Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work is a just cause for dismissal.

Hence, the Supreme Court held as follows:

BDO Unibank, Inc. vs. Nestor N. Nerbes and Armenia F. Suravilla
G.R. No. 208735, July 19, 2017


Respondents Nerbes and Suravilla were employees of Equitable PCI Bank (now BDO Unibank, Inc.) (bank) and members of Equitable PCI Bank Employees Union (EPCIBEU), a legitimate labor union and the sole and exclusive bargaining representative of the rank and file employees of the bank.

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On February 4, 2004, an election of officers of EPCIBEU was held under the supervision of the Labor Relations Division of the National Capital Region Regional Office of the Department of Labor and Employment (DOLE-NCR).

Nerbes and Suravilla won as President and Executive Vice President, respectively, and were proclaimed as winners. The protest of the losing candidates was effectively dismissed.

After taking their oath, Nerbes and Suravilla notified the bank of their decision to exercise their privilege under the Collective Bargaining Agreement (CBA) which allows the President and the Executive Vice President to be on full-time leave for the duration of their term of office in order to devote their time in maintaining industrial peace.

Nerbes and Suravilla anchored their right to immediately assume their respective positions on Rule XV, Section 5 of Department Order No. 09, Series of 1997 which, in part, provides that “Upon resolution of the protest, the committee shall immediately proclaim the winners and the latter may assume their positions immediately.” Thus, Nerbes and Suravilla took their respective union leaves.

The losing candidates appealed to the Bureau of Labor Relations (BLR) the DOLE-NCR’s Resolution. Because of the pendency of said appeal, the bank disapproved Nerbes and Suravilla’s union leaves and were directed to refrain from being absent and to report back to work. Nerbes and Suravilla failed to comply.

Consequently, the bank issued show cause Memoranda directing Nerbes and Suravilla to explain why no disciplinary action should be imposed against them for violation of the bank’s Code of Conduct on attendance and punctuality, and obedience and cooperation. It appears that Nerbes himself filed a complaint for unfair labor practice (ULP) against the bank.

Thus, Nerbes was additionally asked to explain his alleged falsification of public document and perjury pertaining to his submission of a position paper in the ULP case which was purportedly signed by his lawyer but who later on denied having signed the same.

Administrative hearings were then conducted and the bank found Nerbes and Suravilla guilty of serious misconduct and willful disobedience and imposed upon them the penalty of dismissal. Nerbes and Suravilla then filed before the LA a complaint for ULP, illegal dismissal and money claims.

LA Ruling:

The LA rendered a Decision finding dismissal for insubordination a valid exercise of management prerogative but ordered the reinstatement of Nerbes and Suravilla equivalent positions in the bank, without loss of seniority rights, with one (1) year backwages or, at the option of [Nerbes and Suravilla], to accept from the [bank], in lieu of reinstatement and backwages, a separation pay computed at thirty (30) days pay for every year of service, a fraction of at least six ( 6) months to be considered a full year or an applicable separation pay under the subsisting [CBA], whichever is higher.

The bank appealed to the NLRC.

NLRC Ruling:

The NLRC reversed the ruling of the LA and dismissed Nerbes and Suravilla’s complaint.

Their Motion for Reconsideration likewise having been denied by the NLRC, Nerbes and Suravilla filed a petition for certiorari with the CA.

CA Ruling:

The CA granted the petition and annulled and set aside the NLRC Decision and Resolution.

The CA held that while Nerbes and Suravilla disobeyed the bank’s order to return to work, such disobedience was not characterized by a wrongful or perverse attitude.

The CA noted that their refusal to return to work was brought by their honest belief that as elected officers, they were entitled to be on full-time leave. As such, the CA reasoned, their offense was disproportionate to the ultimate penalty of dismissal.

Anent the charge of falsification of public document and perjury against Nerbes, the CA noted that this was a mere retaliatory move on the part of the bank which had nothing to do with the latter’s work. In any case, the CA observed that Nerbes’ counsel already acknowledged having notarized the questioned document.

The bank’s MR was denied. Thus, the bank filed the petition with the SC.

Pending resolution of the instant petition, the bank moved for the withdrawal of its petition as regards Suravilla in view of the parties’ Compromise Agreement. Part of said Compromise Agreement is Suravilla’s undertaking to release the bank from any and all claims arising from or related to the instant petition.

Atty. Emmanuel R. Jabla (Atty. Jabla) of Jabla Brigola Bagas & Sampior Law Offices, counsel for Nerbes and Suravilla, moved to intervene. Atty. Jabla alleged that said Compromise Agreement was wrung from Suravilla without his knowledge and consent, as a result of which, he was deprived of his professional fee supposed to be payable upon full recovery of her monetary claims.

He alleged that there was a verbal agreement between him and Suravilla for the latter to pay a contingent fee of I 0% of all money recovered. He prayed that the bank and Suravilla be held solidarily liable as joint tortfeasors to pay his professional fee equivalent to 10% of the amount received by Suravilla, or PhP 348,751.27 and that a lien upon all judgments for the payment of money and executions issued in pursuance of such judgments be granted in his favor.


Whether or not the intentional refusal of the complainants to report for work constitutes serious misconduct when the same is not characterized by a wrongful and perverse attitude.

Whether or not attorney’s fees agreed verbally can be enforced in the compromised labor award.

Whether or not the compromise agreement can be invalidated by the fact that the counsel’s attorney’s fees were not provided therein

SC Ruling:

The SC denied the petition.

Article 282, now Article 296, of the Labor Code enumerates the just causes for the termination of the employment of an employee. Under Article 282(a), serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work is a just cause for dismissal.

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Misconduct is defined as an improper or wrong conduct. It is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment.

To be a valid cause for dismissal, such misconduct must be of grave and aggravated character and not merely trivial or unimportant. The misconduct must also be related to the performance of the employee’s duties showing him to be unfit to continue working for the employer and that the employee’s act or conduct was performed with wrongful intent.

On the other hand, valid dismissal on the ground of willful disobedience requires the concurrence of twin requisites: (1) the employee’s assailed conduct must have been willful or intentional, the willfulness being characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to discharge.

The return to work order made by the bank is reasonable and lawful, and the act required for Nerbes and Suravilla relates to the performance of their duties. The point of contention is whether their refusal to return to work was willful or intentional and, if so, whether such willful or intentional conduct is attended by a wrongful and perverse attitude.

In this case, Nerbes and Suravilla’s failure to report for work despite the disapproval of their application for leave was clearly intentional. However, though their refusal to do so may have been intentional, such was not characterized by a wrongful and perverse attitude or with deliberate disregard of their duties as such.

At the time Nerbes and Suravilla notified the bank of their intent to avail of their union leaves, they were already proclaimed as winners and in fact took their respective oaths of office. Following the terms of the parties’ CBA, which has the strength of law as between them, Nerbes and Suravilla, as duly-elected union officers, were entitled to take their union leaves.

That Nerbes and Suravilla were indeed entitled to such privilege is tacitly recognized by the bank itself when it continued to pay them their full salaries, despite not reporting for work.

Nerbes and Suravilla’s belief that they are entitled to immediately assume their positions as union officers and thereby entitled to union leaves is not completely bereft of basis. For one, they based the exercise of such privilege on the existing CBA, the terms of which the bank has not demonstrated to be inapplicable. For another, it was only upon being proclaimed as winners did they assume their respective positions which, under Department Order No. 09, take place immediately.

On the other hand, the bank’s disapproval of union leaves and return to work order were essentially based on the pendency of the appeal filed by Nerbes and Suravilla’s opponents before the BLR.

To the bank, the appeal before the BLR defeated the immediately executory nature of Nerbes and Suravilla’s proclamation. Even then, their failure to report for work can hardly be equated as a perverse defiance of the bank’s orders as they believed that such appeal could not have stayed their immediate proclamation and assumption to office for, after all, a doubtful or difficult question of law may be the basis of good faith. As to which interpretation is correct is beside the point and, hence, should be addressed at a more appropriate forum at a proper time.

The SC found that the penalty of dismissal in this case is harsh and severe. Not every case of insubordination or willful disobedience by an employee reasonably deserves the penalty of dismissal because the penalty to be imposed on an erring employee must be commensurate with the gravity of his or her offense.

It is settled that notwithstanding the existence of a just cause, dismissal should not be imposed, as it is too severe a penalty, if the employee had been employed for a considerable length of time in the service of his or her employer, and such employment is untainted by any kind of dishonesty and irregularity. The SC noted that aside from the subject incident, Nerbes and Suravilla were not previously charged with any other offense or irregularity. Considering the surrounding facts, termination ofNerbes and Suravilla’s services was a disproportionately heavy penalty.

It is settled that a client may enter into a compromise agreement with the adverse party to terminate the litigation before a judgment is rendered therein, and if the compromise agreement is found to be in order and not contrary to law, morals, good customs and public policy, its judicial approval is in order.

There being no impediment to the court’s approval of the Compromise Agreement between the bank and Suravilla, the SC accordingly approved the same and grants the bank’s motion to withdraw its petition with respect to Suravilla.

The grant of the bank’s motion to withdraw the petition as regards Suravilla and the approval of their Compromise Agreement does not affect counsel’s right to compensation. On this score, the Supreme Court cited its disquisition in Malvar v. Kraft Foods Philippines, Inc., et al. that the Court disapproved of the tendencies of clients compromising their cases behind the backs of their attorneys for the purpose of unreasonably reducing or completely setting to naught the stipulated contingent fees.

Thus, the Court granted the Intervenor’s Motion for Intervention to Protect Attorney’s Rights as a measure of protecting the Intervenor’s right to its stipulated professional fees that would be denied under the compromise agreement.

Further, the SC said that the claim for attorney’s fees does not void or nullify the compromise agreement. The SC found that Atty. Jabla adequately and sufficiently represented Suravilla and prepared all the required pleadings on her behalf before the LA, the NLRC, the CA and this Court. Despite the absence of a written agreement as to the payment of fees, his entitlement to reasonable compensation may still be fairly ascertained. In this regard, Section 24 of Rule 13 8 of the Rules of Court should be observed in determining Atty. Jabla’s compensation.

Taking into account the foregoing, the Court finds that the amount equivalent to 10% of the settlement amount received by Suravilla, or PhP348,751.27 is reasonable compensation for the skill and services rendered by Atty. Jabla.

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