**Facts:** Madeline Montecillo and Liza Trinidad, employed as goldsmiths by Niña Jewelry since 1994 and 1996 respectively, challenged a new policy introduced by their employer in August 2004. This policy required goldsmiths to deposit cash bonds, amounting to a maximum of 15% of their weekly salaries, as security for the gold entrusted to them, aiming to mitigate losses from theft. The employees were given the option to authorize salary deductions instead. The respondents objected, viewing this as a forced choice leading to constructive dismissal since their continued employment hinged on compliance with the deposit requirement. When the respondents did not report for work post-policy announcement and filed complaints for illegal dismissal, seeking reinstatement and other benefits, the legal battle ensued.
The Labor Arbiter initially dismissed the complaints but ordered payment of proportionate 13th-month pay for 2004. The NLRC affirmed this but removed the 13th-month pay award, leading the respondents to appeal to the Court of Appeals (CA). The CA then reversed the NLRC’s decision, finding in favor of the respondents by declaring their constructive dismissal and ordering their reinstatement with full backwages and benefits.
**Issues:**
1. Was the Court of Appeals correct in assuming jurisdiction and finding grave abuse of discretion by the NLRC, given the alignment of the NLRC’s decision with the evidence and applicable laws?
2. Did the Court of Appeals err in finding constructive dismissal and ordering the respondents’ reinstatement and payment of their backwages and other monetary benefits without factual or legal basis?
**Court’s Decision:**
The Supreme Court partially granted the petition, reversing the CA’s decision on the finding of constructive dismissal but sustained the illegality of the imposed policy requiring cash deposits or salary deductions. The Court clarified that the employers’ policy imposition lacked a legal basis as it failed to meet the strict requirements outlined in the Labor Code regarding employee wage deductions and deposits. However, substantial evidence indicated that the respondents ceased reporting for work voluntarily and were not constructively dismissed. The CA’s reevaluation of evidence leading to its contrary findings was deemed erroneous.
**Doctrine:**
The decision clarified two main legal points:
1. Constructive Dismissal: Occurs when continued employment is rendered impossible, unreasonable, unlikely, involves a demotion in rank or diminution in pay, or where there is clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee.
2. Legality of Deposits and Deductions: Employers’ policies on deposits or salary deductions must align with the strict requirements of the Labor Code, particularly Articles 113 and 114, and any deviation without the necessary legal basis, authorization, or recognized necessity is considered illegal.
**Class Notes:**
– **Constructive Dismissal:** Voluntary cessation of work by the employees does not automatically imply constructive dismissal. The employer’s actions must significantly alter the employment terms detrimentally for such a claim to stand.
– **Deposits and Deductions:** Employers must substantiate the legality and necessity of any policy imposing deposits or deducting from employees’ salaries under specific exceptions outlined in the Labor Code (Articles 113 and 114). Without adhering to these legal conditions, such policies are deemed illegal.
– **Substantial Evidence:** Decisions of administrative bodies like the NLRC will be respected if based on substantial evidence – “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion”.
**Historical Background:**
The case echoes long-standing tensions between employer prerogatives in policy-making for business protection and the rights of employees against unwarranted deductions and policy impositions. It underscores the judiciary’s role in maintaining the balance by scrutinizing the legality and fairness of employment policies against the backdrop of legislative labor protections.
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