Musahamat Workers Labor Union-1-ALU vs. Musahamat Farms, Inc. Farm 1

In illegal dismissal cases, the employer bears the burden of proving a just cause by substantial evidence; circumstantial evidence may support dismissal only if it forms an unbroken chain pointing to the employee to the exclusion of others. Substantial compliance with the twin notice requirements suffices where the first notice, though lacking particularity, apprises the employee of the acts complained of and grievance meetings afford an opportunity to be heard.

Musahamat Farms, Inc. Farm 1, a Davao City corporation engaged in the plantation and exportation of Cavendish bananas, employed Ernesto Suril, Jr., Elvin Suril, Jhonel Suril, Nanding Abana, and Nonito Cabillon as watchmen. Petitioner Musahamat Workers Labor Union-1-ALU represented the watchmen in the labor dispute. The watchmen were tasked to guard respondent's banana plantation. Under the Labor Code, regular employees may not be terminated except for a just or authorized cause and must be accorded procedural due process.

Musahamat Farms, Inc. Farm 1, a Davao City corporation engaged in the plantation and exportation of Cavendish bananas, employed Ernesto Suril, Jr., Elvin Suril, Jhonel Suril, Nanding Abana, and Nonito Cabillon as watchmen. Petitioner Musahamat Workers Labor Union-1-ALU represented the watchmen. On February 14, 2016, Anthony R. Pablo, respondent's Security Officer, announced that all watchmen would be reassigned to farm operations effective the following day. The watchmen allegedly raised their voices in protest, questioned the management's decision on their reassignment, and insisted that they were children of the landowners who leased their farms to respondent; hence, they should not be farm workers or assigned to production work.

On February 15, 2016, respondent received a report that several banana bunches had been chopped down in Block 6A and Block 7A of HKJ 2 Farm. Respondent initiated an investigation. While the investigation was ongoing, on March 3, 2016, respondent issued to the watchmen a notice that they were to be preventively suspended for 15 days, or from March 8, 2016 to March 24, 2016. On March 22, 2016, a grievance meeting was scheduled between respondent and the watchmen, but only Ernesto attended. On March 23, 2016, respondent issued another notice of an additional 15-day preventive suspension, effective March 26, 2016 up to April 13, 2016.

On April 12, 2016, after the investigation had been concluded, respondent issued to the watchmen a notice of termination effective April 14, 2016. The termination notice cited the February 15, 2016 incident, a sworn affidavit of a witness identifying the watchmen as prime suspects planning retaliation, and the offenses of malicious mischief, damage to property, and industrial sabotage. A second grievance conference was still held on April 15, 2016, where the parties agreed to elevate their issues to a third party for resolution. The watchmen claimed that they were not afforded due process of law and that respondent relied on mere hearsay evidence in terminating their employment; respondent maintained that the dismissal was legal.

Respondent's evidence included sworn affidavits of Anthony, Ranel Alauya, and Florentino Avenido. Anthony testified about the watchmen's angry reaction to the reassignment and about a February 19, 2016 conference at HKJ 2 Farm where Ranel allegedly pinpointed the watchmen as the persons he saw and heard plotting to cut down banana plants. Ranel claimed that on the night of February 14, 2016, he overheard the watchmen at Lawigan Beach Resort talking angrily and loudly and plotting to cut down respondent's banana trees; Florentino corroborated Ranel's account of overhearing the watchmen. The affidavits of Anthony, Ranel, and Florentino were all executed on July 19, 2016, while the hearing before the Voluntary Arbitrator was underway.

The Voluntary Arbitrator found that respondent failed to prove by substantial evidence the allegations of serious misconduct and loss of trust and confidence, because the affidavits came from witnesses whose credibility and personal acquaintances with the watchmen were not established. The Voluntary Arbitrator was unconvinced that a February 19, 2016 meeting occurred at which Ranel positively identified the watchmen. The Court of Appeals, by contrast, found that the February 19, 2016 meeting really took place and credited the testimonies of Ranel and Florentino, together with the watchmen's reaction after the reassignment announcement, as circumstantial evidence that they committed the act.

• Due Process: Petitioner, on behalf of the watchmen, claimed that they were not afforded due process of law in their dismissal.
• Hearsay Evidence: Petitioner claimed that respondent relied on mere hearsay evidence in terminating their employment.
• Illegality of Dismissal: Petitioner maintained that the dismissal of the watchmen was illegal.

• Validity of Dismissal: Respondent disagreed and maintained that the watchmen's dismissal was legal.
• First Notice: Respondent claimed that the first notice of preventive suspension served as the first written notice under the law.
• Knowledge of Charges: Respondent argued that a witness had already come forth on February 19, 2016, so the watchmen could no longer feign ignorance about the accusations against them.
• Witness Familiarity: In its Comment, respondent stated that it was neither unlikely nor unquestionable that Ranel knew the faces and names of the five dismissed employees.

• Just and Valid Cause: Whether the dismissal of the watchmen was for a just and valid cause.
• Due Process: Whether due process of law was observed in their dismissal.
• Entitlement to Relief: Whether the illegally dismissed watchmen are entitled to backwages and separation pay in lieu of reinstatement.

• Just and Valid Cause: No. The dismissal failed the substantive requirement of the law because respondent did not prove serious misconduct or loss of trust and confidence by substantial evidence.
• Due Process: Yes. There was substantial compliance with the twin notice requirements; the preventive suspension notice and grievance meetings afforded the watchmen an opportunity to be heard.
• Entitlement to Relief: Yes. An illegally dismissed employee is entitled to backwages and, where reinstatement is no longer possible due to strained relations, separation pay in lieu of reinstatement.

• Just and Valid Cause: The Court found that respondent dismissed the watchmen for serious misconduct and loss of trust and confidence under Article 297 of the Labor Code. Misconduct requires that the act be serious, relate to the performance of the employee's duties showing unfitness to continue working, and be performed with wrongful intent. Loss of trust and confidence requires that the employee hold a position of trust and confidence and that there be an act justifying the loss, founded on clearly established facts; the breach must be willful, and for rank-and-file personnel, there must be proof of involvement in the alleged events. The wrongful act must be supported by substantial evidence, and the employer bears the burden of proof in illegal dismissal cases. Although 260 banana plants were cut down and discovered on February 15, 2016, nobody witnessed the incident, and respondent relied on circumstantial evidence. The Court held that circumstantial evidence is applicable in labor cases because the quantum is only substantial evidence, but the affidavits of Anthony, Ranel, and Florentino lacked credibility and conclusiveness. The affidavits were all executed on July 19, 2016, during the hearing before the Voluntary Arbitrator, and were not discussed or adverted to in the preventive suspension notices. The termination notices dated April 12, 2016 referred to a sworn affidavit of an unnamed witness already executed, but the affidavits on record were dated July 19, 2016, so none could have been the affidavit referred to. The Court also found no substantial evidence that the watchmen were the persons Ranel and Florentino overheard, since they did not personally know the watchmen and the circumstances of their acquaintance were not established. The existence of the February 19, 2016 meeting was crucial because it was when Ranel allegedly identified the watchmen, but no document supported it, and the minutes of the March 22 and April 15, 2016 grievance meetings showed no mention of such identification. The Court concluded that either the meeting was imaginary or Ranel could not have positively identified the watchmen then. Applying falsus in uno, falsus in omnibus, the false portion of Ranel's testimony tainted his entire testimony; Anthony's corroboration of the February 19 meeting was disbelieved, leaving only his account of the watchmen's angry demeanor, which was weak and insufficient; and Florentino's testimony relied heavily on the questionable February 19 meeting. With no direct or circumstantial evidence establishing substantial evidence, the charges of serious misconduct and loss of trust and confidence crumbled.
• Due Process: Procedural due process in termination consists of the twin requirements of notice and hearing. The employer must furnish two written notices: the first apprises the employee of the particular acts or omissions for which dismissal is sought, and the second informs the employee of the decision to dismiss. A hearing is complied with as long as there is an opportunity to be heard, not necessarily an actual hearing. The Court found substantial compliance. The first written notice should contain the specific causes or grounds, a directive to submit a written explanation within a reasonable period, a detailed narration of facts and circumstances, and mention of the company rules or Labor Code grounds violated. Its primordial purpose is to sufficiently apprise the employee of the acts complained of and enable preparation of a defense. Section 2, Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code requires substantial observance. Here, the preventive suspension notice, while lacking particularity, was not couched in general terms; it clearly stated that the watchmen were being preventively suspended during the investigation relative to the February 15, 2016 chopping incident, and it alluded to the reassignment that preceded the incident and involved only the watchmen. A reasonable employee would grasp that the employment was on the line. Two grievance meetings were conducted, and the minutes showed that the alleged involvement of the watchmen in the chopping incident was discussed. During the first grievance meeting, management informed the watchmen of a lead from a witness implicating them; the watchmen demanded presentation of the witness and evidence, but management opted to present its evidence in another venue. The watchmen were thus accorded an opportunity to be heard. The failure to confront the witnesses was not fatal because confrontation is required only in adversarial criminal prosecutions, not in company investigations for administrative liability. The law prohibits only the absolute absence of the opportunity to be heard.
• Entitlement to Relief: An illegally dismissed employee is entitled to reinstatement without loss of seniority rights and other privileges, and to full backwages, inclusive of allowances and other benefits or their monetary equivalent. If reinstatement is no longer possible, separation pay in lieu of reinstatement is justified. Reinstatement is no longer possible when the former position no longer exists, the employer's business has closed, or the employer-employee relationship has been strained so as to render reinstatement impossible; the Court has also considered non-feasibility where considerable time has lapsed or the employee does not want reinstatement. The doctrine of strained relations cannot be applied indiscriminately, and no strained relations should arise from a valid and legal act of asserting one's right. It may be invoked only against employees whose positions demand trust and confidence, or whose differences with the employer are of such nature or degree as to preclude reinstatement. The watchmen held positions of trust and confidence, as watchmen regularly handle the delicate matter of caring for and protecting the employer's property and assets, especially in guarding a huge banana plantation. Thus, separation pay in lieu of reinstatement was proper. Backwages and other benefits were also due from the time of dismissal until finality of judgment. Separation pay is based on the length of past service, while backwages represent compensation that should have been earned but was not collected because of unjust dismissal and are computed from the actual period the employee was unlawfully prevented from working.

• Substantive and Procedural Due Process in Dismissal — A lawful dismissal requires both a just or authorized cause and compliance with the rudimentary due process of notice and hearing. The Court found the dismissal lacked substantive cause but substantially complied with procedural due process.
• Serious Misconduct as Just Cause — Serious misconduct requires concurrence of: (a) seriousness; (b) relation to the performance of the employee's duties showing unfitness to continue working; and (c) wrongful intent. The Court held these elements were not proven by substantial evidence.
• Loss of Trust and Confidence — The employer must show that the employee holds a position of trust and confidence and that an act justifies the loss. The act must be real, founded on clearly established facts, and the breach willful; for rank-and-file personnel, proof of involvement is required, and mere uncorroborated assertions are insufficient. The Court found the ground unproven.
• Substantial Evidence in Labor Cases — Substantial evidence is the least demanding quantum, consisting of relevant evidence a reasonable mind might accept as adequate to support a conclusion. The employer bears the burden of proving the validity of dismissal. Respondent failed to discharge this burden.
• Circumstantial Evidence in Labor Cases — Circumstantial evidence is proof of collateral facts from which the main fact may be inferred according to reason and common experience. It is applicable in labor cases, but it must form an unbroken chain leading to a fair and reasonable conclusion pointing to the employee to the exclusion of others. The Court found the circumstantial evidence insufficient.
• Falsus in Uno, Falsus in Omnibus — False in part, false in everything. Although not an absolute rule and rarely applied in modern jurisprudence, the Court applied it to Ranel's testimony because the portion about the February 19, 2016 meeting was false, tarnishing his entire testimony.
• Twin Notice Requirement and Substantial Compliance — The first written notice must apprise the employee of the particular acts or omissions for which dismissal is sought; the second informs the employee of the decision to dismiss. A hearing is satisfied by an opportunity to be heard. Section 2, Rule XXIII, Book V of the Omnibus Rules requires substantial observance, and the Court found substantial compliance.
• Strained Relations Exception to Reinstatement — Separation pay in lieu of reinstatement is justified when reinstatement is no longer possible, including strained relations. The doctrine cannot be applied indiscriminately and may be invoked only against employees whose positions demand trust and confidence or whose differences with the employer preclude reinstatement. The watchmen held positions of trust and confidence, so separation pay was proper.
• Backwages vs. Separation Pay — Separation pay is based on the length of past service; backwages represent compensation that should have been earned but was not collected because of unjust dismissal and are computed from the actual period the employee was unlawfully prevented from working. Both were awarded.

• "A lawful dismissal must meet both substantive and procedural requirements. The dismissal must be for a just or authorized cause and must comply with the rudimentary due process of notice and hearing." — This states the dual requirements for a valid dismissal and frames the Court's separate analysis of substantive and procedural due process.
• "To constitute a valid cause for the dismissal within the text and meaning of Article 297 of the Labor Code, the following elements of misconduct must concur: (a) it 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." — This defines the elements of serious misconduct, which the Court found unproven.
• "In order for an employer to properly invoke the ground of loss of trust and confidence, the employer must satisfy two conditions: (1) the employer must show that the employee concerned holds a position of trust and confidence; and (2) the employer must establish the existence of an act justifying the loss of trust and confidence." — This sets the requisites for loss of trust and confidence, another ground the Court found unsupported by substantial evidence.
• "The primordial purpose of the first notice is to sufficiently apprise the employee of the acts complained of and to enable the employee to prepare his/her defense." — This explains why the Court found substantial compliance with the first notice requirement despite its lack of particularity.

• Sy, et al. vs. Neat, Inc., et al., 821 Phil. 751, 765-766 (2017) — Cited for the exception to the rule that the Court is not a trier of facts when the factual findings of labor tribunals and the Court of Appeals are contradictory.
• Doctor, et al. vs. NII Enterprises, et al., 821 Phil. 251, 264 (2017) — Cited for the rule that a lawful dismissal must meet both substantive and procedural requirements.
• Sterling Paper Products Enterprises, Inc. vs. KMM-Katipzman, et al., 815 Phil. 425, 435 (2017) — Cited for the definition of misconduct as improper or wrong conduct, a transgression of a rule, willful, and implying wrongful intent.
• Imasen Philippine Manufacturing Corp. vs. Alcon, 746 Phil. 172, 181 (2014) — Cited for the elements of serious misconduct.
• Distribution & Control Products, Inc./Tiamsic vs. Santos, 813 Phil. 423, 434 (2017) — Cited for the conditions for loss of trust and confidence and for the twin requirements of notice and hearing.
• JR Hauling Services, et al. vs. Solamo, et al., G.R. No. 214294, September 30, 2020 — Cited for the substantial evidence standard and for the trust and confidence nature of a watchman's position.
• Italkarat 18, Inc. vs. Gerasmio, G.R. No. 221411, September 28, 2020 — Cited for the rule that the burden of proof in illegal dismissal cases is on the employer.
• People vs. ZZZ, G.R. No. 228828, July 24, 2019, 910 SCRA 325, 340 — Cited for the definition of circumstantial evidence as proof of collateral facts from which the main fact may be inferred.
• Muaje-Tuazon vs. Wenphil Corp., 540 Phil. 516, 521 (2006) — Cited for the requirement that affidavits be discussed during the investigation and submitted before the decision to dismiss, and for the rule that confrontation of witnesses is not required in company investigations.
• People vs. Batin, 564 Phil. 249, 261 (2007) — Cited for the doctrine of falsus in uno, falsus in omnibus.
• Franco vs. People, 780 Phil. 36, 44 (2016) — Cited for the rule that circumstantial evidence must constitute an unbroken chain leading to a fair and reasonable conclusion pointing to the accused to the exclusion of others.
• Unilever Philippines, Inc. vs. Rivera, 710 Phil. 124, 136 (2013) — Cited for the requisites of the first written notice in termination proceedings.
• Genuino vs. National Labor Relations Commission, 564 Phil. 315, 327 (2007) — Cited for the primordial purpose of the first notice.
• AMA Computer College-East Rizal, et al. vs. Ignacio, 608 Phil. 436, 457 (2009) — Cited for the rule that what the law prohibits is the absolute absence of the opportunity to be heard.
• Manila Jockey Club, Inc. vs. Trajano, 712 Phil. 254, 273 (2013) — Cited for the entitlement of an illegally dismissed employee to reinstatement, backwages, and separation pay in lieu of reinstatement.
• Globe-Mackay Cable and Radio Corporation vs. National Labor Relations Commission, 283 Phil. 649 (1992) — Cited for the limitations and qualifications of the strained relations exception.
• Dimabayao vs. NLRC, 363 Phil. 279, 287 (1999) — Cited for the rule that strained relations may be invoked only against employees whose positions demand trust and confidence or whose differences preclude reinstatement.
• Belarso vs. Quality House, Inc., G.R. No. 209983, November 10, 2021 — Cited for the trust and confidence nature of a watchman's position.
• Genuino Agro-Industrial Development Corporation vs. Romano, et al., G.R. No. 204782, September 18, 2019 — Cited for the distinction between separation pay and backwages.

• Article 294, Presidential Decree No. 442 (Labor Code of the Philippines) — Protects security of tenure by providing that in cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by law. The Court cited it to frame the requirement of a lawful dismissal.
• Article 297, Presidential Decree No. 442 (Labor Code of the Philippines) — Enumerates just causes for termination, including serious misconduct or willful disobedience, fraud or willful breach of trust, and analogous causes. Respondent invoked serious misconduct and loss of trust and confidence under this article, but the Court found them unproven.
• Section 4, Rule 133, Revised Rules of Evidence (A.M. No. 19-08-15-SC) — Provides that conviction based on circumstantial evidence suffices if there is more than one circumstance, the facts from which inferences are derived are proven, and the combination produces conviction beyond reasonable doubt. The Court applied the concept by analogy to labor cases, where the quantum is only substantial evidence.
• Section 2, Rule XXIII, Book V, Omnibus Rules Implementing the Labor Code (as amended by DOLE Department Order No. 009-97) — Sets the standards of due process for termination, requiring substantial observance of a written notice specifying grounds and opportunity to explain, a hearing or conference, and a written notice of termination. The Court relied on the "substantially observed" language to find substantial compliance.
• Rule 45, Rules of Court — The petition was filed under Rule 45 as a Petition for Review on Certiorari.
• Rule 43, Rules of Court — Respondent filed a Petition for Review before the Court of Appeals under Rule 43.

Inting, Gaerlan, Dimaampao, and Singh, JJ.