Acesite Corporation vs. Gonzales

In illegal dismissal cases involving positions of trust and confidence where reinstatement is not feasible due to strained relations, the proper award is separation pay equivalent to one month's salary for every year of service in addition to full backwages computed from the time of dismissal until the finality of the decision.

Leo Gonzales was employed as Chief of Security of Manila Pavilion Hotel, which was later taken over by Acesite Corporation and renamed Holiday Inn Manila. The dispute arose from Gonzales' absences in April and May 1998, during which he was campaigning for provincial board member in Abra. Despite disapproval of his emergency leave application and orders to report back to work, Gonzales failed to report, leading to his termination for alleged willful disobedience and insubordination.

• Gonzales was hired on October 18, 1993 as Chief of Security of Manila Pavilion Hotel, which was taken over by Acesite Corporation on January 1, 1995 and renamed Holiday Inn Manila.
• On March 25, 1998, Gonzales took a 4-day sick leave and emergency leave on March 30, 1998.
• From April 16-29, 1998, he took a 12-day vacation leave, exhausting all his leave credits for the year.
• On April 23, 1998, before his vacation leave expired, Gonzales filed an application for emergency leave from April 30 to May 13, 1998 to campaign in Abra for provincial board member; the application was disapproved, but Gonzales claimed he did not receive the telegram of disapproval.
• Gonzales did not report for work on April 30 and May 1, 1998. On April 30, he received a telegram advising him he was on unauthorized leave and requiring him to explain within 24 hours and report on May 1.
• On May 2, 1998, Gonzales' father sent a telegram stating Gonzales was recovering from severe stomach disorder and would report on May 4. A medical certificate dated May 3, 1998 issued by Dr. Laureano C. Gonzales, Jr. stated Gonzales was under his care from April 30 to May 3, 1998.
• On May 4, 1998, Gonzales reported to work and met with Resident Manager Johann Angerbauer. Gonzales claimed he requested leave without pay from May 5-9 and sent an email explanation; Angerbauer claimed Gonzales admitted he went to Abra because it was necessary.
• On May 4, 1998, Angerbauer sent an inter-office memo requiring Gonzales to submit an explanation within 24 hours for his absences on May 1 and for being late on May 4.
• On May 5, 1998, Angerbauer sent a final telegram to Gonzales' provincial address ordering him to report back to work immediately.
• Gonzales claimed he received the May 5 telegram only on May 7, 1998, and immediately returned to Manila on May 8, 1998, but was barred from entering the hotel premises.
• On May 7, 1998, Angerbauer issued a Notice of Termination effective immediately for violations of Rule 27 (Acts of gross disobedience or insubordination) of the House Code of Discipline and Article 282(a) of the Labor Code.
• Gonzales filed a complaint for illegal dismissal on May 27, 1998, which was dismissed for failure to prosecute, but he refiled on July 13, 1999.

• Acesite argued that Gonzales was legally dismissed for just cause under Article 282(a) of the Labor Code (willful disobedience) for repeatedly ignoring lawful orders to report back to work and disregarding telegrams sent to him.
• Acesite claimed that Gonzales' medical certificate was suspect because the doctor could be a relative and the certificate was issued in Quezon City despite stating treatment occurred in Abra.
• Acesite asserted that Gonzales concealed his candidacy for public office, justifying loss of trust and confidence.
• Acesite maintained that procedural due process was observed through the numerous telegrams sent to Gonzales' city and provincial addresses asking him to report and explain his absences.
• Acesite contended that the House Code of Discipline authorized immediate dismissal for violations of Rule 27.

• Gonzales argued that the Court of Appeals erred in deleting the award of fringe benefits or their monetary equivalent ordered by the NLRC.
• Gonzales contended that the Court of Appeals should not have given Acesite the option whether to reinstate him, as the case did not fall under circumstances where reinstatement is impossible.
• Gonzales argued that even assuming reinstatement was not feasible, the separation pay of one-half month ordered by the appellate court was not in accordance with law and jurisprudence.
• Gonzales claimed that the reduction of moral and exemplary damages from P800,000.00 each to P100,000.00 total was erroneous as the NLRC's award was deserved.

• Procedural:
  • Whether the Court of Appeals committed grave abuse of discretion in reversing the Labor Arbiter's finding that Gonzales was legally dismissed.
• Substantive Issues:
  • Whether there was just cause for dismissal based on willful disobedience under Article 282(a) of the Labor Code.
  • Whether procedural due process was complied with under Article 277(b) of the Labor Code.
  • Whether reinstatement should be ordered or if separation pay should be awarded due to strained relations.
  • Whether the separation pay should be one month or one-half month per year of service.
  • Whether corporate officers are solidarily liable with the corporation for illegal dismissal.
  • Whether fringe benefits should be included in the computation of backwages.
  • Whether moral and exemplary damages are proper in the absence of bad faith.

• Procedural: The Supreme Court found no grave abuse of discretion on the part of the Court of Appeals. The appellate court correctly ruled that Gonzales was illegally dismissed based on the evidence showing lack of just cause and procedural defects.
• Substantive:
  • Willful Disobedience: The Court held that dismissal for willful disobedience requires concurrence of two requisites: (1) the employee's conduct is willful or intentional, characterized by a wrongful and perverse attitude; and (2) the order violated is reasonable, lawful, made known to the employee, and pertains to his duties. The Court found the first requisite wanting because Gonzales' conduct was not characterized by a perverse attitude; his failure to receive the disapproval telegram was not disproven, and he immediately returned to Manila upon receiving the final notice on May 7.
  • Procedural Due Process: The Court held that Acesite violated the two-notice rule under Article 277(b). No notice containing a statement of the causes for termination was furnished to Gonzales before the notice of termination. The telegrams and memo requiring explanation did not apprise him that he was being considered for termination, nor was he given ample opportunity to contest the charges with assistance of counsel.
  • Reinstatement and Separation Pay: The Court held that reinstatement is not feasible due to strained relations. As Chief of Security, Gonzales occupied a position demanding trust and confidence, and the circumstances precluded reinstatement. Separation pay is awarded in lieu thereof.
  • Amount of Separation Pay: The Court modified the award from one-half month to one month's salary for every year of service computed from the time Gonzales was first employed by Acesite until the finality of the decision.
  • Solidary Liability of Officers: The Court held that corporate officers Angerbauer and Kennedy are not solidarily liable with Acesite because the termination was not effected with malice or bad faith. Mere involvement in the dismissal without proof of malice does not pierce the corporate veil.
  • Backwages Computation: The Court held that Gonzales is entitled to full backwages, inclusive of allowances and other benefits or their monetary equivalent, computed from the time of illegal dismissal until the finality of the decision, less three days for his one-week suspension for unauthorized absences from May 5-7, 1998.
  • Damages: The Court deleted the awards for moral and exemplary damages because the dismissal was not attended by bad faith, fraud, or oppressive conduct. The Court reduced the attorney's fees to P10,000.00.

• Willful Disobedience — Dismissal for willful disobedience under Article 282(a) requires the concurrence of: (1) the employee's assailed conduct must be willful or intentional, characterized by a wrongful and perverse attitude; and (2) the order violated must be reasonable, lawful, made known to the employee, and pertain to the duties which he had been engaged to discharge. Applied to hold that Gonzales' absences were not willful as he lacked the requisite perverse attitude.
• Strained Relations Doctrine — Reinstatement may be excused on the ground of "strained relations" when the employee occupies a position demanding trust and confidence, or when the differences between the parties are of such nature or degree as to preclude reinstatement. Applied to justify awarding separation pay instead of reinstatement for a Chief of Security whose relationship with management had deteriorated.
• Separation Pay as Substitute for Reinstatement — When reinstatement is no longer feasible due to strained relations in positions of trust, the proper separation pay is equivalent to one month's salary for every year of service, not one-half month. Applied to modify the Court of Appeals' award.
• Two-Notice Rule in Termination — Under Article 277(b) of the Labor Code, the employer must furnish the worker a written notice containing a statement of the causes for termination and afford the latter ample opportunity to be heard. Applied to find procedural defect where no such preliminary notice was given.
• Solidary Liability of Corporate Officers — Corporate directors and officers are solidarily liable with the corporation in cases of illegal dismissal only where the termination of employment is done with malice or in bad faith. Applied to absolve the individual petitioners from solidary liability.

• "In order that an employer may dismiss an employee on the ground of willful disobedience, there must be concurrence of at least two (2) requisites: the employee’s assailed conduct must have been willful or intentional, the willingness being characterized by a wrongful and perverse attitude; and that the order violated must have been reasonable, lawful, made known to the employee and must pertain to the duties which he had been engaged to discharge."
• "In illegal dismissal cases, reinstatement to an illegally dismissed employee’s former position may be excused on the ground of 'strained relations.' This may be invoked against employees whose positions demand trust and confidence, or whose differences with their employer are of such nature or degree as to preclude reinstatement."
• "Employees cannot bargain away this right [to procedural due process] notwithstanding their acquiescence to the employer’s rules."
• "Unless they have exceeded their authority, corporate officers are, as a general rule, not personally liable for their official acts... In cases of illegal dismissal, corporate directors and officers are solidarily liable with the corporation, where terminations of employment are done with malice or in bad faith."

• Lagatic v. NLRC — Cited for the definition and requisites of willful disobedience.
• Procter and Gamble Phils. v. Bondesto — Cited for the requisites of willful disobedience.
• Maranaw Hotels and Resorts Corp. v. Court of Appeals — Cited for the doctrine that reinstatement may be excused on the ground of strained relations when the position requires trust and confidence.
• Globe-Mackay Cable and Radio Corporation v. NLRC — Cited for the strained relations doctrine.
• Bogo-Medellin Sugarcane Planters Association, Inc. v. NLRC — Cited for the rule that corporate officers are solidarily liable only when termination is done with malice or bad faith.
• Garcia v. NLRC — Cited for the rule that moral damages require bad faith or fraud, and exemplary damages require wanton, oppressive or malevolent manner.

• Article 279 of the Labor Code — Entitlement of unjustly dismissed employees to reinstatement without loss of seniority rights and to full backwages, inclusive of allowances, and to other benefits or their monetary equivalent.
• Article 282(a) of the Labor Code — Termination by employer for serious misconduct or willful disobedience.
• Article 277(b) of the Labor Code — Procedural requirements for termination including written notice of causes and opportunity to be heard (two-notice rule).