Hocheng Philippines Corporation vs. Antonio M. Farrales

An employer must prove by substantial evidence that an employee's conduct was induced by a perverse and wrongful intent to gain to justify dismissal for theft as a just cause for termination. Where the employee's act was the result of an honest mistake, and he immediately took steps to rectify the error upon discovery, the dismissal is illegal for lack of just cause.

Hocheng Philippines Corporation (HPC) is a manufacturing company that employed Antonio M. Farrales as a Production Operator from May 12, 1998, with subsequent promotions to Leadman in 2004, Acting Assistant Unit Chief in 2007, and Assistant Unit Chief of Production in 2008—a supervisory position with a monthly salary of ₱17,600.00. Farrales was a consistent recipient of citations for outstanding performance, as well as appraisal and year-end bonuses. The case involves the application of Article 282 of the Labor Code, which enumerates just causes for termination of employment, and Article 69, Class A, Item No. 29 of the HPC Code of Discipline, which classifies "stealing from the company, its employees and officials, or from its contractors, visitors or clients" as serious misconduct and fraud or willful breach of trust.

Antonio M. Farrales was first employed by Hocheng Philippines Corporation (HPC) on May 12, 1998 as Production Operator, followed by promotions as Leadman in 2004, Acting Assistant Unit Chief in 2007, and Assistant Unit Chief of Production in 2008, a supervisory position with a monthly salary of ₱17,600.00. He was a consistent recipient of citations for outstanding performance, as well as appraisal and year-end bonuses.

On December 2, 2009, a report reached HPC management that a motorcycle helmet of an employee, Reymar Solas, was stolen at the parking lot within its premises on November 27, 2009. On December 3, 2009, Security Officer Francisco Paragas III confirmed a video sequence recorded on closed-circuit television (CCTV) around 3:00 p.m. on November 27, 2009 showing Farrales taking the missing helmet from a parked motorcycle. The CCTV footage showed Farrales walking towards the motorcycle parking lot at around 3:07:44, walking back towards the pedestrian gate at around 3:08:47, walking back towards the motorcycle parking lot at around 3:08:51, calling on Andy Lopega and instructing him to get the helmet he was pointing at around 3:09:10, and receiving the helmet from Andy at around 3:09:30.

Later that day, HPC sent Farrales a notice to explain his involvement in the alleged theft. The investigation was supported by the employees' union, ULO-Hocheng. Farrales explained that on November 27, 2009, he borrowed a helmet from his co-worker Eric Libutan since they reside in the same barangay, and they agreed that Eric could get it at Farrales' house or the latter could return it the next time they saw each other. Eric told him that his motorcycle was black in color. As there were many motorcycles with helmets, he asked another employee, Andy Lopega, who was in the parking area where he could find Eric's helmet. Andy handed over to him the supposed helmet which he believed to be owned by Eric, then he went home. On November 28, 2009, at around 6 o'clock in the morning, he saw Eric at their barangay and told him to get the helmet, but Eric was in a rush to go to work and did not bother to get it. In the morning of December 3, 2009, upon seeing Eric in the workplace, Farrales asked him why he did not get the helmet from his house, and Eric told him, "Hindi po sa akin yung nakuha nyong helmet." Farrales was shocked and immediately phoned the HPC's guard to report the situation. After several employees were asked as to the ownership of the helmet, he finally found the owner, Reymar, and promptly apologized and undertook to return the helmet the following day, explaining that it was an honest mistake.

A hearing was held on December 10, 2009, attended by Farrales, Eric, Andy, Jun Reyes, Antonio Alinda, a witness, and Rolando Garciso, representing ULO-Hocheng. From Andy it was learned that at the time of the alleged incident, he was already seated on his motorcycle and about to leave the company compound when Farrales approached and asked him to hand to him a yellow helmet hanging from a motorcycle parked next to him. When Andy hesitated, Farrales explained that he owned it, and so Andy complied. But Eric had specifically told Farrales that his helmet was colored red and black and his motorcycle was a black Honda XRM-125 with plate number 8746-DI, parked near the perimeter fence away from the walkway to the pedestrian gate. The CCTV showed Farrales instructing Andy to fetch a yellow helmet from a blue Rossi 110 motorcycle with plate number 3653-DN parked in the middle of the parking lot, opposite the location given by Eric. Farrales in his defense claimed he could no longer remember the details of what transpired that time, nor could he explain why he missed Eric's specific directions.

On February 15, 2010, HPC issued a Notice of Termination to Farrales dismissing him for violation of Article 69, Class A, Item No. 29 of the HPC Code of Discipline, which provides that "stealing from the company, its employees and officials, or from its contractors, visitors or clients," is akin to serious misconduct and fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative, which are just causes for termination of employment under Article 282 of the Labor Code. On March 25, 2010, Farrales filed a complaint for illegal dismissal, non-payment of appraisal and mid-year bonuses, service incentive leave pay and 13th month pay, praying for reinstatement or separation pay with full backwages, plus moral and exemplary damages and attorney's fees. During the mandatory conference, HPC paid Farrales ₱10,914.51, representing his 13th month pay for the period of January to February 2010 and vacation leave/sick leave conversion, and Farrales agreed to waive his claim for incentive bonus.

• Substantial Evidence of Theft: HPC insisted that since the complaint below involves an administrative case, only substantial evidence, not proof of guilt beyond reasonable doubt, is required to prove the guilt of Farrales, and that there is substantial evidence to show that Farrales committed theft in HPC's premises.
• Theft as Just Cause: HPC argued that theft is a just cause for termination under Article 282 of the Labor Code, and that by committing theft, Farrales, being a supervisorial employee, forfeited the trust reposed in him by HPC, thus rendering him dismissible for loss of confidence.
• Respect for Administrative Findings: HPC argued that the CA violated doctrines laid down by the Supreme Court by substituting its judgment for that of management and by failing to accord due respect to the findings of administrative agencies, particularly the NLRC, which is vested with statutory duty to make factual determinations based on the evidence on record.

N/A — The decision does not separately recount Farrales' arguments before the Supreme Court beyond noting that he sought to refute the NLRC's factual finding that he committed theft and questioned NLRC's jurisdiction over HPC's appeal for non-payment of appeal fees before the CA.

• Just Cause for Dismissal: Whether the Court of Appeals erred in reversing the NLRC and declaring illegal the dismissal of Farrales for HPC's alleged failure to prove the existence of just cause.
• Award of Damages: Whether the Court of Appeals correctly deleted the awards of moral and exemplary damages while retaining the award of attorney's fees.

• Just Cause for Dismissal: No. The dismissal was illegal because HPC failed to prove by substantial evidence that Farrales took Reymar's helmet with intent to gain, a requisite element of theft as a just cause for termination under Article 282 of the Labor Code.
• Award of Damages: Partially. The Court agreed with the CA's deletion of moral and exemplary damages for lack of satisfactory proof that HPC's officers acted in bad faith or with malice, but upheld the award of attorney's fees because Farrales was dismissed for a flimsy charge and was compelled to litigate to secure what is due him.

• Just Cause for Dismissal: To validly dismiss an employee, the law requires the employer to prove the existence of any of the valid or authorized causes enumerated in Article 282 of the Labor Code: (a) serious misconduct or willful disobedience; (b) gross and habitual neglect of duties; (c) fraud or willful breach of trust; (d) commission of a crime or offense against the person of the employer or his family or authorized representative; and (e) other causes analogous to the foregoing. As a supervisorial employee, Farrales is admittedly subject to stricter rules of trust and confidence, and HPC enjoys a wider latitude of discretion to assess his continuing trustworthiness. However, Article 4 of the Labor Code mandates that all doubts in the implementation and interpretation of its provisions shall be resolved in favor of labor. The Court cited the principle that "[t]o be lawful, the cause for termination must be a serious and grave malfeasance to justify the deprivation of a means of livelihood," and that the penalty imposed on the erring employee ought to be proportionate to the offense, taking into account its nature and surrounding circumstances. The Court found that HPC failed to discharge its onus probandi that the taking of Reymar's helmet was with intent to gain, as shown by the following circumstances: Farrales sought and obtained the permission of Eric to borrow his helmet; at the parking lot, Farrales asked Andy to fetch a yellow helmet from one of the parked motorcycles, mistakenly thinking it belonged to Eric; the following day, Farrales asked Eric why he had not dropped by his house to get his helmet, and Eric replied that Farrales got the wrong helmet; Farrales immediately sought the help of the company guards to locate the owner of the yellow helmet, who turned out to be Reymar; and Farrales apologized to Reymar for his mistake, and his apology was promptly accepted. The Court agreed with the CA that Farrales committed no serious or willful misconduct or disobedience to warrant his dismissal. It is not disputed that Farrales lost no time in returning the helmet to Reymar the moment he was apprised of his mistake by Eric, which proves that he was not possessed of a depravity of conduct as would justify HPC's claimed loss of trust in him. When Farrales told Andy that the yellow helmet was his, his intent was not to put up a pretence of ownership over it and thus betray his intent to gain, but rather simply to assuage Andy's reluctance to heed his passing request to reach for the helmet for him. As to Farrales' claim that he and Eric were neighbors, they resided in the same barangay, and thus, loosely, were neighbors. Theft committed by an employee against a person other than his employer, if proven by substantial evidence, is a cause analogous to serious misconduct. Misconduct is improper or wrong conduct, 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. The misconduct to be serious must be of such grave and aggravated character and not merely trivial or unimportant, and must be in connection with the employee's work to constitute just cause for his separation. But where there is no showing of a clear, valid and legal cause for termination of employment, the law considers the case a matter of illegal dismissal. If doubts exist between the evidence presented by the employer and that of the employee, the scales of justice must be tilted in favor of the latter. The employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.
• Award of Damages: The Court agreed with the CA's dismissal of the award of moral and exemplary damages for lack of merit. There is no satisfactory proof that the concerned officers of HPC acted in bad faith or with malice in terminating Farrales. Farrales' bare allegations of bad faith deserve no credence, and neither is the mere fact that he was illegally dismissed sufficient to prove bad faith on the part of HPC's officers. However, concerning the award of attorney's fees, Farrales was dismissed for a flimsy charge, and he was compelled to litigate to secure what is due him which HPC unjustifiably withheld.

• Onus Probandi in Illegal Dismissal Cases — The employer bears the burden of proving by substantial evidence the existence of a just cause for termination. In this case, HPC failed to prove that Farrales took the helmet with intent to gain, a requisite element of theft, and therefore the dismissal was illegal.
• Serious Misconduct as Just Cause — Misconduct is improper or wrong conduct, 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. To be serious, the misconduct must be of such grave and aggravated character and not merely trivial or unimportant, and must be in connection with the employee's work. The Court applied this definition to find that Farrales' act of taking the helmet was a mere honest mistake, not serious misconduct.
• Resolution of Doubts in Favor of Labor — Article 4 of the Labor Code mandates that all doubts in the implementation and interpretation of its provisions shall be resolved in favor of labor. The Court applied this principle in holding that where doubts exist between the evidence presented by the employer and that of the employee, the scales of justice must be tilted in favor of the latter.
• Proportionality of Penalty — The penalty imposed on the erring employee ought to be proportionate to the offense, taking into account its nature and surrounding circumstances. The Court applied this principle in finding that dismissal was too severe a penalty for Farrales' honest mistake.

• "To be lawful, the cause for termination must be a serious and grave malfeasance to justify the deprivation of a means of livelihood. This is merely in keeping with the spirit of our Constitution and laws which lean over backwards in favor of the working class, and mandate that every doubt must be resolved in their favor." — This passage articulates the standard for lawful termination and the constitutional policy favoring labor, which the Court applied in finding the dismissal illegal.
• "Misconduct is improper or wrong conduct, it is the 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. The misconduct to be serious must be of such grave and aggravated character and not merely trivial or unimportant." — This passage defines the elements of serious misconduct as a just cause for termination, which the Court applied to find that Farrales' act did not constitute serious misconduct.
• "If doubts exist between the evidence presented by the employer and that of the employee, the scales of justice must be tilted in favor of the latter. The employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause." — This passage states the rule on resolving evidentiary doubts in illegal dismissal cases in favor of the employee, which the Court applied in affirming the CA's ruling.

• Lynvil Fishing Enterprises, Inc. vs. Ariola, G.R. No. 181974, February 1, 2012, 664 SCRA 679 — Cited for the proposition that to validly dismiss an employee, the employer must prove the existence of any of the valid or authorized causes under Article 282 of the Labor Code.
• Concepcion vs. Minex Import Corporation/Minerama Corporation, G.R. No. 153569, January 24, 2012, 663 SCRA 497 — Cited for the enumeration of just causes for termination under Article 282 of the Labor Code.
• Aurelio vs. NLRC, G.R. No. 99034, April 12, 1993, 221 SCRA 432 — Cited for the proposition that a supervisorial employee is subject to stricter rules of trust and confidence, and the employer enjoys a wider latitude of discretion to assess his continuing trustworthiness.
• Gutierrez vs. Singer Sewing Machine Company, 458 Phil. 401 (2003) — Cited for the principle that the cause for termination must be a serious and grave malfeasance to justify the deprivation of a means of livelihood, and that every doubt must be resolved in favor of the working class.
• Jarcia Machine Shop and Auto Supply, Inc. vs. NLRC, 334 Phil. 84 (1997) — Cited for the proposition that the Court has always taken care that the employer does not invoke any baseless justification, much less management prerogative, as a subterfuge by which to rid himself of an undesirable worker.
• Nisda vs. Sea Serve Maritime Agency, et al., 611 Phil. 291 (2009) — Cited for the proposition that in exceptional cases the Court has never hesitated to delve into the NLRC's factual conclusions where evidence was found insufficient to support them, or where the LA and the NLRC came up with conflicting positions.
• Cosmos Bottling Corp. vs. Fermin, G.R. No. 193676, June 20, 2012, 674 SCRA 310 — Cited for the proposition that theft committed by an employee against a person other than his employer, if proven by substantial evidence, is a cause analogous to serious misconduct.
• Cosep vs. NLRC, 353 Phil. 148 (1998) — Cited for the definition of misconduct as improper or wrong conduct, willful in character, implying wrongful intent and not mere error in judgment.
• Sevillana vs. I.T. (International) Corp./Samir Maddah & Travellers Insurance & Surety Corp., 408 Phil. 570 (2001) — Cited for the proposition that where there is no showing of a clear, valid and legal cause for termination of employment, the law considers the case a matter of illegal dismissal.
• Asuncion vs. NLRC, 414 Phil. 329 (2001); Nicario vs. NLRC, 356 Phil. 936 (1998) — Cited for the rule that the employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.
• Aliling vs. Feliciano, G.R. No. 185829, April 25, 2012, 671 SCRA 186 — Cited for the proposition that the mere fact that an employee was illegally dismissed is not sufficient to prove bad faith on the part of the employer's officers.

• Article 282, Labor Code — Enumerates the just causes for termination of employment: (a) serious misconduct or willful disobedience; (b) gross and habitual neglect of duties; (c) fraud or willful breach of trust; (d) commission of a crime or offense against the person of the employer or his family or authorized representative; and (e) other causes analogous to the foregoing. The Court applied this provision in determining whether HPC had a just cause to dismiss Farrales.
• Article 4, Labor Code — Mandates that all doubts in the implementation and interpretation of the Labor Code's provisions shall be resolved in favor of labor. The Court applied this provision in resolving evidentiary doubts in favor of Farrales.
• Article 3, Labor Code — Declares the State's avowed policy to afford protection to labor. The Court cited this provision in relation to the worker's security of tenure.
• Section 3, Article XIII, 1987 Constitution — Declares the State's policy to afford protection to labor. The Court cited this provision in relation to the worker's security of tenure.
• Article 69, Class A, Item No. 29, HPC Code of Discipline — Classifies "stealing from the company, its employees and officials, or from its contractors, visitors or clients" as serious misconduct and fraud or willful breach of trust. The Court considered this provision in determining whether HPC had a just cause to dismiss Farrales.

Presbitero J. Velasco, Jr. (Chairperson), Diosdado M. Peralta, Martin S. Villarama, Jr., and Francis H. Jardeleza.

N/A — No dissenting opinions were noted in the provided text.