HSY Marketing Ltd., Co. vs. Villastique

An award of separation pay is inconsistent with a finding that there was no illegal dismissal; where no dismissal occurred, the proper relief is reinstatement without backwages, not separation pay. A company driver under the control and supervision of management is a regular employee entitled to service incentive leave pay.

HSY Marketing Ltd., Co. (HSY) was identified in the proceedings as the mother corporation of Fabulous Jeans & Shirt & General Merchandise (Fabulous Jeans), a ready-to-wear and general merchandise business. Respondent Virgilio O. Villastique worked as a field driver in that business. The dispute required application of the Labor Code provisions on illegal dismissal, separation pay, and service incentive leave, as well as the rule that the existence of an employer-employee relationship is essentially a question of fact.

On January 3, 2003, petitioner HSY Marketing Ltd., Co. hired respondent Virgilio O. Villastique as a field driver for Fabulous Jeans & Shirt & General Merchandise (Fabulous Jeans), tasked to deliver ready-to-wear items and/or general merchandise for a daily compensation of ₱370.00. On January 10, 2011, respondent figured in an accident when the 2010-model Mitsubishi Strada pickup he was driving in Iligan City bumped a pedestrian, Ryan Dorataryo. Fabulous Jeans shouldered Dorataryo's hospitalization and medical expenses amounting to ₱64,157.15, which respondent was asked to reimburse, but to no avail.

On February 24, 2011, respondent was allegedly required to sign a resignation letter, which he refused to do. A couple of days later, he tried to collect his salary for that week but was told that it was withheld because of his refusal to resign. Convinced that he was already terminated on February 26, 2011, he filed a complaint for illegal dismissal with money claims against petitioner, Fabulous Jeans, and its owner, Alexander G. Arqueza, before the NLRC, docketed as RAB-X-04-00179-2011.

In their defense, petitioner, et al. contended that respondent had committed several violations during his employment and had been found by his superior and fellow employees to be a negligent and reckless driver, which resulted in the vehicular mishap involving Dorataryo. After they paid for Dorataryo's hospitalization and medical expenses, respondent went on absence without leave, presumably to evade liability for his recklessness. Since respondent was the one who refused to report for work, he should be considered as having voluntarily severed his own employment; thus, his money claims cannot prosper as he was not terminated.

The Labor Arbiter found no evidence to substantiate respondent's claim that he was dismissed on February 26, 2011. No notice of termination was issued to him, and he was not prevented from showing up at petitioner's place of business. There was likewise no evidence that respondent had voluntarily resigned. Mere absence or failure to report for work, even after a notice to return, is not tantamount to abandonment, and it was not even shown that respondent was notified in writing to report for work or warned that continued failure to report would be construed as abandonment or resignation. The Labor Arbiter also found strained relations between the parties and, on the issue of service incentive leave, noted that respondent was a field driver who regularly performed work outside petitioner's place of business and whose hours of work could not be ascertained with reasonable certainty, while petitioner failed to present payroll or pay slips to prove payment of the benefit.

On appeal, the NLRC affirmed the finding that there was no illegal dismissal, stressing respondent's failure to discharge the burden of proof, which shifted to him when his employer denied having dismissed him. It found no evidence of deliberate or unjustified refusal on respondent's part to resume employment, or of overt acts unerringly pointing to the fact that he did not want to work anymore. The CA likewise observed that petitioner's failure to present the alleged resignation letter belied the claim of voluntary resignation, and that respondent's filing of the labor complaint was inconsistent with abandonment. On the service incentive leave issue, the CA declared that respondent was not a field personnel but a regular employee whose task was necessary and desirable to the usual trade and business of his employer, because he was directed to deliver goods at a specified time and place, had no discretion to solicit, select, and contact prospective clients, and claimed he was required to report for work from 8:00 a.m. to 8:00 p.m. at the company's store in Cagayan de Oro City, placing him under the control and supervision of petitioners.

• Voluntary Resignation/Abandonment: Petitioner maintained that respondent voluntarily resigned or abandoned his work; after the accident and reimbursement demand, he went on absence without leave, and because he refused to report for work, he should be considered as having severed his employment.
• No Illegal Dismissal: Petitioner argued that respondent was not dismissed; there was no notice of termination or prevention from returning, and his claim of verbal termination was unsubstantiated.
• Separation Pay and Service Incentive Leave Pay: Petitioner imputed error to the LA in awarding separation pay and service incentive leave pay despite the finding that respondent was not dismissed, and argued that these awards lacked legal basis.
• Employer-Employee Relationship: Petitioner asserted that it was not respondent's employer; respondent was employed as a field driver for Fabulous Jeans, and petitioner had a separate and distinct personality from Fabulous Jeans, so the charges against it should have been dismissed.

• Illegal Dismissal: Respondent claimed he was illegally dismissed on February 26, 2011, after he refused to sign a resignation letter and his salary was withheld.
• Employer Identity: Respondent maintained that he was hired by petitioner and required to report for work at its store in Cagayan de Oro City; petitioner was his employer.
• Dummy Company Practice: Respondent alleged that petitioner used different corporate names for its branches, including Fabulous Jeans, to minimize business tax and evade liability, with HSY Marketing as the mother corporation.
• Relief Sought: Respondent initially prayed for reinstatement with full backwages, but later alleged strained relations and sought separation pay instead.
• Service Incentive Leave Pay: Respondent sought money claims, including service incentive leave pay, as a regular employee.

• Employer-Employee Relationship: Whether an employment relationship existed between petitioner HSY Marketing Ltd., Co. and respondent Virgilio O. Villastique.
• Dismissal, Resignation, and Separation Pay: Whether the CA correctly affirmed the findings that respondent did not voluntarily resign and petitioner did not dismiss him, and whether separation pay was properly awarded.
• Regular Employment and Service Incentive Leave Pay: Whether respondent was a regular employee entitled to service incentive leave pay.

• Employer-Employee Relationship: Yes. The LA, NLRC, and CA consistently found petitioner to be respondent's employer; petitioner admitted in its Position Paper that respondent was a field driver for its Cagayan de Oro branch, and it failed to rebut evidence that it used dummy corporations to evade liability.
• Dismissal, Resignation, and Separation Pay: Yes as to the findings; No as to the separation pay award. No dismissal or voluntary resignation/abandonment was established, but separation pay is a consequence of illegal dismissal and is inconsistent with a finding of no illegal dismissal; the proper relief is reinstatement without backwages.
• Regular Employment and Service Incentive Leave Pay: Yes. Respondent, a company driver under the control and supervision of management, was a regular employee entitled to service incentive leave pay; petitioner failed to prove payment of the benefit.

• Employer-Employee Relationship: The existence of an employer-employee relationship is essentially a question of fact, and the Court generally defers to the findings of the LA, NLRC, and CA absent conflicting findings or cogent reason to hold otherwise. Here, the LA categorically declared petitioner the employer and dismissed the complaint against Fabulous Jeans and Arqueza. Although the NLRC did not explicitly address the issue, it referred to petitioner, et al. collectively as the employer and pinpointed petitioner as the one that knew where to look for respondent. The CA held that petitioner attempted to avoid liability by claiming a separate and distinct personality from Fabulous Jeans without evidence. Respondent claimed he was hired by petitioner and required to report at its Cagayan de Oro store, and petitioner admitted in its Position Paper that respondent was a field driver for the Cagayan de Oro Branch of HSY Marketing Ltd., Co. (NOVO Jeans & Shirt). Petitioner was bound by that admission. The Court also noted the practice of setting up distributors or dealers as dummy companies to avoid employer-employee relations; respondent alleged in his affidavit that NOVO used different corporate names for its branches, including HSY Marketing as mother corporation and Fabulous Jeans in Iligan and Cagayan de Oro, to minimize business tax, and petitioner failed to rebut this. Thus, petitioner cannot evade liability as employer.
• Dismissal, Resignation, and Separation Pay: The lower tribunals unanimously concluded that respondent had not been dismissed. Apart from his unsubstantiated allegation of verbal termination, no substantial evidence showed that he was dismissed or prevented from returning to work. In the absence of an overt or positive act proving dismissal, the claim of illegal dismissal was self-serving, conjectural, and of no probative value. Petitioner's claims of voluntary resignation and abandonment also failed because petitioner did not discharge the burden of proving respondent's deliberate and unjustified refusal to resume employment without any intention of returning; it was incumbent on petitioner to ascertain respondent's interest or non-interest in continuing employment. Since there was no dismissal or abandonment, the appropriate course was to reinstate respondent without backwages. The reinstatement was not a relief from illegal dismissal but a declaration that respondent may return to work because he was not dismissed in the first place. The award of separation pay was erroneous: separation pay is a legal consequence of illegal dismissal where reinstatement is no longer viable or feasible, and as a relief in lieu of reinstatement, it is inconsistent with a finding of no illegal dismissal. An employee who was not dismissed cannot claim separation pay in lieu of reinstatement. The doctrine of strained relations cannot justify separation pay absent illegal dismissal; in Capili vs. NLRC, the Court explained that separation pay must be given only as an alternative to reinstatement emanating from illegal dismissal, and when there is no illegal dismissal, even strained relations do not provide a legal basis. If respondent voluntarily chooses not to return to work, he must be considered as having resigned, without prejudice to the parties' willingness to continue their former contract or enter into a new one.
• Regular Employment and Service Incentive Leave Pay: The CA's finding that respondent was a regular employee entitled to service incentive leave pay was sustained. Respondent was not a field personnel because, as a company driver, he was directed to deliver goods at a specified time and place and had no discretion to solicit, select, and contact prospective clients; he claimed he was required to report for work from 8:00 a.m. to 8:00 p.m. at the company's store in Cagayan de Oro City, placing him under the control and supervision of petitioners. He was therefore a regular employee whose task was usually necessary and desirable to the usual trade and business of the company. The Court has held that company drivers under the control and supervision of management officers are regular employees entitled to benefits including service incentive leave pay. Service incentive leave accrues to every employee who has served within 12 months, whether continuous or broken, reckoned from the date the employee started working, including authorized absences and paid regular holidays unless the working days in the establishment as a matter of practice or policy, or as provided in employment contracts, is less than 12 months, in which case the period is considered one year; it is commutable to its money equivalent if not used or exhausted at the end of the year. Petitioner, as employer with complete control over company records, could have rebutted the claim by presenting vouchers or payrolls showing payment, but it did not; the conclusion was that it never paid the benefit, and it was ordered to pay ₱16,418.75.

• Employer-Employee Relationship as a Question of Fact — The existence of an employer-employee relationship is essentially a question of fact, and the Supreme Court generally defers to the factual findings of the Labor Arbiter, NLRC, and Court of Appeals absent conflicting findings or a cogent reason to hold otherwise. In this case, all three tribunals consistently found petitioner to be respondent's employer, and petitioner's own Position Paper admitted respondent was a field driver for its Cagayan de Oro branch; petitioner also failed to rebut allegations that it used dummy corporations to evade liability.
• Dummy Corporation or Separate Personality Doctrine — The Court recognized the practice of setting up "distributors" or "dealers" that are in reality dummy companies allowing a mother company to avoid employer-employee relations and shield itself from employee claims. Applied here, respondent alleged that NOVO used different corporate names for its branches, including HSY Marketing as mother corporation and Fabulous Jeans in Iligan and Cagayan de Oro, to minimize business tax; petitioner failed to present evidence to rebut this, so it could not evade liability as employer.
• No Dismissal, No Separation Pay — Separation pay is a legal consequence of illegal dismissal where reinstatement is no longer viable or feasible. As a relief in lieu of reinstatement, an award of separation pay is inconsistent with a finding that there was no illegal dismissal; an employee who was not dismissed cannot claim separation pay in lieu of reinstatement. Applied here, because no dismissal or abandonment was established, the separation pay award was deleted and reinstatement without backwages was ordered instead.
• Strained Relations Doctrine — The doctrine of strained relations cannot justify an award of separation pay solely because of hostility between employer and employee. Separation pay must be given only as an alternative to reinstatement emanating from illegal dismissal; when there is no illegal dismissal, even strained relations do not provide a legal basis for separation pay. Applied here, the Court rejected the strained-relations justification because there was no illegal dismissal.
• Regular Employment of Company Drivers and Service Incentive Leave — Company drivers who are under the control and supervision of management officers are regular employees entitled to benefits including service incentive leave pay. A field personnel, by contrast, is not subject to such control and has discretion over work hours and clients. Applied here, respondent was directed to deliver goods at a specified time and place, had no discretion to solicit, select, and contact clients, and reported from 8:00 a.m. to 8:00 p.m. at the company store; he was therefore a regular employee entitled to service incentive leave pay.
• Service Incentive Leave Pay — Service incentive leave is a right accruing to every employee who has served within 12 months, whether continuous or broken, reckoned from the date of employment, including authorized absences and paid regular holidays unless the working days in the establishment are less than 12 months, in which case the period is considered one year; it is commutable to its money equivalent if not used or exhausted at the end of the year. Applied here, petitioner failed to present vouchers or payrolls showing payment, so it was ordered to pay respondent ₱16,418.75.

• "Properly speaking, liability for the payment of separation pay is but a legal consequence of illegal dismissal where reinstatement is no longer viable or feasible. As a relief granted in lieu of reinstatement, it goes without saying that an award of separation pay is inconsistent with a finding that there was no illegal dismissal." — This passage states the ratio decidendi for deleting the separation pay award: because no illegal dismissal was found, separation pay had no legal basis.
• "The award of separation pay cannot be justified solely because of the existence of "strained relations" between the employer and the employee. It must be given to the employee only as an alternative to reinstatement emanating from illegal dismissal. When there is no illegal dismissal, even if the relations are strained, separation pay has no legal basis." — This is the Court's quotation from Capili vs. NLRC, defining the limited scope of the strained relations doctrine in separation pay cases.
• "The Court has already held that company drivers who are under the control and supervision of management officers — like respondent herein — are regular employees entitled to benefits including service incentive leave pay." — This passage is the controlling rule sustaining the award of service incentive leave pay to respondent.
• "Hence, considering that the LA, the NLRC, and the CA consistently found petitioner liable as the employer of respondent, the Court sees no compelling reason to depart from their judgment on this score." — This passage explains the Court's deference to the consistent factual findings on the existence of an employer-employee relationship.

• Capili vs. NLRC, 337 Phil. 210, 216 (1997) — Explained that separation pay cannot be justified solely by strained relations; it must be an alternative to reinstatement emanating from illegal dismissal, and absent illegal dismissal, separation pay has no legal basis. The Court quoted this in deleting the separation pay award.
• Exodus International Construction Corporation vs. Biscocho, 659 Phil. 146 (2011) — Cited for the rule that where there is no dismissal or abandonment, the appropriate course is reinstatement without backwages; also cited on the employer's failure to present payroll or vouchers to rebut service incentive leave claim.
• Leopard Security and Investigation Agency vs. Quitoy, 704 Phil. 449, 460 (2013) — Cited for the rule that an award of separation pay is inconsistent with a finding that there was no illegal dismissal.
• Verdadero vs. Barney Autolines Group of Companies Transport, Inc., 693 Phil. 646, 660 (2012) — Cited on the doctrine of strained relations, which cannot be invoked to support separation pay absent illegal dismissal.
• Far East Agricultural Supply, Inc. vs. Lebatique, 544 Phil. 420, 429 (2007) — Cited for the holding that company drivers under the control and supervision of management officers are regular employees entitled to benefits including service incentive leave pay.
• Mansion Printing Center vs. Bitara, Jr., 680 Phil. 43, 62 (2012) — Cited for the definition and commutation of service incentive leave pay.
• San Miguel Corporation vs. NLRC, 539 Phil. 236, 249-250 (2006) — Cited on the practice of setting up distributors or dealers as dummy companies to avoid employer-employee relations and liability.
• MZR Industries vs. Colambot, 716 Phil. 617, 624 (2013) — Cited on the absence of overt act of dismissal and the burden of proof for abandonment.
• South East International Rattan, Inc. vs. Coming, G.R. No. 186621, March 12, 2014, 718 SCRA 658, 666 — Cited for the rule that the existence of an employer-employee relationship is essentially a question of fact and that the Court is not a trier of facts.

Sereno, C.J. (Chairperson), Leonardo-De Castro, Bersamin, and Caguioa, JJ., concur.