WPP Marketing Communications vs. Galera

An alien who enters into employment in the Philippines without securing the required Alien Employment Permit prior to commencement of work, as mandated by Article 40 of the Labor Code, is barred by the doctrine of unclean hands from recovering monetary benefits and damages for illegal dismissal, notwithstanding the employer's failure to observe due process in the termination.

• Jocelyn M. Galera is an American citizen who was recruited from the United States by John Steedman, Chairman of WPP Worldwide and CEO of Mindshare, Co., to work in the Philippines for WPP Marketing Communications, Inc., a Philippine corporation.
• On 16 August 1999, Galera signed an Employment Contract entitled "Confirmation of Appointment and Statement of Terms and Conditions" with the following key provisions: (a) Position: Managing Director, Mindshare Philippines; (b) Annual Salary: P3,924,000; (c) Housing Allowance: P576,000 per annum; (d) Company car with driver; (e) Medical, health, life and personal accident insurance up to P300,000 per annum; (f) Participation in JWT Pension Plan; (g) 20 days paid holiday; (h) Three months' notice required for termination after a three-month trial period; and (i) Automatic assignment of intellectual property rights for any invention or creation during employment to the company.
• Galera's employment commenced on 1 September 1999 based solely on the CEO's instruction and upon signing the contract, without any action from the Board of Directors of WPP.
• Four months after employment commenced (around January 2000), WPP filed an application with the Bureau of Immigration for Galera to receive a working visa (9(g) visa), wherein she was designated as Vice President of WPP. Galera alleged she was constrained to sign the application to remain in the Philippines and retain her employment.
• At the time of her purported appointment as Vice-President on 31 December 1999, WPP's By-Laws provided for only one Vice-President, a position already occupied by Mark Webster. The By-Laws also provided for only five directors, all positions occupied at the time.
• On 14 December 2000, Galera was verbally notified by Steedman that her services were terminated. A written termination letter dated 15 December 2000 followed, citing lack of leadership, mismanaged priorities, and failure to meet acceptable quality standards.
• Galera's employment was terminated without prior notice specifying the grounds for dismissal and without opportunity to be heard. She was prohibited from reporting for work on 14 December 2000 and told not to report the next day.
• WPP's Amended By-Laws, which provided for additional Vice-Presidents and directors, were approved by the Securities and Exchange Commission only on 16 February 2001, after Galera's dismissal on 14 December 2000.
• Galera worked in the Philippines from 1 September 1999 until her dismissal on 14 December 2000 without securing an Alien Employment Permit prior to the commencement of her employment, as required by Article 40 of the Labor Code.

• Galera was a corporate officer (Vice-President) from the beginning of her term until her removal, not a regular employee; therefore, the controversy was an intra-corporate dispute cognizable by the Regional Trial Court, not the Labor Arbiter or NLRC.
• Assuming the Court of Appeals correctly ruled that the NLRC has jurisdiction, the case should have been remanded to the Labor Arbiter for reception of evidence on the merits.
• Galera is an alien who can never attain regular or permanent working status in the Philippines because there is no guarantee that the Bureau of Immigration and Department of Labor and Employment would continue granting favorable rulings on her visa and employment permit applications after the expiry of her documents on 31 December 2000.
• Galera is not entitled to recover backwages, other benefits, and damages from WPP because her employment contract required three months' notice for termination, and she was only given verbal notice on 14 December 2000 and written notice on 15 December 2000, effectively giving her three months' pay until March 2001.

• The Court of Appeals decision should be consistent with Article 279 of the Labor Code and jurisprudence, awarding full backwages and separation pay reckoned from the time of dismissal (14 December 2000) until the finality of judgment or at least until the promulgation of the Court of Appeals decision.
• The individual respondents (Steedman, Webster, and Lansang) must be held solidarily liable with WPP for the wanton and summary dismissal of Galera, consistent with law, jurisprudence, and the Court of Appeals' finding of bad faith on the part of the respondents.
• Galera was an employee, not a corporate officer, as evidenced by the employment contract and the four-fold test of employer-employee relationship.

• Procedural Issues:
  • Whether the Court of Appeals correctly ruled that the National Labor Relations Commission has jurisdiction over Galera's complaint by finding that she was an employee rather than a corporate officer.
• Substantive Issues:
  • Whether Galera is an employee or a corporate officer of WPP Marketing Communications, Inc.
  • Whether Galera was illegally dismissed from her employment.
  • Whether Galera, as a non-resident alien who worked without a prior Alien Employment Permit, is entitled to backwages, separation pay, and other monetary benefits under Philippine labor laws.

• Procedural: The Supreme Court affirmed that the Labor Arbiter and the NLRC have jurisdiction over the case. Galera is an employee, not a corporate officer. The Board of Directors' resolutions appointing her as Vice-President on 31 December 1999 and as Director on 31 May 2000 were ultra vires because WPP's By-Laws at that time only provided for one Vice-President (already occupied) and five directors (all positions filled). By-laws operate prospectively and cannot validate ultra vires acts. The appointment was ineffective, and Galera remained an employee subject to the jurisdiction of labor tribunals.
• Substantive: The Court held that Galera was an employee based on the four-fold test: (1) selection and engagement by WPP; (2) payment of wages; (3) power of dismissal; and (4) power of control over the means and methods of work, as evidenced by the employment contract provisions on work location, wages, disciplinary procedures, and intellectual property assignment. The dismissal was illegal because WPP failed to comply with the two-notice rule and failed to prove just or authorized cause. However, the Court denied Galera's monetary claims because she worked without an Alien Employment Permit prior to employment, in violation of Article 40 of the Labor Code and Section 4, Rule XIV, Book I of the Implementing Rules. Applying the doctrine of unclean hands, the Court held that granting her prayer would sanction the violation of Philippine labor laws requiring aliens to secure work permits before employment. The Court set aside the Court of Appeals' decision awarding monetary benefits and left the parties where they are.

• Four-fold Test of Employer-Employee Relationship — The test examines: (a) selection and engagement of the employee; (b) payment of wages; (c) power of dismissal; and (d) the employer's power to control the employee with respect to the means and methods by which the work is to be accomplished. The Court applied this to determine Galera was an employee despite her title as "Managing Director" and purported "Vice-President" status.
• Ultra Vires Acts — Acts of the Board of Directors that exceed the authority conferred by the corporate by-laws are void ab initio and without legal effect. The Board's appointment of Galera as Vice-President was ultra vires because the by-laws only allowed one Vice-President, and by-laws operate prospectively only and cannot validate prior ultra vires acts.
• Two-Notice Rule — Before termination for just cause, an employer must give: (1) notice apprising the employee of the particular acts or omissions for which dismissal is sought; and (2) subsequent notice informing the employee of the employer's decision to dismiss. Failure to comply taints the dismissal with illegality.
• Doctrine of Unclean Hands — A party who violates the law or acts in bad faith cannot seek equitable relief or claim benefits arising from such illegal act. Applied to bar Galera's monetary claims due to her employment without the required Alien Employment Permit.
• Employment of Non-Resident Aliens — Article 40 of the Labor Code and Section 4, Rule XIV, Book I of the IRR mandate that aliens must secure an employment permit from the Department of Labor prior to employment, and no alien seeking employment may enter the Philippines without first securing such permit.

• "Galera cannot come to this Court with unclean hands. To grant Galera's prayer is to sanction the violation of the Philippine labor laws requiring aliens to secure work permits before their employment."
• "The law and the rules are consistent in stating that the employment permit must be acquired prior to employment."
• "This is Galera's dilemma: Galera worked in the Philippines without a proper work permit but now wants to claim employee's benefits under Philippine labor laws."
• "We hold that the status quo must prevail in the present case and we leave the parties where they are."

• Easycall Communications Phils., Inc. v. King — Cited for the definition of corporate officers under Section 25 of the Corporation Code (president, secretary, treasurer, and such other officers as may be provided in the by-laws).
• Dily Dany Nacpil v. International Broadcasting Corp. — Distinguished; the Court noted that unlike Nacpil, Galera's appointment was not to a position provided for in the by-laws and was therefore ultra vires and void.
• Pepsi-Cola Bottling Co. v. NLRC — Cited for the two-notice rule in termination of employment and the principle that failure to comply taints the dismissal with illegality.

• Article 40, Labor Code of the Philippines — Mandates that any alien seeking admission to the Philippines for employment purposes and any employer who desires to engage an alien for employment shall obtain an employment permit from the Department of Labor prior to employment.
• Article 217, Labor Code — Defines the jurisdiction of Labor Arbiters and the NLRC over termination disputes, claims for damages arising from employer-employee relations, and other claims exceeding P5,000.
• Section 25, Corporation Code (Batas Pambansa Blg. 68) — Defines corporate officers as the president, secretary, treasurer, and such other officers as may be provided in the by-laws.
• Section 5.2, Republic Act No. 8799 (Securities Regulation Code) — Transferred jurisdiction over intra-corporate disputes from the Securities and Exchange Commission to the courts of general jurisdiction or appropriate Regional Trial Court.
• Section 5(b) and (c), Presidential Decree No. 902-A — Provisions defining intra-corporate controversies (cited to contrast with labor disputes).
• Section 4, Rule XIV, Book I, Implementing Rules and Regulations of the Labor Code — Requires that no alien seeking employment may enter the Philippines without first securing an employment permit, and if entering under a non-working visa, may only be employed upon presentation of a duly approved employment permit.