WPP Marketing Communications vs. Galera

An alien who works in the Philippines without the employment permit required by Article 40 of the Labor Code is barred by the unclean hands doctrine from claiming benefits under Philippine labor laws, including backwages and separation pay, even if the dismissal was illegal.

WPP recruited Galera from the United States to serve as Managing Director of Mindshare Philippines under a contract executed August 1999, effective September 1999. Four months after she started working, WPP filed an application for her working visa designating her as Vice-President. She was dismissed verbally on December 14, 2000, and served a written termination letter the following day citing loss of confidence and poor performance.

• Filed with the NLRC (Labor Arbiter) on January 3, 2001 (NLRC NCR Case No. 30-01-00044-01).
• Labor Arbiter Edgardo M. Madriaga (January 31, 2002): Ruled illegal dismissal due to lack of due process (two-notice rule) and valid cause; awarded reinstatement, backwages ($120,000/year), moral damages ($2M), exemplary damages ($1M), and attorney’s fees.
• NLRC (February 19, 2003): Reversed Labor Arbiter; held Galera was a corporate officer (Vice-President) at the time of removal, rendering the dispute intra-corporate under PD 902-A, outside the NLRC’s jurisdiction.
• CA (April 14, 2005): Reversed NLRC; found Galera was an employee, not a corporate officer; awarded backwages, separation pay, benefits, and damages.
• SC (March 25, 2010): Granted petitions partially; set aside CA decision; found illegal dismissal but denied monetary awards due to lack of Alien Employment Permit.

• Parties: Galera (American employee) vs. WPP (employer), John Steedman (CEO), Mark Webster (VP), Nominada Lansang.
• Contract: "Confirmation of Appointment" dated August 16, 1999; salary of P3,924,000/year; benefits included housing (P576,000/yr), car/driver, insurance, relocation costs, pension plan, and 20 days paid holiday.
• Corporate Officer Issue: WPP’s By-Laws provided for only one Vice-President (occupied by Webster) and five directors (all positions filled). The Board "appointed" Galera as VP on December 31, 1999, and as Director, but no vacancies existed.
• Amendment: Amended By-Laws (allowing multiple VPs and additional directors) approved by SEC only on February 16, 2001 — after Galera’s dismissal on December 14, 2000.
• Dismissal: Verbal notice December 14, 2000; written notice December 15, 2000 cited "lack of leadership," "operations in shambles," and mismanagement.
• Permit Violation: Galera commenced employment September 1, 1999, without an Alien Employment Permit; WPP filed the visa application four months after she started working.

• Galera is a corporate officer (Vice-President), not a mere employee; her removal is an intra-corporate dispute under PD 902-A, cognizable by the RTC, not the NLRC.
• Galera, as an alien, cannot attain regular or permanent employment status.
• Assuming the CA correctly ruled on jurisdiction, the case should be remanded to the Labor Arbiter for reception of evidence on the merits because the NLRC decided the case only on jurisdiction without hearing evidence on the dismissal itself.
• Galera is not entitled to backwages or damages.

• She is an employee, not a corporate officer; the appointment as VP was ultra vires because the By-Laws fixed the number of officers and no vacancy existed when the Board purported to appoint her.
• The Labor Arbiter and NLRC have jurisdiction under Article 217 of the Labor Code.
• Her dismissal violated the two-notice rule and lacked just cause, making it illegal.
• She is entitled to full backwages and separation pay under Article 279 of the Labor Code from date of dismissal until finality of judgment.
• Individual respondents should be held solidarily liable for bad faith dismissal.

• Procedural Issues:
  • Whether the Labor Arbiter and NLRC have jurisdiction over the complaint, or if it is an intra-corporate dispute cognizable by the RTC.
  • Whether the case should be remanded to the Labor Arbiter for reception of evidence on the merits.
• Substantive Issues:
  • Whether Galera is an employee or a corporate officer.
  • Whether Galera was illegally dismissed.
  • Whether Galera is entitled to backwages, separation pay, damages, and benefits despite being an alien who worked without an Alien Employment Permit.

• Procedural:
  • The NLRC has jurisdiction. Galera is an employee, not a corporate officer. The Board’s appointment of Galera as VP was void ab initio (ultra vires) because the By-Laws fixed the number of Vice-Presidents at one (occupied by Webster) and directors at five (all filled). By-laws operate prospectively only; the Amended By-Laws approved February 2001 could not retroactively validate the 1999 appointments.
  • No need to remand. The Labor Arbiter’s factual findings on the illegal dismissal were supported by evidence. The NLRC reversed based on jurisdiction alone without disturbing the factual findings on the merits; the SC can resolve the monetary issue based on the records.
• Substantive:
  • Galera was illegally dismissed. WPP failed to comply with the two-notice rule (notice of charges and notice of termination) and failed to prove just cause.
  • However, Galera is barred from claiming any monetary award (backwages, separation pay, damages, benefits). She worked without the Alien Employment Permit required by Article 40 of the Labor Code and Rule XIV, Book I of the IRR. Applying the unclean hands doctrine, "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 SC leaves the parties where they are (status quo prevails).

• Ultra vires — Corporate acts beyond the powers conferred by the charter or by-laws are void. The Board’s appointment of Galera to a non-existent office (second VP when By-Laws allowed only one) was void from the beginning.
• Prospectivity of By-Laws — Amendments to by-laws take effect only from the date of approval by the SEC (February 16, 2001) and cannot retroactively validate prior void appointments.
• Four-Fold Test of Employment — (1) Selection and engagement; (2) Payment of wages; (3) Power of dismissal; (4) Power to control means and methods of work. The SC applied this to confirm Galera was an employee subject to WPP’s control and disciplinary procedures.
• Two-Notice Rule — Valid dismissal requires: (1) written notice apprising employee of specific charges/acts; (2) written notice of decision to dismiss after opportunity to be heard. WPP’s verbal termination and subsequent written notice failed this.
• Unclean Hands Doctrine — A party seeking relief in equity (or labor benefits) must not have violated the law or acted in bad faith. Galera’s failure to secure an Alien Employment Permit before working barred her from claiming labor benefits.
• Alien Employment Permit Requirement — Article 40, Labor Code: Aliens must obtain an employment permit from DOLE before employment. Rule XIV, Book I, IRR: No alien may enter for employment without a permit; an alien under a non-working visa cannot work without an approved 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. We hold that the status quo must prevail in the present case and we leave the parties where they are."
• "A corporation, through its board of directors, could only act in the manner and within the formalities, if any, prescribed by its charter or by the general law. If the action of the Board is ultra vires such is motu proprio void ab initio and without legal effect whatsoever."

• Dily Dany Nacpil v. International Broadcasting Corp. — Cited by the NLRC below to argue that Board approval of appointment indicates corporate officer status. The SC distinguished this: Nacpil’s appointment required Board approval for a valid corporate office; Galera’s appointment was to a non-existent office under the By-Laws.
• Easycall Communications Phils., Inc. v. King — Cited for the rule that corporate officers are those named in the Corporation Code (Section 25) or provided in the by-laws.
• Pepsi-Cola Bottling Co. v. NLRC — Cited for the requirement of the two-notice rule for valid dismissal.

• Article 217, Labor Code — Jurisdiction of Labor Arbiters over termination disputes and employer-employee relations.
• Article 40, Labor Code — Mandatory requirement for aliens to secure employment permits prior to employment.
• Rule XIV, Book I, IRR of the Labor Code — Specific rules on Alien Employment Permits; prohibition on employment without permit.
• Section 25, Corporation Code — Enumeration of corporate officers (president, secretary, treasurer, and such other officers as provided in by-laws).
• Section 5.2, Republic Act No. 8799 (Securities Regulation Code) — Transfer of intra-corporate dispute jurisdiction from SEC to RTC.
• Section 5(b) & (c), Presidential Decree No. 902-A — Definition of intra-corporate controversies (relations between corporation and officers, election/appointment disputes).