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ABC V Calumpang
ABC V Calumpang
Syllabi:
1. Same; Same; Backwages; Separation Pay; Nominal Damages; Considering
that there were valid and substantive grounds to terminate respondent’s
employment, the award of backwages and separation pay is deleted. However,
petitioner’s violation of respondent’s right to statutory procedural due process
warrants the payment of indemnity in the form of nominal damages.-
DECISION
VELASCO, J.:
The Case
Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the
Rules of Court for the reversal and setting aside of the Decision 1 dated September
12, 2014 and the Resolution2 dated June 9, 2015 of the Court of Appeals (CA) -
Cebu City in CA-G.R. CEB SP No. 02906, which affirmed the findings of the
National Labor Relations Commission (NLRC) and of the Labor Arbiter,
declaring respondent to have been illegally dismissed by petitioner.
The Facts
Petitioner Allied Banking Corporation3 ("Bank") and Race Cleaners, Inc. ("RCI"),
a corporation engaged in the business of janitorial and manpower services, had
entered into a Service Agreement whereby the latter provided the former with
messengerial, janitorial, communication, and maintenance services and the
personnel therefor.4
In his position paper, respondent asserted that the four-fold test of employer-
employee relationship is present between him and the Bank.9 First, he averred that
he was a regular employee of the Bank assigned as a Janitor of the Branch with a
salary of ₱4,200 payable every 15 days each month, and assigned such other tasks
essential and necessary for the Bank's business.10
He alleged that petitioner engaged his services and exercised direct control and
supervision over him through the Branch Head, Oscar Infante, not only as to the
results of his work but also as to the means and methods by which the same was
to be accomplished. According to respondent, Infante gives the direct orders on
the work to be done and accomplished during working days, such as "m[o]pping,
cleaning the comfort room of the [B]ank, arrang[ing] furniture and fixture, bank
documents, throw[ing] garbage/waste disposal, cleaning the windows, tables and
teller cage" as well as directing him to "do messengerial/errand services such as
mailing of letters, delivery of bank statements and deliver[ing] checks for
clearing."11
As regards the payment of salary, respondent claimed that it was the Branch that
directly paid his salaries and wages every "quincina."12 As for the power of
dismissal, respondent further alleged that it was petitioner Bank, through its
Branch Head, who terminated his services.13
For its part, petitioner alleged that respondent was not its employee, but that of
RCI, with which it had entered into a Service Agreement to provide
"messengerial, janitorial, communications and maintenance services and the
personnel therefor."14 It claimed that while respondent was required to be out of
the Branch at times to accomplish his tasks, it was observed that whenever he
went out on these errands, he would take a long time to return to the Branch.
Petitioner eventually discovered that during these times, respondent was "also
plying his pedicab and ferrying passengers." Aside from this, petitioner averred
that several clients of the Branch informed Infante that respondent had been
borrowing money from them "owing to his familiarity with said clients." Upon
discovering these incidents, petitioner "had no choice but to have complainant
relieved and replaced." Accordingly, Infante informed respondent that his
services would no longer be required by the Branch. 15
Furthermore, petitioner argued that it was merely exercising its prerogative under
the Service Agreement to seek the replacement or relief of any personnel assigned
by RCI when the Branch Head informed respondent that his services would no
longer be required at the Branch. According to petitioner, this decision to replace
respondent was not equivalent to termination of employment, especially since it
was neither whimsical nor arbitrary.18 Thus, petitioner concludes that, in the
absence of any employer-employee relationship between the parties, respondent
had no cause of action against petitioner for illegal dismissal, damages and other
claims.19
In its Decision20 dated March 28, 2006, the Labor Arbiter ruled in favor of
respondent, the dispositive portion of which reads:
SO ORDERED.21
The NLRC affirmed the decision of the Labor Arbiter in its Decision dated
February 16, 2007, to wit:
Agreeing with the Labor Arbiter's findings, the NLRC ruled that petitioner
exercised all the elements of an employer-employee relationship through the
payment of wages, control and supervision over complainant's work and the
power of dismissal.26 The NLRC discredited petitioner's argument that it merely
exercised its prerogative to seek for a replacement or relief of any personnel
assigned by RCI absent any evidence that it sought respondent's relief from RCI.27
Petitioner moved for the reconsideration of the NLRC Decision, 28 but the same
was denied in a Resolution dated May 17, 2007. 29 Thus, petitioner elevated the
matter to the CA in a petition which was docketed as CA-G.R. SP No. 02906.30
In the assailed Decision dated September 12, 2014, the CA denied the petition and
upheld the rulings of the Labor Arbiter and the NLRC. The dispositive portion of
the assailed Decision reads:
The Labor Arbiter is hereby ordered to re-compute the award of backwages and
separation pay in accordance with the above disquisitions.
SO ORDERED.31
The CA ruled that RCI is a labor-only contractor. It applied the test of independent
contractorship that "whether one claiming to be an independent contractor has
contracted to do work according to his own methods and without being subject to
the control of the employer, except only as to the results of the work" in
determining that RCI merely served as an agent of petitioner bank and that
respondent was truly an employee of petitioner.32
Nevertheless, finding that there were strained relations between petitioner bank
and respondent, the CA ordered the award of separation pay in lieu of
reinstatement, equivalent to one (1) month salary for every year of service, with a
fraction of a year of at least six (6) months to be considered as one (1) whole year,
to be computed from the date he was hired until the finality of the decision,
earning a legal interest at the rate of six percent (6%) per annum until full
satisfaction.
Petitioner filed a Motion for Reconsideration (of the Decision Dated 12
September 2014) with Entry of Appearance and Motion for Substitution of
Party dated October 16, 2014,33 but it was denied in the assailed Resolution dated
June 9, 2015.
The Petition
Nevertheless, petitioner bank defends its right to ask for respondent's replacement
under Article IV of the Service Agreement. Petitioner reiterates that respondent's
acts of borrowing money from the bank's clients and plying/ferrying passengers
for a fee during his hour of duty constitute conduct which is prejudicial to the
interest of petitioner. Thus, in accordance with the Service Agreement, petitioner
bank merely exercised its right to change or have respondent replaced instead of
imposing disciplinary measures on him. According to petitioner, this act was
erroneously construed by the CA as an exercise of the power of control over or of
dismissal of respondent.
The Issues
3. Whether or not the CA erred in (i) declaring that respondent had been
illegally dismissed, and (ii) granting his monetary claims.
Essentially, the principal issue is whether the CA erred in affirming the NLRC
Decision which declared that RCI is a labor-only contractor, and in ordering the
Labor Arbiter to re-compute the award of backwages and separation pay.
Article 106 of the Labor Code provides the relations which may arise between an
employer, a contractor, and the contractors' employees, thus:
In the event that the contractor or subcontractor fails to pay the wages of his
employees in accordance with this Code, the employer shall be jointly and
severally liable with his contractor or subcontractor to such employees to the
extent of the work performed under the contract, in the same manner and extent
that he is liable to employees directly employed by him.
These distinctions were laid out in the Omnibus Rules Implementing the Labor
Code thus:
(1) Does not have substantial capital or investment in the form of tools,
equipment, machineries, work premises and other materials; and
(2) The workers recruited and placed by such person are performing activities
which are directly related to the principal business or operations of the employer
in which workers are habitually employed.
(c) For cases not falling under this Rule, the Secretary of Labor
and Employment shall determine through appropriate orders
whether or not the contracting out of labor is permissible in the
light of the circumstances of each case and after considering the
operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and
restrictions to insure the protection and welfare of the workers.
In the present case, petitioner failed to establish that RCI is a legitimate labor
contractor as contemplated under the Labor Code. Except for the bare allegation
of petitioner that RCI had substantial capitalization, it presented no supporting
evidence to show the same. Petitioner never submitted financial statements from
RCI. Even the Service Agreement allegedly entered into between petitioner and
RCI, upon which petitioner relied to show that RCI was an independent
contractor, had lapsed in August 2005, as admitted by petitioner in its Position
Paper.37 Notably, petitioner failed to allege when the Service Agreement was
executed, thus, making its claim that respondent was hired by RCI and assigned
to petitioner in 2003 even more ambiguous.
Aside from this, petitioner's claim that RCI exercised control and supervision over
respondent is belied by the fact that petitioner admitted that its own Branch
Manager had informed respondent that his services would no longer be required
at the Branch.38 This overt act shows that petitioner had direct control over
respondent while he was assigned at the Branch. Moreover, the CA is correct in
finding that respondent's work is related to petitioner's business and is
characterized as part of or in pursuit of its banking operations.
In this case, petitioner bank is the principal employer and RCI is the labor-only
contractor. Accordingly, petitioner and RCI are solidarily liable for the rightful
claims of respondent.
The Labor Arbiter haphazardly declared that respondent was illegally dismissed
when it ruled that respondent's misconduct was not established since due process
was not observed.42 The NLRC also ruled in a similar manner and failed to
address the grounds for termination raised by petitioner, specifically respondent's
transgressions.43While the CA addressed the aspect of substantive due process, it
simply disregarded the grounds raised by petitioner and concluded that petitioner
failed to discharge the burden of proof that valid or authorized causes under the
Labor Code exist.44
We, however, find that petitioner's basis for terminating respondent rests on valid
and legal grounds. At the very first instance, petitioner had already stressed in its
position paper that respondent was found committing conduct prejudicial to the
interests of the Branch when it was discovered that 1) respondent was plying his
pedicab and ferrying passengers during his work hours and 2) he had been
borrowing money from several clients of the Branch.
Nowhere in the records was it shown that respondent denied these imputations
against him.1âwphi1 Absent any denial on the part of respondent, the Court is
constrained to believe that respondent's silence can be construed as an admission
of these accusations against him.
The very nature of the actions imputed against respondent is serious and
detrimental to the Bank's operations and reputation. Thus, petitioner's decision to
relieve respondent from his employment is justified.
Nevertheless, We agree with the findings of the appellate court that there were
procedural lapses in the dismissal of respondent.
The importance of procedural due process was expounded by this Court in King
of Kings Transport, Inc. v. Mamac,thus:
(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 calendar days from receipt of the notice x x x. 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.
288 [of the Labor Code] is being charged against the employees.
(2) After serving the first notice, the employees should schedule and conduct a
hearing or conference wherein the employees will be given the opportunity to (1)
explain and clarify their defenses to the charge against them; (2) present evidence
in support of their defenses; and (3) 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 x x x.
(3) After determining that termination is justified, the employer shall serve the
employees a written notice of termination indicating that:
(1) all the circumstances involving the charge against the employees have been
considered; and (2) grounds have been established to justify the severance of their
employment.45 (emphasis in the original)
In the present case, it is uncontested that petitioner failed to give respondent ample
opportunity to contest the legality of his dismissal since he was neither given a
notice to explain nor a notice of termination. The first and second notice
requirements have not been properly observed; thus, respondent's dismissal, albeit
with valid grounds, is tainted with illegality.
The award of backwages and separation pay is deleted but respondent is entitled
to nominal damages
Nominal damages may be awarded to a plaintiff whose right has been violated or
invaded by the defendant, for the purpose of vindicating or recognizing that right,
and not for indemnifying the plaintiff for any loss suffered by him. Its award is
thus not for the purpose of indemnification for a loss but for the recognition and
vindication of a right.46
SO ORDERED.
WE CONCUR:
LUCAS P. BERSAMIN
Associate Justice
ALEXANDER G. GESMUNDO
Associate Justice
ATTESTATION
Pursuant to the Section 13, Article VIII of the Constitution and the Division
Chairperson’s Attestation, I certify that the conclusions in the above Decision
had been reached in consultation before the case was assigned to the writer of
the opinion of the Court’s Division.
Footnotes
1
Rollo, pp. 11-21. Penned by Associate Justice Renato C. Francisco
and concurred in by Associate Justices Gabriel T. Ingles and Pamela
Ann Abella Maxino.
2
Id. at 23-25.
3
Now merged with Philippine National Bank.
4
Rollo, p. 35.
5
Id.
6
Id.
7
Id.
8
Id. at 87.
9
Id. at 73.
10
Id. at 72.
11
Id. at 73.
12
Id.
13
Id. at 74.
14
Id. at 80-81.
15
Id. at 81.
16
Id. at 82.
17
Id. at 83.
18
Id. at 83-84.
19
Id. at 84.
20
Id. at 87-93. Rendered by Labor Arbiter Fructuoso T. Villarin, IV.
21
Id. at 92-93.
22
Id. at 90.
23
Id. at 92-93.
24
Id. at 94-103.
25
Id. at 106.
26
Id. at 105.
27
Id. at 106.
28
Id. at 108-116.
29
Id. at 117-118.
30
Id. at 119-134.
31
Id. at 20-21.
32
Id. at 15-19.
33
Id. at 146-159.
34
Id. at 166-167.
35
Sasan, Sr. v. National Labor Relations Commission 4th
Division, G.R. No. 176240, October 17, 2008, 569 SCRA 670.
36
Diamond Farms, Inc. v. Southern Philippines Federation of Labor
(SPFL)-Workers Solidarity of DARBMUPCO/Diamond-SPFL, G.R.
Nos. 173254-55 & 173263, January 13, 2016.
37
CA rollo, pp. 38-39.
38
Id. at 39.
39
Diamond Farms, Inc. v. Southern Philippines Federation of Labor
(SPFL)-Workers Solidarity of DARBMUPCO/Diamond-SPFL, supra
note 36.
40
Olympia Housing, Inc. v. Allan Lapastora and Irene Ubalubao, G.R.
No. 187691, January 13, 2016.
41
Hanjin Heavy Industries and Construction Co. Ltd. v. Ibaez, G.R.
No. 170181, June 26, 2008, 555 SCRA 537.
42
Rollo, p. 59.
43
Id. at 106.
44
Id. at 19-20.
45
G.R. No. 166208, June 29, 2007, 526 SCRA 116, 125-26.
46
Libcap Marketing Corp., Johanna J. Celiz, and Ma.
Lucia G. Mondragon v. Lanny Jean B. Baquial, G.R. No. 192011, June
30, 2014.
47
Marlo A. Deoferio v. Intel Technology Philippines, Inc. and/or Mike
Wentling. G.R. No. 202996, June 18. 2014, 726 SCRA 679.