Lamadrid vs. Cathay Pacific Airways Limited

The penalty of dismissal must be commensurate with the infraction committed, and where a long-serving employee with an unblemished record commits a first offense involving pilferage of minimal company property, a penalty less punitive than termination—such as suspension—is the appropriate sanction.

Cathay Pacific Airways Limited hired Salvacion A. Lamadrid as a cabin crew in 1990, with all cabin crew based in Hong Kong under Cathay's Conditions of Service. By the time of her termination in 2007, Lamadrid had rendered approximately 17 years of service and held the position of Senior Purser with a monthly salary of HK$26,613.00. Her duties included providing support to the In-flight Service Manager, ensuring that service to passengers was carried out in accordance with company standards, ensuring cabin crew competence in safety and security procedures, and informing the In-flight Service Manager of any crew or passenger problems, irregularities, or defective or missing equipment. The dispute arose from an incident of alleged pilferage of company property during a flight, which Cathay treated as serious misconduct justifying summary dismissal under its Uniform Disciplinary and Grievance Policy.

In 1990, Cathay Pacific Airways Limited hired Salvacion A. Lamadrid as a cabin crew, with all cabin crew based in Hong Kong under the airline's Conditions of Service. Over the course of her employment, Lamadrid rose to the position of Senior Purser with a monthly salary of HK$26,613.00, rendering approximately 17 years of service prior to her termination. Her duties as Senior Purser included supporting the In-flight Service Manager, ensuring that in-flight information was conveyed to cabin crew in assigned areas, ensuring that passenger service was carried out in accordance with company standards, ensuring cabin crew competence in safety, security, and service procedures, and informing the In-flight Service Manager of any crew or passenger problems, irregularities, cabin defects, or defective or missing equipment.

On May 19, 2007, Donald Lal, Airport Services Officer of Cathay at Sydney Airport, received a report from Customer Officer Mary Greiss that some crew members of Cathay flight CX 139, including Lamadrid, were caught in possession of goods after alighting from the aircraft. Mary handed Lal a plastic bag containing a 1.5-liter Evian water bottle and a pile of magazines confiscated from Lamadrid, along with a photocopy of her passport. The confiscated items were turned over to Airport Services Supervisor Cindy Lowe, who recorded them on Lamadrid's passport and then surrendered them to Airport Services Manager Brian Davis. Two days later, on May 21, 2007, Lamadrid and a certain Yvette Tsang met with Davis and pleaded with him not to report the incident to their Hong Kong office, mentioning their 17 years of service. Davis responded that a report had already been relayed and the confiscated items had been sent to Hong Kong via flight CX 100.

By letter dated May 22, 2007, Cathay requested Lamadrid to submit a written explanation regarding the May 19 incident and to show cause why no disciplinary action should be imposed, stating that removal of company property without authorization is considered serious misconduct. Lamadrid replied on May 28, 2007, denying the allegations, claiming that the Hello magazine confiscated from her was not Cathay's property and that another cabin crew member had already admitted taking the other items. Cathay sent another letter on June 21, 2007, reiterating that she was found to have taken a large bottle of Evian water and a pile of magazines, and again requesting her explanation. Lamadrid responded on June 23, 2007, clarifying that she had brought and declared the bottle of Evian water as her own, denying serious misconduct, and demanding that the confiscated items be preserved pending a fair investigation.

On July 10, 2007, Cathay informed Lamadrid of the termination of her services effective immediately for committing serious misconduct by removing company property without authorization, stating that it could no longer repose its trust and confidence in her given the seriousness of the violation. Cathay subsequently attached a confirmation from Danone Imported Water Asia establishing that the batch number of the confiscated Evian water belonged to a batch exclusively shipped to Cathay, thereby proving the bottle was company property. Lamadrid thereafter filed a complaint for illegal dismissal and money claims against Cathay and Vivian Lo.

• Insufficiency of Evidence: Lamadrid argued that Cathay failed to substantiate its allegation that she committed pilferage of company property, and that there was no proof that flight attendants are prohibited from bringing water during long-haul flights. She maintained that the burden of proving theft of company property rests with Cathay and should be discharged by clear and convincing evidence.
• Procedural Due Process: Lamadrid contended that Cathay deviated from procedural due process because she was denied the opportunity to confront or refute the evidence against her.
• Inapplicability of Loss of Trust and Confidence: Lamadrid insisted that loss of trust or confidence as a ground for dismissal applies only to managerial employees or those charged with the care and custody of the employer's money or property, and that her position as Senior Purser was not imbued with trust and confidence.
• Disproportionate Penalty: Lamadrid argued that the penalty of termination was too harsh considering her 17 years of service and clean record.

• Permanent Residency: Respondents countered that Lamadrid had attained permanent residency status in Hong Kong on the strength of the Affirmation of Virginia Ho Mi Han dated September 9, 2008.
• Position of Trust and Confidence: Respondents maintained that Lamadrid was entrusted with and had custody of company properties in her assigned section of the aircraft, including chinaware, glassware, cutlery, champagne, wine, amenity kits, and in-flight reading materials, which were under her exclusive control and safekeeping.
• Substantial Evidence of Pilferage: Respondents asserted that they discharged their burden of proof and that the termination was supported by substantial evidence pointing to Lamadrid's pilferage and dishonesty. They stressed that the Evian water could not have been bought from Hong Kong as the production code showed it was part of a batch exclusively distributed to Cathay.
• Refutation of Lamadrid's Claims: Respondents argued that Virginia's Affirmation belied Lamadrid's claim that Tsang had admitted taking the enumerated items, noting that Tsang did not itemize the things she admitted to have taken in her conversation with Lamadrid.
• Due Process Accorded: Respondents insisted that Lamadrid was afforded due process.
• Trust and Confidence Eroded: Based on the Affirmation of Ip Tak Chau (Kevin), Lamadrid was routinely in charge of company properties in-flight and supervised two to four cabin crew whose performance she rated for promotion purposes, indicating a position impressed with trust and confidence whose employment was chiefly based on Cathay's continuing confidence.
• Payment of Benefits: Respondents averred that despite Lamadrid's abuse of trust, she was still paid her full retirement benefits and long service payment amounting to HK$622,077.50.

• Jurisdiction: Whether the Labor Arbiter and the NLRC had jurisdiction over Lamadrid's illegal dismissal complaint.
• Position of Trust and Confidence: Whether Lamadrid's position as Senior Purser was imbued with trust and confidence.
• Validity of Dismissal: Whether Lamadrid was illegally dismissed, specifically whether the penalty of termination was commensurate with the infraction committed.

• Jurisdiction: Yes. The Labor Arbiter and the NLRC had jurisdiction over the case pursuant to Article 224 (217) of the Labor Code in relation to Section 10 of RA 8042 as amended by RA 10022, Lamadrid being an Overseas Filipino Worker engaged in remunerated activity in a state where she is not a citizen.
• Position of Trust and Confidence: Yes. Lamadrid's position as Senior Purser was imbued with trust and confidence, as she had custody and control of valuable company properties in the normal and routine exercise of her duties and supervised two to four cabin crew members.
• Validity of Dismissal: Yes, Lamadrid was illegally dismissed. While the infraction of pilferage was established and constituted a breach of trust, the penalty of dismissal was disproportionate to the violation—a first offense in 17 years of unblemished service involving a mere bottle of water—warranting a less punitive sanction such as suspension.

• Jurisdiction: Article 224 (217) of the Labor Code grants Labor Arbiters original and exclusive jurisdiction over termination disputes. This provision must be read together with Section 10 of RA 8042 as amended by RA 10022, which confers upon Labor Arbiters original and exclusive jurisdiction over claims arising out of employer-employee relationships involving Filipino workers for overseas deployment. Under Section 3(a) of RA 10022, an "Overseas Filipino Worker" refers to a person engaged in a remunerated activity in a state of which he or she is not a citizen. Lamadrid satisfied this definition: she had been engaged in a remunerated activity in Hong Kong, a state where she is not a citizen, and Cathay's cabin crew are all based in Hong Kong. Lamadrid also resided and leased an apartment in Hong Kong during her stint. As an OFW faced with a termination dispute, her case properly fell within the jurisdiction of the Labor Arbiter and the NLRC.

• Position of Trust and Confidence: Jurisprudence classifies positions of trust and confidence into two categories. The first consists of managerial employees vested with powers to lay down and execute management policies and to hire, transfer, suspend, lay off, recall, discharge, assign, or discipline employees, as defined under Article 219 (212)(m) of the Labor Code. The second involves those who in the normal and routine exercise of their functions regularly handle significant amounts of the employer's money or property, such as cashiers, auditors, and property custodians. Based on the Affirmation of Kevin, Cathay's Cabin Crew Line Manager, Lamadrid was responsible for company properties in her section of the aircraft—including chinaware, glassware, cutlery, linenware, champagne, wine, liquor, amenity kits, and in-flight reading materials—which were under her exclusive safekeeping and control during long intervals in-flight. She also had oversight over two to four cabin crew members and rated their performance for promotion purposes. These duties placed her within the second category of positions of trust and confidence, as she regularly handled significant amounts of the employer's property in the normal and routine exercise of her functions.

• Validity of Dismissal: Two requisites must be complied with to justify dismissal on the ground of loss of trust and confidence: first, the employee must be holding a position of trust, and second, the employer must sufficiently establish the employee's act that would justify loss of trust and confidence. Both requisites were satisfied: Lamadrid held a position of trust, and Cathay demonstrated her infraction of company policy by taking a bottle of Evian water without authorization, which was proven to be company property through the confirmation from Danone Imported Water Asia. The act constituted misconduct—a transgression of an established rule of action, willful in character, implying wrongful intent—and eroded Cathay's trust and confidence. However, the Court emphasized that the evaluation of an employee's infraction should be dealt with fairness and reason, and the penalty must be commensurate to the violation. This was Lamadrid's first infraction in 17 years of service, and it involved a mere bottle of water. Under the principle of totality of infractions, the number of violations committed during the period of employment must be considered in determining the penalty. To impose dismissal for a first offense given the value of the property taken and the length of unblemished service was too harsh. Termination should be the employer's last resort when other disciplinary actions may be imposed. The Court relied on Foodbev International vs. Ferrer, where a less severe penalty of suspension was imposed for a first infraction after years of service, and on Philippine Long Distance Telephone Company vs. Teves, which stressed that management prerogatives must be exercised in good faith and tempered with compassion, as dismissal affects not only the employee but also those dependent on his livelihood. Accordingly, Lamadrid was illegally dismissed and entitled to full backwages and separation pay in lieu of reinstatement, the latter being no longer feasible given the lapse of time and strained relations.

• Principle of Proportionality of Penalty — The penalty imposed on an erring employee must be commensurate with the infraction committed. All surrounding circumstances must be considered, including the employee's length of service, the nature of the offense, and the value of any property involved. Termination of employment should be the employer's last resort, especially when other disciplinary actions may be imposed. In this case, the Court applied the principle to hold that dismissal was too harsh for a first offense—pilferage of a single bottle of water—committed during 17 years of unblemished service.

• Principle of Totality of Infractions — The totality of infractions or the number of violations committed during the period of employment shall be considered in determining the penalty to be imposed upon an erring employee. The Court applied this principle by noting that Lamadrid had not committed any infraction or been sanctioned during her entire span of employment except for the incident subject of the controversy, making dismissal a disproportionate penalty.

• Loss of Trust and Confidence — Two Requisites — To justify dismissal on the ground of loss of trust and confidence under Article 297 (282)(c) of the Labor Code, two requisites must be complied with: (1) the employee must be holding a position of trust, and (2) the employer must sufficiently establish the employee's act that would justify loss of trust and confidence. The act must be real, the facts clearly established, and the employee must have committed it without justifiable reason. In this case, both requisites were satisfied, but the penalty was nonetheless held to be disproportionate.

• Categories of Positions of Trust and Confidence — Positions of trust and confidence fall into two categories: (1) managerial employees vested with powers to lay down and execute management policies and to hire, transfer, suspend, lay off, recall, discharge, assign, or discipline employees, as defined under Article 219 (212)(m) of the Labor Code; and (2) employees who in the normal and routine exercise of their functions regularly handle significant amounts of the employer's money or property, such as cashiers, auditors, and property custodians. Lamadrid's position as Senior Purser fell under the second category.

• "Simply put, all surrounding circumstances must be considered and the penalty must be commensurate to the violation committed by an employee. Termination of the services of an employee should be the employer's last resort especially when other disciplinary actions may be imposed, considering the employee's long years of service in the company, devoting time, effort and invaluable service in line with the employer's goals and mission." — This passage articulates the ratio decidendi on the proportionality of penalties, establishing that dismissal must be the last resort and that surrounding circumstances—including length of service—must be weighed in calibrating the appropriate sanction.

• "The totality of infractions or the number of violations committed during the period of employment shall be considered in determining the penalty to be imposed upon an erring employee." — This is the canonical formulation of the totality of infractions doctrine as quoted by the Court from Merin vs. National Labor Relations Commission, frequently cited in subsequent jurisprudence on penalty proportionality.

• "Dismissal is the ultimate penalty that can be meted to an employee. Even where a worker has committed an infraction, a penalty less punitive may suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe." — Quoted from Philippine Long Distance Telephone Company vs. Teves, this passage encapsulates the Court's policy rationale for tempering management prerogative with compassion, emphasizing that dismissal must not be imposed indiscriminately.

• Merin vs. National Labor Relations Commission — Cited as the source of the principle of "totality of infractions," which requires consideration of the number of violations committed during the entire period of employment in determining the appropriate penalty. The Court relied on this doctrine to hold that dismissal was disproportionate given Lamadrid's clean record over 17 years.
• Foodbev International vs. Ferrer, G.R. No. 206795, September 16, 2019 — Cited as recent precedent where the Court imposed suspension rather than dismissal for a first infraction by employees with several years of service, directly supporting the conclusion that a less severe penalty was warranted in Lamadrid's case.
• Philippine Long Distance Telephone Company vs. Teves — Cited for the principle that while management has the prerogative to discipline employees, such prerogative must be exercised in good faith and tempered with compassion, as dismissal affects not only the employee but also those dependent on his livelihood.
• Baguio Central University vs. Gallente, 722 Phil. 494 (2013) — Cited for the proposition that managerial employees, by the nature of their position, are expected to exhibit utmost fidelity to the employer as they are entrusted with confidential and sensitive matters.
• Lopez vs. Keppel Bank Philippines, Inc., 672 Phil. 370 (2011) — Cited for the definition of the second category of positions of trust and confidence—employees who regularly handle significant amounts of the employer's money or property in the normal and routine exercise of their functions.
• Distribution & Control Products, Inc. vs. Santos, 813 Phil. 423 (2017) — Cited for the two requisites of loss of trust and confidence as a ground for dismissal.
• Nagkakaisang Lakas ng Manggagawa sa Keihin vs. Keihin Philippines Corporation, 641 Phil. 300 (2010) — Cited for the definition of misconduct as a transgression of some established and definite rule of action, a forbidden act, willful in character, implying wrongful intent and not mere error in judgment.

• Article 297 (282), Labor Code of the Philippines — Enumerates the just causes for termination by employer, including serious misconduct, fraud or willful breach of trust reposed by the employer, and commission of a crime or offense. The Court applied paragraph (c)—fraud or willful breach of trust—to assess whether Cathay's dismissal of Lamadrid was for just cause, finding that while the elements were present, the penalty was nonetheless disproportionate.
• Article 224 (217), Labor Code of the Philippines — Grants Labor Arbiters original and exclusive jurisdiction to hear and decide termination disputes. The Court read this provision together with RA 8042 to sustain the jurisdiction of the Labor Arbiter and NLRC over Lamadrid's complaint.
• Article 219 (212)(m), Labor Code of the Philippines — Defines managerial employees as those vested with powers or prerogatives to lay down and execute management policies and/or to hire, transfer, suspend, lay off, recall, discharge, assign, or discipline employees. The Court cited this provision in distinguishing the first category of positions of trust and confidence.
• Section 10, Republic Act No. 8042 (Migrant Workers and Overseas Filipinos Act of 1995), as amended by RA 10022 — Confers upon Labor Arbiters original and exclusive jurisdiction over claims arising out of employer-employee relationships involving Filipino workers for overseas deployment. The Court applied this provision to establish jurisdiction over Lamadrid's claim as an OFW.
• Section 3(a), Republic Act No. 10022 — Defines "Overseas Filipino Worker" as a person engaged in a remunerated activity in a state of which he or she is not a citizen. The Court applied this definition to classify Lamadrid as an OFW, thereby bringing her case within the jurisdictional ambit of the Labor Arbiter and NLRC.

Lazaro-Javier, Delos Santos, and J. Lopez, JJ., concurred. Leonen, J., was on wellness leave.