Caong, Jr. vs. Regualos

The suspension of jeepney drivers for failure to remit the full amount of their boundary payments does not constitute illegal dismissal where there is no intent to sever the employer-employee relationship and the drivers can return to work upon payment of their arrears. The policy of suspending drivers pending payment of arrears is a reasonable exercise of management prerogative, subject only to the limitation that such policies must be fair and reasonable and the penalties commensurate to the offense.

Petitioners were employed by respondent Avelino Regualos as drivers of his jeepneys under a boundary agreement, a system where the driver remits a fixed amount to the owner/operator and keeps the excess as earnings. It is settled jurisprudence that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of employer-employee, not lessor-lessee. Respondent acquired the jeepneys on installment basis and relied on the boundary payments to comply with his monthly amortizations.

Petitioners Primo E. Caong, Jr., Alexander J. Tresquio, and Loriano D. Daluyon were employed by respondent Avelino Regualos as drivers of his jeepneys under a boundary agreement. Caong was hired in September 1998 and became a permanent driver in 2000; in July 2001, he was assigned a brand-new jeepney for a boundary fee of P550.00 per day. Tresquio was employed in August 1996, became a permanent driver in 1997, and was assigned a new jeepney in 1998 for a boundary fee of P500.00 per day. Daluyon started working in March 1998, became a permanent driver in July 1998, and was assigned a relatively new jeepney for a boundary fee of P500.00 per day.

In November 2001, each petitioner incurred deficiencies in their boundary remittances due to what they claimed was the scarcity of passengers. Caong was suspended on October 9-15, 2001 for failure to remit the full boundary; upon readmission, he was reassigned to an older jeepney with a lower boundary fee of P500.00. On November 9, 2001, Caong remitted only P400.00; on November 11, 2001, respondent barred him from driving. Tresquio remitted only P450.00 on November 6, 2001, and was barred on November 8, 2001 for the P50.00 deficiency. Daluyon paid only P470.00 on November 7, 2001, and was barred the following day.

Respondent alleged that petitioners were lessees, not employees, and that a list attached to his Position Paper showed petitioners had incurred arrears since they started working: Caong's total arrears amounted to P10,315.00, Tresquio's to P10,760.00, and Daluyon's to P6,890.00. Respondent discovered that his lessees contracted loans with third parties and used the income of the jeepneys in paying those loans. On November 4, 2001, he gathered all the lessees in a meeting and informed them that, effective November 5, 2001, those who failed to fully pay the daily rental would not be allowed to rent a jeepney on the following day. Most lessees accepted the condition and paid their arrears, but petitioners did not settle their arrears and their remittances were again short. During the mandatory conference, respondent manifested that petitioners were not dismissed and could drive his jeepneys once they paid their arrears, but petitioners refused to do so.

The Labor Arbiter found that an employer-employee relationship existed and that petitioners were not dismissed since they could return to work once they paid their arrears. The NLRC and the CA affirmed, with the CA ruling that the employer-employee relationship was merely suspended, not severed, and that the condition of paying arrears before readmission was neither impossible nor unreasonable.

• Illegal Dismissal: Petitioners averred that they were illegally dismissed by respondent without just cause, and that respondent did not comply with due process requirements before terminating their employment, as they were not furnished notice apprising them of their infractions and another informing them of their dismissal.
• Insincere Reinstatement Offer: Petitioners claimed that respondent's offer during the mandatory conference to reinstate them was an insincere afterthought, as shown by the warning that if they failed to remit the full boundary again, they would be barred from driving the jeepneys.
• Unreasonable Policy: Petitioners questioned respondent's policy of automatically dismissing drivers who fail to remit the full boundary, alleging that it (a) violates their right to due process; (b) does not constitute a just cause for dismissal; and (c) disregards the reality that there are days when they could not raise the full amount because of the scarcity of passengers.
• Scarcity of Passengers: Petitioners argued that the policy is unsound as it does not consider times when passengers are scarce and drivers are not able to raise the amount of the boundary.

• Lack of Jurisdiction: Respondent alleged that petitioners were lessees of his vehicles and not his employees; hence, the Labor Arbiter had no jurisdiction.
• Accumulated Arrears: Respondent claimed that petitioners had actually incurred arrears since they started working, as shown in a list attached to his Position Paper, and that he discovered his lessees contracted loans with third parties and used the income of the jeepneys in paying those loans.
• Meeting as Notice: Respondent explained that on November 4, 2001, he gathered all the lessees in a meeting and informed them that, effective November 5, 2001, those who failed to fully pay the daily rental would not be allowed to rent a jeepney on the following day, and that most lessees accepted the condition and paid their arrears.
• Reinstatement Offer: Respondent stressed that during the mandatory conference, he manifested that he would renew his lease with petitioners if they would pay the arrears they incurred.

• Illegal Dismissal: Whether petitioners were illegally dismissed by respondent when he barred them from driving his jeepneys due to deficiencies in their boundary payments.
• Reasonableness of the Policy: Whether respondent's policy of suspending drivers who fail to remit the full amount of the boundary was fair and reasonable under the circumstances.
• Due Process: Whether petitioners were denied their right to due process when respondent failed to comply with the twin-notice rule before suspending them.

• Illegal Dismissal: No. Petitioners were not dismissed from employment but merely suspended pending payment of their arrears, there being no intent on the part of respondent to sever the employer-employee relationship.
• Reasonableness of the Policy: Yes. The policy of suspending drivers who fail to remit the full amount of the boundary was fair and reasonable, respondent having relied on the boundary payments to meet his monthly amortizations on the jeepneys.
• Due Process: No. Petitioners were not denied due process; the strict application of the twin-notice rule is not warranted where there is no termination of employment, and the meeting conducted on November 4, 2001 served as sufficient notice.

• Illegal Dismissal: The Labor Arbiter, the NLRC, and the CA uniformly declared that petitioners were not dismissed from employment but merely suspended pending payment of their arrears. Findings of fact of the CA, particularly where they are in absolute agreement with those of the NLRC and the Labor Arbiter, are accorded not only respect but even finality, and are deemed binding upon the Court so long as they are supported by substantial evidence. The suspension cannot be categorized as dismissal because there was no intent to sever the employer-employee relationship. It was made clear that petitioners could put an end to the suspension if they only paid their recent arrears. The suspension dragged on for years because of petitioners' stubborn refusal to pay. It would have been different if petitioners complied with the condition and respondent still refused to readmit them; then there would have been a clear act of dismissal. Instead of paying, petitioners even filed a complaint for illegal dismissal against respondent.

• Reasonableness of the Policy: It is settled that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of employer-employee and not of lessor-lessee. The fact that drivers do not receive fixed wages but only get the amount in excess of the "boundary" is not sufficient to negate the employer-employee relationship. An employer has free rein and enjoys a wide latitude of discretion to regulate all aspects of employment, including the prerogative to instill discipline on his employees and to impose penalties, including dismissal, if warranted. This is a management prerogative. The only limitation is that the policies, rules, and regulations on work-related activities must always be fair and reasonable, and the corresponding penalties commensurate to the offense involved and to the degree of the infraction. Respondent explained that he noticed his drivers were getting lax in remitting their boundary payments and that petitioners had already incurred considerable arrears. He had to put a stop to it as he relied on these boundary payments to raise the full amount of his monthly amortizations on the jeepneys. Demonstrating their obstinacy, petitioners, on the days immediately following the implementation of the policy, incurred deficiencies in their boundary remittances.

• Due Process: The case does not involve termination of employment; hence, the strict application of the twin-notice rule is not warranted. The essence of due process is simply the opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling complained of. A formal or trial-type hearing is not at all times and in all instances essential, as the due process requirements are satisfied where the parties are afforded fair and reasonable opportunity to explain their side of the controversy. Respondent conducted a meeting on November 4, 2001 informing petitioners to strictly comply with the policy regarding their remittances and warned them to discontinue driving if they still failed to remit the full amount of the boundary. Petitioners' claim of scarcity of passengers was a bare allegation not worthy of belief, as they merely alleged that there were few passengers during the dates in question without any proof or explanation as to why passengers were scarce. The excuse was also unbelievable because petitioners incurred the shortages on separate days, and it appears that only petitioners failed to remit the full boundary payment on said dates. Under a boundary scheme, on a day when there are many passengers along the route, it is the driver who actually benefits; it would be unfair if, during times when passengers are scarce, the owner/operator will be made to suffer by not getting the full amount of the boundary.

• Employer-Employee Relationship Under the Boundary System — The relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of employer-employee and not of lessor-lessee. The fact that drivers do not receive fixed wages but only get the amount in excess of the "boundary" is not sufficient to negate the relationship. The Court applied this settled doctrine to affirm the Labor Arbiter's finding of an employer-employee relationship between respondent and petitioners.

• Management Prerogative — An employer has free rein and enjoys a wide latitude of discretion to regulate all aspects of employment, including the prerogative to instill discipline on his employees and to impose penalties, including dismissal, if warranted, upon erring employees. The only limitation is that the policies, rules, and regulations on work-related activities must always be fair and reasonable, and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction. The Court applied this doctrine to uphold respondent's policy of suspending drivers who fail to remit the full boundary.

• Essence of Due Process — Due process is not a matter of strict or rigid or formulaic process; its essence is simply the opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling complained of. A formal or trial-type hearing is not at all times and in all instances essential. The Court applied this doctrine to hold that the meeting conducted by respondent on November 4, 2001 served as sufficient notice to petitioners.

• Finality of Factual Findings — Findings of fact of the CA, particularly where they are in absolute agreement with those of the NLRC and the Labor Arbiter, are accorded not only respect but even finality, and are deemed binding upon the Court so long as they are supported by substantial evidence. The Court applied this doctrine in declining to deviate from the uniform factual findings of the lower tribunals.

• "It is already settled that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of employer-employee and not of lessor-lessee. The fact that the drivers do not receive fixed wages but only get the amount in excess of the so-called 'boundary' that they pay to the owner/operator is not sufficient to negate the relationship between them as employer and employee." — This passage states the settled doctrine on the employer-employee relationship under the boundary system, which is foundational to the Court's analysis of whether petitioners were illegally dismissed.

• "Indeed, petitioners' suspension cannot be categorized as dismissal, considering that there was no intent on the part of respondent to sever the employer-employee relationship between him and petitioners. In fact, it was made clear that petitioners could put an end to the suspension if they only pay their recent arrears." — This passage articulates the Court's core reasoning for why the suspension did not constitute illegal dismissal, focusing on the absence of intent to sever the employment relationship.

• "The only limitation on the exercise of management prerogative is that the policies, rules, and regulations on work-related activities of the employees must always be fair and reasonable, and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction." — This passage states the controlling doctrine on management prerogative and its limitations, which the Court applied to uphold respondent's suspension policy.

• "The essence of due process is simply the opportunity to be heard, or as applied to administrative proceedings, an opportunity to explain one's side or an opportunity to seek a reconsideration of the action or ruling complained of." — This passage defines the essence of due process in administrative proceedings, which the Court applied in finding that petitioners were not denied due process.

• Solvic Industrial Corporation vs. NLRC, 357 Phil. 430, 438 (1998) — Cited for the standard of review in certiorari proceedings: petitioner must prove grave abuse of discretion amounting to lack or excess of jurisdiction, not merely reversible error.

• Martinez vs. NLRC, 339 Phil. 176, 182 (1997), citing National Labor Union vs. Dinglasan, 98 Phil. 649, 652-653 (1956) — Cited as controlling precedent for the settled doctrine that the relationship between jeepney owners/operators and jeepney drivers under the boundary system is that of employer-employee.

• San Miguel Corporation vs. National Labor Relations Commission, G.R. Nos. 146121-22, April 16, 2008, 551 SCRA 410, 422 — Cited for the doctrine that findings of fact of the CA, particularly where in absolute agreement with those of the NLRC and the Labor Arbiter, are accorded finality and binding effect upon the Court.

• St. Michael's Institute vs. Santos, 422 Phil. 723, 732-733 (2001) — Cited for the doctrine on management prerogative and its limitation that policies must be fair and reasonable and penalties commensurate to the offense.

• Article 279, Labor Code (as amended) — Impliedly applied regarding security of tenure; the Court found no illegal dismissal since the suspension did not sever the employer-employee relationship.
• Twin-Notice Rule, Labor Code — The Court held that the strict application of the twin-notice rule is not warranted where there is no termination of employment, but due process safeguards nonetheless remain available to employees.

Carpio, J. (Chairperson), Peralta, Abad, and Mendoza, JJ., concurred.