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Diminution of benefits arises when the following are present: (1) the grant or benefit is founded on a  policy or has ripened into a practice over a long period of time; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of a  doubtful or difficult question of law; and ( 4) the diminution or discontinuance is done unilaterally by the employer. There is none where the existence of benefits via company practice was not substantially proven.

Thus, the SC held in the following case:

Kondo vs. Toyota Boshoku (Phils.) Corporation, et al.
G.R. No. 201396, September 11, 2019

Constructive Dismissal; Non-Diminution of Benefits; Company Practice; Regular company practice must be proven by the claimant with clear and convincing evidence; Burden of Proof


Petitioner Yushi Kondo (Kondo), a Japanese citizen, applied with and was hired by respondent Toyota Boshoku Philippines Corporation (Toyota) as Assistant General Manager for Marketing, Procurement and Accounting. His net monthly salary was P90,000.00, to be increased to Pl 00,000.00 after six months.

Among his alleged benefits, Kondo was also provided a  service car and a  local driver by Toyota’s President at the time, Fuhimiko Ito (Ito). Toyota caused the issuance of Kondo’s Alien Employment Permit (AEP).

Kondo further alleges after obtaining a lower evaluation and having protested, he was allegedly assigned the oldest company car and prevented from using other company cars for business travels. He was also prevented from further using his Caltex card for gasoline expenses, and instructed to pay for gas expenses with his own money, subject to reimbursement.

Further, Kondo was allegedly restrained by Toyota’s security personnel from going out of the office even if it were for the purpose of performing his official duty, and prevented from attending the meeting for the evaluation of employees. When respondent Mamoru Matsunaga (Matsunaga) took over as President of Toyota, he was transferred to the Production Control, Technical Development and Special Project department as Assistant Manager. Respondent Kazuki Miura (Miura) took over his former post.

Kondo allegedly objected to the transfer on the ground that it is  in violation of the terms of his AEP, and admitted having no knowledge, skills, and experience in production control and technical development. Nonetheless, Kondo assumed his new post on July 1, 2008. Afterwards, Kondo was notified that his service car and driver will be withdrawn. He pleaded with Matsunaga for the benefits to be retained since he would be helpless without them. Nonetheless, Matsunaga allegedly brushed aside his plea and told him that he must shoulder his own transportation expenses.

Toyota also terminated the services of Kondo’s driver. Since Kondo could not report for work, he considered himself constructively dismissed. On the same day, he filed a complaint with the NLRC for constructive dismissal, illegal diminution of benefits, illegal transfer of department, harassment, and discrimination against Toyota, Matsunaga, Miura, and Joseph Ledesma (Ledesma), corporate officers of Toyota (collectively, Toyota, et al.).

On the part of Toyota, et al., they denied Kondo’s allegations, arguing that Kondo was entitled to the service car and driver only for a period of one year, after which he was expected to drive himself to and from work. The driver assigned to Kondo was discharged due to the termination of his employment contract.

Moreover, the free gasoline that may be availed with the Caltex card is a benefit exclusively given to Japanese expatriates, which Kondo was not, being a local hire. The reason why Kondo was able to use the card is that the service car he used was previously assigned to an expatriate and it had an accompanying Caltex card. Kondo also purportedly abused the Caltex card by using it for personal trips.

Toyota, et al. denied that Kondo was given the oldest company car, as in fact he was given a year 2000Toyota Corolla model. They denied excluding Kondo from any meeting, stating that the only meeting he was excluded from was the one exclusively for top corporate officers. Finally, Kondo’s transfer to another department was an exercise of management prerogative. Kondo had skills in planning, development, and special projects, and was thus competent for his new position. Toyota allegedly had no intention of dismissing Kondo, as it actually later sent him two notices to return to work.

LA Ruling:

The Labor Arbiter (LA) ruled that Kondo was constructively dismissed.

LA held that Toyota failed to prove that Kondo was entitled to the service car and driver for a limited period of one year. None of the Toyota, et al. had personal knowledge of the extent and limitation of the benefits granted to Kondo, who was hired by Toyota’s former President, Ito. Toyota, et al. did not even attempt to obtain Ito’s statement to support their allegation. They merely assumed that the benefits have a duration based on the limited employment contract of Kondo’s driver. Hence, the withdrawal of the benefit was without justification, and thus unwarranted.

Also, the LA held that there was no valid justification for the withdrawal of Kondo’s Caltex card. Kondo’s transfer from the Marketing, Procurement and Accounting Department to the Production Control, Technical Development and Special Project Department of Toyota lacked justification. Kondo did not have the technical knowledge, skills and experience for his new post, as his background pertains to trading, brokering and business consultancy. His transfer was not an exercise of management prerogative as he was not appropriately trained for his new functions. Rather, it was a scheme for him to commit mistakes and create a valid reason for his subsequent termination and deportation. Moreover, Kondo’s transfer should have been approved by the Secretary of Labor and Employment pursuant to Article 41 of the Labor Code.

The LA concluded that the circumstances surrounding the case amounted to constructive dismissal as they made Kondo’s work conditions unbearable. The removal of his service car, driver and Caltex card amounted to a violation of the public  policy of non-diminution of employee benefits. Consequently, the LA adjudged Toyota, et al. to be jointly liable to pay the abovementioned monetary awards to Kondo.

Toyota, et al. appealed to the NLRC.

NLRC Ruling:

The NLRC reversed and set aside the LA Decision and dismissed Kondo’s complaint.

The NLRC held that the award for damages and attorney’s fees should be deleted pursuant to the NLRC Rules of Procedure since these were not asked for in the complaint. Moreover, there was no constructive dismissal to speak of since Kondo claimed to have been “forced to resign” as a  result of Toyota, et al.’ acts. Hence, he had no more intention of going back to work.

In fact, despite receipt of notices to report for work, Kondo failed to do so. He is considered to have abandoned his job or voluntarily terminated his employment relations with Toyota. Moreover, the primary and immediate cause of Kondo’s claim of constructive dismissal is the withdrawal of the car and driver assigned to him, which he considered essential requisites for his continued employment.

To make it appear that he was constructively dismissed, Kondo made various allegations, but he failed to support them with substantial evidence. Further, his transfer to another department was an exercise of Toyota’s management prerogative. His position remained the same and there was no diminution of his benefits. He also agreed to the transfer and assumed his new post. As regards the alleged diminution of benefits, the NLRC gave credence to Toyota’s claim that the service car and driver benefits were limited to one year.

Also, considering that the benefit was not embodied in an employment contract and the driver’s contract of employment had expired, the privilege may be withdrawn anytime without amounting to a diminution of benefits. Finally, the NLRC believed Toyota’s explanation that Kondo was not entitled to the Caltex card because the benefit is extended to Japanese expatriates only and not to local hires.

Kondo filed a motion for reconsideration, but NLRC denied it. Hence, he filed a  petition for certiorari with the Court of Appeals (CA).

CA Ruling:

The CA rendered the assailed Decision denying the petition.

The CA held that it is not the function of certiorari proceedings to review the factual findings of the NLRC, which findings are binding on the court if supported by substantial evidence.

Kondo filed a motion for reconsideration, but the CA denied it. I-le thus filed the petition before the SC.


Whether or not the complainant has the burden of proving existence of company practice

Whether or not diminution of benefits exist where there is failure to prove benefits that arose from company practice

SC Ruling:

The SC denied the petition.

The SC held that constructive dismissal exists where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay. It also exists when continued employment has become so unbearable because of acts of clear discrimination, insensibility or disdain by the employer, that the employee has no choice but to resign. What is essential is that there is a  lack of “voluntariness in the employee’s separation from employment.”

Kondo claimed that he was forced to resign. Hence, it is incumbent upon him to prove that his resignation was involuntary and that it was actually a case of constructive dismissal, with clear, positive and convincing evidence. This he failed to do.

The primary and immediate cause for Kondo’s claim of constructive dismissal is the withdrawal of his assigned car and driver, which Kondo claimed as “essential requisites of his continued employment. In fact, despite all the allegations in his complaint, Kondo started to not report for work, the day Toyota terminated the services of his driver. To place matters in perspective, what Kondo essentially alleges is diminution of benefits. It just so happened that the benefit allegedly unreasonably withdrawn was the means used by him to report for work.

The Court has held that there is diminution of benefits when the following are present: (1) the grant or benefit is founded on a  policy or has ripened into a practice over a long period of time; (2) the practice is consistent and deliberate; (3) the practice is not due to error in the construction or application of a  doubtful or difficult question of law; and ( 4) the diminution or discontinuance is done unilaterally by the employer.

Under the first requisite, the benefit must be based on express policy, a written contract or has ripened into a practice. Here, the grant of service car and local driver to Kondo was based neither on express policy or a written contract. It may also not be considered company practice.

To be considered as a regular company practice, it must be shown by substantial evidence that the giving of the benefit is done over a  long period of time, and that it  has been made consistently and deliberately. There must be an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of the law or agreement requiring the grant thereof. In sum, the benefit must be characterized by regularity and voluntary and deliberate intent of the employer to grant the benefit over a considerable period of time. The burden of proving that the benefit has ripened into practice rests· in the employee.

In this case, Kondo failed to prove that the car and driver benefits were also being enjoyed by other employees who held positions equivalent to his position, or that the benefits were given by the company itself with voluntary and deliberate intent. On the contrary, the record shows that these benefits were granted by Toyota’s former President specifically to Kondo at the time he was hired, in a verbal agreement.

As such, the grant of the benefits may be viewed more as an accommodation given to Kondo by virtue of him being a fellow Japanese working in a  foreign, and presumably unfamiliar, land. Kondo cannot demand a right to the service car and driver indefinitely, especially under new administration, when the benefit ostensibly sprung only from the magnanimity of his former superior rather than actual company practice.

As regards the Caltex card, Toyota consistently argued that the free gasoline that may be availed with it is provided only to Japanese expatriates, and not to local hires like Kondo. The latter was able to enjoy the benefit as it came with the car assigned to him. On this point, there is likewise no showing that Kondo’s entitlement to the Caltex card is based on an express policy, a written contract, or company practice. Considering that Kondo did not sign an employment contract, he can only anchor his claim on company practice. However, he also failed to prove that the card was being enjoyed by other employees or officials similarly situated as him, as would indicate Toyota’s intention to give the benefit consistently and deliberately. Hence, Kondo cannot demand continued use of the card.

Granting arguendo that the benefit amounted to company practice, there is essentially no diminution to speak of. The record bears that the Caltex card was withdrawn by Toyota prior to the withdrawal of the car and driver benefits. Kondo did not raise this as an issue, verbally or in a written memorandum to his superior. Even then, Kondo’s gasoline expenses were subject to reimbursement. Hence, at the end of the day, it was still Toyota that paid for his gasoline consumption.

Finally, Kondo argues that his transfer from the Marketing, Procurement and Accounting Department to the Production Control, Technical Development and Special Project Department was an indication of constructive dismissal because he lacked technical expertise and experience for the new position. Toyota justified this move as an exercise of management prerogative which did not entail any change in the salary and benefits being enjoyed by Kondo, who was expected to exercise the same managerial functions.

Notably, Kondo did not raise any objections to his transfer prior to the filing of the complaint, nor did he amply demonstrate why he was unsuited for the new job. There was no proof of any verbal or written opposition to the transfer. In fact, he was assigned to the new department, but he did not complain of his new assignment until after more than three months, when he filed a complaint with the NLRC. Kondo did not allege and prove specific facts that would indicate his inability to function fully in the new department as a result of his lack of expertise, or that his transfer constituted clear discrimination or harassment. He also did not address Toyota’s assertion that his new function required him merely to oversee the department and carry out management policies, rather than participate in production and  technical development.

Indeed, the mere fact of Kondo’s transfer to the new department does not support his claim of constructive dismissal. The SC reiterated the basic rules of evidence that each party must prove his affirmative allegation, and that mere allegation is  not evidence. We also stress that the evidence to prove the fact of the employee’s constructive dismissal must be clear, positive, and convincing. Absent any showing of an overt or positive act proving that Toyota, et al. had dismissed Kondo, the latter’s claim of illegal dismissal cannot be sustained.

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