Galang vs. Boie Takeda Chemicals, Inc.

An employee who voluntarily avails of early retirement cannot claim constructive dismissal absent clear, positive, and convincing evidence that the separation was involuntary, and management's exercise of its prerogative to promote another employee to a managerial position does not per se constitute constructive dismissal absent a showing of grave abuse of discretion.

Boie Takeda Chemicals, Inc. (BTCI) is a pharmaceutical company with a sales department hierarchically structured so that Regional Sales Managers report to a National Sales Director, who in turn reports to the General Manager. A Collective Bargaining Agreement existed between BTCI and the BTCI Supervisory Union governing, among other things, retirement benefits computed as a percentage of monthly basic salary scaled to length of service. Although managerial employees were not covered by the CBA, BTCI by practice extended the same retirement benefits to them. Petitioners Ernesto Galang and Ma. Olga Jasmin Chan were long-time BTCI employees who had risen from the ranks to become Regional Sales Managers.

BTCI hired Ernesto Galang on August 28, 1975 and Ma. Olga Jasmin Chan on July 20, 1983. Both rose from the ranks and were promoted to Regional Sales Managers in 2000, positions they held until their separation from BTCI on May 1, 2004. As Regional Sales Managers, they managed regional sales budgets and targets, and were responsible for market share and company growth within their respective regions. Within the organizational hierarchy, they reported to the National Sales Director.

In 2002, when the National Sales Director position became vacant after the retirement of Melchor Barretto, petitioners assumed and shared the functions of that higher position, reporting directly to the General Manager. In February 2003, the new General Manager, Kazuhiko Nomura, asked petitioners to apply for the National Sales Director position. Simultaneously, Nomura asked Edwin Villanueva and Mimi Escarte, both Group Product Managers in the marketing department, to apply for the position of Marketing Director. All four employees submitted to management interviews. Nomura ultimately hired an outsider from Novartis Company as Marketing Director, while the National Sales Director position remained vacant.

Later, petitioners were informed that BTCI promoted Villanueva as National Sales Director effective May 1, 2004. BTCI explained that the appointment was pursuant to its management prerogative, arrived at after careful assessment of the situation, the needs of the position, and the qualifications of the candidates. The promotion caused ill feelings on petitioners' part. They believed Villanueva had only three years of experience in sales, lacked the background for the job, was reportedly responsible for losses in the marketing department, and was appointed only because he threatened to leave along with the company's top cardio-medical doctors. Petitioners further claimed that Nomura threatened to dismiss them if they failed to perform well under the newly appointed National Sales Director.

These circumstances prompted petitioners to inquire whether they could avail of an early retirement package due to health reasons. They requested a package of 150% plus 120% of monthly salary for every year of service tax-free, and full ownership of their service vehicles tax-free — the same package they claimed was given to previous retirees Jose Sarmiento, Jr. and Melchor Barretto. Nomura insisted that such a package did not exist and that Sarmiento's case was exceptional since he was only a few years shy of normal retirement age. On April 28, 2004, petitioners submitted a joint written letter of resignation to Nomura, effective April 30, 2004. Thereafter, they received their retirement packages and other monetary pay: Chan received P2,187,236.64 and Galang received P3,754,306.56, both computed under the CBA retirement benefit formula. Upon petitioners' retirement, the positions of Regional Sales Manager were abolished and a new position of Operations Manager was created.

On October 20, 2004, petitioners filed a complaint for constructive dismissal and money claims before the NLRC Regional Arbitration Branch. The Labor Arbiter ruled in their favor, finding that Villanueva's appointment constituted an abuse of management prerogative and that subsequent events — including the abolition of their positions — showed their easing out was orchestrated. The Labor Arbiter also found discrimination in the retirement package. The NLRC reversed, finding no constructive dismissal. Petitioners questioned the NLRC's decision, alleging they had previously received a February Decision that affirmed the Labor Arbiter with modifications, and pointing out irregularities in the March Decision. The NLRC declared the March Decision official and the February Decision a mere draft. The CA affirmed the NLRC, prompting the present petition.

• Constructive Dismissal: Petitioners argued that they were forced into resigning because BTCI, instead of promoting them to National Sales Director, hired Villanueva, who had only three years of service, no sales background or experience, and was allegedly responsible for the near-bankruptcy of the company. They alleged that Nomura threatened to dismiss them if they did not perform well under the newly-appointed National Sales Director.
• Discriminatory Retirement Package: Petitioners contended that their retirement package was lower compared to others who held similar positions, citing Sarmiento, who allegedly received 150% of monthly salary for every year of service on top of the 120% retirement package. They claimed the same generous package was given to Anita Ducay, Marcielo Rafael, Rolando Arada, Sarmiento, and Melchor Barretto.
• Validity of NLRC Decision: Petitioners questioned the authenticity of the NLRC's March Decision, pointing out irregularities such as missing signatures, inconsistent signature specimens, missing initials, and differences in paper quality, and argued that a February Decision affirming the Labor Arbiter should be recognized as the official ruling.

• No Constructive Dismissal: BTCI denied having constructively dismissed petitioners, arguing that no constructive dismissal could occur because there was no movement or transfer of position, no diminution of salaries or benefits, and no circumstance rendering petitioners' continued employment unreasonable or impossible.
• Management Prerogative: BTCI maintained that Villanueva's appointment was within the sphere of management's prerogatives, arrived at after careful consideration, and had no adverse effect on petitioners' positions as Regional Sales Managers. Petitioners' decision to retire was voluntary and of their own volition.
• Retirement Benefits: BTCI insisted that petitioners were paid according to the CBA between BTCI and BTCI Supervisory Union, which BTCI by practice extended to managers. BTCI admitted giving Sarmiento additional financial assistance due to serious health problems and proximity to normal retirement, and maintained that other employees cited by petitioners all received retirement benefits computed on CBA provisions.
• Extortion Attempt: BTCI characterized the complaint as an attempt to extort additional benefits from the company.

• Constructive Dismissal: Whether petitioners were constructively dismissed from service.
• Retirement Package: Whether petitioners are entitled to a higher retirement package.

• Constructive Dismissal: No. Petitioners voluntarily retired and were not constructively dismissed, as there was no demotion, diminution in pay, or clear acts of discrimination preceding their separation that rendered continued employment impossible, unreasonable, or unlikely.
• Retirement Package: No. Petitioners were not discriminated against in terms of their retirement package, having failed to prove by substantial evidence that the more generous package given to certain retirees had ripened into regular company practice.

• Constructive Dismissal: Constructive dismissal exists where cessation of work occurs because continued employment is rendered impossible, unreasonable, or unlikely — as through demotion in rank or diminution in pay — or when continued employment becomes unbearable due to clear discrimination, insensibility, or disdain by the employer. In both formulations, what is essentially lacking is voluntariness in the employee's separation. Here, petitioners were neither demoted nor did they suffer diminution in pay and benefits. They admitted having previously intended to retire and were the ones who requested early retirement. The circumstances they cited did not render continued employment impossible. Villanueva's appointment over theirs reflected a general disagreement with a management decision, not acts of discrimination. The National Sales Director position is managerial, and promotion to managerial or executive positions rests upon management's discretion; labor arbiters, the NLRC, and courts are not vested with managerial authority. The employer's exercise of management prerogatives, with or without reason, does not per se constitute unjust discrimination absent grave abuse of discretion — and none was shown here. Petitioners presented no evidence of BTCI's qualification standards for the position, merely assuming one of them was better qualified. An independent consulting agency, K Search Asia Consulting, had in fact recommended Villanueva. Nomura's caution that petitioners could be dismissed if they failed to perform well was merely a warning to cooperate with the new National Sales Director, expected of management as part of its supervision and disciplining power. The other acts complained of — the lesser retirement package and abolition of their positions — occurred after their voluntary retirement and could not have contributed to their decision to separate. In constructive dismissal cases, the employee bears the initial burden to prove the fact of dismissal by substantial evidence; only then does the burden shift to the employer. Petitioners failed to establish that their retirement was involuntary, so no constructive dismissal could be found.
• Retirement Package: Entitlement to retirement benefits must be specifically granted under existing laws, a CBA, an employment contract, or an established employer policy. There was no dispute that petitioners received more than what Article 287 of the Labor Code mandates. To claim a more generous package as company practice, the employee must prove by substantial evidence that the giving of the benefit was done over a long period of time, consistently and deliberately, with the employer's voluntary and deliberate intent over a considerable period. Petitioners presented evidence that Ducay, Arada, Rafael, and Sarmiento received larger packages, but these employees were not shown to be similarly situated in rank, and all retired within the same year of 2001 — a period too short to constitute company practice. Anita Ducay's affidavit affirmed that CBA provisions governed retirement pay and that the more generous packages given to Sarmiento, Barretto, Rafael, and Arada were not in accordance with standard merit or company practice. Petitioners received benefits as specified in the CBA: Chan received P1,764,000.00 (P70,000 x 120% x 21 years) and Galang received P3,248,000.00 (P70,000 x 160% x 29 years).

• Constructive Dismissal — Defined as a "dismissal in disguise" or "an act amounting to dismissal but made to appear as if it were not." It exists where cessation of work occurs because continued employment is rendered impossible, unreasonable, or unlikely, as through a demotion in rank and diminution in pay. Even without demotion or diminution, constructive dismissal may exist when continued employment becomes so unbearable because of clear discrimination, insensibility, or disdain by the employer that the employee has no choice but to resign. The acts of discrimination, insensibility, or disdain must necessarily precede the apparent voluntary separation; post-employment events cannot contribute to the employee's decision to resign. The Court found none of these elements present.
• Burden of Proof in Illegal Dismissal Cases — In constructive dismissal cases, the employee bears the burden to first prove the fact of dismissal by substantial evidence. Only upon establishment of dismissal does the burden shift to the employer to prove the dismissal was for just or authorized cause. The logic is that if there is no dismissal, there can be no question as to its legality or illegality. Where the employee voluntarily avails of early retirement, the onus is on the employee to prove that such availment was in fact involuntary.
• Management Prerogative in Promotion to Managerial Positions — Management has exclusive prerogatives to determine the qualifications and fitness of workers for hiring, firing, promotion, or reassignment. This prerogative is reviewed only in instances of unlawful discrimination, limitations imposed by law, or collective bargaining agreement. The reluctance to interfere applies with greater force for managerial positions, which can only be held by persons who have the trust of the corporation. The employer's exercise of management prerogatives, with or without reason, does not per se constitute unjust discrimination absent grave abuse of discretion.
• Company Practice for Retirement Benefits — To be considered regular company practice, the employee must prove by substantial evidence that the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately. It requires an indubitable showing that the employer agreed to continue giving the benefit knowing fully well that the employees are not covered by any provision of law or agreement requiring payment thereof. The benefit must be characterized by regularity, voluntary and deliberate intent of the employer, over a considerable period of time.

• "Constructive dismissal has often been defined as a 'dismissal in disguise' or 'an act amounting to dismissal but made to appear as if it were not.'" — This is the canonical definition of constructive dismissal relied upon by the Court, establishing the conceptual framework for analyzing whether an employee's separation was truly voluntary.
• "The employer's exercise of management prerogatives, with or without reason, does not per se constitute unjust discrimination, unless there is a showing of grave abuse of discretion." — This articulates the boundary of judicial review over management prerogatives in promotion decisions, particularly for managerial positions.
• "if there is no dismissal, there can be no question as to its legality or illegality." — This states the logical premise for placing the initial burden of proving the fact of dismissal on the employee before the burden shifts to the employer.
• "To be considered as a regular company practice the employee must prove by substantial evidence that the giving of the benefit is done over a long period of time, and that it has been made consistently and deliberately." — This sets the evidentiary standard for proving that a benefit has ripened into company practice, requiring regularity, deliberateness, and voluntary employer intent over a considerable period.

• Portuguez vs. GSIS Family Bank (Comsavings Bank), G.R. No. 169570, March 2, 2007 — Followed. The Court applied the same principle that an employee who voluntarily avails of early retirement has the onus to prove that such availment was involuntary, and that the employer's burden of proof in illegal dismissal cases presupposes an established involuntary separation.
• Vergara vs. Coca-Cola Bottlers Philippines, Inc., G.R. No. 176985, April 1, 2013 — Followed. Cited for the standard that company practice requires proof by substantial evidence of regularity, deliberateness, and voluntary employer intent over a significant period of time.
• Machica vs. Roosevelt Service Center, Inc. — Followed. Cited for the rule that one who alleges a fact has the burden of proving it, and that the employer's burden of proof in illegal dismissal cases finds no application where the employer denies having dismissed the employee.
• Bulletin Publishing Corporation vs. Sanchez, G.R. No. L-74425, October 7, 1986 — Followed. Cited for the principle that managerial positions can only be held by persons who have the trust of the corporation, and that promotion to such positions rests upon management's discretion.
• National Federation of Labor Unions vs. NLRC, G.R. No. 90739, October 3, 1991 — Followed. Cited for the principle that labor arbiters, the NLRC, and courts are not vested with managerial authority, reinforcing the limits of judicial interference in promotion decisions.

• Article 287, Labor Code — Governs retirement benefits, mandating that an employee retiring upon reaching the established retirement age is entitled to receive such retirement benefits as earned under existing laws and any CBA or other agreements. The Court noted that petitioners received more than what this article mandates. (Renumbered to Article 302 pursuant to Republic Act No. 10151.)
• Section 4(c) and Section 13, Rule VII, 2005 NLRC Rules of Procedure — Pertains to the completeness of NLRC decisions in form and substance. The Court relied on these provisions to validate the March Decision as the official NLRC ruling, finding no grave abuse of discretion in the NLRC's declaration.
• Section 2, Article XV, CBA between BTCI and BTCI Supervisory Union — Provides the retirement benefit schedule based on length of service, ranging from 60% of monthly basic salary for 5–8 years of service to 160% for 27 years and over. Applied to compute petitioners' retirement pay: Chan at 120% for 21 years and Galang at 160% for 29 years.

Presbitero J. Velasco, Jr. (Chairperson), Diosdado M. Peralta, Jose Portugal Perez, and Bienvenido L. Reyes.