Bicol Isarog Transport System, Inc. vs. Relucio

Where just cause for dismissal exists but the employer fails to comply with procedural due process requirements — specifically, where the notices of infraction and termination were never actually received by the employee — the dismissal is not illegal, but the employer is liable for nominal damages in the amount of ₱30,000.00.

Bicol Isarog Transport System, Inc. is a bus transport company that employed Roy R. Relucio as a bus driver, initially on a probationary basis beginning April 11, 2011, and later as a regular employee effective March 26, 2012. The company maintained a Code of Discipline that categorized insubordination and failure to report for duty as grave offenses punishable by dismissal. The dispute arose from Relucio's alleged insubordination on March 28, 2013, and his subsequent failure to report for work, which led Bicol Isarog to terminate his employment.

On April 11, 2011, Roy R. Relucio was employed by Bicol Isarog Transport System, Inc. as a bus driver on a probationary basis. He received compensation above the minimum wage, including a daily rate of ₱247.00, trip allowances, and a lutao allowance of ₱100.00 on rest days. On March 26, 2012, he became a regular employee. At the start of his employment, Bicol Isarog explained the provisions of its Code of Discipline, and Relucio expressed willingness to comply. After becoming regular, Bicol Isarog alleged that Relucio repeatedly violated the Code of Discipline by failing to submit Trip Collection Reports and turn over collections for charter buses on several dates in June 2012. The company issued a memorandum requiring a written explanation, found him liable, and imposed a 30-day suspension from June 22 to July 22, 2012.

On March 28, 2013, Bicol Isarog received a report that Relucio insisted on making a trip from Masbate to Manila with only five passengers on board, despite the express order of the Officer-in-Charge (OIC) for Operations in Masbate not to proceed and to transfer the passengers to another bus with more passengers. Relucio disobeyed the instruction and proceeded with the trip. The Operations Manager, Kirby Del Castillo, sent a text message directing Relucio to report to him upon arriving in Manila. When Relucio reached the J. Ruiz terminal in Manila on the morning of March 29, 2013, he walked out without reporting to the Operations Manager. Another text message was sent requiring him to report to the MR Department on April 1, 2013, but he again failed to do so.

Bicol Isarog then issued Memorandum Circular No. BITSI-PM-2013-145, serving as the first notice, requiring Relucio to present himself at the J. Ruiz office or submit a written explanation for the insubordination incident. The HR Manager, Roberto Cabilao, went to the address listed in Relucio's biodata, NBI clearance, and barangay clearance to personally serve the memorandum, but was told that no Roy Radasa Relucio lived there, and the person he spoke to refused to acknowledge receipt. On April 5, 2013, Bicol Isarog issued a second memorandum requiring Relucio to explain his failure to report for work since March 31, 2013. Cabilao again went to the same address but was told for a second time that Relucio did not reside there. Bicol Isarog subsequently issued a notice of termination for Relucio's failure to report for work for five consecutive days without valid reason or official leave. Since the company had no information on Relucio's whereabouts, the notice of termination was only served on April 18, 2013, during a conference before the DOLE-NCR Field Office.

Relucio, for his part, claimed that upon arriving in Manila on March 29, 2013, he went to the Bicol Isarog office but found no representative to speak with. The next day, he returned but was told to go home because he had already been dismissed. On April 1, 2013, he sought assistance from the NLRC. He also denied violating any instructions, claiming he was not the on-duty driver for the Masbate-Manila route on March 28, 2013. The Labor Arbiter found just cause for dismissal and substantial compliance with due process, a ruling affirmed by the NLRC. The Court of Appeals reversed, holding that Relucio was illegally dismissed because Bicol Isarog failed to prove just cause and violated procedural due process since the memoranda never reached him.

• Just Cause for Dismissal: Bicol Isarog maintained that Relucio's failure to report for duty constituted a grave offense punishable by dismissal under the company's Code of Conduct, and that his insubordination on March 28, 2013 — defying the OIC's order not to proceed with a trip carrying only five passengers — constituted willful disobedience of a lawful order.
• Compliance with Twin-Notice Rule: Bicol Isarog argued that it complied with the twin-notice requirement by issuing two memoranda requiring Relucio to explain his alleged infractions and a third memorandum terminating his employment, and that notices were served at Relucio's last known address as required by the implementing rules.
• Monetary Awards: Bicol Isarog questioned the monetary awards granted by the CA for lack of factual and legal basis.

• No Defiance of Instructions: Relucio countered that he did not defy instructions to report for work, claiming that upon arriving in Manila on March 29, 2013, he went to the Bicol Isarog office but found no representative, and the next day was told to go home because he had already been dismissed.
• Not the On-Duty Driver: Relucio claimed he did not violate any instructions on March 28, 2013, because he was not the on-duty driver for the Masbate-Manila route on that date.
• Prompt Action: Relucio pointed out that on April 1, 2013, he sought assistance from the NLRC, indicating he did not abandon his employment.

• Substantive Due Process / Just Cause: Whether there was just cause to terminate Relucio's employment based on insubordination and failure to report for work.
• Procedural Due Process / Twin-Notice Rule: Whether Bicol Isarog substantially complied with the procedural due process requirements in effecting Relucio's dismissal.
• Relief and Damages: Whether Relucio was entitled to reinstatement, backwages, and other monetary awards, or whether nominal damages were the proper award.

• Substantive Due Process / Just Cause: Yes. There was just cause to terminate Relucio's employment. The order not to continue with the trip was reasonable, lawful, made known to Relucio, and pertained to his duty as a bus driver. Relucio did not deny or offer any explanation for his disobedience, satisfying the requisites of insubordination under Article 297 of the Labor Code.

• Procedural Due Process / Twin-Notice Rule: No. Bicol Isarog failed to comply with procedural due process. The memoranda never reached Relucio; the HR Manager discovered at the first attempted service that Relucio no longer resided at the given address, yet returned to the same address for the second notice. The notice of termination was only handed to Relucio during the DOLE-NCR conference, and no hearing or conference was ever scheduled.

• Relief and Damages: Nominal damages of ₱30,000.00, not reinstatement or backwages. Because just cause existed but procedural due process was not observed, Relucio was entitled only to nominal damages under prevailing jurisprudence. The CA's award of reinstatement, backwages, and other monetary claims was set aside.

• Substantive Due Process / Just Cause: Insubordination as a just cause for dismissal requires the concurrence of two requisites: (1) the employee's conduct must have been willful, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties he had been engaged to discharge. The Court found that the OIC's order not to proceed with the Masbate-Manila trip with only five passengers was reasonable and lawful, as it was based on a company policy to transfer passengers to another bus to save operational costs. The order was made known to Relucio and pertained to his duties as a bus driver. Relucio did not deny or explain his disobedience. His subsequent failure to report to the Operations Manager and the MR Department as directed further constituted willful disregard of lawful orders. Bicol Isarog's Code of Conduct categorized insubordination and failure to report for duty as grave offenses meriting dismissal. The burden of proving just cause lies with the employer, who must present substantial evidence — that amount of relevant evidence which a reasonable mind might accept as adequate to justify a conclusion. Bicol Isarog met this burden.

• Procedural Due Process / Twin-Notice Rule: To effect a valid dismissal for just cause, the employer must substantially comply with the standards of due process refined in Unilever Philippines, Inc. vs. Rivera: (1) a first written notice containing the specific causes, detailed narration of facts, and a directive to submit a written explanation within a reasonable period of at least five calendar days; (2) a hearing or conference affording the employee opportunity to explain, present evidence, and rebut management's evidence; and (3) a written notice of termination indicating all circumstances were considered and grounds established. The employer bears the burden of proving compliance with the two-notice requirement. Here, although Bicol Isarog issued the required memoranda, the notices never reached Relucio. The HR Manager discovered on the first attempt that Relucio no longer resided at the address on file, yet returned to the same address for the second notice — a mere feint at compliance. The notice of termination was served only during the DOLE-NCR conference. No hearing or conference was ever scheduled. Relucio was thus deprived of ample opportunity to intelligently respond to the accusations and prepare his defense. The Court adopted the CA's observation that the only effort to comply with procedural due process consisted of two memoranda that were never served on or received by Relucio.

• Relief and Damages: Where just cause exists but procedural due process is not observed, the employee is not entitled to reinstatement or backwages, but is entitled to nominal damages. Citing prevailing jurisprudence (Agabon vs. NLRC and its progeny), the Court awarded ₱30,000.00 as nominal damages for the employer's failure to comply with due process requirements. The CA's awards of reinstatement, backwages, holiday pay, service incentive leave pay, 13th month pay, and attorney's fees were accordingly set aside, as the existence of just cause negated the finding of illegal dismissal.

• Twin-Notice Rule in Termination for Just Cause — The employer must serve: (1) a first written notice containing the specific causes or grounds for termination under Article 297 of the Labor Code and company policies, a detailed narration of facts and circumstances serving as basis for the charge, and a directive to submit a written explanation within a reasonable period of at least five calendar days from receipt; (2) after serving the first notice, afford the employee ample opportunity to be heard and to defend himself, including scheduling and conducting a hearing or conference where the employee may explain, present evidence, and rebut management's evidence; and (3) after determining that termination is justified, serve a written notice of termination indicating that all circumstances have been considered and grounds established. The notices shall be served personally to the employee or to the employee's last known address. The employer bears the burden of proving compliance. In this case, the Court held that mere attempts to serve notices at an address where the employee was known to no longer reside did not constitute substantial compliance, and the absence of any scheduled hearing or conference further violated procedural due process.

• Requisites of Insubordination as Just Cause — Insubordination necessitates the concurrence of two requisites: (1) the employee's assailed conduct must have been willful, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee, and must pertain to the duties which the employee had been engaged to discharge. The Court found both requisites present: Relucio willfully disobeyed a reasonable, lawful, and communicated order pertaining to his duties as a bus driver.

• Nominal Damages for Procedural Due Process Violation Despite Existence of Just Cause — Where the employer has just cause to dismiss but fails to observe procedural due process, the dismissal is not illegal, but the employer must pay nominal damages. The amount of ₱30,000.00 was awarded in accordance with prevailing jurisprudence stemming from Agabon vs. NLRC. The employee is not entitled to reinstatement or backwages because the dismissal was for cause.

• "The order not to continue with the trip is reasonable, lawful, made know to Relucio and pertained to his duty as a bus driver of Bicol Isarog. Relucio did not deny nor offered any explanation for his disobedience. Thus, there is just cause to terminate his employment." — This passage articulates the ratio decidendi on substantive due process, applying the two-requisite test for insubordination and concluding that just cause was established.

• "Clearly, there was no substantial compliance with the dictates of procedural due process in the dismissal of Relucio." — This sentence captures the Court's conclusion on procedural due process, following its analysis that the notices were never served on the employee and no hearing was conducted.

• "Indubitably, Bicol Isarog failed to comply with the proper procedural requirements, despite having a just cause to dismiss Relucio. Thus, Relucio is entitled to nominal damages in the amount of P30,000.00 in accordance with prevailing jurisprudence." — This passage states the dispositive legal consequence of a procedural lapse despite just cause, establishing the award of nominal damages as the proper remedy.

• Unilever Philippines, Inc. vs. Rivera, 710 Phil. 124 (2013) — Followed as the controlling authority refining the standards of procedural due process in termination for just cause, setting out the three-step notice-and-hearing requirement. The Court applied its framework to evaluate Bicol Isarog's compliance.

• King of Kings Transport, Inc. vs. Mamac, 553 Phil. 108 (2007) — Cited within Unilever as the source of the refined due process standards; followed as foundational jurisprudence on the twin-notice rule and the employee's right to a hearing or conference.

• Agabon vs. NLRC, 485 Phil. 248 (2004) — Followed as the seminal doctrine establishing that where just cause exists but procedural due process is not observed, the employer is liable for nominal damages rather than reinstatement and backwages. The ₱30,000.00 award was grounded on this line of cases.

• Santos vs. Integrated Pharmaceutica, Inc., 789 Phil. 477 (2016) — Cited for the proposition that the employer bears the burden of proving compliance with the two-notice requirement.

• Grandteq Industrial Steel Products, Inc. vs. Estrella, 661 Phil. 735 (2011) — Cited for the two-requisite test of insubordination as a just cause for dismissal under Article 297 (formerly Article 282) of the Labor Code.

• Article 297, Labor Code of the Philippines — (Formerly Article 282.) Enumerates the just causes for termination of employment, including serious misconduct or willful disobedience by the employee of the lawful orders of the employer or representative in connection with work. The Court applied paragraph (a) to find that Relucio's insubordination constituted just cause.

• Section 5.1, DOLE Department Order No. 147-15, series of 2015 — Amending the Implementing Rules and Regulations of Book VI of the Labor Code. Sets out the due process requirements for termination based on just causes, including the two-notice rule and the requirement that notices be served personally to the employee or to the employee's last known address. The Court found that Bicol Isarog's service attempts did not satisfy this provision because the HR Manager knew the address was no longer valid yet returned to the same address.

• Section 12, DOLE Department Order 18-A — Defines "ample opportunity to be heard" as any meaningful opportunity (verbal or written) given to the employee to answer charges and submit evidence, whether in a hearing, conference, or other fair and reasonable way. The Court found this standard was not met because no hearing or conference was ever scheduled.

Peralta, C.J. (Chairperson), Caguioa, Reyes, Jr., and Lazaro-Javier, JJ., concurred. No separate concurring opinions were written.