Papertech, Inc. vs. Katando

The doctrine of strained relations may apply even to rank-and-file employees who do not occupy positions of trust and confidence, when the protracted and litigious nature of the parties' conflict, combined with the abolition of the employee's position, renders reinstatement no longer feasible.

Papertech, Inc. hired Josephine P. Katando as a machine operator on June 6, 1996 at its premises in Pasig City. Katando became active in union activities, joining other employees in filing a Petition for Certification Election in 2007 and conducting a picket on February 28, 2008. These activities triggered a series of legal disputes between the parties spanning over a decade, including complaints for illegal strike, illegal suspension, and illegal dismissal, alongside parallel proceedings concerning the validity of Papertech's reassignment of employees from its Pasig City premises to provincial plants.

On June 6, 1996, Papertech, Inc. hired Josephine P. Katando as a machine operator at its office on Felipe Pike Street, Bagong Ilog, Pasig City. In 2007, Katando and other employees filed a Petition for Certification Election. They conducted a picket at the company on February 28, 2008. Papertech responded by filing a Complaint for Illegal Strike on May 24, 2008, praying that the participants be declared to have lost their employment. Labor Arbiter Thomas T. Que, Jr. ruled in favor of Papertech on May 30, 2008, but the NLRC reversed that ruling on May 29, 2009 and ordered the reinstatement of Katando and her co-employees. The NLRC's ruling was upheld by the Court of Appeals and the Supreme Court, and became final and executory on September 2, 2011. Upon motion of the employees, Labor Arbiter Que issued a Writ of Execution on April 17, 2013 ordering reinstatement at Papertech's Pasig City premises.

On May 14, 2013, instead of reinstating the employees to their former posts, Papertech sent a notice assigning them to various provincial locations — Cagayan De Oro, Davao City, Cebu City, Iloilo City, and Pangasinan — under pain of removal for non-compliance. The employees filed a Manifestation with Urgent Motion to Cite Respondent Company in Contempt and to Order Payment of their Salaries. Labor Arbiter Que denied the motion on August 5, 2013. The employees elevated the matter to the NLRC, which granted their petition in its Resolutions dated September 30, 2013 and November 29, 2013, declaring Labor Arbiter Que's order null and void and directing execution of the May 29, 2009 NLRC decision. Papertech assailed these NLRC resolutions before the CA in CA-G.R. SP No. 135557.

While that petition was pending, Papertech issued a memorandum on December 14, 2013 transferring Katando to its Makati office, purportedly due to urgency of business, stating she would remain under the same employment terms but would be tasked to clean the area. Three days later, Katando received another memorandum requiring her to explain why she should not be subjected to disciplinary action for failing to sign the December 14 memorandum, for refusing to transfer, and for shouting at a company representative. On December 26, 2013, Papertech imposed a seven-day suspension for disrespectful behavior. After serving that suspension, Katando was suspended again for one week for refusing to transfer. She filed a complaint for illegal suspension before the NLRC, and Labor Arbiter Rosalina Maria O. Apita-Battung ruled on May 26, 2014 that the suspension was illegal.

Papertech issued a memorandum on February 6, 2014 reiterating Katando's transfer to the Makati office. When Katando refused to receive the memorandum, Papertech required her to explain within 48 hours. She submitted her explanation, but on February 17, 2014, Papertech issued another notice directing her to explain why she should not be administratively charged for refusing to transfer. Despite her explanation, Papertech dismissed Katando on February 24, 2014 for insubordination. Katando filed a complaint for illegal dismissal, moral and exemplary damages, and attorney's fees against Papertech, its Chairman of the Board Alexander Wong, and Human Resource Manager Joan M. Balde.

Labor Arbiter Nicolas B. Nicolas ruled on January 30, 2015 that Katando was illegally dismissed, finding no just cause for termination. Papertech failed to prove legitimate urgency justifying the transfer, and did not disprove the certification from the Makati City Business Permit Office that it was not a registered entity in Makati City. Labor Arbiter Nicolas ordered backwages and separation pay in lieu of reinstatement, citing the antipathy and antagonism between the parties. The NLRC affirmed on May 25, 2015, noting that the multiple cases between the parties created an atmosphere of antipathy and antagonism. Meanwhile, in the parallel case CA-G.R. SP No. 135557, the CA ruled on November 9, 2015 that the transfer of Papertech's manufacturing and production departments to provincial plants was a valid exercise of management prerogative, and that the positions held by Katando and co-respondents in Pasig City were abolished. That ruling was upheld by the Supreme Court and became final on November 21, 2016. In the present case, the CA granted Katando's petition on August 18, 2017, ordering reinstatement on the ground that the doctrine of strained relations could not apply to a rank-and-file employee who sought reinstatement and against whom no strained relations were proven.

• Reversal of CA Ruling: Papertech sought reversal of the CA decision ordering Katando's reinstatement, maintaining that separation pay was the appropriate remedy given the strained relationship between the parties.
• Willingness to Pay Separation Pay: Papertech expressed willingness to pay the judgment award of separation pay, stating that "in order not to prolong the proceedings, and for both parties to peacefully move on from this unwanted situation," it was prepared to comply, thereby indicating its position that reinstatement was no longer viable.

• Reinstatement Sought: Katando sought reinstatement to her former position, asserting that the doctrine of strained relations should not bar her return since she is a rank-and-file employee who does not occupy a position of trust and confidence.
• No Strained Relations Proven: Katando maintained that no strained relations existed between her and Papertech, arguing that involvement in litigation per se should not bar reinstatement, as no strained relations should arise from a valid and legal act of asserting one's right.

• Doctrine of Strained Relations: Whether the CA erred in ordering the reinstatement of Katando instead of granting her separation pay.

• Doctrine of Strained Relations: Yes, the CA erred. The doctrine of strained relations applies notwithstanding Katando's rank-and-file status, given the protracted litigation spanning eleven years and the abolition of her position, making reinstatement no longer feasible and separation pay the only viable remedy.

• Doctrine of Strained Relations: The doctrine of strained relations, first introduced in Balaquezon Employees & Workers Transportation Union vs. Zamora, was further elaborated in Globe-Mackay Cable and Radio Corp. vs. National Labor Relations Commission, which established four considerations: (1) the employee must occupy a position of trust and confidence; (2) reinstatement would likely generate an atmosphere of antipathy and antagonism adversely affecting efficiency and productivity; (3) the doctrine cannot be applied indiscriminately because some hostility is invariably engendered by litigation; and (4) it cannot arise from a valid and legal act of asserting one's right. The Court acknowledged that Katando, as a machine operator, does not occupy a position of trust and confidence, and that litigation per se should not bar reinstatement. However, the circumstances of this case nonetheless warranted application of the doctrine. The parties had been in continuous conflict since 2008 — for eleven years — involving at least four separate cases: Papertech's 2008 illegal strike complaint, Katando's 2013 verified petition for extraordinary remedies, her 2014 illegal suspension complaint, and her 2014 illegal dismissal complaint. Citing Digital Telecommunications Philippines, Inc. vs. Digitel Employees Union, the Court held that the length of time and demonstrated litigiousness of the parties sufficiently demonstrated strained relations. Papertech's own statement that it was willing to pay separation pay to "peacefully move on" confirmed it did not want Katando back. Furthermore, the final and executory November 9, 2015 CA decision in CA-G.R. SP No. 135557 had established that Papertech's manufacturing and production departments had been transferred to provincial plants and that the positions held by Katando and her co-respondents in Pasig City were abolished. Reinstatement as a machine operator in Pasig City was therefore no longer possible. Separation pay was the only viable option. The Court also declined to impose legal interest, finding that Papertech should not be penalized for delay in payment because it was Katando who chose to elevate the case to the NLRC and the CA, while Papertech had expressed willingness to pay the monetary awards after the Labor Arbiter's decision.

• Doctrine of Strained Relations — The doctrine permits the award of separation pay in lieu of reinstatement when the relationship between employer and employee has become so strained that reinstatement would adversely affect efficiency and productivity. The doctrine originated in Balaquezon Employees & Workers Transportation Union vs. Zamora, where the Court awarded backwatches as severance pay based on equity when reinstatement could no longer be effected due to the passage of time or "realities of the situation." In Globe-Mackay Cable and Radio Corp. vs. National Labor Relations Commission, the Court enumerated four considerations: (1) the employee must occupy a position where he or she enjoys the trust and confidence of the employer; (2) reinstatement would likely generate an atmosphere of antipathy and antagonism adversely affecting efficiency and productivity; (3) the doctrine cannot be applied indiscriminately because some hostility is invariably engendered by litigation; and (4) it cannot arise from a valid and legal act of asserting one's right. The doctrine cannot apply when the employee has not indicated aversion to returning to work, does not occupy a position of trust and confidence, or has no say in the operation of the employer's business. Strained relations must be proven as a fact. In this case, the Court applied the doctrine despite Katando's rank-and-file status, because the protracted eleven-year litigation and the abolition of her position made reinstatement no longer feasible — demonstrating that the doctrine may apply beyond the typical position-of-trust scenario when the totality of circumstances, including the length and intensity of conflict and the impossibility of reinstatement, so warrant.

• "Although Katando does not occupy a position of trust and confidence as a machine operator, the circumstances of this case nonetheless calls for the application of the doctrine of strained relations." — This passage marks the Court's departure from a rigid application of the position-of-trust requirement, extending the doctrine to rank-and-file employees when the protracted nature of conflict and abolition of positions render reinstatement infeasible.

• "It is true that litigation between the parties per se should not bar the reinstatement of an employee. However, as observed by the NLRC, this is not the only case involving Papertech and Katando. They have been in conflict since 2008, or for 11 years now." — This establishes the distinction between ordinary litigation-related hostility (insufficient to trigger the doctrine) and sustained, multi-case conflict over years (sufficient), drawing on the principle from Digital Telecommunications Philippines, Inc. vs. Digitel Employees Union.

• "Clearly, Papertech does not want Katando back as its employee." — The Court treated the employer's expressed willingness to pay separation pay and its failure to appeal the Labor Arbiter's decision as affirmative evidence of strained relations, supplementing the objective impossibility of reinstatement.

• Balaquezon Employees & Workers Transportation Union vs. Zamora, 186 Phil. 3 (1980) — Originating case for the doctrine of strained relations, where the Court awarded severance pay as an alternative to reinstatement based on equity. Followed as the doctrinal foundation.
• Globe-Mackay Cable and Radio Corp. vs. National Labor Relations Commission, 283 Phil. 649 (1992) — Clarified and expanded the doctrine by enumerating four considerations for its application, including the position-of-trust requirement and the prohibition against indiscriminate application. Followed as the primary framework, though the Court departed from the strict position-of-trust element in this case.
• Digital Telecommunications Philippines, Inc. vs. Digitel Employees Union, 697 Phil. 132 (2012) — Held that the length of time from the incident to resolution and the demonstrated litigiousness of the parties showed strained relations. Applied directly to support the conclusion that eleven years of protracted litigation demonstrated strained relations.
• Fernandez, Jr. vs. Manila Electric Co., G.R. No. 226002, June 25, 2018 — Clarified that the doctrine cannot apply when the employee has not indicated aversion to returning to work, does not occupy a position of trust, or has no say in the employer's operations. Cited but effectively distinguished, as the Court found the totality of circumstances warranted application despite Katando's rank-and-file status.
• Rodriguez vs. Sintron Systems, Inc., G.R. No. 240254, July 24, 2019 — Held that strained relations must be proven as a fact. Cited as a requisite that was satisfied through the evidence of protracted multi-case litigation.

Leonen (Chairperson), Gesmundo, Zalameda, and Delos Santos, JJ., concurred.