Serrano vs NLRC

Facts:

Petitioner, was the head of the Security Checkers Section of private respondent. Respondent decided to
phase out its entire security section and engage the services of an independent security agency as a
cost-cutting measure. On October 11, 1991 petitioner received a memorandum terminating his service
immediately effective on that day.

Issue:

Whether or not the dismissal of the respondent is valid?

Ruling:

1. In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security
section, private respondents real purpose was to avoid payment to the security checkers of the wage
increases provided in the collective bargaining agreement approved in 1990. Such an assertion is not a
sufficient basis for concluding that the termination of petitioners employment was not a bona fide
decision of management to obtain reasonable return from its investment, which is a right guaranteed to
employers under the Constitution. Indeed, that the phase-out of the security section constituted a
"legitimate business decision" is a factual finding of an administrative agency which must be accorded
respect and even finality by this Court since nothing can be found in the record which fairly detracts
from such finding.

Accordingly, we hold that the termination of petitioners services was for an authorized cause, that is,
redundancy. Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at
the rate of one month pay for every year of service.

2. The number of cases involving dismissals without the requisite notice to the employee, although
effected for just or authorized causes, suggests that the imposition of fine for violation of the notice
requirement has not been effective in deterring violations of the notice requirement. The monetary
sanctions are "too insignificant, too niggardly, and sometimes even too late." There has in effect been
fostered a policy of "dismiss now, pay later" which moneyed employers find more convenient to comply
with than the requirement to serve a 30-day written notice or to give notice and hearing.

Art. 283 provides that to terminate the employment of an employee for any of the authorized causes
the employer must serve "a written notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date thereof." In the case at bar, petitioner was
given a notice of termination on October 11, 1991. On the same day, his services were terminated. He
was thus denied his right to be given written notice before the termination of his employment, and the
question is the appropriate sanction for the violation of petitioners right.

The Court, however, that disregard of this requirement by an employer renders the dismissal or
termination of employment null and void. It is really unjust to require an employer to keep in his service
one who is guilty, for example, of an attempt on the life of the employer or the latters family, or when
the employer is precisely retrenching in order to prevent losses.
The remedy is to order the payment to the employee of full backwages from the time of his dismissal
until the court finds that the dismissal was for a just cause. But, otherwise, his dismissal must be upheld
and he should not be reinstated. This is because his dismissal is ineffectual.

EN BANC

[G.R. No. 117040. January 27, 2000]

RUBEN SERRANO, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION and ISETANN
DEPARTMENT STORE, respondents.

DECISION

MENDOZA, J.:

This is a petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of the
National Labor Relations Commission (NLRC) which reversed the decision of the Labor Arbiter and
dismissed petitioner Ruben Serranos complaint for illegal dismissal and denied his motion for
reconsideration. The facts are as follows:

Petitioner was hired by private respondent Isetann Department Store as a security checker to
apprehend shoplifters and prevent pilferage of merchandise.[1] Initially hired on October 4, 1984 on
contractual basis, petitioner eventually became a regular employee on April 4, 1985. In 1988, he became
head of the Security Checkers Section of private respondent.[2]

Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire
security section and engage the services of an independent security agency. For this reason, it wrote
petitioner the following memorandum:[3]

October 11, 1991

MR. RUBEN SERRANO

PRESENT

Dear Mr. Serrano,

......In view of the retrenchment program of the company, we hereby reiterate our
verbal notice to you of your termination as Security Section Head effective October 11,
1991.

......Please secure your clearance from this office.

Very truly yours,

 [Sgd.] TERESITA A. VILLANUEVA
Human Resources Division Manager

The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal
dismissal, illegal layoff, unfair labor practice, underpayment of wages, and nonpayment of salary and
overtime pay.[4]

The parties were required to submit their position papers, on the basis of which the Labor Arbiter
defined the issues as follows:[5]

Whether or not there is a valid ground for the dismissal of the complainant.

Whether or not complainant is entitled to his monetary claims for underpayment of

wages, nonpayment of salaries, 13th month pay for 1991 and overtime pay.

Whether or not Respondent is guilty of unfair labor practice.

Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding
petitioner to have been illegally dismissed. He ruled that private respondent failed to establish that it
had retrenched its security section to prevent or minimize losses to its business; that private respondent
failed to accord due process to petitioner; that private respondent failed to use reasonable standards in
selecting employees whose employment would be terminated; that private respondent had not shown
that petitioner and other employees in the security section were so inefficient so as to justify their
replacement by a security agency, or that "cost-saving devices [such as] secret video cameras (to
monitor and prevent shoplifting) and secret code tags on the merchandise" could not have been
employed; instead, the day after petitioners dismissal, private respondent employed a safety and
security supervisor with duties and functions similar to those of petitioner.

Accordingly, the Labor Arbiter ordered:[6]

WHEREFORE, above premises considered, judgment is hereby decreed:

(a)......Finding the dismissal of the complainant to be illegal and

concomitantly, Respondent is ordered to pay complainant full
backwages without qualification or deduction in the amount
of P74,740.00 from the time of his dismissal until reinstatement
(computed till promulgation only) based on his monthly salary
of P4,040.00/month at the time of his termination but limited to (3)
three years;

(b)......Ordering the Respondent to immediately reinstate the

complainant to his former position as security section head or to a
reasonably equivalent supervisorial position in charges of security
without loss of seniority rights, privileges and benefits. This order is
immediately executory even pending appeal;
 (c)......Ordering the Respondent to pay complainant unpaid wages in the
amount of P2,020.73 and proportionate 13th month pay in the amount
of P3,198.30;

(d)......Ordering the Respondent to pay complainant the amount

of P7,995.91, representing 10% attorneys fees based on the total
judgment award of P79,959.12.

All other claims of the complainant whether monetary or otherwise is

hereby dismissed for lack of merit.

SO ORDERED.

Private respondent appealed to the NLRC which, in its resolution of March 30, 1994, reversed the
decision of the Labor Arbiter and ordered petitioner to be given separation pay equivalent to one month
pay for every year of service, unpaid salary, and proportionate 13th month pay. Petitioner filed a motion
for reconsideration, but his motion was denied.

The NLRC held that the phase-out of private respondents security section and the hiring of an
independent security agency constituted an exercise by private respondent of "[a] legitimate business
decision whose wisdom we do not intend to inquire into and for which we cannot substitute our
judgment"; that the distinction made by the Labor Arbiter between "retrenchment" and the
employment of "cost-saving devices" under Art. 283 of the Labor Code was insignificant because the
company official who wrote the dismissal letter apparently used the term "retrenchment" in its "plain
and ordinary sense: to layoff or remove from ones job, regardless of the reason therefor"; that the rule
of "reasonable criteria" in the selection of the employees to be retrenched did not apply because all
positions in the security section had been abolished; and that the appointment of a safety and security
supervisor referred to by petitioner to prove bad faith on private respondents part was of no moment
because the position had long been in existence and was separate from petitioners position as head of
the Security Checkers Section.

Hence this petition. Petitioner raises the following issue:

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT

TO REPLACE ITS CURRENT SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF
THE EMPLOYEES CLASSED UNDER THE LATTER?[7]

Petitioner contends that abolition of private respondents Security Checkers Section and the
employment of an independent security agency do not fall under any of the authorized causes for
dismissal under Art. 283 of the Labor Code.

Petitioner Laid Off for Cause

Petitioners contention has no merit. Art. 283 provides:

Closure of establishment and reduction of personnel. - The employer may also terminate
the employment of any employee due to the installation of labor-saving devices,
 redundancy, retrenchment to prevent losses or the closing or cessation of operations of
the establishment or undertaking unless the closing is for the purpose of circumventing
the provisions of this Title, by serving a written notice on the workers and the
Department of Labor and Employment at least one (1) month before the intended date
thereof. In case of termination due to the installation of labor-saving devices or
redundancy, the worker affected thereby shall be entitled to a separation pay
equivalent to at least one (1) month pay or to at least one (1) month pay for every year
of service, whichever is higher. In case of retrenchment to prevent losses and in cases of
closure or cessation of operations of establishment or undertaking not due to serious
business losses or financial reverses, the separation pay shall be equivalent to at least
one (1) month pay or at least one-half (1/2) month pay for every year of service,
whichever is higher. A fraction of at least six (6) months shall be considered as one (1)
whole year.

In De Ocampo v. National Labor Relations Commission,[8] this Court upheld the termination of
employment of three mechanics in a transportation company and their replacement by a company
rendering maintenance and repair services. It held:

In contracting the services of Gemac Machineries, as part of the companys cost-saving

program, the services rendered by the mechanics became redundant and superfluous,
and therefore properly terminable. The company merely exercised its business
judgment or management prerogative. And in the absence of any proof that the
management abused its discretion or acted in a malicious or arbitrary manner, the court
will not interfere with the exercise of such prerogative.[9]

In Asian Alcohol Corporation v. National Labor Relations Commission,[10] the Court likewise upheld the
termination of employment of water pump tenders and their replacement by independent contractors.
It ruled that an employers good faith in implementing a redundancy program is not necessarily put in
doubt by the availment of the services of an independent contractor to replace the services of the
terminated employees to promote economy and efficiency.

Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the
faculty of promoting efficiency and attaining economy by a study of what units are essential for its
operation. To it belongs the ultimate determination of whether services should be performed by its
personnel or contracted to outside agencies . . . [While there] should be mutual consultation, eventually
deference is to be paid to what management decides."[11] Consequently, absent proof that management
acted in a malicious or arbitrary manner, the Court will not interfere with the exercise of judgment by an
employer.[12]

In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section,
private respondents real purpose was to avoid payment to the security checkers of the wage increases
provided in the collective bargaining agreement approved in 1990.[13] Such an assertion is not a
sufficient basis for concluding that the termination of petitioners employment was not a bona
fide decision of management to obtain reasonable return from its investment, which is a right
guaranteed to employers under the Constitution.[14] Indeed, that the phase-out of the security section
constituted a "legitimate business decision" is a factual finding of an administrative agency which must
be accorded respect and even finality by this Court since nothing can be found in the record which fairly
detracts from such finding.[15]
Accordingly, we hold that the termination of petitioners services was for an authorized
cause, i.e., redundancy. Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given
separation pay at the rate of one month pay for every year of service.

Sanctions for Violations of the Notice Requirement

Art. 283 also provides that to terminate the employment of an employee for any of the authorized
causes the employer must serve "a written notice on the workers and the Department of Labor and
Employment at least one (1) month before the intended date thereof." In the case at bar, petitioner was
given a notice of termination on October 11, 1991. On the same day, his services were terminated. He
was thus denied his right to be given written notice before the termination of his employment, and the
question is the appropriate sanction for the violation of petitioners right.

To be sure, this is not the first time this question has arisen. In Sebuguero v. NLRC,[16] workers in a
garment factory were temporarily laid off due to the cancellation of orders and a garment embargo. The
Labor Arbiter found that the workers had been illegally dismissed and ordered the company to pay
separation pay and backwages. The NLRC, on the other hand, found that this was a case of
retrenchment due to business losses and ordered the payment of separation pay without backwages.
This Court sustained the NLRCs finding. However, as the company did not comply with the 30-day
written notice in Art. 283 of the Labor Code, the Court ordered the employer to pay the
workers P2,000.00 each as indemnity.

The decision followed the ruling in several cases involving dismissals which, although based on any of
the just causes under Art. 282,[17] were effected without notice and hearing to the employee as required
by the implementing rules.[18] As this Court said: "It is now settled that where the dismissal of one
employee is in fact for a just and valid cause and is so proven to be but he is not accorded his right to
due process, i.e., he was not furnished the twin requirements of notice and opportunity to be heard, the
dismissal shall be upheld but the employer must be sanctioned for non-compliance with the
requirements of, or for failure to observe, due process."[19]

The rule reversed a long standing policy theretofore followed that even though the dismissal is based on
a just cause or the termination of employment is for an authorized cause, the dismissal or termination is
illegal if effected without notice to the employee. The shift in doctrine took place in 1989 in Wenphil
Corp. v. NLRC.[20] In announcing the change, this Court said:[21]

The Court holds that the policy of ordering the reinstatement to the service of an
employee without loss of seniority and the payment of his wages during the period of
his separation until his actual reinstatement but not exceeding three (3) years without
qualification or deduction, when it appears he was not afforded due process, although
his dismissal was found to be for just and authorized cause in an appropriate proceeding
in the Ministry of Labor and Employment, should be re-examined. It will be highly
prejudicial to the interests of the employer to impose on him the services of an
employee who has been shown to be guilty of the charges that warranted his dismissal
from employment. Indeed, it will demoralize the rank and file if the undeserving, if not
undesirable, remains in the service.

....
 However, the petitioner must nevertheless be held to account for failure to extend to
private respondent his right to an investigation before causing his dismissal. The rule is
explicit as above discussed. The dismissal of an employee must be for just or authorized
cause and after due process. Petitioner committed an infraction of the second
requirement. Thus, it must be imposed a sanction for its failure to give a formal notice
and conduct an investigation as required by law before dismissing petitioner from
employment. 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.

The fines imposed for violations of the notice requirement have varied
from P1,000.00[22] to P2,000.00[23] to P5,000.00[24] to P10,000.00.[25]

Need for Reexamining the Wenphil Doctrine

Today, we once again consider the question of appropriate sanctions for violations of the notice
requirement in light of our experience during the last decade or so with the Wenphil doctrine. The
number of cases involving dismissals without the requisite notice to the employee, although effected for
just or authorized causes, suggests that the imposition of fine for violation of the notice requirement has
not been effective in deterring violations of the notice requirement. Justice Panganiban finds the
monetary sanctions "too insignificant, too niggardly, and sometimes even too late." On the other hand,
Justice Puno says there has in effect been fostered a policy of "dismiss now, pay later" which moneyed
employers find more convenient to comply with than the requirement to serve a 30-day written notice
(in the case of termination of employment for an authorized cause under Arts. 283-284) or to give notice
and hearing (in the case of dismissals for just causes under Art. 282).

For this reason, they regard any dismissal or layoff without the requisite notice to be null and void even
though there are just or authorized causes for such dismissal or layoff. Consequently, in their view, the
employee concerned should be reinstated and paid backwages.

Validity of Petitioners Layoff Not Affected by Lack of Notice

We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the
sanction of fine for an employers disregard of the notice requirement. We do not agree, however, that
disregard of this requirement by an employer renders the dismissal or termination of employment null
and void. Such a stance is actually a reversion to the discredited pre-Wenphil rule of ordering an
employee to be reinstated and paid backwages when it is shown that he has not been given notice and
hearing although his dismissal or layoff is later found to be for a just or authorized cause. Such rule was
abandoned in Wenphil because it is really unjust to require an employer to keep in his service one who
is guilty, for example, of an attempt on the life of the employer or the latters family, or when the
employer is precisely retrenching in order to prevent losses.

The need is for a rule which, while recognizing the employees right to notice before he is dismissed or
laid off, at the same time acknowledges the right of the employer to dismiss for any of the just causes
enumerated in Art. 282 or to terminate employment for any of the authorized causes mentioned in Arts.
283-284. If the Wenphil rule imposing a fine on an employer who is found to have dismissed an
employee for cause without prior notice is deemed ineffective in deterring employer violations of the
notice requirement, the remedy is not to declare the dismissal void if there are just or valid grounds for
such dismissal or if the termination is for an authorized cause. That would be to uphold the right of the
employee but deny the right of the employer to dismiss for cause. Rather, the remedy is to order the
payment to the employee of full backwages from the time of his dismissal until the court finds that the
dismissal was for a just cause. But, otherwise, his dismissal must be upheld and he should not be
reinstated. This is because his dismissal is ineffectual.

For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of a
labor-saving device, but the employer did not give him and the DOLE a 30-day written notice of
termination in advance, then the termination of his employment should be considered ineffectual and
he should be paid backwages. However, the termination of his employment should not be considered
void but he should simply be paid separation pay as provided in Art. 283 in addition to backwages.

Justice Puno argues that an employers failure to comply with the notice requirement constitutes a
denial of the employees right to due process. Prescinding from this premise, he quotes the statement of
Chief Justice Concepcion in Vda. de Cuaycong v. Vda. de Sengbengco[26] that "acts of Congress, as well as
of the Executive, can deny due process only under the pain of nullity, and judicial proceedings suffering
from the same flaw are subject to the same sanction, any statutory provision to the contrary
notwithstanding." Justice Puno concludes that the dismissal of an employee without notice and hearing,
even if for a just cause, as provided in Art. 282, or for an authorized cause, as provided in Arts. 283-284,
is a nullity. Hence, even if just or authorized causes exist, the employee should be reinstated with full
back pay. On the other hand, Justice Panganiban quotes from the statement in People v. Bocar[27] that
"[w]here the denial of the fundamental right of due process is apparent, a decision rendered in
disregard of that right is void for lack of jurisdiction."

Violation of Notice Requirement Not a Denial of Due Process

The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by
the State, which is not the case here. There are three reasons why, on the other hand, violation by the
employer of the notice requirement cannot be considered a denial of due process resulting in the nullity
of the employees dismissal or layoff.

The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It
does not apply to the exercise of private power, such as the termination of employment under the Labor
Code. This is plain from the text of Art. III, 1 of the Constitution, viz.: "No person shall be deprived of life,
liberty, or property without due process of law. . . ." The reason is simple: Only the State has authority to
take the life, liberty, or property of the individual. The purpose of the Due Process Clause is to ensure
that the exercise of this power is consistent with what are considered civilized methods.

The second reason is that notice and hearing are required under the Due Process Clause before the
power of organized society are brought to bear upon the individual. This is obviously not the case of
termination of employment under Art. 283. Here the employee is not faced with an aspect of the
adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is not
to afford him an opportunity to be heard on any charge against him, for there is none. The purpose
rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to
determine whether economic causes do exist justifying the termination of his employment.
Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not
to comply with Due Process Clause of the Constitution. The time for notice and hearing is at the trial
stage. Then that is the time we speak of notice and hearing as the essence of procedural due process.
Thus, compliance by the employer with the notice requirement before he dismisses an employee does
not foreclose the right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "Any
decision taken by the employer shall be without prejudice to the right of the worker to contest the
validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission."

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to
overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which
gave either party to the employer-employee relationship the right to terminate their relationship by
giving notice to the other one month in advance. In lieu of notice, an employee could be laid off by
paying him a mesada equivalent to his salary for one month.[28] This provision was repealed by Art. 2270
of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise
known as the Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was
amended by R.A. No. 1787 providing for the giving of advance notice or the payment of compensation at
the rate of one-half month for every year of service.[29]

The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of
which was to give the employer the opportunity to find a replacement or substitute, and the employee
the equal opportunity to look for another job or source of employment. Where the termination of
employment was for a just cause, no notice was required to be given to the employee.[30] It was only on
September 4, 1981 that notice was required to be given even where the dismissal or termination of an
employee was for cause. This was made in the rules issued by the then Minister of Labor and
Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much later
when the notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A. No.
6715 on March 2, 1989. It cannot be that the former regime denied due process to the employee.
Otherwise, there should now likewise be a rule that, in case an employee leaves his job without cause
and without prior notice to his employer, his act should be void instead of simply making him liable for
damages.

The third reason why the notice requirement under Art. 283 can not be considered a requirement of the
Due Process Clause is that the employer cannot really be expected to be entirely an impartial judge of
his own cause. This is also the case in termination of employment for a just cause under Art. 282
(i.e., serious misconduct or willful disobedience by the employee of the lawful orders of the employer,
gross and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of
crime against the employer or the latters immediate family or duly authorized representatives, or other
analogous cases).

Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been won
by employees before the grievance committees manned by impartial judges of the company." The
grievance machinery is, however, different because it is established by agreement of the employer and
the employees and composed of representatives from both sides. That is why, in Batangas Laguna
Tayabas Bus Co. v. Court of Appeals,[31] which Justice Puno cites, it was held that "Since the right of [an
employee] to his labor is in itself a property and that the labor agreement between him and [his
employer] is the law between the parties, his summary and arbitrary dismissal amounted to deprivation
of his property without due process of law." But here we are dealing with dismissals and layoffs by
employers alone, without the intervention of any grievance machinery. Accordingly in Montemayor v.
Araneta University Foundation,[32] although a professor was dismissed without a hearing by his
university, his dismissal for having made homosexual advances on a student was sustained, it appearing
that in the NLRC, the employee was fully heard in his defense.

Lack of Notice Only Makes Termination Ineffectual

Not all notice requirements are requirements of due process. Some are simply part of a procedure to be
followed before a right granted to a party can be exercised. Others are simply an application of the
Justinian precept, embodied in the Civil Code,[33] to act with justice, give everyone his due, and observe
honesty and good faith toward ones fellowmen. Such is the notice requirement in Arts. 282-283. The
consequence of the failure either of the employer or the employee to live up to this precept is to make
him liable in damages, not to render his act (dismissal or resignation, as the case may be) void. The
measure of damages is the amount of wages the employee should have received were it not for the
termination of his employment without prior notice. If warranted, nominal and moral damages may also
be awarded.

We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employers failure to comply
with the notice requirement does not constitute a denial of due process but a mere failure to observe a
procedure for the termination of employment which makes the termination of employment merely
ineffectual. It is similar to the failure to observe the provisions of Art. 1592, in relation to Art. 1191, of
the Civil Code[34] in rescinding a contract for the sale of immovable property. Under these provisions,
while the power of a party to rescind a contract is implied in reciprocal obligations, nonetheless, in cases
involving the sale of immovable property, the vendor cannot exercise this power even though the
vendee defaults in the payment of the price, except by bringing an action in court or giving notice of
rescission by means of a notarial demand.[35] Consequently, a notice of rescission given in the letter of
an attorney has no legal effect, and the vendee can make payment even after the due date since no
valid notice of rescission has been given.[36]

Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can
make the dismissal of an employee illegal. This is clear from Art. 279 which provides:

Security of Tenure. - In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement
without loss of seniority rights and other privileges and to his full backwages, inclusive
of allowances, and to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time of his actual
reinstatement.[37]

Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and,
therefore, the employee should be reinstated and paid backwages. To contend, as Justices Puno and
Panganiban do, that even if the termination is for a just or authorized cause the employee concerned
should be reinstated and paid backwages would be to amend Art. 279 by adding another ground for
considering a dismissal illegal. What is more, it would ignore the fact that under Art. 285, if it is the
employee who fails to give a written notice to the employer that he is leaving the service of the latter, at
least one month in advance, his failure to comply with the legal requirement does not result in making
his resignation void but only in making him liable for damages.[38] This disparity in legal treatment, which
would result from the adoption of the theory of the minority cannot simply be explained by invoking
President Ramon Magsaysays motto that "he who has less in life should have more in law." That would
be a misapplication of this noble phrase originally from Professor Thomas Reed Powell of the Harvard
Law School.

Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC,[39] in support of his view that an illegal dismissal
results not only from want of legal cause but also from the failure to observe "due process." The Pepsi-
Cola case actually involved a dismissal for an alleged loss of trust and confidence which, as found by the
Court, was not proven. The dismissal was, therefore, illegal, not because there was a denial of due
process, but because the dismissal was without cause. The statement that the failure of management to
comply with the notice requirement "taints the dismissal with illegality" was merely a dictum thrown in
as additional grounds for holding the dismissal to be illegal.

Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is the
payment of backwages for the period when the employee is considered not to have been effectively
dismissed or his employment terminated. The sanction is not the payment alone of nominal damages as
Justice Vitug contends.

Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal

The refusal to look beyond the validity of the initial action taken by the employer to terminate
employment either for an authorized or just cause can result in an injustice to the employer. For not
giving notice and hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even
of an attempt against the life of the employer, an employer will be forced to keep in his employ such
guilty employee. This is unjust.

It is true the Constitution regards labor as "a primary social economic force."[40] But so does it declare
that it "recognizes the indispensable role of the private sector, encourages private enterprise, and
provides incentives to needed investment."[41] The Constitution bids the State to "afford full protection
to labor."[42] But it is equally true that "the law, in protecting the rights of the laborer, authorizes neither
oppression nor self-destruction of the employer."[43] And it is oppression to compel the employer to
continue in employment one who is guilty or to force the employer to remain in operation when it is not
economically in his interest to do so.

In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the termination
of employment was due to an authorized cause, then the employee concerned should not be ordered
reinstated even though there is failure to comply with the 30-day notice requirement. Instead, he must
be granted separation pay in accordance with Art. 283, to wit:

In case of termination due to the installation of labor-saving devices or redundancy, the

worker affected thereby shall be entitled to a separation pay equivalent to at least his
one (1) month pay or to at least one month for every year of service, whichever is
higher. In case of retrenchment to prevent losses and in cases of closures or cessation of
operations of establishment or undertaking not due to serious business losses or
financial reverses, the separation pay shall be equivalent to one (1) month pay or at
least one-half (1/2) month pay for every year of service, whichever is higher. A fraction
of at least six months shall be considered one (1) whole year.
If the employees separation is without cause, instead of being given separation pay, he should be
reinstated. In either case, whether he is reinstated or only granted separation pay, he should be paid full
backwages if he has been laid off without written notice at least 30 days in advance.

On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee
was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that
article, he should not be reinstated. However, he must be paid backwages from the time his
employment was terminated until it is determined that the termination of employment is for a just
cause because the failure to hear him before he is dismissed renders the termination of his employment
without legal effect.

WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is
MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay petitioner separation
pay equivalent to one (1) month pay for every year of service, his unpaid salary, and his proportionate
13th month pay and, in addition, full backwages from the time his employment was terminated on
October 11, 1991 up to the time the decision herein becomes final. For this purpose, this case is
REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and other monetary
awards to petitioner.

SO ORDERED.

Davide, Jr., C.J., Melo, Kapunan, Quisumbing, Purisima, Pardo, Buena, Gonzaga-Reyes, and De Leon, Jr.,
JJ., concur.

Bellosillo, J., see separate opinion.

Puno, J., see dissenting opinion.

Vitug, J., see separate opinion.

Panganiban, J., see separate opinion.

Ynares-Santiago, J., joins the dissenting opinion of J. Puno.

[1]
TSN of testimony of petitioner, pp. 24, 76-78, April 24, 1992.
[2]
Petitioners Position Paper, Annex C; Records, p. 19.
[3]
Id., Annex B; id., p. 21.
[4]
Records, p. 2.
[5]
Decision, dated April 30, 1993, of Labor Arbiter Pablo C. Espiritu. Petition, Annex A; Rollo, p. 30.
[6]
Id., pp. 35-36.
[7]
Petition, p. 10; id., p. 16.
[8]
213 SCRA 652 (1992)
[9]
Id., at 662.
[10]
G.R. No. 131108, March 25, 1999.
[11]
Shell Oil Workers Union v. Shell Company of the Philippines, Ltd., 39 SCRA 276, 284-285 (1971)
[12]
Asian Alcohol Corporation v. National Labor Relations Commission, G.R. No. 131108, March 25, 1999.
[13]
TSN, p. 61, April 24, 1992.
[14]
Const., Art. XIII, 3.
[15]
E.g., Aurora Land Projects Corporation v. NLRC, 266 SCRA 48 (1997)
[16]
248 SCRA 532 (1995)

[17]
This provision reads:

Termination by employer. - An employer may terminate an employment for any of the following causes:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or
representative in connection with his work;

(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or duly
authorized representative;

(d) Commission of a crime or offense by the employee against the person of his employer or any
immediate member of his family or his duly authorized representative; and

(e) Other causes analogous to the foregoing.

[18]
Bk. VI, Rule 1, of the Omnibus Rules and Regulations to Implement the Labor Code provides in
pertinent parts:

Section 2. Security of tenure. . . .

(d) In all cases of termination of employment, the following standards of due process shall be
substantially observed:

For termination of employment based on just causes as defined in Article 282 of the Labor Code:

(i) A written notice served on the employee specifying the ground or grounds for termination, and giving
said employee reasonable opportunity within which to explain his side.

(ii) A hearing or conference during which the employee concerned, with the assistance of counsel if he
so desires, is given opportunity to respond to the charge, present his evidence, or rebut the evidence
presented against him.

(iii) A written notice of termination served on the employee, indicating that upon due consideration of
all the circumstances, grounds have been established to justify his termination.

For termination of employment as defined in Article 283 of the Labor Code, the requirement of due
process shall be deemed complied with upon service of a written notice to the employee and the
appropriate Regional Office of the Department of Labor and Employment at least thirty days before
effectivity of the termination, specifying the ground or grounds for termination . . . .
[19]
Sebuguero v. NLRC, 248 SCRA at 547.
[20]
170 SCRA 69 (1989)
[21]
Id., at 75-76.
[22]
E.g., Aurelio v. NLRC, 221 SCRA 432 (1993) (dismissal of a managerial employee for breach of trust);
Rubberworld (Phils.), Inc. v. NLRC, 183 SCRA 421 (1990) (dismissal for absenteeism, leaving the work
place without notice, tampering with machines); Shoemart, Inc. v. NLRC, 176 SCRA 385 (1989) (dismissal
for abandonment of work)
[23]
Sebuguero v. NLRC, 248 SCRA 536 (1995) (termination of employment due to retrenchment)
[24]
E.g., Worldwide Papermills, Inc. v. NLRC, 244 SCRA 125 (1995) (dismissal for gross and habitual
neglect of duties)
[25]
E.g., Reta v. NLRC, 232 SCRA 613 (1994) (dismissal for negligence and insubordination)
[26]
110 Phil. 113, 118 (1960)
[27]
138 SCRA 166, 170 (1985)

[28]
Art. 302 of the Code of Commerce provided:

In cases in which no special time is fixed in the contracts of service, any one of the parties thereto may
dissolve it, advising the other party thereof one month in advance.

The factory or shop clerk shall be entitled, in such case, to the salary due for said month.

[29]
R.A. No. 1052, as amended by R.A. No. 1787, provided:

Section 1. In cases of employment without a definite period, in a commercial, industrial, or agricultural

establishment or enterprise, the employer or the employee may terminate at any time the employment
with just cause; or without just cause in the case of an employee by serving written notice on the
employer at least one month in advance, or in the case of an employer, by serving such notice to the
employee at least one month in advance or one-half month for every year of service of the employee,
whichever is longer, a fraction of at least six months being considered as one whole year.

The employer, upon whom no such notice was served in case of termination of employment without
just cause may hold the employee liable for damages.

The employee, upon whom no such notice was served in case of termination of employment without
just cause shall be entitled to compensation from the date of termination of his employment in an
amount equivalent to his salaries or wages corresponding to the required period of notice.
[30]
Abe v. Foster Wheeler Corp., 110 Phil. 198 (1960); Malate Taxicab and Garage, Inc. v. CIR, 99 Phil. 41
(1956)
[31]
71 SCRA 470, 480 (1976)
[32]
77 SCRA 321 (1977)
[33]
Civil Code, Art. 19.

[34]
Art. 1191: "The power to rescind obligations is implied in reciprocal ones, in case one of the obligors
should not comply with what is incumbent upon him. . . ."
Art. 1592: "In the sale of immovable property, even though it may have been stipulated that upon
failure to pay the price at the time agreed upon the rescission of the contract shall of right take place,
the vendee may pay, even after the expiration of the period, as long as no demand for rescission of the
contract has been made upon him either judicially or by a notarial act. After the demand, the court may
not grant him a new term."
[35]
De la Cruz v. Legaspi, 98 Phil. 43 (1955); Taguba v. Vda. de Leon, 132 SCRA 722 (1984)
[36]
See Maximo v. Fabian, G.R. No. L-8015, December 23, 1955, (unpub.), 98 Phil. 989.
[37]
Emphasis added.

[38]
Art. 285 reads:

Termination by employee. - (a) An employee may terminate without just cause the employee-employer
relationship by serving a written notice on the employer at least one (1) month in advance. The
employer upon whom no such notice was served may hold the employee liable for damages.

(b) An employee may put an end to the relationship without serving any notice on the employer for any
of the following just causes:

1. Serious insult by the employer or his representative on the honor and person of the employee;

2. Inhuman and unbearable treatment accorded the employee by the employer or his representative;

3. Commission of a crime or offense by the employer or his representative against the person of the
employee or any of the immediate members of his family; and

4. Other causes analogous to any of the foregoing.

[39]
210 SCRA 277 (1992)
[40]
Art. II, 18.
[41]
Id., 20.
[42]
Art. XIII, 3.
[43]
Manila Trading and Supply Co. v. Zulueta, 69 Phil. 485, 487 (1940) (per Laurel, J.) Accord, Villanueva v.
NLRC, 293 SCRA 259 (1998); DI Security and General Services, Inc. v. NLRC, 264 SCRA 458 (1996);
Flores v. NLRC, 256 SCRA 735 (1996); San Miguel Corporation v. NLRC, 218 SCRA 293 (1993); Colgate
Palmolive Philippines, Inc. v. Ople, 163 SCRA 323 (1988)