Fabricator Philippines, Inc. vs. Estolas

A verbal tussle with a co-employee during work hours, absent wrongful intent and without rendering the employee unfit to continue working, is not serious misconduct justifying dismissal under Article 297 (formerly Article 282) of the Labor Code; and once the employer has suspended the employee for that same act, it may no longer impose dismissal for the same misconduct.

Fabricator Philippines, Inc. is a domestic corporation engaged in the manufacture and sale of motorcycle parts, and Victor Lim is its President. Jeanie Rose Q. Estolas was employed by Fabricator as a welder. The Labor Code, as amended, lists serious misconduct as a just cause for termination under Article 297 (formerly Article 282).

Estolas, a welder at Fabricator, was waiting before break time on July 2, 2011 for a replacement part she had requested for the welding machine she was using, and she took a seat and rested. Rosario Banayad passed by, saw her sitting, and uttered “Ayos ka ha.” The matter was brought to Assembly Action Team Leader Warlito Abaya, who confronted Estolas about the incident. While Abaya and Banayad were talking, Estolas told Banayad in the vernacular “Ang kitid ng utak mo[.] [B]akit hindi mo muna ako tinanong kung bakit ako nakaupo[?] [B]akit hindi mo muna ako tinanong kung ano [ang] nasa likod ng nakita mo?” Banayad retorted, “Matapang ka ha! Matapang ka!” Estolas replied, “Candy, ikaw pa naman ang nagdadasal araw-araw, tapos ganyan ang ugali mo!” Abaya then directed Estolas to see Lim in his office. During their meeting, Lim allegedly asked what she would feel if he would hit her ear, then proceeded to hit her ear. Estolas reasoned out that she did not hit Banayad’s ear and that Banayad had provoked her, but Lim insisted that Estolas was rude toward Banayad.

On July 13, 2011, Estolas was issued a suspension order effective the following day for three days. While she was in the locker area, the company guard on duty informed her to report for work the following day. A few months later, on October 17, 2011, Lim told Estolas to resign and that his lawyer would see her on October 19, 2011. On November 25, 2011, Estolas was again instructed not to report for work until she and Lim had talked. On November 28, 2011, Lim directed Estolas to sign a paper, which she refused because it pertained to the promotion of Banayad as Strategy and Control Group-Senior Assistant 1. On November 30, 2011, Estolas received a letter from Lim directing her to seek the assistance of a lawyer for the hearing on December 7, 2011. At the scheduled hearing, Estolas was required to sign the statements of Banayad and other witnesses, which she refused to do. Thereafter, on December 16, 2011, Estolas was served a notice of termination effective December 17, 2011, finding her guilty of serious misconduct.

Estolas filed a complaint for illegal dismissal with claims for moral damages, exemplary damages, and attorney’s fees before the NLRC against Fabricator and Lim. Fabricator and Lim maintained that Estolas was validly dismissed for gross misconduct because she was caught sitting down during office hours and had insulted and uttered offensive language toward her superior, Banayad. They further pointed out that they had sent Estolas various memoranda regarding the incident, but she refused to receive them, so they were constrained to terminate her employment.

The LA found that while Estolas may have committed acts of misconduct, the same were not willful and intentional in character; there was no wrongful intent, but a mere spur-of-the-moment incident prompted by a simple miscommunication among workmates. The NLRC agreed that Estolas committed an act of misconduct but that it was not of a serious and grave character so as to warrant dismissal for a just cause. The CA found the infraction minor and noted that Estolas had already been suspended for three days for her misconduct.

• Gross Misconduct: Petitioner maintained that respondent was validly dismissed for gross misconduct because she was caught sitting down during office hours and insulted and uttered offensive language toward her superior, Banayad.
• Refusal to Receive Memoranda: Petitioner pointed out that it sent respondent various memoranda regarding the incident, but she refused to receive them, constraining petitioner to terminate her employment.

• Illegal Dismissal: Whether the CA correctly ruled that respondent was illegally dismissed.
• Backwages and Separation Pay: Whether respondent is entitled to backwages and separation pay, and whether the CA erred in deducting fifteen days’ salary from the backwages.

• Illegal Dismissal: Yes. The CA correctly ruled that respondent was illegally dismissed; her verbal tussle was not serious misconduct under Article 297 (formerly Article 282) of the Labor Code because it was not shown to be with wrongful intent or to render her unfit to continue working, and she had already been suspended for the same act.
• Backwages and Separation Pay: Yes, but with modification. Respondent is entitled to backwages and separation pay; the CA erred in deducting fifteen days’ salary from backwages because she had already been suspended for the same misconduct, and separation pay is proper under the doctrine of strained relations.

• Illegal Dismissal: Article 297 (formerly Article 282) of the Labor Code lists serious misconduct as a just cause for termination. The SC defined misconduct as improper or wrong conduct, a transgression of an established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implying wrongful intent and not mere error in judgment. To justify dismissal, the misconduct must be serious, must relate to the performance of the employee’s duties showing that the employee has become unfit to continue working for the employer, and must have been performed with wrongful intent. The tribunals a quo observed that respondent committed some misconduct when she engaged in a verbal tussle with Banayad during work hours and in front of their superior, Abaya, but the misconduct was not serious enough to warrant dismissal; it was not shown that she acted with wrongful intent or that the act rendered her unfit to continue working for petitioner. The SC also stressed that on July 13, 2011, petitioner had already issued an order suspending respondent for three days for her misconduct, so petitioner could no longer subject her to another disciplinary proceeding based on the same act. The SC further applied the rule that where the factual findings of the labor tribunals conform to, and are affirmed by, the CA, they are accorded respect and finality and are binding on the SC.
• Backwages and Separation Pay: As illegal dismissal was established, respondent is entitled to two separate and distinct reliefs: backwages and reinstatement or payment of separation pay if reinstatement is no longer viable. The SC upheld the CA’s award of backwages because payment of backwages restores the income lost by reason of the unlawful dismissal. However, the CA erred in imposing a fifteen-day suspension on respondent with the equivalent monetary value deducted from backwages, because respondent had already been meted a three-day suspension for the same act of misconduct and could no longer be further penalized for it; the SC thus deleted the deduction and awarded full backwages. On reinstatement, the SC noted that reinstatement is restoration to a state from which one has been removed or separated, but under the doctrine of strained relations, separation pay is an acceptable alternative when reinstatement is no longer desirable or viable. Although the LA and CA did not discuss the basis for separation pay in lieu of reinstatement, the SC deemed the award proper because the circumstances of respondent’s unlawful termination created an atmosphere of animosity and antagonism between employer and employee.

• Serious Misconduct as a Just Cause for Dismissal — Under Article 297 (formerly Article 282) of the Labor Code, misconduct is improper or wrong conduct, a transgression of an established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. To justify dismissal, the misconduct must be serious, must relate to the performance of the employee’s duties showing that the employee has become unfit to continue working for the employer, and must have been performed with wrongful intent. In this case, the verbal tussle during work hours was not serious, was not shown to be with wrongful intent, and did not render respondent unfit to work.
• Respect and Finality of Factual Findings of Labor Tribunals Affirmed by the CA — Where the factual findings of the labor tribunals or agencies conform to, and are affirmed by, the CA, the same are accorded respect and finality and are binding upon the SC. The SC applied this because the LA, NLRC, and CA all found that respondent’s misconduct was not serious enough to warrant dismissal.
• Doctrine of Strained Relations — The payment of separation pay is considered an acceptable alternative to reinstatement when reinstatement is no longer desirable or viable; it liberates the employee from a highly oppressive work environment and releases the employer from maintaining in its employ a worker it could no longer trust. The SC applied it because the circumstances of respondent’s unlawful termination created an atmosphere of animosity and antagonism between employer and employee, making separation pay proper in lieu of reinstatement.
• Backwages as Relief for Illegal Dismissal — The payment of backwages is a form of relief that restores the income lost by reason of unlawful dismissal. The SC upheld the award of backwages but deleted the CA’s deduction of fifteen days’ salary because respondent had already been suspended for the same act.

• “Misconduct is defined as an improper or wrong conduct. It is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment.” — Defines misconduct for purposes of serious misconduct as a just cause for dismissal.
• “To constitute a valid cause for the dismissal within the text and meaning of the foregoing provision, the following elements must concur: (a) the misconduct must be serious; (b) it must relate to the performance of the employee's duties, showing that the employee has become unfit to continue working for the employer; and (c) it must have been performed with wrongful intent.” — Enumerates the requisites for serious misconduct as a just cause for termination.
• “Thus, petitioner could no longer subject respondent to another disciplinary proceeding based on the same act of misconduct. Clearly, respondent could not have been validly terminated from work.” — Holds that a prior suspension for the same act bars a subsequent dismissal based on that same misconduct.
• “Under the doctrine of strained relations, the payment of separation pay is considered an acceptable alternative to reinstatement when the latter option is no longer desirable or viable.” — States the doctrine of strained relations applied to justify separation pay in lieu of reinstatement.

• Imasen Philippine Manufacturing Corporation vs. Alcon, 746 Phil. 172, 181 (2014) — Cited for the definition of misconduct and the elements required for serious misconduct as a just cause for dismissal.
• Centennial Transmarine, Inc. vs. Quiambao, 763 Phil. 411, 424 (2015) — Cited for the rule that factual findings of labor tribunals affirmed by the CA are accorded respect and finality and are binding on the SC.
• Reyes vs. RP Guardians Security Agency, Inc., 708 Phil. 598, 604 (2013) — Cited for the rule that illegal dismissal entitles the employee to backwages and reinstatement or separation pay, and that backwages restore income lost by reason of unlawful dismissal.
• Sumifru (Philippines) Corporation vs. Baya, G.R. No. 188269, April 17, 2017 — Cited for the doctrine of strained relations as basis for awarding separation pay in lieu of reinstatement.

• Article 297 (formerly Article 282), Labor Code (Presidential Decree No. 442, as amended), as renumbered by Department of Labor and Employment Department Advisory No. 01, Series of 2015 — Lists serious misconduct or willful disobedience by the employee of the lawful orders of the employer or representative in connection with work as a just cause for termination. The SC applied it by requiring serious misconduct to be serious, work-related, and performed with wrongful intent; respondent’s acts failed these requisites.