were accommodated through your approval which was in excess of your authority.

3. The branch failed to follow the fundamental and basic procedures in handling BP/DAUD accommodations which made

the accommodations basically flawed.

4. The accommodations were attended by lapses in control consisting of failure to report the exception and failure to

cover the account of Joel Maniwan with the required Credit Line Agreement.

Since the foregoing were established by your own admissions in your letter explanation dated 5 December 1996, andthe Audit Report and findings of the Region Head, Management finds your actions in violation of the Banks Code of

Ethics:

Table 6.2., no. 1: Compliance with Standard Operating Procedures

- "Infraction of Bank procedures in handling any bank transactions or work assignment which results in a loss or

probable loss."

Table 6.3., no. 6: Proper Conduct and Behavior -

"Willful misconduct in the performance of duty whether or not the bank suffers a loss," and/or

Table 6.5., no. 1: Work Responsibilities -

"Dereliction of duty whether or not the Bank suffers a loss," and/or

Table 6.6., no. 2: Authority and Subordination -

"Failure to carry out lawful orders or instructions of superiors."

Your approval of the accommodations in excess of your authority without prior authority and/or approval from higher

management is a violation of the above cited Rules.

In view of these, you are directed to restitute the amount of P1,507,736.79 representing 90% of the total loss

of P1,675,263.10 incurred by the Bank as your proportionate share. However, in light of your voluntary separation from

the Bank effective May 31, 1997, in view of the years of service you have given to the Bank, management

Labor Law (Batch2)

Documents

Transcript of Labor Law (Batch2)