Claudia's Kitchen, Inc. vs. Tanguin

Separation pay in lieu of reinstatement may not be awarded to an employee who was never dismissed from employment, as the grant of separation pay in all recognized instances presupposes that the employee was in fact dismissed, whether legally or illegally; where there is neither dismissal nor abandonment, the proper course is to order the employee to return to work and the employer to accept the employee.

Respondent Ma. Realiza S. Tanguin was employed by petitioner Claudia's Kitchen, Inc. on June 20, 2001 as a billing supervisor at the Manila Jockey Club's Turf Club Building in Carmona, Cavite. Her duties included handling petty cash funds, releasing check payments to suppliers, giving job assignments to employees, and preparing inventory and sales reports — functions involving the care and custody of company funds and property. Petitioner Enzo Squillantini was the president of Claudia's Kitchen. The dispute arose from allegations that Tanguin was conducting a personal silver jewelry business during office hours and within company premises, which led to her preventive suspension and, ultimately, to her filing of an illegal dismissal complaint.

Respondent Ma. Realiza S. Tanguin was employed by petitioner Claudia's Kitchen, Inc. on June 20, 2001 as a billing supervisor assigned at the Manila Jacket Club's Turf Club Building in San Lazaro Leisure and Business Park, Carmona, Cavite. Her duties included sorting and preparing suppliers' billing statements, releasing check payments, giving job assignments to employees, training new employees, encoding daily and monthly menu production, preparing inventory and sales reports, handling petty cash funds and depositing collections, and programming the cash register. Petitioner Enzo Squillantini was the president of Claudia's Kitchen.

On October 26, 2010, Tanguin was placed on preventive suspension by Marivic Lucasan, the Human Resources Manager, for allegedly forcing co-employees to buy silver jewelry from her during office hours and inside the company premises. Tanguin admitted selling silver jewelry but denied doing so during office hours. On the same date, she was directed to submit a written explanation. On October 30, 2010, she was barred by a security guard from entering the company premises. She claimed that co-employees Khena Nama, Jordan Lopez, and Rose Marie Esquejo told her they were forced to write letters against her under threat of termination.

The petitioners countered that they received reports from employees about Tanguin's jewelry-selling activities, which she admitted. She was placed under preventive suspension on October 26, 2010, to allow a thorough investigation. On October 27, 2010, the petitioners sent Tanguin a letter requiring her to submit a written explanation. During her suspension, the petitioners discovered her habitual tardiness and gross negligence in computing the total number of hours worked by her co-employees. They subsequently sent her a series of notices: a First Notice on November 17, 2010 requiring her to report to the Head Office on November 19, 2010; a Second Notice on November 24, 2010; a Third Notice on November 25, 2010; a letter on December 1, 2010 reminding her that she was still an employee and directing her to report back to work; and a Final Letter on December 2, 2010 requiring her to report for work on December 3, 2010.

Tanguin failed to act on these notices. Instead of answering the allegations against her, she filed a complaint for illegal dismissal with the Labor Arbiter. The Labor Arbiter found that she was not illegally dismissed and that her preventive suspension was justified. The NLRC found neither dismissal nor abandonment and ordered reinstatement without backwages. The Court of Appeals modified the NLRC ruling by applying the doctrine of strained relations and awarding separation pay in lieu of reinstatement, reasoning that Tanguin's sensitive position required trust and confidence and that the controversy generated an atmosphere of antipathy and antagonism.

• No Legal Basis for Separation Pay: Petitioners argued that the CA erred in awarding separation pay in the absence of any authorized cause for termination of employment, and that the CA's conclusion that petitioners sought to terminate Tanguin due to loss of confidence was refuted by the evidence on record.
• Separation Pay as Unjust Reward: Petitioners contended that separation pay could not be awarded on the ground of social justice when the dismissal was based on just causes under Article 282 of the Labor Code, and that granting separation pay in Tanguin's favor would unjustly reward her for her infractions.

• Notices Were Post-Complaint: Respondent averred that the petitioners sent her notices to return to work only after she had filed the illegal dismissal complaint against them before the Labor Arbiter.
• Barred from Workplace: Respondent claimed that on October 27, 2010, she was barred from entering her workplace by Martin Martinez, the Cost Comptroller.
• Concocted Charges: Respondent asserted that the charges of negligence in computing the number of hours worked by her co-employees and habitual tardiness were merely concocted.

• Separation Pay: Whether separation pay in lieu of reinstatement may be awarded to an employee who was not dismissed from employment.
• Dismissal: Whether respondent was dismissed from employment.
• Abandonment: Whether respondent abandoned her work.
• Strained Relations: Whether the doctrine of strained relations applies to justify separation pay in lieu of reinstatement.

• Separation Pay: No. Separation pay in lieu of reinstatement may not be awarded to an employee who was never dismissed, as the grant of separation pay in all recognized instances presupposes that the employee was in fact dismissed, whether legally or illegally.
• Dismissal: No. Respondent failed to establish by substantial evidence that she was dismissed; the petitioners proved they did not dismiss her, as evidenced by multiple notices requiring her to report to work and explain the charges against her.
• Abandonment: No. Respondent's failure to report for work was not accompanied by a clear intent to sever the employer-employee relationship, and the filing of a complaint for illegal dismissal with a prayer for reinstatement negates any intention to abandon employment.
• Strained Relations: No. The doctrine of strained relations cannot be applied indiscriminately; the mere filing of an illegal dismissal case is not sufficient to conclude that the relationship between employer and employee is already strained, and respondent herself was seeking reinstatement.

• Separation Pay: Separation pay is warranted when the cause for termination is not attributable to the employee's fault, such as under Articles 298 and 299 of the Labor Code, or in cases of illegal dismissal where reinstatement is no longer feasible. As an exception, case law allows separation pay as a measure of social justice to a legally dismissed employee for causes other than serious misconduct or those reflecting on moral character. In all recognized instances — closure of establishment, termination due to disease, social justice in valid dismissal, unavailability of position, strained relations, or when the employee opts not to be reinstated — the grant presupposes that the employee was in fact dismissed. To award separation pay to an employee who was never dismissed would give imprimatur to the unacceptable act of an employee who, instead of answering charges against him, files a premature illegal dismissal case. The general rule that no separation pay may be awarded to an employee who was not dismissed thus obtains.

• Dismissal: In illegal dismissal cases, the employer bears the burden of proving the termination was for a valid or authorized cause, but the employee must first establish by substantial evidence that dismissal in fact occurred. Tanguin failed to discharge this burden, offering no evidence beyond a bare allegation that a security guard barred her from entering the workplace. Even assuming she was barred, there was a lawful basis because she had been placed under preventive suspension pending investigation. The petitioners, on the other hand, proved they did not dismiss her through multiple notices requiring her to report to work and explain the charges, including a December 1, 2010 letter reminding her she was still an employee. Her complaint for illegal dismissal was premature, if not pre-emptive.

• Abandonment: Abandonment requires two concurring elements: (1) failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, the second being the more determinative factor. The records are bereft of any indication that Tanguin's failure to report for work was with a clear intent to sever her employment relationship. Mere absence or failure to report for work, even after a notice to return has been served, is not enough to constitute abandonment. Moreover, the filing of a complaint for illegal dismissal with a prayer for reinstatement is totally inconsistent with a charge of abandonment, as it is proof of the desire to return to work.

• Strained Relations: The doctrine of strained relations must be demonstrated as a fact and should not be used recklessly or applied loosely. The CA's conclusion was based on a mere presumption that Tanguin would be spiteful, without any factual basis. The filing of an illegal dismissal case alone is not sufficient to engender a conclusion that the relationship is already strained, since every labor dispute almost invariably results in strained relations; otherwise, reinstatement would never be possible. Notably, Tanguin herself was seeking reinstatement, which is inconsistent with a claim of strained relations.

• Burden of Proof in Illegal Dismissal Cases — While the employer bears the burden of proving that a dismissal was for a valid or authorized cause, the employee must first establish by substantial evidence that dismissal in fact occurred. If there is no dismissal, there can be no question as to the legality or illegality thereof. The evidence to prove dismissal must be clear, positive, and convincing. The rule that the employer bears the burden of proof finds no application when the employer denies having dismissed the employee.

• Abandonment of Employment — Abandonment is the deliberate and unjustified refusal of an employee to resume employment. Two elements must concur: (1) failure to report for work or absence without valid or justifiable reason, and (2) a clear intention to sever the employer-employee relationship, with the second element as the more determinative factor, manifested by some overt acts. The filing of a complaint for illegal dismissal with a prayer for reinstatement negates any intention to abandon employment.

• Instances When Separation Pay Is Proper — Separation pay is awarded only to a dismissed employee in the following instances: (1) closure of establishment under Article 298; (2) termination due to disease under Article 299; (3) as a measure of social justice where the employee is validly dismissed for causes other than serious misconduct or those reflecting on moral character; (4) where the dismissed employee's position is no longer available; (5) when continued relationship is no longer viable due to strained relations; or (6) when the dismissed employee opted not to be reinstated or separation benefits would be for the best interest of the parties. In all instances, the grant presupposes that the employee was in fact dismissed.

• Doctrine of Strained Relations — Under this doctrine, separation pay is an acceptable alternative to reinstatement when the latter is no longer desirable or viable. Strained relations must be demonstrated as a fact; the doctrine should not be used recklessly or applied loosely or based on impression alone. The mere filing of an illegal dismissal case is not sufficient to conclude that the relationship is already strained, as every labor dispute almost invariably results in strained relations.

• "To award separation pay in lieu of reinstatement to an employee who was never dismissed by his employer would only give imprimatur to the unacceptable act of an employee who is facing charges related to his employment, but instead of addressing the complaint against him, he opted to file an illegal dismissal case against his employer." — This passage articulates the ratio decidendi on why separation pay cannot be awarded to a non-dismissed employee, grounding the rule in policy against rewarding premature or pre-emptive complaints.

• "In fine, as a general rule, separation pay in lieu of reinstatement could not be awarded to an employee whose employment was not terminated by his employer." — This is the canonical formulation of the general rule established in this case, frequently cited in subsequent labor jurisprudence.

• "The doctrine on strained relations cannot be applied indiscriminately since every labor dispute almost invariably results in strained relations; otherwise, reinstatement can never be possible simply because some hostility is engendered between the parties as a result of their disagreement." — This passage defines the limitation on the doctrine of strained relations and is commonly cited to prevent its loose application.

• Machica vs. Roosevelt Services Center, Inc., 523 Phil. 199 (2006) — Cited for the rule that the employee must first establish by substantial evidence that dismissal occurred before the employer's burden of proof is triggered; the evidence must be clear, positive, and convincing.
• Tan Brothers Corporation of Basilan City vs. Escudero, 713 Phil. 392 (2013) — Cited for the comprehensive discussion of the elements of abandonment in labor cases, establishing the two-concurring-elements test.
• Philippine Long Distance Telephone Co. vs. NLRC (PLDT), 247 Phil. 641 (1988) — Cited as the foundational case allowing separation pay as a measure of social justice to a legally dismissed employee for causes other than serious misconduct or those reflecting on moral character.
• Dee Jay's Inn and Cafe vs. Raneses, G.R. No. 191823, October 5, 2016 — Cited for the rule that where an employee was neither dismissed nor abandoned work, the proper course is to dismiss the complaint, direct the employee to return to work, and order the employer to accept the employee.
• Nightowl Watchman & Security Agency, Inc. vs. Lumahan, G.R. No. 212096, October 14, 2015 — Cited and distinguished as an exception where separation pay was awarded despite no finding of dismissal or abandonment, based on the employee's failure to report for work for more than ten years; the Court held the circumstances of the present case did not warrant application of this exception.

• Article 297 (formerly Article 282), Labor Code — Provides the just causes for termination by the employer, including serious misconduct, gross and habitual neglect of duties, fraud or willful breach of trust, commission of a crime, and analogous causes. Cited to establish that an employee dismissed for just causes is generally not entitled to separation pay.
• Article 298 (formerly Article 283), Labor Code — Governs closure of establishment and reduction of personnel, providing for separation pay in cases of installation of labor-saving devices, redundancy, retrenchment, or closure. Cited as an instance where separation pay is warranted because the cause is not attributable to the employee's fault.
• Article 299 (formerly Article 284), Labor Code — Governs disease as a ground for termination, requiring payment of separation pay. Cited as another instance where separation pay is warranted.
• Section 7, Rule I, Book VI, Omnibus Rules Implementing the Labor Code — Provides that an employee separated for just cause is not entitled to termination pay under the Code, without prejudice to whatever rights, benefits, and privileges he may have under applicable individual or collective agreements or voluntary employer policy.

Antonio T. Carpio, Diosdado M. Peralta (Acting Chairperson, Second Division), Marvic M.V.F. Leonen, and Samuel R. Martires concurred. No separate concurring opinions were noted.