PROCEDURAL DUE PROCESS IS NOT COMPLIED WITH BY GIVING THE EMPLOYEE MERE 24 HOURS TO EXPLAIN THE CHARGE

Acquire Mastery of HR/Labor Doctrines, Rules and Principles with Atty. Elvin’s HR Bundle Books at Discounted Rate

Procedural due process requirements in the dismissal of an employee provide that the employer must furnish the employee with two  written notices before dismissal from employment: (1) notice to apprise the employee of the particular acts or omissions for which the dismissal is  sought, and (2) subsequent notice to inform him of the employer’s decision to dismiss him.

Thus, the SC held as follows:

J’ Marketing Corporation, et al. vs. Iguiz
G.R. No. 211522, September 4, 2019

Loss of trust and confidence; Mere summarized list on the alleged customer collection and incomplete remittance amounts fails to prove by substantial evidence the loss of trust and confidence based on willful breach of trust; Procedural due process; The 24-hour notice to explain the charge is severely insufficient and in violation of the implementing rules of the Labor Code; Consideration of employee’s past offense as part of his just or valid cause for termination; The employer cannot invoke past finding through when the employee was not censured, reprimanded or even investigated after he had explained his side and tendered full payment; The previous act of alleged dishonesty cannot be made as a corroborating evidence for another supposed infraction absent the requirement of procedural due process;

Facts:

Respondent Fernando S. Iguiz (Iguiz) was hired as a driver by petitioner J’ Marketing Corporation (JMC). JMC is a company engaged in the business of selling appliances to the general public and has several branches in the Visayas region. After nine months in JMC’s Kalibo Branch, Iguiz was promoted as a collector/credit investigator.

On 11 December 2006, lguiz submitted a Daily Cash Collection Report and remitted his collections for the week of 4-9 December 2006. JMC found that lguiz was short in his remittance collection in the amount of P5,811. Thereafter, through a Memorandum dated 11 December 2006, petitioner Pepito P. Estrellan (Estrellan), JMC’s Kalibo Branch Manager, directed lguiz to explain within 24 hours the reason for the P5,811 shortage and suspended Iguiz from his position as collector/credit investigator.

Iguiz sent a notarized letter-reply and stated that he failed to make a complete remittance since the amount of P5,811 was lost. He said that this was due to the flood brought about by typhoon “Siniang” which affected his home. lguiz also attached in his letter-reply the amount of P5,811 as tender of payment. JMC, in turn, did not pursue further investigation on the matter.

Thereafter, JMC conducted an audit of Iguiz’ s customers under his coverage area (Area 7). As per Sonio’s audit report, JMC discovered that lguiz had an unremitted collection in the amounts of P15,300 and $29 from 14 customers, without the corresponding official receipts. The unremitted collection covered different months from April 2005 to December 2006. Sonio attached a summary list of customers who made the payments to Iguiz without any receipts. Later, JMC collected the affidavits of the 14 customers.

On 8 February 2007, Estrellan issued a memorandum to Iguiz asking him to explain within 24 hours why he should not be reprimanded for loss of trust and confidence for receiving payments of Pl5,300 and $29 without issuing official receipts, as per Sonio’s audit report.

On 12 February 2007, before Iguiz could file an explanation for the memorandum dated 8 February 2007, Iguiz received another memorandum dated 9  February 2007 from Estrellan asking him to sign the administrative investigation report within 12 hours; otherwise it would mean that Iguiz is waiving his right to be heard and JMC would be constrained to evaluate his case based on the evidence on hand.

In his reply-memorandum dated 12 February 2007 addressed to Estrellan, Iguiz denied the allegationagainst him. Iguiz stated that there is no reason to accuse him of loss of trust and confidence since he never accepted payments from customers without issuing the corresponding official receipts. Iguiz added that there was no basis for the audit report since no formal complaint had been filed against him.

On 7 March 2007, Vangie M. Tionko, JMC’s Personnel Manager, issued a  memorandum 19 informing Iguiz that because of (1) dishonesty for collecting P15,300 and $29 without issuing official receipts, and (2) breach of trust and confidence, he is  terminated from employment on the ground of violation of Article 282, paragraph (c) of the Labor Code.

Iguiz received the memorandum of termination. Aggrieved, Iguiz filed a Complaint for illegal dismissal with money claims with the National Labor Relations Commission (NLRC) Sub-Regional Arbitration Branch No. VI in Kalibo, Aldan.

LA Ruling:

The Labor Arbiter (LA) dismissed the complaint for lack of merit.

The Labor Arbiter stated that Iguiz’s bare, unsubstantiated and uncorroborated denial of the charges of unremitted collections and non-issuance of receipts justified his dismissal as a valid exercise of JMC’s management prerogative for loss of trust and confidence.

Iguiz filed an appeal with the NLRC.

NLRC Ruling:

The NLRC, 4th Division of Cebu City reversed the decision of the Labor Arbiter.

JMC filed a motion for reconsideration which was denied by the NLRC. JMC then filed an appeal with the CA (note: the Decision of the NLRC is not appealable).

CA Ruling:

The CA affirmed the NLRC.

JMC filed a motion for reconsideration which was denied by the CA. Hence, the petition before the SC.

Issue/s:

Whether or not presentation of summarized list on the alleged customer collection and incomplete remittance amounts is substantial evidence to prove the loss of trust and confidence based on willful breach of trust

Whether or not the 24-hour notice to explain the charge is sufficient and in compliance with the Labor Code

Whether or not the employer can consider the employee’s past offense as part of his just or valid cause for termination when the employee was not censured, reprimanded or even investigated after he had explained his side and tendered full payment

Whether or not the previous act of alleged dishonesty can be made as a corroborating evidence for another supposed infraction absent the requirement of procedural due process

SC Ruling:

The SC did not find merit in the petition.

The SC held that under the Labor Code, the dismissal of an employee has a two-fold due process requirement: one is substantive and the other, procedural. For substantive due process, the dismissal must be for a just and authorized cause as provided under Articles 282, 283, and 284 of the Labor Code; and for procedural due process, the opportunity to be heard and to defend oneself must be observed.

In Tiu vs. NLRC, we held that the language of Article 282(c) [Note: now Art. 297] of the Labor Code states that the loss of trust and confidence must be based on willful breach of the trust reposed in the employee by his employer. Ordinary breach will not suffice; it must be willful. Such 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. Stated otherwise, it must be based on substantial evidence.

The SC found that JMC failed to prove by substantial evidence the loss of trust and confidence in Iguiz based on willful breach of trust. Aside from the summarized list submitted by JMC’s credit supervisor Sonio on the alleged customer collection and incomplete remittance amounts of Iguiz, no other details were provided by JMC.

Iguiz was not given an opportunity to question the report of Sonio and to check if there were supporting documents attached to the list. Neither were the customers affected presented nor did they come forward to personally attest to the collection and non-issuance of receipts. Also, JMC belatedly obtained the affidavits of said customers on 28 February 2007 or more than three weeks after the said report was given by Sonio to Estrellan.

By then, the purported administrative investigation conducted by Estrellan on 8 February 2007 had already been concluded. Clearly, Iguiz was not sufficiently apprised of the allegations against him. He was also not given an opportunity to present his side, refute the charges, and confront the witnesses against him. Thus, JMC’s justification for willful breach of trust as the basis for the dismissal was not convincingly established.

It bears stressing that in illegal dismissal cases, the employer bears the burden of showing that the dismissal was for a just or authorized cause. Not only must the reasons for dismissing an employee be substantiated, the manner of his dismissal must be in accordance with governing rules and regulations. Failure by the employer to discharge this burden would necessarily mean that the dismissal is not justified, and therefore illegal. This means that the requirements of due process must be observed.

Article 277(b) of the Labor Code contains the procedural due process requirements in the dismissal of an employee. The law and the rules provide that the employer must furnish the employee with two  written notices before dismissal from employment: (1) notice to apprise the employee of the particular acts or omissions for which the dismissal is  sought, and (2) subsequent notice to inform him of the employer’s decision to dismiss him.

In addition to the notices, the employer must set a hearing or conference to give the employee an opportunity to present evidence and rebut the charges against him. The requirement of two notices and a hearing is mandatory; otherwise the order of dismissal is void. The case of King of Kings Transport, Inc. v. Mamac enumerated the proper steps an employer should take in terminating the services of an employee.

In the present case, JMC sent Iguiz the first notice – a memorandum dated 8 February 2007 asking Iguiz to explain why he should not be reprimanded for loss of trust and confidence for receiving payments of Pl5,300 and $29 without issuing official receipts. Iguiz received this notice on 9  February 2007 and he was able to file a  written reply on 12 February 2007 denying the allegation. JMC then sent Iguiz another notice –   a memorandum dated 7 March 2007 terminating his employment. Iguiz received the termination notice on 12 March 2007.

At first glance, it seems that JMC complied with the two notice requirement. However, the succession of events would show that JMC actually railroaded the termination ofiguiz from the start.

First, JMC, through Estrellan, issued the first written notice –   the memorandum dated 8  February 2007 stating “you are instructed by the undersigned to explain within 24 hours why you should not [be] reprimanded for los[ s] of trust and confidence.” The notice clearly says reprimand and not termination from employment. Also, the 24-hour notice does not give Iguiz ample time to study the accusation against him, consult a union official or lawyer, gather data, and decide on what defenses to raise.

In Naranjo vs. Biomedica Health Care, Inc., we held that the period of 24 hours allotted to answer the notice was severely insufficient and in violation of the implementing rules of the Labor Code. Under the implementing rule of Article 277, an employee should be given “reasonable opportunity” to file a response to the notice. The case of King of Kings Transport, Inc. states that “reasonable opportunity” should be a period of at least five calendar days from receipt of the notice. Iguiz failed to comply with the 24 hour deadline and only filed his reply-memorandum to the first notice on 12 February 2007 denying the allegations against him.

Second, even before Iguiz could file an explanation to the first notice, Iguiz received another memorandum dated 9 February 2007 from Estrellan asking him to sign the administrative investigation report conducted on 8 February 2007. The report consists of a two-page transcript of a hearing conducted by Estrellan and witnessed by Nazareta. However, not knowing the basis of the investigation and the charges against him, lguiz could not have participated in this so-called hearing or conference.

The records reveal that lguiz denied having participated in said administrative investigation. Iguiz stated that no formal investigation and hearing were conducted by JMC where he could have an opportunity to defend himself, present evidence in support of his defense  and confront the witnesses against him. JMC countered this argument by saying that lguiz refused to sign the administrative investigation report as indicated in the memorandum dated 9 February 2007 where JMC reiterated to Iguiz that failure to sign the administrative investigation conference within 12 hours would mean waiving his right to be heard.

This period of 12 hours given by JMC to lguiz is again not the “reasonable opportunity” contemplated by the rules. Without any chance for Iguiz to know the basis for the investigation and to defend himself personally, with the assistance of a representative or counsel of his choice, the 12-hour notice is evidently deficient. Thus, the administrative investigation purportedly conducted was not in accordance with the hearing or conference contemplated in Section 2, Rule XXIII, Book V of the implementing rules.

Third, in the second notice -memorandum dated 7 March 2007 informing Iguiz of his termination from employment –  JMC mentioned that lguiz had another offense previously for shortage in his collection in the amount of P5,811. However, while an employer may take into consideration an employee’s past offenses as part of his just or valid cause for termination, JMC, in this case, cannot invoke Iguiz’s shortage of P5,811 pertaining to a  past collection, through memorandum dated 11 December 2006, since lguiz was not censured, reprimanded or even investigated for this shortage after he had explained his side and tendered full payment.

lguiz’ s previous act of alleged dishonesty cannot be made as a corroborating evidence for another supposed infraction absent the requirement of procedural due process. Accordingly, given the illegality of lguiz’s dismissal without just cause and the non-observance of procedural due process, Iguiz is entitled to reinstatement and backwages as provided in Article 279 of the Labor Code.