SEPARATION PAY CANNOT BE AWARDED TO EMPLOYEE WHO WAS NOT DISMISSED FROM SERVICE

Separation pay is warranted when the cause for termination is not attributable to the employee’s fault, such as those provided in Articles 298 and 299 of the Labor Code, as well as in cases of illegal dismissal where reinstatement is no longer feasible.

Guide to Valid Dismissal of Employees

On the other hand, an employee dismissed for any of the just causes enumerated under Article 297 of the same Code, being causes attributable to the employee’s fault, is not, as a general rule, entitled to separation pay.

The non-grant of such right to separation pay is premised on the reason that an erring employee should not benefit from their wrongful acts.

Thus, the Supreme Court held that:

Claudia’s Kitchen, Inc. and Enzo Squilantini vs. Ma. Realiza S. Tanguin
G.R. No. 221096, June 28, 2017

Facts:

Respondent Ma. Realiza S. Tanguin (Tanguin) was employed by petitioner Claudia’s Kitchen, Inc. (Claudia’s Kitchen). She performed her functions as a billing supervisor in Manila Jockey Club’s Turf Club Building in San Lazaro Leisure and Business Park (SLLBP), Carmona, Cavite.

Tanguin averred that on October 26, 2010, she was placed on preventive suspension by Marivic Lucasan (Lucasan), Human Resources Manager, for allegedly forcing her co-employees to buy silver jewelry from her during office hours and inside the company premises. On the same date, she was directed by Lucasan to submit her written explanation on the matter.

Tanguin admitted that she was selling silver jewelry, but she denied that she did so during office hours. On October 30, 2010, she was barred by a security guard from entering the company premises. She was informed by her co-employees, namely Khena Nama, Jordan Lopez and Rose Marie Esquejo that they were forced to write letters against her, or else they would be terminated from their work.

For their part, Claudia’s Kitchen and Enzo Squillantini, its President, countered that in October 2010, they received reports from some employees that Tanguin was allegedly forcing some of them to buy silver jewelry from her during office hours and inside the company premises, which the latter admitted.

In order to conduct a thorough investigation, she was placed under preventive suspension. Claudia’s Kitchen, et al. sent Tanguin a letter requiring her to submit a written explanation as to why she should not be charged for conducting business within the company premises and during office hours.

During her suspension, the Claudia’s Kitchen, et al. discovered her habitual tardiness and gross negligence in the computation of the total number of hours worked by her co-employees.

Subsequently, they sent letters to her directing her to explain the charges and to report for work. Tanguin, however, failed to act on these notices.

LA Ruling:

The LA ruled that Tanguin’ s preventive suspension was justified because, as supervisor, she was in possession of the company’s cash fund and collections. It stressed that she was not illegally dismissed.

Nevertheless, the LA ordered the Claudia’s Kitchen, et al. to pay Tanguin her unpaid salary. Unsatisfied, Tanguin elevated an appeal before the NLRC.

NLRC Ruling:

The NLRC partly granted Tanguin’s appeal. It opined that there was no scintilla of proof that she was dismissed from service. It pointed out that it was she who chose not to report for work despite receipt of notices requiring her to report to the head office.

It stated that the nature of her position as billing supervisor, whereby she held company funds and gave job assignments to the employees, was sufficient basis for the preventive suspension.

The NLRC, however, found that Tanguin did not abandon her work when she failed to report for work despite notice. It stated that the filing of the complaint for illegal dismissal negated the claim of abandonment. The NLRC concluded that there was neither dismissal nor abandonment. Thus, she should be reinstated to her former position, but without backwages.

Unconvinced, the Claudia’s Kitchen, et al. filed a partial motion for reconsideration thereto. The NLRC denied the same. Aggrieved, the Claudia’s Kitchen, et al. filed a petition for certiorari with the CA.

CA Ruling:

The CA modified the NLRC ruling. It wrote that reinstatement was not proper because such remedy was applicable only to illegally dismissed employees. It added that the Claudia’s Kitchen, et al. did not dismiss her from employment as evidenced by several notices sent to her requiring her to report back to work and to explain the charges against her.

The CA, however, applied the doctrine of strained relations and ordered the payment of separation pay to Tanguin instead of compelling the Claudia’s Kitchen, et al. to accept her in their employ. It opined that she was employed as a billing supervisor and such a sensitive position required no less than the trust and confidence of her employer as she was routinely charged with the care and custody of the funds and property of her employer; and that as a necessary consequence of the judicial controversy, an atmosphere of antipathy and antagonism may be generated as to adversely affect her efficiency and productivity if she would be reinstated.

The Claudia’s Kitchen, et al. moved for reconsideration, but their motion was denied by the CA.

Issue/s:

Whether or not separation pay in lieu of reinstatement may be awarded to an employee who was not dismissed from employment

Whether or not the filing of illegal dismissal instead of answering the allegations is premature.

SC Ruling

The SC granted the petition.

The SC held that in cases of illegal dismissal, the employer bears the burden of proof to prove that the termination was for a valid or authorized cause. But before the employer must bear the burden of proving that the dismissal was legal, the employees must first establish by substantial evidence that indeed they were dismissed.

If there is no dismissal, then there can be no question as to the legality or illegality thereof. Citing Machica v. Roosevelt Services Center, Inc., [523 Phil. 199 (2006)] the Court enunciated that one who alleges a fact has the burden of proving it; thus, employees were burdened to prove their allegation that the company dismissed them from their employment. It must be stressed that the evidence to prove this fact must be clear, positive and convincing. The rule that the employer bears the burden of proof in illegal dismissal cases finds no application where because the company denies having dismissed the employees.

Re-Numbered Labor Code per DOLE Department Advisory 01, Series of 2015

Atty. Elvin’s new work, The Labor Code of the Philippines

In this instant case, Tanguin, instead of answering the allegations against her, opted to file an illegal dismissal complaint with the Labor Arbiter. Clearly, her complaint for illegal dismissal was premature, if not pre-emptive.

Separation pay is warranted when the cause for termination is not attributable to the employee’s fault, such as those provided in Articles 298 and 299 of the Labor Code, as well as in cases of illegal dismissal where reinstatement is no longer feasible.

On the other hand, an employee dismissed for any of the just causes enumerated under Article 297 of the same Code, being causes attributable to the employee’s fault, is not, as a general rule, entitled to separation pay. The non-grant of such right to separation pay is premised on the reason that an erring employee should not benefit from their wrongful acts.

As an exception, case law allows the grant of separation pay or financial assistance to a legally-dismissed employee as a measure of social justice or on grounds of equity. In Philippine Long Distance Telephone Co. vs. NLRC (PLDT), the Court allowed the grant when the employee was validly dismissed for causes other than serious misconduct or those reflecting on his moral character.

The payment of separation pay and reinstatement are exclusive remedies. The payment of separation pay replaces the legal consequences of reinstatement to an employee who was illegally dismissed. To award separation pay in lieu of reinstatement to an employee who was never dismissed by his employer would only give imprimatur to the unacceptable act of an employee who is facing charges related to his employment, but instead of addressing the complaint against him, he opted to file an illegal dismissal case against his employer.

In sum, separation pay is only awarded to a dismissed employee in the following instances:

1) in case of closure of establishment under Article 298 [formerly Article 283] of the Labor Code;

2) in case of termination due to disease or sickness under Article 299 [formerly Article 284] of the Labor Code;

3) as a measure of social justice in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character;

4) where the dismissed employee’s position is no longer available;

5) when the continued relationship between the employer and the employee is no longer viable due to the strained relations between them; or

6) when the dismissed employee opted not to be reinstated, or the payment of separation benefits would be for the best interest of the parties involved.

In all of these cases, the grant of separation pay presupposes that the employee to whom it was given was dismissed from employment, whether legally or illegally. In fine, as a general rule, separation pay in lieu of reinstatement could not be awarded to an employee whose employment was not terminated by his employer.

There were cases, however, wherein the Court awarded separation pay in lieu of reinstatement to the employee even after a finding that there was neither dismissal nor abandonment. In Nightowl Watchman & Security Agency, Inc. vs. Lumahan (Nightowl), the Court awarded separation pay in view of the findings of the NLRC that Tanguin stopped reporting for work for more than ten (10) years and never returned, based on the documentary evidence of petitioner.

The circumstances in this case, however, does not warrant an application of the exception.