Agabon v. NLRC, G.R. No. 158693, Nov.

17, 2004
Holiday Pay

FACTS:
Private respondent Riviera Home Improvements, Inc. is engaged in the business of
selling and installing ornamental and construction materials. It employed petitioners
Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on January
2, 1992 until February 23, 1999 when they were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money claims.

The Labor Arbiter (LA) rendered a decision declaring the dismissals illegal and ordered
private respondent to pay the monetary claims.

On appeal, the National Labor Relations Commission (NLRC) reversed the Labor
Arbiter because it found that the petitioners had abandoned their work, and were not
entitled to backwages and separation pay. The other money claims awarded by the LA
were also denied for lack of evidence.

Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari
with the Court of Appeals (CA) which in turn ruled that the dismissal of the petitioners
was not illegal because they had abandoned their employment but ordered the payment
of money claims.

Petitioner’s Arguments:
 Petitioners assert that they were dismissed because the private respondent refused
to give them assignments unless they agreed to work on a “pakyaw” basis when they
reported for duty on February 23, 1999. They did not agree on this arrangement
because it would mean losing benefits as Social Security System (SSS) members.

 Petitioners also claim that private respondent did not comply with the twin
requirements of notice and hearing.

Respondent’s Arguments:
 Private respondent, on the other hand, maintained that petitioners were not
dismissed but had abandoned their work. In fact, private respondent sent two letters
to the last known addresses of the petitioners advising them to report for work.

 Private respondent’s manager even talked to petitioner Virgilio Agabon by telephone

to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square
meters of cornice installation work. However, petitioners did not report for work
because they had subcontracted to perform installation work for another company.
Petitioners also demanded for an increase in their wage to P280.00 per day. When
this was not granted, petitioners stopped reporting for work and filed the illegal
dismissal case.

ISSUE:
Whether or not petitioners were illegally dismissed [NO, but they were entitled with
monetary claims awarded by the LA and nominal damages for respondent’s violation of
procedural due process]

RULING:

1. The SC established that the terminations were for a just and valid cause.

It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are
accorded not only respect but even finality if the findings are supported by substantial
evidence. This is especially so when such findings were affirmed by the CA. However, if
the factual findings of the NLRC and the LA are conflicting, as in this case, the
reviewing court may delve into the records and examine for itself the questioned
findings.

After a careful review of the facts, the CA ruled that petitioners’ dismissal was for a just
cause. They had abandoned their employment and were already working for another
employer.

To dismiss an employee, the law requires not only the existence of a just and
valid cause but also enjoins the employer to give the employee the opportunity to
be heard and to defend himself. Article 282 of the Labor Code enumerates the just
causes for termination by the employer:

(a) serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or the latter’s representative in connection with the employee’s work;

(b) gross and habitual neglect by the employee of his duties;

(c) fraud or willful breach by the employee of the trust reposed in him by his employer or
his duly authorized representative;

(d) commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized representative;
and

(e) other causes analogous to the foregoing.

Abandonment is the deliberate and unjustified refusal of an employee to resume

his employment. It is a form of neglect of duty, hence, a just cause for termination of
employment by the employer. For a valid finding of abandonment, these two factors
should be present:

(1) the failure to report for work or absence without valid or justifiable reason; and
(2) a clear intention to sever employer-employee relationship, with the second as the
more determinative factor which is manifested by overt acts from which it may be
deduced that the employees has no more intention to work. The intent to discontinue
the employment must be shown by clear proof that it was deliberate and unjustified.

Application: In February 1999, petitioners were frequently absent having subcontracted

for an installation work for another company. Subcontracting for another company
clearly showed the intention to sever the employer-employee relationship with private
respondent. This was not the first time they did this.

In January 1996, they did not report for work because they were working for another
company. Private respondent at that time warned petitioners that they would be
dismissed if this happened again. Petitioners disregarded the warning and exhibited a
clear intention to sever their employer-employee relationship. The record of an
employee is a relevant consideration in determining the penalty that should be meted
out to him.

In Sandoval Shipyard v. Clave, the SC held that an employee who deliberately

absented from work without leave or permission from his employer, for the purpose of
looking for a job elsewhere, is considered to have abandoned his job. This rule was
applied with more reason here where petitioners were absent because they were
already working in another company.

 The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of notice
and hearing in the termination of employment.

 The law also recognizes the right of the employer to expect from its workers not
only good performance, adequate work and diligence, but also good conduct and
loyalty.

The employer may not be compelled to continue to employ such persons whose
continuance in the service will patently be inimical to his interests. The SC
established that the terminations were for a just and valid cause.

2. It then determined if the procedures for dismissal were observed.

Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor Code
provides for the procedure for terminating an employee:

Standards of due process: requirements of notice. – In all cases of termination of employment, the
following standards of due process shall be substantially observed: I. For termination of
employment based on just causes as defined in Article 282 of the Code:

(a) A written notice served on the employee specifying the ground or grounds for termination, and
giving to said employee reasonable opportunity within which to explain his side;
 (b) A hearing or conference during which the employee concerned, with the assistance of counsel if
the employee so desires, is given opportunity to respond to the charge, present his evidence or
rebut the evidence presented against him; and

(c) A written notice of termination served on the employee indicating that upon due consideration of
all the circumstances, grounds have been established to justify his termination.

In case of termination, the foregoing notices shall be served on the employee’s last known address.

Dismissals based on just causes contemplate acts or omissions attributable to

the employee while dismissals based on authorized causes involve grounds under the
Labor Code which allow the employer to terminate employees.

 A termination for an authorized cause requires payment of separation pay.

 When the termination of employment is declared illegal, reinstatement and full

backwages are mandated under Article 279.

 If reinstatement is no longer possible where the dismissal was unjust, separation

pay may be granted.

Procedurally,
(1) If the dismissal is based on a just cause under Article 282, the employer must give
the employee two written notices and a hearing or opportunity to be heard if
requested by the employee before terminating the employment:
a. A notice specifying the grounds for which dismissal is sought a hearing or an
opportunity to be heard; and
b. After hearing or opportunity to be heard, a notice of the decision to dismiss.
(2) If the dismissal is based on authorized causes under Articles 283 and 284, the
employer must give the employee and the Department of Labor and Employment
written notices 30 days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived:

(1) The dismissal is for a just cause under Article 282 of the Labor Code, for an
authorized cause under Article 283, or for health reasons under Article 284, and due
process was observed;
(2) The dismissal is without just or authorized cause but due process was observed;
(3) The dismissal is without just or authorized cause and there was no due process;
and
(4) The dismissal is for just or authorized cause but due process was not observed.

In the first situation, the dismissal is undoubtedly valid and the employer will not suffer
any liability.

In the second and third situations where the dismissals are illegal, Article 279 mandates
that the employee is entitled to reinstatement without loss of seniority rights and other
privileges and full backwages, inclusive of allowances, and other benefits or their
monetary equivalent computed from the time the compensation was not paid up to the
time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural
infirmity cannot be cured, it should not invalidate the dismissal. However, the
employer should be held liable for non-compliance with the procedural
requirements of due process.

Application: The present case squarely falls under the fourth situation. The dismissal
should be upheld because it was established that the petitioners abandoned their
jobs to work for another company. Private respondent, however, did not follow the
notice requirements and instead argued that sending notices to the last known
addresses would have been useless because they did not reside there anymore.
Unfortunately for the private respondent, this is not a valid excuse because the law
mandates the twin notice requirements to the employee’s last known address. Thus, it
should be held liable for non-compliance with the procedural requirements of due
process.

A review and re-examination of the relevant legal principles is appropriate and timely to
clarify the various rulings on employment termination in the light of Serrano v. National
Labor Relations Commission.

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee
was not given any notice. In the 1989 case of Wenphil Corp. v. National Labor
Relations Commission, the SC reversed this long-standing rule and held that the
dismissed employee, although not given any notice and hearing, was not entitled to
reinstatement and backwages because the dismissal was for grave misconduct and
insubordination, a just ground for termination under Article 282. The employee had a
violent temper and caused trouble during office hours, defying superiors who tried to
pacify him. It concluded that reinstating the employee and awarding backwages “may
encourage him to do even worse and will render a mockery of the rules of discipline that
employees are required to observe.” It further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be
maintained. He has no right to return to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to private
respondent his right to an investigation before causing his dismissal. The rule is explicit as above
discussed. The dismissal of an employee must be for just or authorized cause and after due
process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed a
sanction for its failure to give a formal notice and conduct an investigation as required by law before
dismissing petitioner from employment. Considering the circumstances of this case petitioner must
indemnify the private respondent the amount of P1,000.00. The measure of this award depends on
the facts of each case and the gravity of the omission committed by the employer.

The rule thus evolved: where the employer had a valid reason to dismiss an
employee but did not follow the due process requirement, the dismissal may be
upheld but the employer will be penalized to pay an indemnity to the employee.
This became known as the Wenphil or Belated Due Process Rule.

On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed .
The SC held that the violation by the employer of the notice requirement in termination
for just or authorized causes was not a denial of due process that will nullify the
termination. However, the dismissal is ineffectual and the employer must pay full
backwages from the time of termination until it is judicially declared that the dismissal
was for a just or authorized cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the
significant number of cases involving dismissals without requisite notices. The SC
concluded that the imposition of penalty by way of damages for violation of the notice
requirement was not serving as a deterrent. Hence, the SC now required payment of full
backwages from the time of dismissal until the time the Court finds the dismissal was for
a just or authorized cause.

Serrano was confronting the practice of employers to “dismiss now and pay later” by
imposing full backwages. The SC believed, however, that the ruling in Serrano did not
consider the full meaning of Article 279 of the Labor Code which states:

ART. 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or
their monetary equivalent computed from the time his compensation was withheld from him up to
the time of his actual reinstatement.

This means that the termination is illegal only if it is not for any of the justified or
authorized causes provided by law. Payment of backwages and other benefits,
including reinstatement, is justified only if the employee was unjustly dismissed. The
fact that the Serrano ruling can cause unfairness and injustice which elicited strong
dissent has prompted us to revisit the doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution
embodies a system of rights based on moral principles so deeply imbedded in the
traditions and feelings of our people as to be deemed fundamental to a civilized society
as conceived by our entire history. Due process is that which comports with the deepest
notions of what is fair and right and just. It is a constitutional restraint on the legislative
as well as on the executive and judicial powers of the government provided by the Bill of
Rights.

Due process under the Labor Code, like Constitutional due process, has two aspects:

 Substantive, i.e., the valid and authorized causes of employment termination

under the labor code; and procedural, i.e., the manner of dismissal; and
  Procedural due process requirements for dismissal are found in the implementing
rules of p.d. 442, as amended, otherwise known as the labor code of the
philippines in book vi, rule i, sec. 2, as amended by department order nos. 9 and
10.

Breaches of these due process requirements violate the Labor Code. Therefore,
statutory due process should be differentiated from failure to comply with constitutional
due process.

 Constitutional due process protects the individual from the government and
assures him of his rights in criminal, civil or administrative proceedings;

 While statutory due process found in the Labor Code and Implementing Rules
protects employees from being unjustly terminated without just cause after notice
and hearing.

In Sebuguero v. National Labor Relations Commission, the dismissal was for a just and
valid cause but the employee was not accorded due process. The dismissal was upheld
by the Court but the employer was sanctioned. The sanction should be in the nature of
indemnification or penalty, and depends on the facts of each case and the gravity of the
omission committed by the employer.

In Nath v. National Labor Relations Commission, it was ruled that even if the employee
was not given due process, the failure did not operate to eradicate the just causes for
dismissal. The dismissal being for just cause, albeit without due process, did not entitle
the employee to reinstatement, backwages, damages and attorney’s fees.

Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v.
National Labor Relations Commission, which opinion he reiterated in Serrano, stated:

C. Where there is just cause for dismissal but due process has not been properly observed by an
employer, it would not be right to order either the reinstatement of the dismissed employee or the
payment of backwages to him. In failing, however, to comply with the procedure prescribed by law
in terminating the services of the employee, the employer must be deemed to have opted or, in any
case, should be made liable, for the payment of separation pay. It might be pointed out that the
notice to be given and the hearing to be conducted generally constitute the two-part due process
requirement of law to be accorded to the employee by the employer. Nevertheless, peculiar
circumstances might obtain in certain situations where to undertake the above steps would be no
more than a useless formality and where, accordingly, it would not be imprudent to apply the res
ipsa loquitur rule and award, in lieu of separation pay, nominal damages to the employee. x x x.

After carefully analyzing the consequences of the divergent doctrines in the law on
employment termination, the SC believed that in cases involving dismissals for
cause but without observance of the twin requirements of notice and hearing, the
better rule is to abandon the Serrano doctrine and to follow Wenphil by holding
that the dismissal was for just cause but imposing sanctions on the employer.
Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, the
SC would be able to achieve a fair result by dispensing justice not just to employees,
but to employers as well.

It must be stressed that in the present case, the petitioners committed a grave offense,
i.e., abandonment, which, if the requirements of due process were complied with, would
undoubtedly result in a valid dismissal.

An employee who is clearly guilty of conduct violative of Article 282 should not
be protected by the Social Justice Clause of the Constitution. Social justice, as the
term suggests, should be used only to correct an injustice. As the eminent Justice Jose
P. Laurel observed, social justice must be founded on the recognition of the necessity
of interdependence among diverse units of a society and of the protection that should
be equally and evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of bringing about “the
greatest good to the greatest number.”

This is not to say that the Court was wrong when it ruled the way it did in
Wenphil, Serrano and related cases. Social justice is not based on rigid formulas
set in stone. It has to allow for changing times and circumstances.

Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-
management relations and dispense justice with an even hand in every case:

We have repeatedly stressed that social justice – or any justice for that matter – is for the
deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case
of reasonable doubt, we are to tilt the balance in favor of the poor to whom the Constitution fittingly
extends its sympathy and compassion. But never is it justified to give preference to the poor simply
because they are poor, or reject the rich simply because they are rich, for justice must always be
served for the poor and the rich alike, according to the mandate of the law.

Justice in every case should only be for the deserving party. It should not be
presumed that every case of illegal dismissal would automatically be decided in
favor of labor, as management has rights that should be fully respected and
enforced by this Court. As interdependent and indispensable partners in nation-
building, labor and management need each other to foster productivity and economic
growth; hence, the need to weigh and balance the rights and welfare of both the
employee and employer.

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due
process should not nullify the dismissal, or render it illegal, or ineffectual. However, the
employer should indemnify the employee for the violation of his statutory rights, as ruled
in Reta v. National Labor Relations Commission. The indemnity to be imposed should
be stiffer to discourage the abhorrent practice of “dismiss now, pay later,” which we
sought to deter in the Serrano ruling. The sanction should be in the nature of
indemnification or penalty and should depend on the facts of each case, taking into
special consideration the gravity of the due process violation of the employer.
The violation of the petitioners’ right to statutory due process by the private
respondent warrants the payment of indemnity in the form of nominal damages.
The amount of such damages is addressed to the sound discretion of the court, taking
into account the relevant circumstances.

3. The SC was not persuaded by the private respondent claims that the CA erred
in holding that it failed to pay petitioners’ holiday pay, service incentive leave pay
and 13th month pay. It affirmed the ruling of the appellate court on petitioners’ money
claims. Private respondent is liable for petitioners’ holiday pay, service incentive leave
pay and 13th month pay without deductions.

As a general rule, one who pleads payment has the burden of proving it. Even where
the employee must allege non-payment, the general rule is that the burden rests on the
employer to prove payment, rather than on the employee to prove non-payment. The
reason for the rule is that the pertinent personnel files, payrolls, records, remittances
and other similar documents – which will show that overtime, differentials, service
incentive leave and other claims of workers have been paid – are not in the possession
of the worker but in the custody and absolute control of the employer.

Application: In the case at bar, if private respondent indeed paid petitioners’ holiday pay
and service incentive leave pay, it could have easily presented documentary proofs of
such monetary benefits to disprove the claims of the petitioners. But it did not, except
with respect to the 13th month pay wherein it presented cash vouchers showing
payments of the benefit in the years disputed. Allegations by private respondent that it
does not operate during holidays and that it allows its employees 10 days leave with
pay, other than being self-serving, do not constitute proof of payment. Consequently, it
failed to discharge the onus probandi thereby making it liable for such claims to the
petitioners.

Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio
Agabon’s 13th month pay, the SC found the same to be unauthorized. The evident
intention of Presidential Decree No. 851 is to grant an additional income in the form of
the 13th month pay to employees not already receiving the same so as “to further protect
the level of real wages from the ravages of world-wide inflation.” Clearly, as additional
income, the 13th month pay is included in the definition of wage under Article 97(f) of the
Labor Code, to wit:

(f) “Wage” paid to any employee shall mean the remuneration or earnings, however designated,
capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece ,
or commission basis, or other method of calculating the same, which is payable by an employer to
an employee under a written or unwritten contract of employment for work done or to be done, or
for services rendered or to be rendered and includes the fair and reasonable value, as determined
by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the
employer to the employee…”

from which an employer is prohibited under Article 113 of the same Code from making
any deductions without the employee’s knowledge and consent. In the instant case,
private respondent failed to show that the deduction of the SSS loan and the value of
the shoes from petitioner Virgilio Agabon’s 13th month pay was authorized by the latter.
The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio
Agabon included the same as one of his money claims against private respondent.

The CA properly reinstated the monetary claims awarded by the LA ordering the private
respondent to pay each of the petitioners holiday pay for four regular holidays, service
incentive leave pay, and the balance of Virgilio Agabon’s thirteenth month pay.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of
Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and
Virgilio Agabon abandoned their work, and ordering private respondent to pay each of the
petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00,
service incentive leave pay for the same period in the amount of P3,255.00 and the balance of
Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 is AFFIRMED with
the MODIFICATION that private respondent Riviera Home Improvements, Inc. is
further ORDERED to pay each of the petitioners the amount of P30,000.00 as nominal damages
for non-compliance with statutory due process.