2.

4 ABANDONMENT
JARDINE DAVIS VS SALUTIN
Salutin, a demonstrator/agronomist, filed a complaint against petitioner Jardine Davis Inc (JDI)
for illegal dismissal, with prayer for reinstatement and backwages. LA ruled in favor of
respondent Salutin. NLRC dismissed JDI's appeal and modified the decision by eliminating the
awards given for holiday pay, service incentive leave pay, moral and exemplary damages.
Shortly after the reinstatement of Salutin "on payroll only", JDI sent a letter directing him to
report for work to their Bacolod Branch Manager.
Later, JDI filed a "Manisfestation and Motion" with the respondent Commission stating that
Salutin be considered as having abandoned his work considering his continuous absence of
more than three (3) weeks since he was required to report for work . . . and that any award for
reinstatement to his former position, without loss of seniority and other rights, in the Arbiter's
decision subject of this appeal be considered and held as waived or lost. Salutin opposed the
motion, claiming that he was forced to leave in haste because he was then suffering from a
serious ailment. He submitted a medical certificate to support his claim.
RULING:
Petition dismissed. Court affirmed NLRC.
For abandonment to constitute a valid cause for termination of employment, there must be a
deliberate unjustified refusal of the employee to resume his employment. This refusal must be
clearly shown. Mere absence is not sufficient; it must be accompanied by overt acts pointing to
the fact that the employee simply does not want to work anymore.
Abandonment of position is a matter of intention expressed in clearly certain and unequivocal
acts. In this instance, however, certain uncontroverted facts show just exactly the opposite.
Hence, Salutin did report, as directed, on 24 September 1991, but that he could not stay long
because he was ailing at that time; he, although perhaps belatedly made, did seek medical
consultation on 7 November 1991, at the Corazon Locsin Montelibano Memorial Regional
Hospital, for "peptic ulcer"; and on 11 December 1991, he did, in fact, manifest his desire to
assume his work with the petitioner.
SECURITY AND CREDIT INVEST INC vs NLRC
Eighteen (18) of petitioners security guards detailed at the CHR filed a complaint for money
claims against petitioner. Later, security guards withdraw the complaint, each of the
complainants, except for Mercado, Somosot and Oliver. Mercado, Somosot and Oliver filed a
complaint for illegal dismissal Mercado and Somosot claiming that they were only pressured by
petitioner to sign a Release and Quitclaim. Petitioner, on the other hand, denied that it
dismissed Mercado, Somosot and Oliver and alleged that the latter abandoned their
employment.
LA found that there was neither dismissal by petitioner of the respondent security guards nor
abandonment of employment by the latter, and that the controversy resulted from
miscommunication and misapprehension of facts by the parties. NLRC affirmed with
modification on monetary claims.
RULING:
NLRC committed no grave abuse of discretion in affirming the finding that petitioner did not
dismiss respondent security guards, and that the latter did not abandon their employment.
Both the NLRC and the Labor Arbiter found no clear proof that petitioner had in fact dismissed
respondent security guards. Mercado based his claim of illegal dismissal only on the statement
of officer-in-charge Mr. Vecido that he had not been assigned to any post. Similarly,
Somosot relied merely on the verbal information relayed to him that he had been
terminated. Olivers belief that he had been illegally dismissed was founded on the telegram
from petitioner requiring him to explain his absence without leave which he received on March
29, 1990. None of them exerted efforts to confirm from petitioners office whether they had in
fact been dismissed.
Absent any showing of an overt or positive act proving that petitioner had dismissed Mercado,
Somosot and Oliver, their claim of illegal dismissal cannot be sustained. And there being no

finding that respondent security guards were illegally dismissed, there is no basis for an award
of backwages in their favor.
Also, the NLRC find evidence to support petitioners allegation that Mercado, Somosot and Oliver
abandoned their employment. The records reveal that their failure to report for duty was not
caused by a willful and deliberate intent to abandon their employment. Rather, such failure
resulted from their belief, though mistaken, that they had been suspended or terminated from
work. The rule is that for abandonment to exist, two elements must concur: first, the employee
must have failed to report for work or must have been absent without justifiable reason; and
second, there must have been a clear intention to sever the employer-employee relationship
manifested by some overt acts. The filing by Mercado, Somosot and Oliver of their complaints for
illegal dismissal negates the existence of any intention on their part to abandon their
employment.
2.5 FRAUD
FELIX VS ENERTECH
Responent issued a memorandum [7] placing petitioner under preventive suspension for 30
days. Thereafter, respondent sent petitioner a memorandum terminating his employment
.Petitioner filed a complaint for illegal dismissal.
NLRC rendered a decision reversing the labor arbiters decision and dismissing petitioners
complaint for illegal dismissal for lack of merit. The NLRC found sufficient evidence to prove
that petitioner put in less than the required eight hours daily work during his detail at the Big J
Feedmills and, therefore, held that his dismissal was in accordance with the Company Code of
Discipline and the Labor Code. CA affirmed
RULING:
We find petitioners dismissal to be in order. Falsification of time cards constitutes serious
misconduct and dishonesty or fraud, which are just causes for the termination of employment
under Art. 282(a) and (c) of the Labor Code.
ART.
282. Termination by employer. An employer may terminate an employment for
any of the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
....
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative
PFIZER AND LLANDER VS GALAN
Pfizer, Inc. issued a memo requiring respondent to explain his unauthorized use of the
companys vehicle, his questionable expense claims; and to comment on the doubtful
liquidation of his cash advance of US$5,000 incurred during his official trip to Indonesia. After
respondent submitted his explanation, a formal investigation was conducted and thereafter, he
was preventively suspended. Petitioner Maria Angelica B. Lleander sent respondent a Notice of
Termination on the ground of loss of trust and confidence. Respondent filed with the a complaint
for illegal dismissal
LA ruled that respondent was illegally dismissed from the service. NLRC affirmed the judgment
of the Labor Arbiter. CA held that there was no deliberate attempt on respondents part to
defraud his employer. Hence, his dismissal from the service is unjustified.
RULING:
Factual findings of the NLRC affirming those of the Labor Arbiter, when devoid of any unfairness
or arbitrariness, are accorded respect if not finality by the Court of Appeals. And where the
findings of the Labor Arbiter are affirmed by the NLRC and the Court of Appeals, these are
deemed binding, final, and conclusive upon the Supreme Court. It is not the function of the
Supreme Court to inquire into the correctness of the evaluation of the evidence which was the
basis for the labor officials ruling. And this Court may not disturb the findings of facts of those
officials who have gained expertise in their specialized field, where such findings have been
given the stamp of approval by the Court of Appeals.

This Court, therefore, sustains the findings of fact by the labor agencies and the Court of
Appeals which warrant the dismissal of petitioners complaint for loss of trust and confidence
against respondent.
N.B CONCEALMENT OF PREGNANCY; DISMISSAL TOO HARSH
LAKPUE DRUG VS BELGA
Tropical terminated Belga on the following grounds: (1) Absence without official leave for 16
days; (2) Dishonesty, for deliberately concealing her pregnancy; (3) Insubordination, for her
deliberate refusal to heed and comply with the memoranda sent by the Personnel Department.
Belga thus filed a complaint with the Public Assistance and Complaint Unit (PACU) of the
Department of Labor and Employment (DOLE). Attempts to settle the case failed. LA ruled in
favor of Belga and found that she was illegally dismissed. NLRC reversed the LA decision. CA
ruled in favour of Belga.
RULING:
Tropical has not satisfactorily shown how and to what extent it had suffered damages because of
Belgas absences. For while it may be true that the company was caught unprepared and
unable to hire a temporary replacement, we are not convinced that Belgas absence for 16 days
has wreaked havoc on Tropicals business as to justify her termination from the company. On the
other hand, it is undisputed that Belga has worked for Tropical for 7 years without any blemish
on her service record. In fact, the company admitted in its petition that she has rendered
seven (7) years of service in compliance with [the companys] rules.And her fidelity to her work
is evident because even in the midst of an emergency, she managed to transmit to the
company the documents she worked on over the weekend so that it would not cause any
problem for the company.
The penalty of dismissal was too harsh in light of the circumstances obtaining in this case.
While it may be true that Belga ought to have formally informed the company of her impending
maternity leave so as to give the latter sufficient time to find a temporary replacement, her
termination from employment is not commensurate to her lapse in judgment.
Even assuming that there was just cause for terminating Belga, her dismissal is nonetheless
invalid for failure of Tropical to observe the twin-notice requirement. The March 21, 2001
memorandum merely informed her to report for work and explain her absences. The March 30,
2001 memorandum demanded that she report for work and attend a clarificatory conference.
Belga received the first memorandum but allegedly refused to receive the second.
2.6 LOSS OF CONFIDENCE/ BREACH OF TRUST
2.6 LOSS OF CONFIDENCE/ BREACH OF TRUST
PAL v NLRC
Respondents contended that complainant Meneses was among the thirty two (32) employees
charged in connection with the irregularities committed in the Ground Equipment Support
Department and Corporate Logistics Department (GSED/CLD); that complainant was dismissed
for giving the go-signal to Mr. Manuel Jarina, supervisor of GSED, to release ten (10) reparables
to Peters Auto Parts without the required P.O.; that prior to his dismissal, complainant was
suspended for three (3) months for ordering high temperature non-melt moly grease without the
approved P.O.; that in the c[o]urse of the committee hearings, respondents discovered that
there was tampering of the maintenance and engineering management information system
(MEMIS) where class B items which are reparable items were misclassified as class C which are
expendable items, which means that class C items, being non-reparable are sent to surplus or
virtually thrown away; that due to his participation in the aforesaid anomaly, complainant was
meted with one (1) month suspension.
Meneses claims that he was a minor employee and could not, therefore, be dismissed on ground
of lack of confidence, the NLRC held otherwise as he was charged with the acquisition,
handling, maintenance, care and protection of his employers property. As to his assertion that
he was denied due process, the NLRC likewise held against Meneses since he was formally
notified of the charges against him and given the opportunity to explain his side on the matter
and prepare his defense.
RULING:

In the leading case of Philippine Long Distance Co. v. NLRC,[10] we set the policy as to the award
of separation pay for validly dismissed employees, i.e., it shall be allowed as a measure of social
justice only when the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character. The Constitution was never meant to protect those who
have proved themselves unworthy, like the workers who have tainted the cause of labor with the
blemishes of their own character.[11]
We have since applied the abovementioned rule in numerous cases [12] where the employee was
validly dismissed due to either serious misconduct or causes reflecting on his moral
character. We see no compelling reason to rule differently here.
The Labor Arbiter found MENESES engaged in highly anomalous activities constituting serious
misconduct in connection with his work. This was unqualifiedly affirmed by the NLRC. The
latter, therefore, acted with grave abuse of discretion when it awarded separation pay to
MENESES despite such finding.

Contra: JERUSALEM VS KEPPEL MONTE BANK

James Jerusalem was found guilty of breach of trust and confidence for knowingly and
maliciously referring, endorsing and vouching for VISA card applicants who later turned out to be
impostors resulting in financial loss to Keppel. This prompted James to file before the Labor
Arbiter a complaint for illegal dismissal.
LA ruled that dismissal was illegal. NLRC affirmed LA. The CA found merit in the petition and
setting aside the decision of LA and NLRC.
RULING:
"Law and jurisprudence have long recognized the right of employers to dismiss employees by
reason of loss of trust and confidence." 23 As provided for in Article 282, an employer may
terminate an employees employment for fraud or willful breach of trust reposed in him. "But, in
order to constitute a just cause for dismissal, the act complained of must be work-related such
as would show the employee concerned to be unfit to continue working for the employer." 24
The first requisite for dismissal on the ground of loss of trust and confidence is that the
employee concerned must be holding a position of trust and confidence. In this case, there is no
doubt that James held a position of trust and confidence as Assistant Vice-President of the
Jewelry Department.
"The second requisite is that there must be an act that would justify the loss of trust and
confidence. Loss of trust and confidence, to be a valid cause for dismissal, must be based on a
willful breach of trust and founded on clearly established facts. The basis for the dismissal must
be clearly and convincingly established but proof beyond reasonable doubt is not
necessary."27 Keppels evidence against James fails to meet this standard.
From the findings of both the Labor Arbiter and the NLRC it is clear that James did nothing wrong
when he handed over to Marciana the envelope containing the applications of persons under the
referred accounts of Jorge who were later found to be fictitious. As the records now stand, James
was no longer connected with the VISA Credit Card Unit when the 67 applications for VISA card
were approved. At such time, he was already the Head of the Marketing and Operations of the
Jewelry Department. His act therefore of forwarding the already accomplished applications to
the VISA Credit Card Unit is proper as he is not in any position to act on them. The processing
and verification of the identities of the applicants would have been done by the proper
department, which is the VISA Credit Card Unit. Therefore, it is incumbent upon Marciana as Unit
Head to have performed her duties. As correctly observed by the Labor Arbiter, Keppel had gone
too far in blaming James for the shortcomings and imprudence of Marciana. The invocation of
Keppel of the loss of trust and confidence as ground for Jamess termination has therefore no
basis at all.
Having shown that Keppel failed to discharge its burden of proving that Jamess dismissal is for a
just cause, we have no other recourse but to declare that such dismissal based on the ground of
loss of trust and confidence was illegal. This is in consonance with the constitutional guarantee
of security of tenure.

MANAGERIAL EMPLOYEES
AURELIO VS NLRC
Petitioner's application for an indefinite leave of absence was not approved by the college
authorities, but this notwithstanding, she failed to follow-up her application and did not report
for work. Believing she was dismissed, petitioner filed the complaint for illegal dismissal.
Petitioner's claim of constructive dismissal stems from her alleged removal from the positions of
Administrator, Vice President for Administration and Executive Vice President. From the time
petitioner assumed the position of Executive Vice President, she did not possess any legal right
to claim security of tenure concerning this position because she assumed the same without
authority from the Board of Directors. Both LA and NLRC found that there is some basis for
respondent NWC's loss of trust and confidence on petitioner.
RULING:
The dismissal of the petitioner was for a just and valid cause.
The Board of Directors of NWC merely exercised rights vested in it by the Articles of
Incorporation. Petitioner failed to refute the evidence proffered by NWC before the labor arbiter.
In her appeal to the NLRC, petitioner also failed to rebut the findings of the labor arbiter. In the
instant petition, she has again failed to overturn private respondents' evidence as well as the
findings of the labor arbiter which were affirmed by the NLRC.
As pointed out earlier, the rules on termination of employment, penalties for infractions, and
resort to concerted actions, insofar as managerial employees are concerned, are not necessarily
the same as those applicable to termination of employment of ordinary employees. Employers,
generally, are allowed a wider latitude of discretion in terminating the employment of
managerial personnel or those of similar rank performing functions which by their nature require
the employer's trust and confidence, than in the case of ordinary rank-and-file employees (Cruz
vs. Medina, 177 SCRA S65 [1989]).
It must be emphasized that the rules of dismissal for managerial employees are different from
those governing ordinary employees for it would be unjust and inequitable to compel an
employer to continue with the employment of a person who occupies a managerial and sensitive
position despite loss of trust and confidence. At the very least, the relationship must be
considered seriously strained, foreclosing the remedy of reinstatement. We find that the
allegations of irregularities were sufficiently substantiated thus justifying petitioner's separation.
Admittedly, complainant was a managerial employee who has to have the complete trust and
confidence of respondents. While it may be true that complainant was not strictly an
accountable employee primarily responsible for disbursement of whatever funds, respondents
had some basis in losing its trust and confidence in complainant. Respondents' evidence showed
that under the principle of command responsibility, complainant was in a sense responsible in
the monitoring of monetary transactions involving funds from library collections and from
Related Learning Science collection. For it has been held that in case of termination due to loss
of trust and confidence proof beyond reasonable doubt of misconduct is not necessary but some
basis being sufficient.

PRUDENTIAL BANK VS MAURICIO

Bankss Board of Directors has found Antonio S.A. Mauricio to have violated Bank policies and
regulations and committed imprudent acts prejudicial to the interests of the Bank; resulting in
monetary loss to the Bank and giving rise to loss of trust and confidence. The services of Mr.
Mauricio be terminated effective immediately and that his retirement benefits shall be forfeited.
LA ruled that the Bank was justified in terminating Mauricios employment. The labor arbiter
ruled that even if Mauricio, as branch manager, was clothed with discretion, he gravely abused

it to the detriment and prejudice of the Bank. NLRC affirmed. CA set aside the NLRC decision and
ruled in favor of Mauricio.
RULING:
We affirm the appellate courts decision.
Moreover, as correctly held by the CA, Mauricio cannot be held to have abused the discretion he
was clothed with absent some semblance of parameters. In the absence of such guidelines, the
validity of Mauricios acts can be tested by determining whether they were justified under the
circumstances. Mauricio was faced with a dilemma whether to accommodate the request for
immediate encashment and/or withdrawals against USTWs by a valued client, knowing that
under the Banks rules refund of any returned check shall be the personal accountability of the
approving officer. In exercising his discretion to allow the questioned withdrawals, Mauricio took
into consideration the fact that the Spouses Cruz have substantial deposit and security, and
enjoyed a favorable credit standing with the Bank. And, as found by the RTC, no malice can be
inferred from Mauricios acts who tried to collect from the Spouses Cruz and reported all the
transactions to the head office; in fact, the Bank never called his attention to any irregularity in
the transactions but even continued to credit the account of the spouses for the value of the
returned checks. Under the circumstances, Mauricio indeed fully considered the interest of his
employer before approving the questioned transactions.1avvphi1
The Bank should be reminded that for a dismissal based on loss of trust and confidence to be
valid, the breach of trust must be willful, meaning it must be done intentionally, knowingly, and
purposely, without justifiable excuse.32Loss of trust and confidence stems from a breach of trust
founded on dishonest, deceitful or fraudulent act.33 This is obviously not the case here.
TWO KINDS OF POSITIONS OF TRUST IDENTIFIED
ABELARDO ABEL vs PHILEX MINING G.R. 165960 (2007)
Abel was Philexs Contract Claims Assistant of the Legal Department, stationed at Philexs
Benguet mine. He monitors the enforcement of Philexs contracts at the job site. Philex and
ANSECA entered into a contract whereby Philex will deliver materials to ANSECA. There was a
controversy regarding the subsidence area, whereby the trucks carrying backfills (materials)
were not completely filled up. Allegedly, a worker at the mine site found that the practice was
known by the petitioner, who did not do anything about it. He attested in an affidavit that he
heard Abel and the ANSECA secretary during a telephone conversation saying:
Abel: Si Abel ito. Kamusta na yung usapan natin?
ANSECA Accountant: Sige ipapaalam ko sa Cebu branch, hintayin mo ako
magwwithdraw lang ako.
On the strength of this sole affidavit, Abel was terminated on the ground of loss of confidence.
Apparently, there was some loss to Philex due to the practice of underloading the trucks.
HELD:
The first requisite for dismissal on the ground of loss of trust and confidence is that the
employee concerned must be holding a position of trust and confidence. Verily, the Court must
first determine if petitioner holds such a position.
There are two classes of positions of trust. The first class consists of managerial employees.
They are defined as those vested with the powers or prerogatives to lay down management
policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees
or effectively recommend such managerial actions. The second class consists of cashiers,
auditors, property custodians, etc.. They are defined as those who, in the normal and
routine exercise of their functions, regularly handle significant amounts of money or property.
In this case, petitioner was a Contract Claims Assistant at respondents Legal Department at the
time he allegedly committed the acts which led to its loss of trust and confidence. It is not the
job title but the actual work that the employee performs. It was part of petitioners
responsibilities to monitor the performance of respondents contractors in relation to the scope
of work contracted out to them. Respondent relies on petitioners reports regarding his
inspection of the work accomplishment of such contractors. As a result of his monitoring
the enforcement of respondents contracts which involve large sums of money,
petitioner may well be considered an employee with a position of trust analogous to

those falling under the second class. A position where a person is entrusted with
confidence on delicate matters, or with the custody, handling or care and protection of the
employers property is one of trust and confidence
However, the actual basis for the loss of trust is specious at best. The colleagues affidavit is but
one piece of the puzzle, the strength of which cannot be the sole basis in dismissing Abel.
Further, doubt should be resolved in favor of labor.
CARLOS VALENZUELA vs CALTEX G.R. 169965-66 (2010)
Valenzuela is working at Caltexs Lapu-Lapu Terminal. He was designated as Gauger, but he also
handled Bulk Receiving, Truck Loading and Bunkering. During his stint there, the warehouseman
of Caltex retired, hence the duties of the retiree were passed to him, which included
maintenance of stock cards for the storehouse materials and supplies, and physical inventory of
the warehouse.
An operational audit by the Head Office revealed an inventory shortage of Php 800K. Hence,
after due hearing/notice, he was terminated.
HELD:
It was discovered that Valenzuela habitually manipulated the stock cards of the warehouse to
impress upon the Head Office that all stocks were accounted for, even if it was actually missing.
Further, this was not the first time he was admonished for his neglect in the inventory process.
Thus, Under LC 282, he can be terminated for gross neglect. This fact was indubitably proved by
Caltex. Further, the same section also provides that fraud or willful breach by employee of the
trust reposed in him by his employer as a just cause for termination. He was in-charge of the
custody and monitoring of the merchandise stocks, and was entrusted with
confidence on delicate matters, i.e., the handling and care and protection of the
employer's property.
Considering that the merchandise stocks are the lifeblood of petitioner Caltex, petitioner
Valenzuela's act of allowing the loss of merchandise stocks and concealing these from the
employer is reason enough for his termination from his employment.
DIFF IN TERMINATION OF CONFIDENTIAL EMPLOYEE AND R&F
PHIL TRANSMARINE VS CARILLA
In the case of Philippine Transmarine Carriers, Inc. vs. Felicisimo Carilla (G.R. No. 157975, June
26, 2007), the seafarer filed a complaint for illegal dismissal after he was summarily repatriated
to the Philippines while the vessel he embarked on was in India. His employer presented mere
unauthenticated and unsigned papers and reports to enumerate his alleged acts of
incompetence. The Supreme Court found that the said documents have no probative value and
that the seafarer was dismissed without due process hence, his claim for the unexpired portion
of his contract partially granted.
Petitioners claim that it has a wider latitude of discretion in terminating respondent, since the
latter was a managerial employee, is not plausible. It is well settled in this jurisdiction that
confidential and managerial employees cannot be arbitrarily dismissed at any time,
and without cause as reasonably established in an appropriate investigation.
[23] Such employees, too, are entitled to security of tenure, fair standards of
employment and the protection of labor laws. [24] Managerial employees, no less
than rank-and-file laborers, are entitled to due process.[25] The captain of a vessel is a
confidential and managerial employee within the meaning of this doctrine.[26] Thus, respondent
was illegally dismissed as he was not accorded a fair investigation as required by law and the
ground invoked for his dismissal was not proven.
In cases regarding contract workers who were dismissed without just cause which arose before
the effectivity[27] of R.A. No. 8042, it is settled that if the contract is for a fixed term and the
employee
is
dismissed
without
just
cause,
he is entitled to the payment of his salaries corresponding to the
unexpired portion of his contract.[28] In this case, respondent's contract was until November
18, 1994, but he was dismissed and repatriated to the Philippines on June 6, 1994, not for a just
cause; thus, respondent is entitled to be paid his salary corresponding to the unexpired portion
of his contract

BAGO VS NLRC
FACTS: Arlyn Bago (Bago) and five other employees were dismissed by Celia P. Abordo
(Abordo), head of the Tuguegarao Branch of Standard Insurance Company Incorporated (SICI) for
manipulating the company funds and spreading damaging rumors. Bago, the auditor of the
company, and the five other employees apologized for spreading the rumors. Abordo issued a
memo to the employees requiring an explanation for the charges. Thinking that Abordo had
already forgiven them, the employees did not respond to the memo.
Not receiving any reply, the Human Resource Department of SICI proceeded with their
investigation and found all the employees guilty and dismissed them for loss of confidence and
serious misconduct. Bago filed a complaint for illegal dismissal. She contended that there was
no due process in the investigation and that dismissal is a severe penalty for the offenses
charged.
The Labor Arbiter found that Bago was illegally dismissed but the National Labor Relations
Commission (NLRC), reversed the Labor Arbiter's decision and declared valid the termination of
Arlyns services on the grounds of loss of trust and confidence and dishonesty.
ISSUE: Whether or not Bago was illegally dismissed by Standard Insurance Company
Incorporated
HELD: As a general rule, employers are allowed a wide latitude of discretion in terminating the
employment of managerial personnel or those who, while not of similar rank, perform functions
which by their nature require the employers full trust and confidence. Proof beyond reasonable
doubt is not required. It is sufficient that there is some basis for loss of confidence, such as when
the employer has reasonable ground to believe that the employee concerned is responsible for
the purported misconduct, and the nature of his participation therein renders him unworthy of
the trust and confidence demanded by his position.
This must be distinguished from the case of ordinary rank-and-file employees, whose
termination on the basis of these same grounds requires a higher proof of involvement in the
events in question; mere uncorroborated assertions and accusations by the employer will not
suffice.
Even assuming that Arlyn may be considered a rank and file employee, sufficient evidence of
her involvement in the dishonest scheme of SICIs accountant and cashier who were also
charged and found guilty exists. Not only was her participation established by the internal audit
conducted; the cashier identified her as part of the scheme, and she herself admitted her
involvement
TIRAZONA vs PET INC. G.R. 169712 (2009)
Tirazona was an Admin Manager of PET Inc. PET directors called her attention to her improper
handling of a situation involving a rank-and-file employee. In reprisal, she arrogantly and
unreasonably demanded Php 2M as damages against the PET directors, and threatened legal
action if the amount was not paid in 5 days. Considering that it arose from a mere reminder to
her to be more circumspect in handling the delicate concerns of employees. She further
adamantly refused to cooperate with PET directors during investigation.
Further, she allegedly read a confidential letter from the PET legal counsel to the Directors that
she was validly terminated by loss of trust and confidence.
HELD:
The actions of Tirazona reflected an obdurate character that is arrogant, uncompromising, and
hostile. By immediately and unreasonably adopting an adverse stance against PET, she sought
to impose her will on the company and placed her own interests above those of her employer.
Her attitude towards her employer was clearly inconsistent with her position of trust
and confidence. Her poor character became even more evident when she read what was
supposed to be a confidential letter of the legal counsel of PET to PET officers/directors
expressing his legal opinion on Tirazonas administrative case. PET was, therefore, fully justified
in terminating Tirazonas employment for loss of trust and confidence.

R&F not entrusted with custody of property; cannot be terminated for loss of trust and confidence
CENTURY IRON WORKS VS LETRAN
MARK
G.R. No. 184116
June 19, 2013
CENTURY
IRON
WORKS,
INC.
and
BENITO
CHUA,
Petitioners,
vs.
ELETO B. BANAS,
Facts:
According to Century Iron, Baas worked as an inventory comptroller whose duties are to: (1)
train newly hired warehouseman; (2) initiate analysis on the discrepancies concerning records
and inventories; (3) check and confirm warehousemans report; (4) check the accuracy of
materials requisition before issuance to the respective warehouseman at the jobsite; (5) monitor
and maintain records; and (6) recommend and initiate corrective or preventive action as may be
warranted.7
Sometime in 2002, Century Iron received letters of complaint from its gas suppliers regarding
alleged massive shortage of empty gas cylinders.8 In the investigation that Century Iron
conducted in response to the letters, it found that Baas failed to make a report of the missing
cylinders. On May 31, 2002, Century Iron issued a Memorandum requiring Baas to attend a
hearing regarding the missing cylinders.10 On June 17, 2002, Century Iron, through Personnel
Officer Mr. Virgilio T. Baaga, terminated Baas services on grounds of loss of trust and
confidence, and habitual and gross neglect of duty.11 The termination was effective June 18,
2002.
In his defense, Baas alleged that he merely worked as an inventory clerk who is not responsible
for the lost cylinders. He pointed out that his tasks were limited to conducting periodic and
yearly inventories, and submitting his findings to the personnel officer. He maintained that
unlike a supervisory employee, he was not required to post a bond and he did not have the
authority to receive and/or release cylinders in the way that a warehouseman does. Therefore,
he cannot be terminated on the ground of loss of confidence.12
Issue: 1) Does loss of confidence apply in this case?
Can Banas be dismissed based on his previous infractions?
Held: 1) No. Baas was a rank-and-file employee who was not charged with the care and
custody of Century Irons money or property. The evidence on record supports the holding that
Baas was an ordinary employee. There is no indication that the NLRCs decision was unfair or
arbitrary. It properly relied on Century Irons numerous memoranda36 where Baas was
identified as an inventory clerk. Since Baas did not occupy a position of trust and confidence
nor was he routinely in charge with the care and custody of Century Irons money or property,
his termination on the ground of loss of confidence was misplaced.
We point out in this respect that loss of confidence applies to: (1) employees occupying
positions of trust and confidence, the managerial employees; and (2) employees who are
routinely charged with the care and custody of the employers money or property which may
include rank-and-file employees.
2) Yes, The evidence on record shows that Baas committed numerous infractions in his one
year and eleven-month stay in Century Iron. On October 27, 2000, Century Iron gave Baas a
warning for failing to check the right quantity of materials subject of his inventory.40 On
December 29, 2000, Baas went undertime.41 On January 2, 2001, Baas incurred an absence
without asking for prior leave.42 On August 11, 2001, he was warned for failure to implement
proper warehousing and housekeeping procedures.43 On August 21, 2001, he failed to ensure
sufficient supplies of oxygen-acetylene gases during business hours.44 On November 15, 2001,
Baas was again warned for failing to secure prior permission before going on leave.45 In May
2002, Century Irons accounting department found out that Baas made double and wrong
entries in his inventory. To our mind, such numerous infractions are sufficient to hold him grossly
and habitually negligent.1wphi1 His repeated negligence is not tolerable. The totality of
infractions or the number of violations he committed during his employment merits his
dismissal. Moreover, gross and habitual negligence includes unauthorized absences and
tardiness,49 as well as gross inefficiency, negligence and carelessness.
TAMPERING OF COMPANY RECORDS SUFF FOR LOST OF TRUST
Eats cetera Food Services vs Letran
Eats-Cetera Food Services Outlet and/or Serafin Ramirez v. Myrna B. Letran and Mary Grace
Espadero
G.R. No. 179507, October 2, 2009

Facts: Espadero had been employed by Eats-Cetera Food Services Outlet as Cashier. Sometime
in 2002, when she reported for duty, she discovered that her time card was already punched in.
She found out that certain Joselito Caliayagan was the one who punched in her time card.
Espadero failed to report it to her supervisor. Espadero contented that she was dismissed
outright without being given opportunity to explain. She claimed that petitioners called her and
asked her to make admission letter of admission as condition for her re-employment. After
writing the letter, she was asked to wait for an assignment. However, the company issued a
Memorandum terminating her for violation of company rules and regulations. Because of this,
Espadero filed a complaint for illegal dismissal before the NLRC. The Labor Arbiter declared that
petitioners are liable for illegally terminating Espadero since petitioners failed to prove that
Espadero deliberately caused another person to punch in her time card on her behalf. Petitioners
was ordered to reinstate Espadero and pay her full backwages. NLRC reversed Labor Arbiters
findings. Respondents filed a petition before Court of Appeals which rendered a ruling affirming
Labor Arbiters pronouncement that Espadero was not afforded due process. It also observed
that the punishment of dismissal was too harsh and unjustified.
Issue: Whether or not Espaderos infraction constitutes serious misconduct.
Ruling: The Supreme granted the petition.
Espadero`s position as a cashier is one that requires a high degree of trust and confidence, and
that her infraction reasonably taints such trust and confidence reposed upon her by her
employer. In the instant case, the petitioners cannot be faulted for losing their turst in Espadero.
An employee occupying a job which requires utmost fidelity to her employers, she failed to
report to her immediate supervisor the tampering of her time card. Moreover, the peculiar
nature of Espadero`s position aggravates her misconduct. Under Article 282 of the Labor Code,
the misconduct must be serious, must be of such a grave character, and not merely trivial or
unimportant. To constitute just cause for termination, it must be in connection with the
employee`s work.
Bus Conductor is a confidential employee
MAPILI VS PHIL RABBIT
MARK
Bus conductor terminated because he refuses to collect fare at times.
Based on this testimony, it is quite apparent that petitioner was aware that the infraction he
committed constituted a grave offense but he still persisted in committing the same out of
gratitude to the passenger. Hence, as correctly found by the CA, there was deliberate intent on
the part of the petitioner to commit the violation in order to repay a personal debt at the
expense of the company. Petitioner chose to violate company rules for his benefit without regard
to his responsibilities to the company. Also, if not for the inspector who discovered the incident,
the company would have been defrauded by the amount of fare.
It bears stressing that petitioner has been in the employ of PRBLI for more than eight years
already and is a member of the companys labor union. As such, he ought to know the specific
company rules pertaining to his line of work as a bus conductor. For that matter, his length of
service has even aggravated the resulting consequences of his transgressions. In addition, on
April 8, 1994 and May 3, 1995, he committed similar infractions of extending free ride to a police
officer and a former employee, respectively. These had been brought to the attention of the
petitioner and for which the penalties of relief from duty and suspension were meted out upon
him.[23] Hence, he ought to have known better than to repeat the same violation as he is
presumed to be thoroughly acquainted with the prohibitions and restrictions against extending
free rides. We also cannot agree with petitioners contention that his infraction was trivial. As a
bus conductor whose duties primarily include the collection of transportation fares, which is the
lifeblood of the PRBLI, petitioner should have exercised the required diligence in the
performance thereof and his habitual failure to exercise the same cannot be taken for
granted. As correctly observed by the CA, petitioners position is imbued with trust and
confidence because it involves handling of money and failure to collect the proper fare from the
riding public constitutes a grave offense which justifies his dismissal. Moreover, petitioners
series of irregularities when put together may constitute serious misconduct.
May an employee be terminated even if he did not benefit from the fraud committed?
ERIC DELA CRUZ VS COCA COLA
MARK
Indeed, an award of back wages and separation pay is justified only if there is a finding of illegal
dismissal. Since petitioners were supervisory employees and were thus covered by the trust and

confidence rule,22 the Court of Appeals correctly overturned the ruling of the NLRC and the
Labor Arbiter.
Petitioners contend, however, that for loss of trust and confidence to be a ground for termination
of employment, it must be willful and must be connected with the employees work.23 This
contention has been passed upon by the Court of Appeals, thus:
The records of the case are rife with proof that the supervisors committed acts which are
inimical to the interests and stability, not only of management, but of the company
itself.1avvph!1 They did so, through deceitful means and methods. The detailed account of what
transpired between August 12 to 16, 2002 by Asuncion, Calderon, the witnesses and the
supervisors themselves were not only substantial proof of the grave infraction committed by
them but indubitable proof of their anomalous acts.24 (Underscoring supplied)
Indeed, by obtaining an altered police report and medical certificate, petitioners deliberately
attempted to cover up the fact that Sales was under the influence of liquor at the time the
accident took place. In so doing, they committed acts inimical to respondents interests. They
thus committed a work-related willfull breach of the trust and confidence reposed in them.

2.7 INCOMPETENCE
EDI STAFFBUILDERS VS NLRC
JOSH
In 1993, EDI-Staffbuilders, Inc. (EDI), upon request of Omar Ahmed Ali Bin Bechr Est. (OAB), a
company in Saudi Arabia, sent to OAB resumes from which OAB can choose a computer
specialist. Eleazar Gran was selected. It was agreed that his monthly salary shall be $850.00.
But five months into his service in Saudi Arabia, Gran received a termination letter and right
there and then was removed from his post. The termination letter states that he was
incompetent because he does not know the ACAD system which is required in his line of work;
that he failed to enrich his knowledge during his 5 month stay to prove his competence; that he
is disobedient because he failed to submit the required daily reports to OAB. Gran then signed a
quitclaim whereby he declared that he is releasing OAB from any liability in exchange of
2,948.00 Riyal.
When Gran returned, he filed a labor case for illegal dismissal against EDI and OAB. EDI in its
defense averred that the dismissal is valid because when Gran and OAB signed the employment
contract, both parties agreed that Saudi labor laws shall govern all matters relating to the
termination of Grans employment; that under Saudi labor laws, Grans termination due to
incompetence and insubordination is valid; that Grans insubordination and incompetence is
outlined in the termination letter Gran received. The labor arbiter dismissed the labor case but
on appeal, the National Labor Relations Commission (NLRC) reversed the decision of the arbiter.
The Court of Appeals likewise affirmed the NLRC.
ISSUE: Whether or not the Saudi labor laws should be applied.
HELD: No. The specific Saudi labor laws were not proven in court. EDI did not present proof as to
the existence and the specific provisions of such foreign law. Hence, processual presumption
applies and Philippine labor laws shall be used. Under our laws, an employee like Gran shall only
be terminated upon just cause. The allegations against him, at worst, shall only merit a
suspension not a dismissal. His incompetence is not proven because prior to being sent to Saudi
Arabia, he underwent the required trade test to prove his competence. The presumption
therefore is that he is competent and that it is upon OAB and EDI to prove otherwise. No proof of
his incompetence was ever adduced in court. His alleged insubordination is likewise not proven.
It was not proven that the submission of daily track records is part of his job as a computer
specialist. There was also a lack of due process. Under our laws, Gran is entitled to the two
notice rule whereby prior to termination he should receive two notices. In the case at bar, he
only received one and he was immediately terminated on the same day he received the notice.
Lastly, the quitclaim may not also release OAB from liability. Philippine laws is again applied
here sans proof of Saudi laws. Under Philippine Laws, a quitclaim is generally frowned upon and
are strictly examined. In this case, based on the circumstances, Gran at that time has no option
but to sign the quitclaim. The quitclaim is also void because his separation pay was merely
2,948 Riyal which is lower than the $850.00 monthly salary (3,190 Riyal).
Contra: Inefficiency of employee;condonation of employer
SALVALOZA VS NLRC ET AL

Inefficiency of employee; condonation by employer; Bebina G. Salvaloza vs. National Labor

Relations Commission, Gulf Pacific Security Agency, Inc., and Angel Quizon, G.R. No. 182086,
November 24, 2010. -- While it is acknowledged that petitioner Gregorios service record shows
that his performance as a security guard was below par, respondent Gulf Pacific never issued
any memo citing him for the alleged repeated errors, inefficiency, and poor performance while
on duty, and instead continued to assign him to various posts. This amounts to condonation by
Gulf Pacific of whatever infractions Gregorio may have committed. Even assuming the reasons
for relieving Gregorio of his position were true, it was incumbent upon Gulf Pacific to be vigilant
in its compliance with labor laws.
2.8 COMMISSION OF A CRIME
Torreda vs Toshiba

( SEE SAME CASE UNDER TERMINATION, M2.3)

AUTHORIZED CAUSES OF TERMINATION

2.9 REDUNDANCY
SEBUGERO VS NLRC
38 workers put in temporary lay off. Definition of redundancy
Redundancy exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of
factors, such as overhiring of workers, decreased volume of business, or dropping of a particular
product line or service activity previously manufactured or undertaken by the enterprise. 10
Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the
termination of employment initiated by the employer through no fault of the employee's and
without prejudice to the latter, resorted to by management during periods of business recession,
industrial depression, or seasonal fluctuations, or during lulls occasioned by lack of orders,
shortage of materials, conversion of the plant for a new production program or the introduction
of new methods or more efficient machinery, or of automation. 11 Simply put, it is an act of the
employer of dismissing employees because of losses in the operation of a business, lack of work,
and considerable reduction on the volume of his business, a right consistently recognized and
affirmed by this Court.
There was a valid retrenchment but due process was not observed.
CALTEX vs NLRC
Caltex closed its Marketing Department due to redundancy. They filed for illegal dismissal. They
won.
As we ruled, redundancy exists where the services of an employee are in excess of what is
reasonably demanded by the actual requirement of the enterprise.[26] It is the burden of
petitioner, as employer, to prove the factual and legal basis for the dismissal of its employees on
the ground of redundancy.[27]
The CA committed no reversible error when it found that petitioner failed to discharge the
burden of proving respondents dismissal as valid.
There is merit in petitioners claim that the CAs finding that it (petitioner) failed to provide
proof that it truly had an extensive reengineering study on account of business losses arising out
of massive oil deregulation is misplaced considering that Article 283 of the Labor Code does not
require that the employer should be suffering financial losses before he can terminate the
services of the employee on the ground of redundancy.[28] Nevertheless, the CA finding on this
matter does not detract from the fact that petitioner failed to show proof of fair and reasonable
criteria for the implementation of a valid redundancy program. Thus, whether it is retrenchment
or redundancy, or any of the other authorized causes, no employee may be dismissed without
observance of the fundamentals of fair play.[29]
Petitioner committed a fatal error when it failed to give a written notice to DOLE as required
under Article 283 of the Labor Code. All three, the LA, NLRC and the CA, found the absence of

notice sent by petitioner to DOLE one month before the intended date of private respondents
termination. While petitioner claims that it sent a notice to the DOLE through a letter dated June
30, 1997, petitioner failed to show that the same was actually received by DOLE. The purpose
of the written notice to the DOLE is to give it the opportunity to ascertain the verity of the
alleged authorized cause of termination.[30]
Petitioners insistence that its written notice of redundancy program per its October 1996 letter
addressed to DOLE is a substantial compliance with the notice requirement, is not persuasive
since the said letter merely stated its plan of implementing a redundancy program but did not
contain the details necessary to effect the program such as the reason for finding certain
portions as redundant, the name of the employees to be terminated and the actual date of
termination. In fact, petitioner in its October letter wrote that it would provide DOLE with a list
of affected employees as it implements each phase of the redundancy program which it failed to
do.

Requirements of a Valid Redundancy Program

The employer must comply with the following requisites to ensure the validity of the
implementation of a redundancy program:
1. A written notice served on both the employees and the Department of Labor and Employment
(DOLE) at least one month prior to the intended date of retrenchment as required by the Labor
Code;
2. Payment of separation pay equivalent to at least one month pay or at least one month pay for
every year of service, whichever is higher;
3. Good faith in abolishing the redundant positions; and
4. Fair and reasonable criteria in ascertaining what positions are to be declared redundant and
accordingly abolished. (See Caltex vs. NLRC, 2007, )

PANTOJA VS SCA HYGIENE PROD CORP

Dismissal; management prerogative. Respondents right of management prerogative was
exercised in good faith. Respondent presented evidence of the low volume of sales and orders
for the production of industrial paper in 1999, which inevitably resulted to the companys
decision to streamline its operations. This fact was corroborated by respondents VP-Tissue
Manufacturing Director and was not disputed by petitioner. Exercising its management
prerogative and sound business judgment, respondent decided to cut down on operational costs
by shutting down one of its paper mill. As held in International Harvester Macleod, Inc. v.
Intermediate Appellate Court [233 Phil. 655,655-666 (1987)] the determination of the need to
phase out a particular department and consequent reduction of personnel and reorganization as
a labor and cost saving device is a recognized management prerogative which the courts will
not generally interfere with.
In this case, shutting down Paper Mill No. 4 was undoubtedly a business judgment arrived at in
the face of the low demand for the production of industrial paper at the time. Despite an
apparent reason to implement a retrenchment program as a cost-cutting measure, respondent,
did not dismiss the workers affected by the closure of Paper Mill No. 4 outright but gave them an
option to be transferred to posts of equal rank and pay. Retrenchment was given only as an
option in case the affected employee did not want to be transferred. The Court viewed this as an
indication of good faith on respondents part since it exhausted other possible measures before
retrenchment. Besides, the employers prerogative to bring down labor costs by retrenchment
must be exercised essentially as a measure of last resort, after less drastic means have been
tried and found wanting. Giving the workers an option to be transferred without any diminution
in rank and pay belie petitioners allegation that the streamlining scheme was implemented as a
ploy to ease out employees. Apparently, respondent implemented its streamlining or
reorganization plan in good faith, not in an arbitrary manner and without violating
the tenurial rights of its employees.

CULILI VS EASTERN TELECOM

IN 1998, due to business troubles and losses, respondent Eastern Telecommunications
Philippines, Inc. (ETPI) was compelled to implement a right-sizing program that resulted to,
among others, the abolition of certain departments. Among those abolished was the Service
Quality Department, under which was the Customer Premises Equipment Management Unit,
where petitioner Nelson A. Culili was a senior technician.
In a case for illegal dismissal, Culili claimed that respondents singled him out for termination
from employment. Did his claim find merit?
Ruling: No.
In the new table of organization that the management approved, 112 employees were
redeployed and nine positions were declared redundant. It is inconceivable that ETPI would
effect a company-wide reorganization of this scale for the mere purpose of singling out Culili and
terminating his services.
If Culilis position were indeed indispensable to ETPI, then it would be absurd for ETPI, which was
then trying to save its operations, to abolish that one position which it needed the most.
Contrary to Culilis assertions that ETPI could not do away with his functions as long as it is in
the telecommunications industry, ETPI did not abolish the functions performed by Culili as a
senior technician. What ETPI did was to abolish the position itself for being too specialized and
limited. The functions of that position were then added to another employee whose functions
were broad enough to absorb the tasks of a senior technician.
Culili maintains that ETPI had already decided to dismiss him even before the second phase of
the right-sizing program was implemented as evidenced by a letter dated Dec. 7, 1998.
That termination of services letter signed by ETPIs AVP Stella Garcia hardly suffices to prove
bad faith on the part of the company. The fact remains that the said letter was never officially
transmitted and Culilis services were not terminated at the end of the first phase of ETPIs rightsizing program. ETPI had given an adequate explanation for the existence of the letter and
considering that it had been transparent with its employees, through their union ETEU, so much
so that ETPI even gave ETEU this unofficial letter, there is no reason to speculate and attach
malice to such act.
That Culilis services would be subsequently terminated during the second phase of the rightsizing program is not evidence of undue discrimination or singling out since not only Culilis
position, but his entire unit was abolished and absorbed by another department. (Nelson A. Culili
vs. Eastern Telecommunications Philippines, Inc., et. al., G.R. No. 165381, Feb. 9, 2011).

Alleged redundancy to voluntary retirement

GENERAL MILLING VS VIAJAR

JOSH

Terminating an employee because of redundancy is still part of business judgment. In

General Milling Corp. vs. Violeta L. Viajar (G.R. No. 181738, January 30, 2013), the Philippine
Supreme Court reiterated however that a company must still exercise this discretion in good
faith and that there must be fair and reasonable criteria in ascertaining redundant positions. To
do this, according to the High Court, a company claiming to be over manned must produce
adequate proof such as but not limited to (1) new staffing pattern; (2) feasibility studies or
proposals on the viability of the newly created positions; (3) job description and the approval by
the management of the restructuring; and (4) audited financial documents like balance sheets,
annual income tax returns and similar documents.
In General Milling, Violeta Viajar (Viajar) filed a Complaint for Illegal Dismissal with
damages against GMC.

GMC countered that it was forced to terminate Viajars services due to the economic
setbacks the company was suffering which affected its profitability, and the continuing rise of its
operating and interest expenditures. Redundancy was part of the GMCs concrete and actual
cost reduction measures, according to the company. GMC also presented the Establishment
Termination Report which it filed before the Department of Labor and Employment (DOLE)
involving thirteen (13) of its employees, including Viajar.
The Supreme Court held that Viajars termination was illegal. The Supreme Court found
that the letter-memorandum issued by GMC to prove redundancy which contained general
allegations was not enough to show that Viajar termination of employment was warranted.
There was no indication that GMC made an evaluation of the existing positions and their effect
to the company. Neither did GMC exert efforts to present tangible proof that it was experiencing
business slow down or over hiring.
The High Court ruled that based on Article 283 of the Labor Code, it is imperative that
the employer must comply with the requirements for a valid implementation of the companys
redundancy program, to wit: (a) the employer must serve a written notice to the affected
employees and the DOLE at least one (1) month before the intended date of retrenchment; (b)
the employer must pay the employees a separation pay equivalent to at least one month pay or
at least one month pay for every year of service, whichever is higher; (c) the employer must
abolish the redundant positions in good faith; and (d) the employer must set fair and reasonable
criteria in ascertaining which positions are redundant and may be abolished.
Citing Smart Communications, Inc. v. Astorga (G.R. No. 148132, January 28, 2008), the
High Tribunal explained that the characterization of an employees services as superfluous or
no longer necessary and properly terminable, is an exercise of business judgment on the part of
the employer, the exercise of such judgment must not be contrary to law, and must not be
arbitrary or malicious.
While GMC had been harping that it was on a reduction mode of its employees, it failed
to present any evidence (such as new staffing pattern, feasibility studies or proposal, viability of
newly created positions, job description and the approval of the management of the
restructuring, audited financial documents like balance sheets, annual income tax returns and
other documents) which could readily show that the companys declaration of redundant
positions was justified. Such proof would suffice to show the good faith on the part of the
employer or that this business prerogative, was not whimsically exercised in terminating Viajars
employment on the ground of redundancy.
On the other hand, Viajar presented evidence that GMC had been hiring new employees
while it was firing the old ones, negating the claim of redundancy.
In termination cases, the burden of proving that the dismissal of the employees was for a
valid and authorized cause rests on the employer. GMC had to show by substantial evidence that
it validly terminated the employment of Viajar. Failure to discharge this burden would only mean
that the dismissal was not justified and therefore illegal.

2.10 RETRENCHMENT
Businessday vs NLRC
BSSI was engaged in the manufacture and sale of computer forms. Due to financial reverses, its
creditors, the Development Bank of the Philippines (DBP) and the Asset Privatization Trust (APT), took
possession of its assets, including a manufacturing plant in Marilao, Bulacan.
As a retrenchment measure, some plant employees, including the private respondents, were laid off on
and were paid separation pay equivalent to one-half (1/2) month pay for every year of service. BSSI
retained some employees in an attempt to rehabilitate its business as a trading company.
However, barely two and a half months later, these remaining employees were likewise discharged
because the company decided to cease business operations altogether. Unlike the private respondents,
that batch of employees received separation pay equivalent to a full month's salary for every year of
service plus mid-year bonus.

Protesting against the discrimination in the payment of their separation benefits, the twenty-seven (27)
private respondents filed three (3) separate complaints against the BSSI and Raul Locsin. These cases
were later consolidated.
Issue: Validity of termination & different separation payment scheme
Held : Termination is valid but unequal payment is not.
In case of retrenchment of a company to prevent losses and closure of business operation, the law
provides:
Art. 283. Closure of establishment and reduction of personnel. The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operations of the
establishment or undertaking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In case of termination due
to the installation of labor saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one half (l /2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered one (1) whole year." (Labor Code;
emphasis supplied.)
Undoubtedly, petitioners' right to terminate employees on account of retrenchment to prevent losses or
closure of business operations, is recognized by law, but it may not pay separation benefits unequally
for such discrimination breeds resentment and ill-will among those who have been treated less
generously than others.
Petitioners' right to terminate employees on account of retrenchment to prevent losses or closure of
business operations, is recognized by law, but it may not pay separation benefits unequally for such
discrimination breeds resentment and ill-will among those who have been treated less generously than
others. "Granting that the 16 May 1988 termination was a retrenchment scheme, and the 31 July 1988
and the 28 February 1989 were due to closure, the law requires the granting of the same amount of
separation benefits to the affected employees in any of the cases. The respondent argued that the
giving of more separation benefit to the second and third batches of employees separated was their
expression of gratitude and benevolence to the remaining employees who have tried to save and make
the company viable in the remaining days of operations. This justification is not plausible. there are
workers in the first batch who have rendered more years of service and could even be said to be more
efficient than those separated subsequently, yet, they did not receive the same recognition.
Understandably, their being retained longer in their job and be not included in the batch that was first
terminated, was a concession enough and may already be considered as favor granted by the
respondents to the prejudice of the complainants. As it happened, there are workers in the first batch
who have rendered more years in service but received lesser separation pay, because of that
arrangement made by the respondents in paying their termination benefits . . ."

San Miguel Jeepney vs NLRC

The 23 complainants were formerly working (as drivers, dispatchers and mechanic) with petitioner San
Miguel Jeepney Service (SMJS), with services ranging from two to eight years. Petitioner SMJS had a
contract with the U.S. Naval Base Facility located in San Miguel, San Antonio, Zambales, to provide
transportation services to personnel and dependents inside said facility. When the said contract
expired on 02 May 1988, petitioner Galace, owner and general manager of SMJS, opted not to renew.
Petitioners filed a complaint for non-compliance with the minimum wage law from 1980 onwards, plus
non-payment of the 13th month pay, legal holiday pay, overtime pay, service incentive leave pay and
separation pay.
Issue: Whether or not the workers are entitled for separation pay

Held: Yes
Ratio:
Sliding incomes are not necessarily losses, much less serious business losses within the meaning of the
law. The requisites of a valid retrenchment are: (a) the losses expected should be substantial and not
merely de minimis in extent; (b) the substantial losses apprehended must be reasonably imminent; (c)
the retrenchment must be reasonably necessary and likely to effectively prevent the expected losses;
and (d) the alleged losses, if already incurred, and the expected imminent losses sought to be
forestalled, must be proved by sufficient and convincing evidence. We have also held that adverse
business conditions justify the exercise of management prerogative to retrench in order to avoid the
not-so-remote possibility of closure of the entire business. At the other end of the spectrum, it seems
equally clear that not every asserted possibility of loss is sufficient legal warrant for reduction of
personnel. In the nature of things, the possibility of incurring losses is constantly present, in greater or
lesser degree, in the carrying on of business operations, since some, indeed many, of the factors which
impact upon the profitability or viability of such operations may be substantially outside the control of
the employer. Employer bears the burden of proving his allegation of economic or business reverses
with clear and satisfactory evidence, it being in the nature of an affirmative defense. Apparently, the
petitioners evidence failed to persuade the public respondent, and it is not difficult to understand why
Such loss per se, absent any other evidence, and viewed in the light of the amounts of gross receipts
the business generated historically, may not be deemed the serious business loss contemplated by law,
and thus cannot justify the non-payment of separation pay. Neither did petitioners present any
evidence whatsoever regarding the impact of the said net loss on the business (extent of impairment of
equity, loss of liquidity, and so forth) nor on expected losses that would have been incurred had
operations been continued (under, say, a new contract with the base).
CONTRA: Separation pay not necessary
North Davao vs NLRC
Petitioner North Davao Mining Corporation (North Davao) ceased operation due to serious financial
loses. Its total liabilities had exceeded its assets by 20.392 billion pesos, as shown by its financial
statements audited by the Commission on Audit. When it ceased operations, its remaining employees
were separated and given the equivalent of 12.5 days pay for every year of service, computed on their
basic monthly pay, in addition to the commutation to cash of their unused vacation and sick leaves.
However, it appears that, during the life of the petitioner corporation, from the beginning of its
operations in 1981 until its closure in 1992, it had been giving separation pay equivalent to thirty (30)
days pay for every year of service.
Issue: Whether or not an employer whose business operations ceased due to serious business losses or
financial reverses is obliged to pay separation pay to its employees separated by reason of such
closure.
Held:
To resolve this issue, it is necessary to revisit the provision of law adverted to by the parties in their
submissions, namely Art. 283 of the Labor Code, which reads as follows:
Art. 283. Closure of establishment and reduction of personnel. - The employer may also
terminate the employment of any employee due to the installation of labor saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operation of the
establishment or under-taking unless the closing is for the purpose of circumventing the
provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and
Employment at least one (1) month before the intended date thereof. In case of termination due
to the installation of labor saving devices or redundancy, the worker affected thereby shall be
entitled to a separation pay equivalent to at least his one (1) month pay or to at least one (1)
month pay for every year of service, whichever is higher. In case of retrenchment to prevent
losses and in cases of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be equivalent to
one (1) month pay or at least one-half () month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered one (1) whole year. (italics
supplied)

The underscored portion of Art. 283 governs the grant of seperation benefits in case of closures or
cessation of operation of business establishments NOT due to serious business losses or financial
reverses x x x. Where, however, the closure was due to business losses - as in the instant case, in
which the aggregate losses amounted to over P20 billion - the Labor Code does not impose any
obligation upon the employer to pay separation benefits, for obvious reasons.
In contrast to Business Information System where the giving of unequal separation pay between the
first batch and second batch of terminated employees was held discrimination, and thus employees
terminated due to retrenchment were entitled to the same separation pay, the case at bar is totally
different. In the instant case, the companys practice of giving one months pay for every year of
service could no longer be continued precisely because the company could not afford it anymore. It
was forced to close down on account of accumulated losses of over P20 billion. This could not be said
of BISSI. In the case of North Davao, it gave 30-days separation pay to its employees when it was still
a going concern even if it was already losing heavily. As a going concern, its cash flow could still have
sustained the payment of such separation benefits. But when a business enterprise completely ceases
operations, i.e., upon its death as a going business concern, its vital lifeblood -its cashflow - literally
dries up. Therefore, the fact that less separation benefits were granted when the company finally met
its business death cannot be characterized as discrimination. Such action was dictated not by a
discriminatory management option but by its complete inability to continue its business life due to
accumulated losses. Indeed, one cannot squeeze blood out of a dry stone. Nor water out of parched
land.
As already stated, Art. 283 of the Labor Code does not obligate an employer to pay separation benefits
when the closure is due to losses. In the case before us, the basis for the claim of the additional
separation benefit of 17.5 days is alleged discrimination, i.e., unequal treatment of employees, which is
proscribed as an unfair labor practice by Art. 248 (e) of said Code. Under the facts and circumstances
of the present case, the grant of a lesser amount of separation pay to private respondent was done, not
by reason of discrimination, but rather, out of sheer financial bankruptcy - a fact that is not controlled
by management prerogatives. Stated differently, the total cessation of operation due to mind-boggling
losses was a supervening fact that prevented the company from continuing to grant the more generous
amount of separation pay. The fact that North Davao at the point of its forced closure voluntarily paid
any separation benefits at all - although not required by law - and 12.5-days worth at that, should have
elicited admiration instead of condemnation. But to require it to continue being generous when it is no
longer in a position to do so would certainly be unduly oppressive, unfair and most revolting to the
conscience.

Anabe vs AsiaKonstruct

Petitioner Virgilio Anabe was dismissed from service by respondent Asian Construction (Asiakonstrukt)
on the ground of retrenchment. He thus filed a complaint for illegal dismissal and money claims.
Asiakonstrukt failed to submit its audited financial statements within the two years that the case was
pending before the labor arbiter. It submitted the documents only when the case was on appeal with
the National Labor Relations Commission (NLRC). Anabe contended that their submission was belated.
Was this contention meritorious?
Ruling: Yes.
Indubitably, the NLRC is not precluded from receiving evidence on appeal as technical rules of evidence
are not binding in labor cases. There is, however, a caveat to this policy. The delay in the submission of
evidence should be clearly explained and should adequately prove the employers allegation of the
cause for termination. In the present case, Asiakonstrukt preferred no explanation behind the belated
submission. And the financial statements it submitted covered the period 1998-2000. Further, note that
the audited financial statement covering the period 1998-2000 was prepared in April 2001, which begs
the question of how the management knew at such date of the companys huge losses to justify
petitioners retrenchment in 1999.
Furthermore, from the certification issued by the Securities and Exchange Commission (SEC), it would
appear that Asiakonstrukt failed to submit its financial statements to the SEC, as required under the
law, for 1998-2000 and 2003-2005, thereby lending credence to petitioners theory that the financial
statements submitted on appeal may have been fabricated. Indeed, Asiakonstrukt could have easily

submitted its audited financial statements during the pendency of the proceedings at the labor arbiters
level, especially considering that it was in late 2001 that the case was decided.
For failure then of Asiakonstrukt to clearly and satisfactorily substantiate its financial losses, the
dismissal of petitioner on account of retrenchment is unjustified. Petitioner is thus entitled to the twin
reliefs of payment of backwages and other benefits from the time of his dismissal up to the finally of
this Courts Decision, and reinstatement without loss of seniority rights or, in lieu thereof, payment of
separation pay.

Notice to DOLE
Sebugero vs NLRC - missing
Serrano vs NLRC
Facts: Petitioner was hired by Isettan to apprehend shoplifters. Isettan decided to terminate his
employment when the entire security group was transferred to an independent security agency.
Petitioner filed for illegal dismissal. Petitioner contends that abolition of private respondents Security
Checkers Section and the employment of an independent security agency do not fall under any of the
authorized causes for dismissal under Art. 283 of the Labor Code.
Issue: Whether or not the dismissal is legal.
Held: Dismissal was valid, but there is violation of 30 day notice of termination.
Petitioners contention has no merit. Art. 283 provides:
Closure of establishment and reduction of personnel. - The employer may also terminate
the employment of any employee due to the installation of labor-saving devices,
redundancy, retrenchment to prevent losses or the closing or cessation of operations of
the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay equivalent
to at least one (1) month pay or to at least one (1) month pay for every year of service,
whichever is higher. In case of retrenchment to prevent losses and in cases of closure or
cessation of operations of establishment or undertaking not due to serious business
losses or financial reverses, the separation pay shall be equivalent to at least one (1)
month pay or at least one-half (1/2) month pay for every year of service, whichever is
higher. A fraction of at least six (6) months shall be considered as one (1) whole year.
Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the
faculty of promoting efficiency and attaining economy by a study of what units are essential for its
operation. To it belongs the ultimate determination of whether services should be performed by its
personnel or contracted to outside agencies . . . [
Sanctions for Violations of the Notice Requirement
Art. 283 also provides that to terminate the employment of an employee for any of the authorized
causes the employer must serve "a written notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date thereof." In the case at bar, petitioner was
given a notice of termination on October 11, 1991. On the same day, his services were terminated. He
was thus denied his right to be given written notice before the termination of his employment, and the
question is the appropriate sanction for the violation of petitioners right.
This Court said: "It is now settled that where the dismissal of one employee is in fact for a just and valid
cause and is so proven to be but he is not accorded his right to due process, i.e., he was not furnished
the twin requirements of notice and opportunity to be heard, the dismissal shall be upheld but the
employer must be sanctioned for non-compliance with the requirements of, or for failure to observe,
due process.".

CHENIVER DECO PRINT vs. NLRC

FACTS:

Cheniver is a corporation operating its printing business in Makati. The respondents are members of
the labor union and former employees of Cheniver.
June 5, 1992 Cheniver informed its employees that it will transfer its operations to Batangas.
Reasons for the transfer are expiration of lease contracton the premises of the Makati plant, and
local authorities action to force out Chenivers operations from Makati because of alleged hazards
to residents nearby.
Cheniver gave its employees until the end of June to inform management if they wanted with
Cheniver in its transfer, otherwise it would hire replacements.Aug1 was the scheduled start of
operations in the new plant in Batangas.
Aug 4, 1992 Cheniver wrote its employees to report to the new location within 7days, otherwise
they will be deemed to have lost interest in the job and would be replaced. However, no one
reported for work in batangas, even afterextension of period of time to report to work.- Respondents
filed a complaint for unfair labor practice and illegal dismissal,and demanded separation pay
(among others).
LA ruled that the transfer of operations was valid and absolved cheniver of charges for unfair labor
practice and illegal dismissal. It however orderedpayment of separation pay. NLRC affirmed.
Cheniver contends that the transfer of its business is neither closure norretrenchment, thus
separation pay should not be awarded. Also, employeeswere not terminated but they resigned
because they find the new site to farfrom their residences

ISSUE:
Whether or not employees are entitled to separation pay considering that the transfer of the plant was
valid
HELD:
Yes.
It must be stressed that the phrase "closure or cessation of operation of an establishment or
undertaking not due to serious business losses or reverses" under Article 283 of the Labor Code
includes both the complete cessation of all business operations and the cessation of only part of a
company's business.
There is no doubt that petitioner has legitimate reason to relocate its plant because of the expiration of
the lease contract on the premises it occupied.
That is its prerogative. But even though the transfer was due to a reason beyond its control, petitioner
has to accord its employees some relief in the form of severance pay.
As public respondent observed, the subsequent transfer of petitioner to another place hardly accessible
to its workers resulted in the latter's untimely separation from the service not to their own liking, hence,
not construable as resignation. Resignation must be voluntary and made with the intention of
relinquishing the office, accompanied with an act of relinquishment. Indeed, it would have been illogical
for private respondents herein to resign and then file a complaint for illegal dismissal. Resignation is
inconsistent with the filing of the said complaint.

CAPITOL MEDICAL CENTER (CMC) v. MERIS,

FACTS: Petitioner closed its industrial service unit due to alleged loss and extinct demand resulting to
the termination of the employment of the respondent. The latter filed an illegal dismissal case but the
same was denied by the labor arbiter, and subsequently by the NLRC contending that the same is part
of the management prerogative.

ISSUE: Has employer the right to close its business even without basis resulting to the displacement of
the worker?
HELD: No. Employers are also accorded with rights and privileges to assure their self-determination
and independence and reasonable return of capital. This mass of privileges is called management
prerogatives. Although they may be broad and unlimited in scope, the State has the right to determine
whether an employer's privilege is exercised in a manner that complies with the legal requirements and
does not offend the protected rights of labor.

ESPINA VS CA
The phrase "closure or cessation of operations of establishment or undertaking" includes a partial or
total closure or cessation. x x x Ordinarily, the closing of a warehouse facility and the termination of the
services of employees there assigned is a matter that is left to the determination of the employer in the
good faith exercise of its management prerogatives. The applicable law in such a case is Article 283 of
the Labor Code which permits "closure or cessation of operation of an establishment or undertaking not
due to serious business losses or financial reverses," which, in our reading includes both the complete
cessation of operations and the cessation of only part of a companys business.
And the phrase "closure or cessation not due to serious business losses or financial reverses"
recognizes the right of the employer to close or cease its business operations or undertaking even in
the absence of serious business losses or financial reverses, as long as he pays his employees their
termination pay in the amount corresponding to their length of service.
It would indeed be stretching the intent and spirit of the law if a court were to unjustly interfere in
managements prerogative to close or cease its business operations just because said business
operation or undertaking is not suffering from any loss. The determination to cease operations is a
prerogative of management which the State does not usually interfere with, as no business or
undertaking must be required to continue operating simply because it has to maintain its workers in
employment, and such act would be tantamount to a taking of property without due process of law. As
long as the companys exercise of the same is in good faith to advance its interest and not for the
purpose of circumventing the rights of employees under the law or a valid agreement, such exercise
will be upheld.

ANGELES VS. POLYTEX

An employer is not prevented from exercising its prerogative to close shop so long as it is done in good
faith to advance its interest and not for the purpose of defeating or circumventing the rights of the
employees under the law or a valid agreement.
A careful examination of Art. 283 of the Labor Code shows that closure or cessation of business
operation as a valid and authorized ground of terminating employment is not limited to those resulting
from business losses or reverses. Said provision in fact provides for the payment of separation pay to
employees terminated because of closure of business not due to losses, thus implying that termination
of employees other than closure of business due to losses may be valid.

PENAFRANCIA VS. SARMIENTO

FACTS: Joselito Sarmiento worked as a bus inspector of petitioner Peafrancia Tours and Travel
Transport, Inc. (petitioner). In his complaint for illegal dismissal, Sarmiento prayed for his
reinstatement, and charged petitioner with underpayment of wages; non-payment of overtime, holiday
pay, premium pay for holiday and rest day, service incentive leave pay, 13 th month pay, and separation
pay; unfair labor practice; damages; and attorneys fees.
Meanwhile, respondent Ricardo Catimbang also worked for petitioner as a bus inspector. He was also
paid a daily wage of P198.00. He averred that petitioner was guilty of union-busting, and prayed for
reinstatement with payment of full backwages, benefits, damages, and attorneys fees.
Both Sarmiento and Catimbang (respondents) averred that sometime in the first week of October 2002,
they received notices of termination on the ground of petitioners alleged irreversible business losses.
Petitioner asseverated that due to severe business losses, petitioner made the painful decision to stop
its operation and sell the business enterprise to the Perez family of ALPS Transportation. The new

owners maintained the business name of petitioner, and the management of petitioner was entrusted
to the new owners in October 2002.
ISSUE: WON respondents were legally terminated from employment by reason of the sale of the
business enterprise and the consequent change or transfer of ownership/management
HELD:
Closure of business is the reversal of fortune of the employer whereby there is a complete cessation of
business operations and/or an actual locking-up of the doors of the establishment, usually due to
financial losses. Closure of business, as an authorized cause for termination of employment, aims to
prevent further financial drain upon an employer who can no longer pay his employees since business
has already stopped.
Closure or cessation of operation of the establishment is an authorized cause for terminating an
employee, as provided in Article 283 of the Labor Code.
On this ground, petitioner terminated the employment of respondents. However, what petitioner
apparently made was a transfer of ownership. It is true that, as invoked by petitioner, in Manlimos, et
al. v. NLRC, et al., we held that a change of ownership in a business concern is not proscribed by law.
Lest petitioner forget, however, we also held therein that the sale or disposition must be motivated by
good faith as a condition for exemption from liability. Thus, where the charge of ownership is done in
bad faith, or is used to defeat the rights of labor, the successor-employer is deemed to have absorbed
the employees and is held liable for the transgressions of his or her predecessor.
But, in this case, there is no successor-employer because there was no actual change of ownership. We
sustain the uniform factual finding of both the NLRC and the CA that no actual sale transpired and, as
such, there is no closure or cessation of business that can serve as an authorized cause for the
dismissal of respondents.