Wenphil Corporation vs. NLRC and Mallare

An employer's failure to give notice and conduct an investigation before dismissing an employee violates due process, but where just cause for dismissal is later established in the labor proceedings, the employee is not entitled to reinstatement and backwages; the employer may instead be held liable for an indemnity as a sanction for the procedural violation.

Wenphil Corporation and Roberto Mallare were employer and employee at Wenphil's Cubao Branch, where Mallare served as assistant head of the Backroom department. The employment relationship was governed by Wenphil's Personnel Manual, which conditioned the convening of an investigation board on the erring employee's request, and by the Labor Code's implementing rules requiring due process before dismissal. The governing framework included the constitutional and statutory protection of security of tenure.

Wenphil Corporation employed Roberto Mallare on January 18, 1984 as a crew member at its Cubao Branch. He later became assistant head of the Backroom department of the same branch. The employment relationship was governed by Wenphil's Personnel Manual, which provided that an investigation board would be convened only upon the request of the erring employee when the offense was punishable by a penalty higher than suspension for fifteen days.

At about 2:30 P.M. on May 20, 1985, Mallare had an altercation with co-employee Job Barrameda. According to petitioner Wenphil, the misunderstanding concerned tending the Salad Bar; Mallare slapped Barrameda's cap, stepped on his foot, and picked up the ice scooper and brandished it against him. Marijo B. Kolimlim, a management trainee, tried to pacify Mallare, but he defied her, so she reported the incident to assistant manager Delilah C. Hermosura. Hermosura immediately asked Mallare to see her, but he refused and had to be brought by the security guard. Before Hermosura, Mallare shouted and uttered profane words instead of explaining, and stated that the matter should be settled only by him and Barrameda.

The following day, Kolimlim and Hermosura submitted a report on the incident and recommended appropriate penalties on both employees. In the morning, the store manager issued a report meting out suspension on both until further notice. Later that day, the Operations Manager issued a memorandum advising Barrameda of a one-week suspension and dismissing Mallare from the service in accordance with the Personnel Manual. The notice of dismissal was served on Mallare on May 25, 1985.

Mallare filed a complaint against Wenphil for unfair labor practice, illegal suspension, and illegal dismissal. After the parties submitted their respective position papers to the Labor Arbiter, the hearing could not be conducted due to the repeated absence of counsel for private respondent, and the case was submitted for resolution. The Labor Arbiter later found that Mallare's dismissal was for just cause, as he was guilty of grave misconduct and insubordination, a finding borne by the sworn statements of witnesses. The NLRC, on appeal, found that Mallare had not been afforded due process before his dismissal.

• Waiver of Investigation: Petitioner argued that under its Personnel Manual, an investigation was required only if the offense was punishable by a penalty higher than fifteen days' suspension and the erring employee requested one; private respondent did not request an investigation and was therefore deemed to have waived it.
• Defiance as Waiver: Petitioner maintained that immediately after the incident, when private respondent was asked to see Hermosura, he was defiant and showed no interest in availing of an investigation.
• Due Process Already Afforded: Petitioner insisted that private respondent was afforded due process but refused to avail of it; when the matter reached the Labor Arbiter, he submitted his position paper, and any failure to hold a hearing was due to the non-appearance of his counsel.
• Just Cause for Dismissal: Petitioner argued that private respondent was guilty of serious misconduct in threatening or coercing a co-employee, a ground for dismissal under Article 283 of the Labor Code.
• Grave Abuse of Discretion: Petitioner alleged that the NLRC committed grave abuse of discretion in rendering a decision contrary to the evidence on record.

• Due Process in Dismissal: Whether private respondent was denied due process when he was dismissed without a formal notice and investigation before termination.
• Waiver of Right to Investigation: Whether private respondent waived his right to an investigation by failing to request one and by his defiant conduct.
• Validity of Personnel Manual Provision: Whether the Personnel Manual provision conditioning an investigation upon the erring employee's request is valid and enforceable.
• Reinstatement and Backwages: Whether an employee dismissed for just cause but without prior due process is entitled to reinstatement with backwages.
• Sanction for Employer's Procedural Violation: Whether the employer may be held liable for an indemnity or other sanction for failing to give formal notice and conduct an investigation before dismissal.
• Grave Abuse of Discretion: Whether the NLRC committed grave abuse of discretion in setting aside the Labor Arbiter's decision and ordering reinstatement with backwages.

• Due Process in Dismissal: Yes. The employer failed to give private respondent the benefit of a hearing and investigation before dismissal, infringing his constitutional right to due process; the Personnel Manual did not excuse that duty.
• Waiver of Right to Investigation: No. Private respondent's refusal to explain and defiant attitude, though insubordinate, did not amount to a waiver of his right to an investigation.
• Validity of Personnel Manual Provision: No. The provision requiring the employee to request an investigation, insofar as it effectively deprives employees of due process, is against law and null and void.
• Reinstatement and Backwages: No. Although pre-dismissal due process was lacking, just cause for dismissal was later established before the Labor Arbiter; reinstatement and backwages would be arbitrary and unfair.
• Sanction for Employer's Procedural Violation: Yes. Petitioner was ordered to indemnify private respondent P1,000.00 as a sanction for failing to give formal notice and conduct an investigation, the amount depending on the facts and gravity of the omission.
• Grave Abuse of Discretion: Partly. The NLRC's finding that private respondent was denied due process was supported by the records, but its order of reinstatement with backwages was not justified; the petition was granted to that extent.

• Due Process in Dismissal: The controlling rule is that dismissal must be for just or authorized cause and after due process. Section 1, Rule XIV, Implementing Regulations of the Labor Code states: "No worker shall be dismissed except for just or authorized cause provided by law and after due process." Sections 2, 5, 6, and 7 require written notice of the grounds, an opportunity to answer, an ample opportunity to be heard and defend with assistance of a representative if desired, and a written decision stating the reasons. Wenphil suspended Mallare the morning after the incident and dismissed him that afternoon, with the notice served four days later. No investigation was conducted. The claim that no formal investigation was necessary because co-employees and supervisors witnessed the incident was rejected; due process requires that which hears before it condemns, proceeds upon inquiry, and renders judgment only after trial. The failure to give Mallare a hearing before dismissal infringed his constitutional right to due process and equal protection. The Personnel Manual could not excuse the employer because its provision conditioning investigation on the employee's request, if it deprived employees of due process, was null and void. Security of tenure is protected by the Constitution, Labor Code, and related laws.

• Waiver of Right to Investigation: Mallare's defiance immediately after the incident amounted to insubordination, but his refusal to explain under the circumstances could not be considered a waiver of his right to an investigation. Although the Personnel Manual stated that an erring employee must request an investigation, that did not relieve Wenphil of its duty to conduct an investigation before dismissing him. The employer cannot shift to the employee the burden of initiating the process that the law requires the employer to observe.

• Validity of Personnel Manual Provision: The provision of the Personnel Manual providing that an investigation shall be conducted only if the offense is punishable by a penalty higher than fifteen days' suspension and the erring employee requests it was invalid to the extent it effectively deprived employees of the right to due process. It was clearly against law and hence null and void. The security of tenure of a laborer or employee is enshrined in the Constitution, the Labor Code, and other related laws.

• Reinstatement and Backwages: The NLRC's conclusion that Mallare was not afforded due process before dismissal was binding and supported by the records. However, that did not justify reinstatement with backwages. Although belatedly, Mallare was afforded due process before the Labor Arbiter, who found that his dismissal was for just cause and that he was guilty of grave misconduct and insubordination based on sworn statements of witnesses. That finding was binding. Ordering reinstatement with backwages despite just cause would be arbitrary and unfair. The policy of ordering reinstatement and backwages whenever due process was lacking, even when dismissal was for just cause, should be re-examined. It would be highly prejudicial to the employer to impose the services of an employee shown to be guilty of the charges warranting dismissal, and it would demoralize the rank and file if the undeserving or undesirable remained in service. Mallare, who appeared to be of violent temper, caused trouble during office hours, and defied his superiors, should not be rewarded with re-employment and backwages. His dismissal for just cause should be maintained, and he had no right to return.

• Sanction for Employer's Procedural Violation: Although the dismissal for just cause was maintained, Wenphil remained accountable for failing to extend to Mallare his right to an investigation before dismissal. The rule is explicit that dismissal must be for just or authorized cause and after due process. Wenphil committed an infraction of the second requirement. It must therefore be sanctioned for its failure to give a formal notice and conduct an investigation as required by law before dismissing Mallare. Considering the circumstances, Wenphil was ordered to indemnify Mallare P1,000.00. The measure of the award depends on the facts of each case and the gravity of the omission committed by the employer.

• Grave Abuse of Discretion: The NLRC's finding that Mallare was denied due process was well taken and supported by the records, so that portion was not disturbed. But the NLRC's order of reinstatement with backwages was contrary to the established just cause and to the policy considerations against reinstating an employee dismissed for cause. The petition was therefore granted, the NLRC decision reversed and set aside, and the Labor Arbiter's decision revived and affirmed with the modification of a P1,000.00 indemnity.

• Due Process in Dismissal (Substantive and Procedural) — Dismissal must satisfy two requirements: just or authorized cause and due process. Under Section 1, Rule XIV, Implementing Regulations of the Labor Code, no worker shall be dismissed except for just or authorized cause provided by law and after due process. Sections 2, 5, 6, and 7 require written notice of the grounds, opportunity to answer, ample opportunity to be heard and defend with assistance of a representative if desired, and a written decision stating the reasons. In this case, Wenphil failed the procedural requirement because it dismissed Mallare without notice and investigation before termination.
• Waiver of Right to Investigation — An employee's refusal to explain or defiant conduct does not waive the right to an investigation before dismissal. The employer remains obligated to conduct the investigation required by law. A Personnel Manual provision conditioning investigation on the employee's request is null and void if it effectively deprives employees of due process.
• Due Process in Administrative Proceedings — The bare minimum of due process is notice and opportunity to be heard before judgment is rendered. The basic requirement is that which hears before it condemns, proceeds upon inquiry, and renders judgment only after trial. The presence of witnesses to the incident does not excuse the employer from conducting a formal investigation.
• Reinstatement and Backwages Despite Lack of Due Process — The policy of ordering reinstatement with backwages whenever an employee is dismissed without due process, even if dismissal was for just cause, was re-examined. Where just cause is later established in the labor proceedings, reinstatement and backwages may be denied because it would be prejudicial to the employer and demoralizing to the rank and file to retain an employee shown to be guilty of the charges.
• Indemnity as Sanction for Procedural Violation — An employer that fails to give formal notice and conduct an investigation before dismissal may be held liable for an indemnity as a sanction. The amount depends on the facts of each case and the gravity of the omission. In this case, the indemnity was fixed at P1,000.00.
• Security of Tenure — Security of tenure of laborers and employees is enshrined in the Constitution, the Labor Code, and related laws. A company rule that effectively deprives employees of the right to due process is against law and void.

• "Although in the Personnel Manual of the petitioner, it states that an erring employee must request for an investigation it does not thereby mean that petitioner is thereby relieved of the duty to conduct an investigation before dismissing private respondent. Indeed said provision of the Personnel Manual of petitioner which may effectively deprive its employees of the right to due process is clearly against the law and hence null and void." — This passage invalidates the Personnel Manual provision and establishes the employer's non-waivable duty to investigate before dismissal.
• "The failure of petitioner to give private respondent the benefit of a hearing before he was dismissed constitutes an infringement of his constitutional right to due process of law and equal protection of the laws." — This states the core due process violation.
• "The basic requirement of due process is that which hears before it condemns, which proceeds upon inquiry and renders judgment only after trial." — This is the canonical formulation of due process applied to reject the employer's claim that witness presence excused a formal investigation.
• "Considering the circumstances of this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award depends on the facts of each case and the gravity of the omission committed by the employer." — This articulates the sanction for the employer's procedural failure and the standard for measuring the indemnity.

• BLTB Bus Co. vs. Court of Appeals, 71 SCRA 470 — cited in the majority opinion for the standards of due process in judicial and administrative proceedings, specifically that the bare minimum is notice and opportunity to be heard before judgment is rendered.
• Lopez vs. Director of Lands, 47 Phil. 23 — cited in the majority opinion for the basic requirement of due process: that which hears before it condemns, proceeds upon inquiry, and renders judgment only after trial.
• Shurdut Mill Supply Co. vs. Central Azucarera del Danao — cited in Justice Padilla's separate concurring and dissenting opinion to define "indemnity" and distinguish it from "separation pay."

• Section 1, Rule XIV, Implementing Regulations of the Labor Code — Provides that no worker shall be dismissed except for just or authorized cause provided by law and after due process. Applied: Wenphil failed the procedural requirement when it dismissed Mallare without prior notice and investigation.
• Sections 2, 5, 6, and 7, Rule XIV, Implementing Regulations of the Labor Code — Require that before dismissal, the employee be given written notice of the particular act or omission constituting the ground, an opportunity to answer within a reasonable period, ample opportunity to be heard and defend himself with the assistance of a representative if desired, and written notice of the decision stating clearly the reasons. Applied: none of these steps were complied with before dismissal.
• Section 18, Article II, and Section 3, Article XIII, 1987 Constitution — Cited as constitutional bases for security of tenure. Applied: the Personnel Manual provision that effectively deprived employees of due process was void for being against the law and the constitutional protection of labor.
• Articles 280 and 283, Labor Code — Cited in the decision's footnote as part of the legal framework on security of tenure and dismissal for just cause. Article 283 was also invoked by petitioner as the ground for dismissal for serious misconduct in threatening or coercing a co-employee. Applied: the dismissal was ultimately maintained for just cause, but the employer was still sanctioned for failing procedural due process.

The majority opinion was concurred in by Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Bidin, Sarmiento, Griño-Aquino, Medialdea, and Regalado, JJ. Justices Melencio-Herrera, Padilla, and Cortes filed separate concurring and dissenting opinions, summarized below.

• Justice Melencio-Herrera — Concurred that private respondent was not entitled to reinstatement and backwages for having been terminated for cause. Believed, however, that private respondent was not denied due process. Even if the employer failed to comply with investigation and hearing requirements, the proper award should not be indemnity but separation pay in such amount as may be justified under the circumstances, not out of right but to cushion the impact of loss of employment, which was the practice then followed by the NLRC.
• Justice Padilla — Concurred that private respondent was not entitled to reinstatement and backwages because the Labor Arbiter found him guilty of grave misconduct and insubordination, and that petitioner failed to comply with administrative due process. Would nevertheless order payment of separation pay instead of indemnity in the amount of P1,000.00. Distinguished "indemnity" from "separation pay," citing Shurdut Mill Supply Co. vs. Central Azucarera del Danao.
• Justice Cortes — Concurred that a case for illegal dismissal was not established. Found no denial of due process, hence no basis for the award of P1,000.00 as indemnity. If the P1,000.00 were imposed as an administrative penalty for failure to comply strictly with duly promulgated regulations implementing the Labor Code, the amount, if authorized, should form part of the public funds of the government.