An employee dismissed for serious misconduct or for causes reflecting on their moral character (e.g., dishonesty, theft, illicit sexual relations with a fellow worker) is not entitled to separation pay or financial assistance on the grounds of social justice or equity; such an award would effectively reward wrongdoing.

Marilyn Abucay, a traffic operator at PLDT, was accused by two complainants of demanding and receiving P3,800.00 in exchange for a promise to facilitate the approval of their telephone installation applications. Following an investigation, PLDT found her guilty and terminated her employment.

• Marilyn Abucay, a traffic operator for PLDT, was accused by two individuals of demanding and receiving P3,800.00 from them in exchange for her promise to facilitate the approval of their telephone installation applications.
• After an internal investigation, PLDT found Abucay guilty as charged and terminated her employment.
• Abucay filed a complaint for illegal dismissal, which the Labor Arbiter dismissed for lack of merit, thereby sustaining her dismissal.
• Despite upholding the dismissal, the Labor Arbiter awarded Abucay financial assistance equivalent to one month's pay for every year of her service, citing that the complainants were not totally blameless as the deal occurred outside company premises and their act of giving money without a receipt was tantamount to corruption of public officers.
• Abucay had worked for PLDT for 10 years.
• The NLRC affirmed the Labor Arbiter's decision, including the award of financial assistance, on grounds of equity and compassion, considering Abucay's long years of service.
• Abucay did not take further action after the NLRC decision, impliedly accepting the validity of her dismissal.

• PLDT argued that an employee dismissed for cause is not entitled to reinstatement, backwages, or any other relief, including financial assistance, because the dismissal is in accordance with law.
• PLDT contended that awarding financial assistance to an employee dismissed for dishonesty rewards rather than punishes the misconduct and lacks legal authorization or justification.
• PLDT asserted that equity and compassion cannot substitute for law and that such an award sets a premium on dishonesty and encourages, rather than deters, corruption.

• The NLRC (public respondent) argued that Abucay was sufficiently punished by her dismissal.
• The NLRC claimed the grant of financial assistance was not a reward for her offense but was intended to help her cope with the loss of employment after 10 years of service.
• The NLRC cited previous Supreme Court cases where employees dismissed for cause were nevertheless granted separation pay on grounds of social and compassionate justice.
• The NLRC found the award equitable, considering Abucay's long years of service and her contribution to the company, despite not approving of her malfeasance.

• Whether or not an employee dismissed for cause, specifically for an act of dishonesty, is entitled to an award of financial assistance (separation pay) on grounds of equity and compassion.

• The Supreme Court granted PLDT's petition and disallowed the award of financial assistance to Marilyn Abucay.
• The Court held that while social justice and compassion are constitutionally mandated, they cannot be used to condone wrongdoing or to compel an employer to give separation pay to an employee dismissed for serious misconduct or for causes reflecting on moral character.
• The Court clarified that separation pay as a measure of social justice is permissible only when an employee is validly dismissed for causes other than serious misconduct or those reflecting on moral character (e.g., inefficiency, non-iniquitous loss of confidence, redundancy, retrenchment to prevent losses, or closure of establishment not due to serious business losses or financial reverses).
• Dismissal for dishonesty, like in Abucay's case, falls under serious misconduct reflecting on moral character, and awarding separation pay would pervert the meaning of social justice and reward disloyalty.
• The Court also ruled that if separation pay is found due, it should generally be computed at one month's salary for every year of service, assuming the length of service is material, without prejudice to more favorable agreements.

• Social Justice — A broad principle of promoting the welfare of all the people, the adoption by the Government of measures calculated to insure economic stability of all the component elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally, through the adoption of measures legally justifiable, or extra-constitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex. In this case, the Court held that social justice is not intended to countenance wrongdoing or to be a refuge for scoundrels. It cannot be used to justify awarding separation pay to an employee dismissed for dishonesty, as this would reward misconduct.
• Equity — Justice outside law, being ethical rather than jural and belonging to the sphere of morals rather than law. It is grounded on precepts of conscience and not on any sanction of positive law. The Court ruled that equity cannot prevail against expressed provisions of labor laws allowing dismissal for cause without separation pay, especially when the cause involves serious misconduct.
• Dismissal for Just Cause — Termination of employment by the employer for reasons specified in the Labor Code, such as serious misconduct or willful disobedience, gross and habitual neglect of duties, fraud or willful breach of trust, commission of a crime or offense against the employer or his family or representative, or other analogous causes. The Court affirmed that Abucay's dismissal for dishonesty was a dismissal for just cause, which generally does not entitle an employee to separation pay.
• Separation Pay — An amount given to an employee terminated from employment, typically in cases of authorized causes (e.g., retrenchment, closure) or, exceptionally, for just causes on compassionate grounds. The Court rationalized the grant of separation pay, limiting it to valid dismissals for causes not involving serious misconduct or moral turpitude.

• "We hold that henceforth separation pay shall be allowed as a measure of social justice only in those instances where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character."
• "Where the reason for the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed employee separation pay, or financial assistance, or whatever other name it is called, on the ground of social justice."
• "A contrary rule would, as the petitioner correctly argues, have the effect of rewarding rather than punishing the erring employee for his offense."
• "The policy of social justice is not intended to countenance wrongdoing simply because it is committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense."
• "Social justice cannot be permitted to be the refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty."

• Firestone Tire and Rubber Company of the Philippines v. Lariosa — Cited by respondents where an employee dismissed for theft was allowed separation pay. The Court distinguished this and other similar past rulings, noting inconsistency and now setting a clearer guideline.
• Soco v. Mercantile Corporation of Davao — Cited by respondents where an employee dismissed for unauthorized use of a company vehicle and refusal to attend grievance proceedings was granted separation pay. Similarly distinguished by the Court.
• Filipro, Inc. v. NLRC — Cited as an instance where an employee validly dismissed for violating company policy was allowed separation pay. The Court noted inconsistencies in past awards.
• Metro Drug Corporation v. NLRC — Cited where an employee validly removed for loss of confidence (failure to account for funds) was granted separation pay. The Court noted inconsistencies in past awards.
• Engineering Equipment, Inc. v. NLRC — Cited where an employee dismissed for instigating labor unrest was granted separation pay. The Court noted inconsistencies in past awards.
• New Frontier Mines, Inc. v. NLRC — Cited where an employee dismissed for lack of confidence and abandonment was granted separation pay. The Court noted inconsistencies in past awards.
• San Miguel Corporation v. Deputy Minister of Labor and Employment, et al. — Cited where employees dismissed for misappropriating company funds were allowed separation pay. The Court noted inconsistencies in past awards and effectively overturned the leniency in such cases.

• Constitution, Article II (Declaration of Principles and State Policies) and Article XIII (Social Justice and Human Rights, sub-topic Labor) — Cited as the basis for the state's commitment to social justice and the protection of workers' rights, which underpins the grant of separation pay in proper cases even for dismissal with cause, but not when the cause involves serious misconduct or moral turpitude.
• Omnibus Rules Implementing the Labor Code, Book VI, Rule 1, Section 7 — Impliedly referenced as the general rule that a person dismissed for cause is not entitled to separation pay. The Court carves out exceptions based on social justice but clarifies its limits.

• Justice Padilla — Concurred with disallowing separation pay due to dishonesty. However, he disagreed with the majority's view that separation pay, when due, should be computed at a standard rate of one month's salary per year of service. He opined that the amount of financial assistance (except for terminations based on dishonesty or serious misconduct involving moral turpitude) should be left to the judgment of the NLRC based on the "environmental facts" of each case, and the Court should generally not disturb such awards absent grave abuse of discretion.

• Chief Justice Fernan — Dissented, arguing that providing a rigid mathematical formula for separation pay is not in keeping with constitutional directives on social justice, particularly the principle that "those who have less in life should have more in law." He believed computing financial assistance based on a fixed formula would not adequately consider the hardship faced by low-salaried employees and agreed with Justice Padilla that the award of financial assistance should be left to the NLRC's discretion based on the case's "environmental facts."
• Justice Griño-Aquino — Dissented with the statement, "we should not rationalize compassion. I vote to affirm the grant of financial assistance."