Sterling Paper Products Enterprises, Inc. vs. KMM-Katipunan and Esponga

An employee's utterance of obscene, insulting, or offensive words against a superior, coupled with a lewd gesture and refusal to perform assigned duties, constitutes serious misconduct justifying dismissal under Article 282(a) of the Labor Code when the act is serious, related to the performance of the employee's duties, and performed with wrongful intent.

Sterling Paper Products Enterprises, Inc. hired Raymond Esponga as a machine operator on July 29, 1998. In June 2006, Sterling imposed a 20-day suspension on Esponga and several other employees for allegedly participating in a wildcat strike, with a warning that repetition of a similar offense would compel termination. The present dispute arises from a June 26, 2010 workplace incident and the subsequent disciplinary proceedings that culminated in Esponga's termination.

Sterling Paper Products Enterprises, Inc. hired Raymond Z. Esponga as a machine operator on July 29, 1998. In June 2006, Sterling imposed a 20-day suspension on Esponga and several other employees for allegedly participating in a wildcat strike, with a warning that repetition of a similar offense would compel termination.

On June 26, 2010, Sterling's supervisor Mercy Vinoya found Esponga and his co-employees about to take a nap on the sheeter machine. She called their attention and prohibited them from doing so for safety reasons. Esponga and his co-employees transferred to a mango tree near the staff house. When Vinoya passed by the staff house, she heard Esponga utter, "Huwag maingay, puro bawal." She confronted him, and he responded in a loud and disrespectful tone, "Pura kayo bawal, bakit bawal ba magpahinga?" When Vinoya turned away, Esponga gave her the "dirty finger" sign in front of his co-employees and said, "Wala ka pala eh, puro ka dakdak. Baka pag ako nagsalita hindi mo kayanin." The incident was witnessed by Mylene Pesimo, who executed a handwritten account of what she saw. Later that day, Esponga was found not working, as the machine assigned to him was not running from 2:20 to 4:30 in the afternoon. Instead, he was seen conversing with co-employees Bobby Dolor and Ruel Bertulfo. He also failed to submit his daily report from June 21 to June 29, 2010.

A Notice to Explain dated July 26, 2010 was served on Esponga on July 30, 2010, requiring him to submit a written explanation and attend an administrative hearing on August 9, 2010. On August 9, 2010, Esponga submitted his written explanation denying the charges, claiming he was not in the area where the incident reportedly took place and that during the time he was not seen operating his machine, he was at the Engineering Department and then proceeded to the comfort room. Because the July 26, 2010 Notice to Explain indicated a wrong date for the incident, an amended Notice to Explain dated August 16, 2010 was issued, requiring him to submit a written explanation and attend a hearing on August 23, 2010. Esponga failed to submit a written explanation and did not attend. The hearing was reset several more times due to his failure to appear, and was finally set on October 4, 2010, which Esponga and his counsel still failed to attend.

Having found Esponga guilty of gross and serious misconduct, gross disrespect to superior, and habitual negligence, Sterling sent a termination notice dated November 15, 2010. Esponga and KMM-Katipunan then filed a complaint for illegal dismissal, unfair labor practice, damages, and attorney's fees. The Labor Arbiter ruled Esponga was illegally dismissed, finding that Sterling failed to submit the company's code of conduct in evidence. The NLRC reversed, declaring the dismissal valid. The Court of Appeals reinstated the Labor Arbiter's ruling, holding that Esponga's conduct constituted only simple misconduct, as his actuations sprang from his perception that he was being unfairly prevented from taking a rest and could not be said to be motivated by wrongful intent.

• Serious Misconduct: Sterling argued that Esponga's utterance of foul and abusive language against his supervisor, demonstrating a dirty finger, and defiance to perform his duties undeniably constitute serious misconduct.
• Relation to Duties: Sterling asserted that Esponga's acts were not only serious but also related to the performance of his duties.
• Wrongful Intent: Sterling maintained that Esponga was motivated by wrongful intent in committing the acts.
• Due Process and Management Prerogative: Sterling contended that the existence of just cause for dismissal and its compliance with due process requirements had been proven by clear, convincing, and substantial evidence on record, and that an employer has free rein and wide latitude of discretion to regulate all aspects of employment, including the prerogative to instill discipline and impose penalties upon erring employees.

• Burden of Proof: Esponga replied that Sterling failed to establish the validity of his dismissal by clear and convincing evidence, and that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter, as the employer must affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause.

• Serious Misconduct: Whether the cause of Esponga's dismissal amounts to serious misconduct.

• Serious Misconduct: Yes. Esponga's conduct—uttering obscene and disrespectful language, making a lewd "dirty finger" gesture toward his supervisor, and refusing to perform assigned duties—satisfied all three elements of serious misconduct under Article 282(a) of the Labor Code: seriousness, relation to the performance of his duties, and wrongful intent.

• Serious Misconduct: The Court applied the settled three-element test for serious misconduct as a just cause for dismissal: (a) the misconduct must be serious, i.e., of such grave and aggravated character and not merely trivial or unimportant; (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. As to the first element, the Court relied on consistent precedent holding that the utterance of obscene, insulting, or offensive words against a superior is not only destructive of co-employee morale and a violation of company rules but also constitutes gross misconduct, citing de La Cruz vs. National Labor Relations Commission, Autobus Workers' Union vs. National Labor Relations Commission, Asian Design and Manufacturing Corporation vs. Deputy Minister of Labor, and Reynolds Philippines Corporation vs. Eslava. As to the second element, Esponga's conduct was related to his work: Vinoya did not prohibit him from taking a nap but merely reminded him that he could not do so on the sheeter machine for safety reasons, and Esponga's acts reflected an unwillingness to comply with reasonable management directives. As to the third element, contrary to the CA's pronouncement, wrongful intent was present: Esponga committed all the acts in front of his co-employees, evidently intending to disrespect and humiliate his supervisor. The Court also addressed the recantation of witness Pesimo, holding that her earlier handwritten statement prevailed over her subsequent recantation, as there was no proof the earlier statement was made under force or intimidation, the recantation was made only after Esponga came to see her, and in a text message to Vinoya she did not deny the contents of her earlier statement. The Court further emphasized the employer's right to exercise management prerogative, including the right to dismiss erring employees, as long as the exercise of judgment is in good faith to advance its interest and not to circumvent employee rights.

• Serious Misconduct as Just Cause for Dismissal — Misconduct is an improper or wrong conduct, a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. For misconduct to be a valid cause for dismissal under Article 282(a) of the Labor Code, three elements must concur: (a) the misconduct must be serious, i.e., of such grave and aggravated character and not merely trivial or unimportant; (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. The Court found all three elements present in Esponga's conduct.

• Recantation of Testimony — A recantation does not necessarily cancel an earlier declaration. Where previous testimony is retracted and a subsequent different testimony is made, the test to decide which to believe is one of comparison coupled with the application of the general rules of evidence. A testimony solemnly given in court should not be set aside and disregarded lightly; both the previous and subsequent testimonies should be carefully compared and juxtaposed, the circumstances under which each was made scrutinized, and the reasons and motives for the change analyzed. The Court applied this doctrine to find Pesimo's earlier statement more credible than her recantation, noting the recantation was made only after Esponga visited her and that she did not deny the earlier statement's contents in a subsequent text message.

• Management Prerogative — The right of an employer to exercise management prerogative in dealing with its affairs, including the right to dismiss erring employees, is a general principle of labor law. Even as the law is solicitous of employee welfare, it also recognizes the employer's exercise of management prerogatives. As long as the company's exercise of judgment is in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of employees under the laws or valid agreements, such exercise will be upheld.

• "To summarize, for misconduct or improper behavior to be a just cause for dismissal, the following elements must concur: (a) the misconduct 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 passage sets forth the controlling three-element test for serious misconduct as a just cause for dismissal, the ratio decidendi of the case.

• "An aggrieved employee who wants to unburden himself of his disappointments and frustrations in his job or relations with his immediate superior would normally approach said superior directly or otherwise ask some other officer possibly to mediate and discuss the problem with the end in view of settling their differences without causing ferocious conflicts. No matter how the employee dislikes his employer professionally, and even if he is in a confrontational disposition, he cannot afford to be disrespectful and dare to talk with an unguarded tongue and/or with a baleful pen." — This passage articulates the standard of conduct expected of employees in dealing with superiors, reinforcing the finding that Esponga's disrespectful behavior was not a mere error in judgment but constituted serious misconduct.

• "As long as the company's exercise of judgment is in good faith to advance its interest and not for the purpose of defeating or circumventing the rights of employees under the laws or valid agreements, such exercise will be upheld." — This passage states the governing principle on management prerogative, contextualizing the Court's deference to the employer's disciplinary decision.

• de La Cruz vs. National Labor Relations Commission, 258 Phil. 432 (1989) — Followed. The dismissed employee shouted "Sayang ang pagka-professional mo!" and "Putang ina mo" at the company physician. Cited to support the rule that obscene and insulting language against a superior constitutes gross misconduct.

• Autobus Workers' Union vs. National Labor Relations Commission, 353 Phil. 419 (1998) — Followed. The dismissed employee told his supervisor "Gago ka" and taunted him with "Bakit anong gusto mo, tang ina mo." Cited to support the rule that offensive words against a superior warrant dismissal.

• Asian Design and Manufacturing Corporation vs. Deputy Minister of Labor, 226 Phil. 20 (1986) — Followed. The dismissed employee made false and malicious statements against the foreman and posted a defamatory notice. Cited to illustrate that inflammatory language toward a superior is ground for dismissal.

• Reynolds Philippines Corporation vs. Eslava, 221 Phil. 614 (1985) — Followed. The dismissed employee circulated letters calling the executive vice-president a "big fool," "anti-Filipino," and accusing him of various misconduct. Cited to support the rule that accusatory and inflammatory language toward a superior justifies termination.

• Santos vs. People, 443 Phil. 618 (2003) — Followed. Cited for the doctrine that a recantation does not necessarily cancel an earlier declaration.

• Firaza vs. People, 547 Phil. 573 (2007) — Followed. Cited for the rule on comparing retracted and subsequent testimony to determine which to believe.

• Philippines Today, Inc. vs. National Labor Relations Commission, 334 Phil. 854 (1997) — Followed. Cited for the principle that an employee cannot be disrespectful toward a superior regardless of professional disagreements.

• Moya vs. First Solid Rubber Industries, Inc., 718 Phil. 77 (2013) — Followed. Cited for the doctrine on management prerogative and the employer's right to dismiss erring employees in good faith.

• Article 282(a), Labor Code — Provides that an employer may terminate an employee for serious misconduct. The Court applied this provision by testing Esponga's conduct against the three-element standard for serious misconduct and finding all elements satisfied, thereby justifying the termination.

Antonio T. Carpio (Chairperson), Marvic M.V.F. Leonen, Francis H. Jardeleza, Samuel R. Martires.