Supra Multi-Services, Inc., et al. vs. Lanie M. Labitigan
G.R. No. 192297. August 3, 2016


Respondent was hired as a rank and file employee of petitioner SMSI “. When respondent’s employment was terminated, she was holding the position of Accounting Supervisor with a monthly salary of P13,000.00. Respondent filed before the Labor Arbiter a complaint for illegal dismissal against petitioners, seeking reinstatement and payment of backwages, overtime pay, holiday pay, premium pay for holiday and rest day, separation pay, unused leave pay, damages, and attorney’s fees.

Petitioners claim that the position as Supervisor was reposed with trust and confidence.

Petitioners discovered that respondent was receiving ECOLA, even when she was not entitled to the same under Wage Order Nos. NCR-09 and NCR-10. Respondent was the one doing the payroll.

Respondent willfully and deliberately ignored and disobeyed the Notice of Personnel Action cancelling the payment of her daily ECOLA of P24.67. Respondent continued to grant/give herself ECOLA in the payroll. Consequently, petitioner SMSI, through its HR Department, issued Memo requiring respondent to explain in writing within 24 hours why no administrative action should be taken against her for insubordination and dishonesty.

Petitioner SMSI next issued Memo placing respondent under preventive suspension and another Memo fixing respondent’s preventive suspension at 30 days and advising respondent to attend the administrative hearing. During the administrative hearing, attended by respondent with her son, respondent was unable to justify her grant/payment of ECO LA to herself and refusal to obey the order of petitioner SMSI to stop the same.

In granting herself pro-rated ECOLA, respondent reasoned that Wage Order Nos. NCR-09 and NCR-10 granted ECOLA not only to minimum wage earners, but also to other workers and employees who would suffer from wage distortion because of the application of the ECOLA, such as herself. Said Wage Orders prescribed a formula precisely to resolve wage distortion, which respondent applied to her salary and to the salaries of others similarly situated.

It was likewise discovered that (1) respondent availed herself of cash advances from petitioner SMSI, which she was supposed to pay by periodically deducting certain amounts from her salary, but since she was not making such deductions, the accumulated cash advances already amounted to P64,173.83; and (2) her employment record with petitioner SMSI, spanning several years, was riddled with previous acts of insubordination and dishonesty. As a result, petitioner SMSI issued Memo terminating respondent’s services.

LA Ruling:

The LA ruled in favor of respondent holding that while it is true that ECOLA is being enjoyed by minimum wage earners, the provisions of the Wage Orders are not absolute since the Orders expressly provide certain exceptions as when it would result in wage distortion. It held that [respondent] merely applied the procedure prescribed by Article 124 of the Labor Code and for which she received not the entire amount but the pro-rated share of the mandated amount. This of course does not constitute payroll padding as alleged by [petitioners].

Petitioners filed an appeal with the NLRC.

NLRC Ruling:

Initially, the NLRC dismissed the appeal due to lack of certification of non-forum shopping. It was given due course however, upon motion for reconsideration and submission of the required certificate.

In another Resolution, the NLRC overturned the Labor Arbiter and adjudged that petitioners had sufficient cause to dismiss respondent holding that if indeed there was wage distortion then [respondent], being in charge of the payroll, should have applied proportionately the ECOLA to affected employees. But she did not. Other employees of [petitioners] who were paid more than the minimum wage and/or with the same salary rate with [respondent] were not given ECOLA. As it appears it was only [respondent] who received proportionate ECOLA from among the employees of [petitioners] who are receiving more than the minimum wage. Clearly, there was a breach of trust committed by [respondent] that would warrant her termination from the service. It is to be stressed that [respondent’s] position as Accounting Supervisor involves trust and confidence for it deals with [petitioners’] finances. One aspect of which is the preparation of [petitioners’] payroll for their employees.

Hence, the NLRC dismissed the complaint for lack of merit. The NLRC denied the respondent’s motion for reconsideration.

Respondent went to the CA via petition for certiorari.

CA Ruling

As to whether or not respondent was illegally dismissed, the Court of Appeals concluded that petitioners complied with the requirements for procedural due process in dismissing respondent.

As for substantive due process, while the Court of Appeals agreed with the NLRC that the requisites for a valid dismissal of respondent on the ground of loss of trust and confidence were present in this case, it determined that the penalty of dismissal was too harsh under the circumstances.

The Court of Appeals then proceeded to award respondent with separation pay in lieu of reinstatement, but denied her backwages and damages.

Petitioners moved for reconsideration, but it was denied. Hence, the petition with the SC.


  1. Whether or not the penalty of dismissal for breach of trust is proper in the instant case
  2. Whether or not the CA erred in awarding separation pay despite the fact that the there was just cause for dismissal

SC Ruling:

The SC found the petition party meritorious.

The SC held that for a valid dismissal of an employee, it is fundamental that the employer observe both substantive and procedural due process -the termination of employment must be based on a just or authorized cause and the dismissal can only be effected, after due notice and hearing. Petitioners’ compliance with procedural due process in dismissing respondent is no longer being challenged in the present Petition; the issues for review of the Court essentially involved substantive due process.

Under Article 282 (c) of the Labor Code, as amended, an employer may terminate an employment for, among other just causes, fraud or willful breach by the employee of the trust reposed in him/her by his/her employer or duly authorized representative.

Citing Etcuban vs. Sulpicio Lines, Inc., the SC held that as regards a managerial employee, the mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded by his position.

Respondent, as Accounting Supervisor, was occupying a managerial position. The Court is not persuaded by respondent’s assertion that even as Accounting Supervisor, she was still just a mere rank and file employee performing the same clerical functions she had since her hiring in 1994. In her own memorandum dated February 12, 2001 to petitioner Tambunting, respondent accepted the responsibilities of an Accounting Manager. Respondent underwent training for three months, received additional compensation, and was assigned an accounting assistant to help her out with her responsibilities. As Accounting Supervisor, respondent was entrusted with the custody and management of one of the most delicate matters of any business, that is, the financial resources of petitioner SMSI. Respondent also exercised discretion in the preparation of the payroll of the employees of petitioner SMSI, evident from the fact that it was by her own judgment call that she granted and paid herself pro-rated ECOLA since November 2002.

It was not disputed that respondent was earning more than minimum wage, so she was not one of the intended beneficiaries of ECOLA under Wage Order Nos. NCR-09 and NCR-10. Respondent though insisted that Wage Order Nos. NCR-09 and NCR-10 granted her the right to a pro-rated share of the ECO LA on the ground of wage distortion. The NLRC and the Court of Appeals were correct in not giving much credence to respondent’s claim of wage distortion, based on their observation that respondent was the only employee of petitioner SMSI earning more than minimum wage who was receiving ECOLA.

Other than respondent’s bare allegation of wage distortion, there is an absolute dearth of proof to the same. It is an age-old rule that the one who alleges a fact has the burden of proving it and the proof should be clear, positive, and convincing. Mere allegation is not evidence. By its definition, wage distortion is quantifiable, and it may be established by presentation of the employee groups, wage structure, and the computation showing how the application of the ECOLA eliminated or severely contracted the difference in wage or salary rates among the groups.

As Accounting Supervisor who was in charge of preparation of the payroll of the employees of petitioner SMSI for more than a decade, respondent had knowledge of and access to all these relevant information and was capable of illustrating, even just by approximation, how she suffered from wage distortion because of the application of the ECOLA, which would have entitled her to pro-rated ECOLA under Section 14 of Wage Order No. NCR-09.

However, respondent, apart from her insistence on the presence of wage distortion, was remarkably silent on any other detail concerning the purported wage distortion. It bears to stress further that the formula for computing pro-rated ECOLA in case of wage distortions was not reproduced in Wage Order No. NCR-10. Consequently, from the effectivity date of Wage Order No. NCR-10 on July 10, 2004, respondent’s unilateral grant of pro-rated ECOLA to herself became even more evidently baseless.

Even assuming that respondent acted in good faith in granting herself ECOLA since November 2002, petitioners already explicitly ordered the cancellation of respondent’s ECOLA through the Notice of Personnel Action dated August 22, 2005. Yet, in defiance of said Notice, respondent still continued to grant and pay herself ECOLA until December 15, 2005. Respondent averred that she immediately took up the matter of said Notice with petitioner Tambunting who promised to look into it, but again, respondent’s averment was unsubstantiated and lacked details which would have lent it some credibility.

Granting once more that respondent’s encounter with petitioner Tambunting was true, the Notice of Personnel Action dated August 22, 2005 was not officially recalled or reversed and, therefore, said Notice subsisted. The more prudent course of action for respondent was to comply with the Notice for the meantime. After being expressly ordered in the Notice to cancel her ECOLA, respondent could no longer claim good faith in continuing to grant herself said allowance.

Respondent herself referred to the amount of daily ECOLA she was receiving as “miniscule,” but given that she had been receiving the unwarranted ECOLA since November 2002, it had already accumulated to a substantial amount. And regardless of the amount involved, it is apparent that respondent took advantage of her position as Accounting Supervisor in granting herself ECOLA even when she was not entitled to the same and after already being ordered to stop doing so, which constituted breach of trust. Willful breach of trust is one of the just causes under Article 282 (c) of the Labor Code, as amended, for the employer to terminate the services of an employee.

The SC disagreed with the CA decision that the penalty of dismissal was too harsh and that she was entitled to separation pay. It held that the law is plain and clear: willful breach of trust is a just cause for termination of employment. Necessarily, a finding of breach of trust on the part of respondent in the present case already justified her dismissal from service by petitioners. An employer cannot be compelled to retain an employee who is guilty· of acts inimical to the interests of the employer. A company has the right to dismiss its employees as a measure of protection, more so in the case of supervisors or personnel occupying positions of responsibility. Together with petitioners’ compliance with procedural due process, there is no other logical conclusion than that respondent’s dismissal was valid.

In view of the valid dismissal from service of respondent, then she is not entitled to backwages, as well as separation pay in lieu of reinstatement. The award of separation pay is inconsistent with a finding that there was no illegal dismissal, for under Article 279 of the Labor Code, as amended, and as held in a catena of cases, the employee who is dismissed without just cause and without due process is entitled to backwages and reinstatement or payment of separation pay in lieu thereof.

Citing Reno Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa-Katipunan, the SC held that mployee commits an act of dishonesty, depravity, or iniquity, the grant of financial assistance is misplaced compassion. It is tantamount not only to condoning a patently illegal or dishonest act, but an endorsement thereof. It will be an insult to all the laborers who, despite their economic difficulties, strive to maintain good values and moral conduct.

Further, in the case of Toyota Philippines, Corp. Workers Association v. National Labor Relations Commission, the Court cited its ruling that separation pay shall not be granted to all employees who are dismissed on any of the four grounds provided in Article 282 of the Labor Code. Such ruling was reiterated and further explained in Central Philippines Bandag Retreaders, Inc. v. Diasnes.

As to the fact that respondent rendered 11 years of service, the SC, disposed the same by citing Central Pangasinan Electric Cooperative, Inc. v. National Labor Relations Commission stating that the length of service and a previously clean employment record cannot simply erase the gravity of the betrayal exhibited by a malfeasant employee. Length of service is not a bargaining chip that can simply be stacked against the employer. After all, an employer-employee relationship is symbiotic where both parties benefit from mutual loyalty and dedicated service. If an employer had treated his employee well, has accorded him fairness and adequate compensation as determined by law, it is only fair to expect a long-time employee to return such fairness with at least some respect and honesty. Thus, it may be said that betrayal by a long-time employee is more insulting and odious for a fair employer. Xxx And that the length of service even aggravates his offense. He should have been more loyal to petitioner company from which he derived his family bread and butter for seventeen years.

The length of service of 11 years at petitioner SMSI did not mitigate, but even aggravated her offense, demonstrating, in addition to her insubordination and dishonesty, her lack of loyalty. It is likewise worthy to note that respondent, through her years of employment, was charged with the commission of several other transgressions.

As to return of the cash advances:

Unlike the unwarranted ECOLA, however, the Court cannot order respondent to pay her outstanding cash advances from petitioner SMSI, allegedly amounting to P64,173.83. In Banez v. Valdevilla, the Court recognized that the jurisdiction of Labor Arbiters and the NLRC in Article 217 of the Labor Code, as amended, is comprehensive enough to include claims for all forms of damages “arising from the employer-employee relations.” Whereas the Court in a number of occasions had applied the jurisdictional provisions of Article 217 to claims for damages filed by employees, it also held that by the designating clause “arising from the employer-employee relations,” Article 217 should apply with equal force to the claim of an employer for actual damages against its dismissed employee, where the basis for the claim arises from or is necessarily connected with the fact of termination, and should be entered as a counterclaim in the illegal dismissal case.

Petitioners’ counterclaim for payment of respondent’s outstanding cash advances, although undoubtedly arising from employer-employee relations between petitioners and respondent, did not arise from or was not necessarily connected with the fact of respondent’s termination. Respondent’s failure to make the necessary deductions from her salary to pay for her cash advances from petitioner SMSI was clearly another transgression petitioners were charging respondent with. While the Court may take cognizance herein of the fact that such a charge by petitioners against respondent exists, it has no jurisdiction to determine the truth or falsity of such charge. Such was not covered by the notices and hearing petitioners accorded respondent prior to the latter’s dismissal and for the Court to rule upon the same in this case would.be in violation of respondent’s right to due process.

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