Paez vs. Marinduque Electric Cooperative, Inc.

An employee's refusal to identify the person who instructed him to act does not constitute willful disobedience or fraud/breach of trust warranting dismissal where the employee does not hold a position of trust and confidence, did not derive undue advantage from the omission, and the employer was not prejudiced in its business interests; outright dismissal is also disproportionate where the employee has rendered long service with no prior infractions.

Petitioner Jimmy Paez was hired by respondent Marinduque Electric Cooperative, Inc. (MARELCO) on March 16, 1984, and at the time of his termination on March 21, 2005, occupied the position of Sub-Office Chief. MARELCO is an electric cooperative that undertook Smart and Globe Projects involving the energization of telecommunications cell sites. In 2004, MARELCO discovered that several Globe cell sites had been illegally tapped to the service connections of member-consumers, prompting the creation of an Ad-hoc Committee to investigate the irregularities.

Petitioner Jimmy Paez was hired by respondent Marinduque Electric Cooperative, Inc. (MARELCO) on March 16, 1984. Over the course of 21 years, he rose to the position of Sub-Office Chief, serving without any recorded infraction or offense until the events that led to this case.

Sometime in 2004, MARELCO discovered highly irregular activities in connection with its Smart and Globe Projects. It learned that several Globe cell sites had been illegally tapped to the service connections of member-consumers in the vicinity. MARELCO created an Ad-hoc Committee to investigate the matter and invited petitioner, among others, to shed light on the irregularities. The Committee specifically asked petitioner to identify the person who ordered or approved the energization of the Globe cell sites and the installation of the KWH meter at Brgy. San Antonio, Sta. Cruz. Petitioner answered that the go-signal was given by someone from the Technical Services Department, but he could not remember who, because the approval was made through a telephone conversation and he failed to identify the voice of the person he was speaking with.

Petitioner later received three letters of invitation dated January 24, 2005, February 10, 2005, and February 15, 2005, directing him to attend a further investigation regarding the irregularities. He failed to attend for certain reasons, and the investigating committee deemed his non-appearance a waiver of his right to be heard and to present evidence. After the inquiry concluded, petitioner was placed under floating status on the ground that he was "concealing information apparently designed for whatever favor either or both yourself and any party/ies which may be classified as collusion or conspiracy including conflict of interest."

On March 21, 2005, MARELCO terminated petitioner's services on that same ground. Petitioner appealed on March 28, 2005, stating that he had nothing to do with the Globe and Smart construction and explaining that at the relevant time he had already been recalled as Area Supervisor of Sta. Cruz and assigned to three islands (Polo, Maniwaya, Mogpog); he decided to energize the cell sites because he believed there were no more problems, as the documents were complete and the required payments had been paid. MARELCO did not reverse its decision. Petitioner then filed a complaint for illegal dismissal before the Labor Arbiter. MARELCO maintained that petitioner violated Section 7.2.9 of its Code of Employees Conduct for knowingly giving untruthful statements or concealing material facts to the Ad-hoc Committee and the Executive Committee, and accordingly imposed the penalty of dismissal.

The Labor Arbiter dismissed the complaint, finding that petitioner's refusal to divulge the name constituted serious misconduct and fraud or willful breach of trust. The NLRC reversed, ruling the dismissal illegal and ordering backwages and retirement pay. The CA affirmed the NLRC with modification, sustaining the validity of petitioner's dismissal on a different ground — that he failed to ensure Globe's application went through proper procedure and approved the connection without instruction from the Technical Services Department and without prior Board approval — and deleting the monetary awards granted to him. The Labor Arbiter and the NLRC, however, made no mention of any failure to await Board approval as a basis for dismissal.

• Nature of the dismissal ground: Petitioner insisted that the only ground for his dismissal — his failure to reveal the name of the person who approved the energization of the Globe cell sites — is not tantamount to willful disobedience or fraud or loss of trust and confidence.
• CA's reversible error: Petitioner contended that the CA committed reversible error when it reversed the NLRC decision based on a misconception that he was dismissed for failure to abide by the proper company procedure, a ground never raised before the Labor Arbiter or NLRC.
• Proportionality of penalty: Assuming arguendo that he committed an infraction, petitioner argued that a less severe penalty than dismissal would suffice, considering the 21 years of service he had rendered for MARELCO.

• Willful concealment: Respondent admitted that petitioner was dismissed due to his willful concealment of facts during the investigation but averred that subsequent developments and evidence proved that petitioner failed to comply with proper company procedure, such as failure to wait for the approval of the Board of Directors before pushing through with the energization of the cell sites.
• Valid ground for termination: Respondent maintained that this failure to follow proper procedure constituted a valid ground for the termination of petitioner's employment.

• Willful Disobedience: Whether petitioner's refusal to divulge the identity of the person who instructed him to energize the Globe cell sites constitutes willful disobedience under Article 297(a) of the Labor Code.
• Fraud or Loss of Trust and Confidence: Whether petitioner's omission constitutes fraud or willful breach of trust under Article 297(c) of the Labor Code.
• Due Process — Change of Ground: Whether the CA committed reversible error by sustaining petitioner's dismissal on a ground different from that established before the Labor Arbiter and the NLRC.
• Proportionality of Penalty: Whether outright dismissal is commensurate to petitioner's infraction given his 21 years of service and absence of prior violations.

• Willful Disobedience: No. Petitioner's refusal to divulge the name of the person who instructed him to energize the cell sites could not be characterized as willful disobedience under Article 297(a), as it was not attended by a wrongful or perverse mental attitude, and petitioner neither benefited from the omission nor prejudiced MARELCO's business interests.
• Fraud or Loss of Trust and Confidence: No. Petitioner did not hold a position of trust and confidence — he was neither a managerial employee nor a fiduciary rank-and-file employee — and thus Article 297(c) of the Labor Code does not apply.
• Due Process — Change of Ground: Yes, the CA committed reversible error. The ground it relied upon — failure to ensure Globe's application went through proper procedure — was never the basis for petitioner's termination before the Labor Arbiter or NLRC, and raising it deprived petitioner of due process.
• Proportionality of Penalty: No, outright dismissal is not commensurate. Given petitioner's 21 years of service and the absence of any prior infraction, the NLRC's declaration of illegal dismissal is just and equitable.

• Willful Disobedience: For termination under Article 297(a) for willful disobedience, two requisites must concur: (a) the employee's conduct must be willful or intentional, and (b) the order violated must be reasonable, lawful, made known to the employee, and pertain to the duties he was engaged to discharge. Willfulness requires a wrongful and perverse mental attitude rendering the act inconsistent with proper subordination, and it is implied that the erring employee obtains undue advantage detrimental to the employer's business interest. Petitioner's refusal to name the person who instructed him to energize the cell sites lacked these elements. He neither benefited from the omission nor prejudiced MARELCO; in fact, MARELCO was able to complete its investigation and arrive at a conclusion despite the non-disclosure. Moreover, petitioner's 21-year record without any prior charge or infraction demonstrated no propensity to disobey superiors or company rules. There was thus no wrong or perversity warranting termination for willful disobedience.

• Fraud or Loss of Trust and Confidence: For fraud or loss of trust and confidence to be a valid ground for termination, the employer must establish that: (1) the employee holds a position of trust and confidence; and (2) the act complained of justifies the loss of trust and confidence. The law contemplates two classes of positions of trust: managerial employees, who are vested with the power to lay down management policies and to hire, transfer, suspend, lay off, recall, discharge, assign, or discipline employees or effectively recommend such actions; and fiduciary rank-and-file employees such as cashiers, auditors, and property custodians, who regularly handle significant amounts of money or property. Petitioner, while holding the title of Sub-Office Chief, was not vested with powers to lay down management policies or recommend managerial actions, nor was he charged with the care and custody of the employer's money or property. He was neither a managerial nor a fiduciary rank-and-file employee, and Article 297(c) therefore could not apply.

• Due Process — Change of Ground: The established record shows that petitioner was terminated solely for his failure to identify the person who approved the energization of the cell sites and installation of the KWH meter. MARELCO itself admitted in its comment that this was the only basis for dismissal. The Labor Arbiter and the NLRC made no mention of any failure to await Board approval. The CA nevertheless sustained the dismissal on the ground that petitioner failed to ensure Globe's application went through proper procedure — a ground different from the established facts. This substitution of grounds deprived petitioner of due process, as he was never afforded the opportunity to defend against the charge of failing to await Board approval.

• Proportionality of Penalty: While petitioner committed an infraction or dishonesty in refusing to identify the person who instructed him, outright dismissal was not commensurate to the misdemeanor. It is settled that in determining the penalty for an erring employee, due consideration must be given to length of service and the number of violations committed. Petitioner served MARELCO for 21 years with no prior infractions. Under these circumstances, the NLRC's declaration of illegal dismissal was just and equitable, and outright dismissal would be too severe a penalty.

• Willful disobedience under Article 297(a) of the Labor Code — Requires that (a) the employee's conduct be willful or intentional, characterized by a wrongful and perverse mental attitude rendering the act inconsistent with proper subordination, and (b) the order violated be reasonable, lawful, made known to the employee, and pertain to the duties he was engaged to discharge. It is implied that the erring employee obtains undue advantage detrimental to the employer's business interest. The Court applied this doctrine to hold that petitioner's refusal to name the person who instructed him did not satisfy these requisites, as there was no perverse mental attitude, no undue advantage, and no prejudice to MARELCO.

• Loss of trust and confidence under Article 297(c) of the Labor Code — Requires that (1) the employee holds a position of trust and confidence, and (2) the act complained of justifies the loss of trust and confidence. The law contemplates two classes of positions of trust: first, managerial employees vested with the power to lay down management policies and to hire, transfer, suspend, lay off, recall, discharge, assign, or discipline employees or effectively recommend such managerial actions; and second, fiduciary rank-and-file employees such as cashiers, auditors, and property custodians who regularly handle significant amounts of money or property. The Court held that petitioner, as Sub-Office Chief, fell into neither class, and Article 297(c) could not apply.

• Proportionality of penalty; consideration of length of service — In determining the penalty to be imposed on an erring employee, due consideration must be given to the employee's length of service and the number of violations committed during employment. The Court applied this principle to hold that petitioner's 21 years of service without prior infraction rendered outright dismissal too severe, and the NLRC's ruling of illegal dismissal was just and equitable.

• "Under the foregoing standards, the disobedience attributed to petitioner, which, to reiterate, is his refusal to divulge the name of the person who instructed him to push through with the energization of Globe cell sites and the installation of the KWH Meter, could not be justly characterized as willful within the contemplation of Article 297 of the Labor Code. He neither benefited from it, nor thereby prejudiced the business interest of MARELCO." — This passage articulates the ratio decidendi on the willful disobedience issue, defining the boundary between mere non-compliance and the perverse mental attitude required for dismissal under Article 297(a).

• "In the instant case, petitioner was neither a managerial nor a fiduciary rank-and-file employee. While having the position of Sub-Office Chief of MARELCO at the time of his dismissal, records show that he was not vested with powers to lay down management policies and recommend managerial actions. Likewise, he was not in charged with the care and custody of his employer's money or property. Simply put, petitioner did not hold a position of trust and confidence. Thus, Article 297(c) of the Labor Code will never apply to petitioner's case." — This passage establishes the Court's application of the two-class framework for positions of trust and confidence, demonstrating that a supervisory title alone does not suffice to bring an employee within Article 297(c).

• "To raise this, his failure to ensure that Globe's application had gone through the proper procedure before acting thereon, as a ground for petitioner's dismissal, the CA had deprived petitioner of due process." — This passage defines the due process violation inherent in the CA's substitution of grounds, a principle significant for labor cases where the appellate tribunal's independent factual basis diverges from the employer's actual charge.

• Coca-Cola Bottlers, Phils., Inc. vs. Kapisanan ng Malayang Manggagawa sa Coca-Cola-FFW, 492 Phil. 570 (2005) — Cited for the two requisites of willful disobedience under Article 297(a): that the conduct must be willful or intentional, and that the order violated must be reasonable, lawful, made known to the employee, and pertain to the duties he was engaged to discharge.
• Dongon vs. Rapid Movers and Forwarders Co., Inc., 716 Phil. 533 (2013) — Cited for the definition of willfulness as a wrongful and perverse mental attitude rendering the employee's act inconsistent with proper subordination, and for the proposition that the erring employee obtains undue advantage detrimental to the employer's business interest.
• Lagahit vs. Pacific Concord Container Lines, 778 Phil. 168 (2016) — Cited for the two requisites of fraud or loss of trust and confidence as a valid ground for termination: that the employee holds a position of trust and confidence, and that the act complained of justifies the loss of trust.
• PJ Lhuiller, Inc. vs. Camacho, 806 Phil. 413 (2017) — Cited for the two classes of positions of trust and confidence: managerial employees and fiduciary rank-and-file employees.
• Wesleyan University-Philippines vs. Reyes, 740 Phil. 297 (2014) — Cited for the definition of managerial employees and the classification of fiduciary rank-and-file employees who regularly handle significant amounts of money or property.
• De Guzman vs. National Labor Relations Commission, 371 Phil. 192 (1999) — Cited for the doctrine that in determining the penalty for an erring employee, due consideration must be given to length of service and the number of violations committed.

• Article 297 (formerly Article 282), Labor Code of the Philippines — Enumerates the just causes for termination by employer: (a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; (d) commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representatives; and (e) other causes analogous to the foregoing. The Court applied paragraphs (a) and (c) and found that neither was satisfied on the facts.

Peralta, C.J., Caguioa, Carandang, and Zalameda, JJ., concurred.