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Serious misconduct if used as ground to validly dismiss and employee, negates the award of separation pay. Thus, the SC held in the following case:

Herma Shipping and Transport Corporation vs. Cordero
G.R. No. 244144/G.R. No. 244210, January 27, 2020

Separation pay; Social Justice and Equity; Serious Misconduct; Length of service; Length of service as justification for moderating the penalty of dismissal; Prize for disloyalty; Length of service of more than 20 years may reflect a regrettable lack of loyalty, and worse, betrayal of the company


Cordero was employed as Able Seaman by Herma Shipping and Transport Corporation (HSTC). During his employment, he was part of the complement of M/Tkr Angat, where one of his primary duties entailed being a Helmsman or a duty lookout during vessel navigation.

Sometime in 2015, HSTC discovered significant losses of the oil and petroleum products transported by M/Tkr Angat during its past twelve (12) voyages. Consequently, HSTC conducted an investigation and sent a Notice to Explain/Show Cause Memo to five (5) crew members, including Cordero, requiring them to submit a written explanation for allegedly committing: (a) violation of HSTC’s Code of Discipline; (b) Serious Misconduct; and (c) Willful Breach of Trust and Confidence. Pending the investigation, the five (5) crew members were placed on preventive suspension.

In his defense, Cordero denied the allegations against him and claimed that he did not see anything unusual or suspicious during the voyages, and that if there were any such case, he did not see them due to this poor eyesight. After HSTC found Cordero’s explanation insufficient, he was dismissed from employment through a Notice of Termination. This prompted Cordero to file a complaint for illegal dismissal and payment of 13th month pay, separation pay, damages, and attorney’s fees against HSTC andEsguerra, CEO, before the NLRC.

For its part, HSTC and Esguerra (HSTC, et al.) contended that the significant losses in the oil and petroleum products were confirmed after using a Four Point Analysis, an accepted formula adopted in the oil shipping industry to determine oil/petroleum loss during a sea voyage. Moreover, a suspicious event was captured and recorded by M/Tkr Angat’s CCTV camera, showing an unknown boat navigating its way at the side of the vessel, crew members coming out of their quarters, examining/investigating, and waving off the boat, and the blocking/covering of the CCTV camera for three (3) hours.

HSTC, et al. maintained that Cordero, as M/Tkr Angat’s  Helmsman/Watchman, was undoubtedly aware of the oil pilferage; having had a vantage point from the bridge of the vessel, he would not have missed any boat or vessel that will approach M/Tkr Angat from the side. Likewise, Cordero would have seen who removed the cover of the CCTV camera that was blocked. However, despite the incident, Cordero did not report any irregularity to HSTC.

LA Ruling:

The Labor Arbiter (LA) found Cordero’s employment to have been validly terminated and thus, dismissed the complaint for lack of merit.

The LA ruled that there was substantial evidence to show that Cordero participated in the oil pilferage while navigating at sea. Hence, he committed serious misconduct and willful breach of trust and confidence when he perpetrated a serious infraction amounting to theft of property entrusted to him.

Aggrieved, Cordero appealed to the National Labor Relations Commission (NLRC).

NLRC Ruling:

The NLRC affirmed the LA’s dismissal of the complaint upon a finding that Cordero was validly dismissed for a just cause.

It explained that for failure to call out the irregularity during his duty and report the same to HSTC, Cordero committed a dereliction of duty that amounted to Serious Misconduct. Moreover, Cordero also committed Willful Breach of Trust and Confidence, since he was considered as a fiduciary rank-and-file employee who was entrusted with the care and custody of HSTC’s vessel and the oil it transported.

Finally, the NLRC found that HSTC and Esguerra complied with the procedural due process rule in terminating Cordero’s employment, having been apprised of the charges against him and given the opportunity to be heard.

Dissatisfied, Cordero moved for reconsideration, which was denied by the NLRC. Hence, the matter was elevated to the Court of Appeals (CA) via a petition for certiorari.

CA Ruling:

The CA affirmed the NLRC Decision with a modification directing HSTC, et al. to pay Corder separation pay equivalent to one (1)-month salary for every year of service from date of hire in March 1992 until finality of judgment.

Accordingly, the CA remanded the case to the LA for the proper computation of separation pay. Undeterred, both parties respectively moved for reconsideration. Both motions were denied. Hence, both parties filed a petition before the Supreme Court (SC).

The petition of HSTC, et al. submit that the CA erred in awarding separation pay in favor of Cordero, considering that there was just cause to validly dismiss him. On the other hand, the Cordero petition insists that the CA erred in affirming the labor tribunals’ finding that he was validly dismissed and that he is not entitled to his monetary claims.


Whether or not an employee who was validly dismissed for serious misconduct is entitled to separation pay on principle of social justice and equity

Whether or not the service of 24 years should serve the mitigate the offense in meting out the appropriate penalty

SC Ruling:

The SC granted HSTC, et al.’s petition and denied Cordero’s.

Citing the case of Manila Water Company vs. Del Rosario [72 Phil. 641 (1988)], the SC held that as a general rule, an employee who has been dismissed for any of the just causes enumerated under Art. 282 [now 297] of the Labor Code is not entitled to separation pay. In exceptional cases, however, the Court has granted separation pay to a legally dismissed employee as an act of “social justice” or on “equitable grounds.” In both instances, it is required that the dismissal (1) was not for serious misconduct; and (2) did not reflect on the moral character of the employee.

In exceptional cases, however, the Court has granted separation pay to a legally dismissed employee as an act of “social justice” or on “equitable grounds.” In both instances, it is required that the dismissal (1) was not for serious misconduct; and (2) did not reflect on the moral character of the employee.

In the cases of Philippine Long Distance Telephone Company vs. NLRC and subsequently Toyota Motor Phils. Corp. Workers Association vs. NLRC, the Court stressed “separation pay shall be allowed as a measure of social justice only in the instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character.”

Where the reason for the dismissal is, for example, habitual intoxication or an offense involving moralturpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice. A contrary rule would have the effect of rewarding rather than punishing the erring employee for his offense.

The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. Indeed, equity as an exceptional extenuating circumstance does not favor, nor may it be used to reward, the indolent or the wrongdoer for that matter. The Court will not allow a party, in guise of equity, to benefit from his own fault.

That Cordero had been employed with HSTC for twenty-four (24) years does not serve to mitigate his offense nor should it be considered in meting out the appropriate penalty therefor. In fact, it may be reasonably argued that the infraction that he committed against HSTC, i.e., theft of invaluable company property, demonstrates the highest degree of ingratitude to an institution that has been the source of his livelihood for twenty-four (24) years, constitutive of disloyalty and betrayal of the trust and confidence reposed upon him.

Citing Manila Water Company, the SC held that the Court refused to take into account the errant employee’s length of service of more than twenty (20) years, considering that his violation reflects “a regrettable lack of loyalty and worse, betrayal of the company.”

In this case, the Supreme Court held that having established that Cordero’s employment was terminated for just cause and that he was therefore validly dismissed, as well as the fact that the infractions he committed against HSTC involve moral turpitude and constitute Serious Misconduct, the award of separation pay in his favor is devoid of basis in fact an in law. Accordingly, the SC held that the same must be deleted.

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