KENN RIO, PETITIONER, VS. HON. JOSEPH GERARD E. MABILOG (PRESIDING COMMISSIONER), HON. ISABEL G. PANGANIBAN-ORTIGUERRA, HON. NIEVES E. VIVAR-DE CASTRO, COMMISSIONERS OF THE NATI…

Kenn Rio versus Norwegian Maritime Foundation of the Phils

The Case

This is Kenn Rio versus Norwegian Maritime Foundation of the Philippines, a petition for certiorari brought by an employee against the findings of the National Labor Relations Commission, which had upheld his dismissal. Rio, a mechanical engineer who headed the Maintenance Section of the Foundation, was dismissed for serious misconduct and willful breach of trust after he concealed the receipt of a welding machine given as a supplier's freebie and then claimed the machine was his own personal property. The case matters because it is a compact illustration of the two faces of due process in dismissal cases — the substantive side, anchored on the just causes in the Labor Code, and the procedural side, satisfied by the twin notices — and because it states the lowered evidentiary standard for loss of confidence as to managerial employees.

Procedural History

Rio filed a complaint for illegal dismissal and money claims before the Labor Arbiter. The Labor Arbiter dismissed the complaint for lack of merit, finding a valid ground for dismissal and noting that, as to a managerial employee, the mere existence of a basis for believing that the employee breached the employer's trust suffices. Rio appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter's decision in full. Rio moved for reconsideration, and the Commission denied the motion. Rio then came to the Supreme Court by a petition for certiorari under Rule 65, alleging that the Commission acted with grave abuse of discretion amounting to lack or excess of jurisdiction.

Facts

Rio was employed by the Norwegian Maritime Foundation of the Philippines as Head of the Maintenance Section under its Finance and Administration Department. One of the Foundation's suppliers, NCH Philippines, ran a rewards program in which valued customers earned points redeemable for free items. In July 2011, NCH's Belma Isidro called Rio to say the Foundation had earned enough points and asked what item it wished to redeem. Rio requested a portable inverter type welding machine. A different type of machine was delivered, and Isidro agreed to replace it with the correct one.

On September 29, 2011, NCH delivered the replacement machine and asked that the wrongly delivered unit be pulled out. Rio instructed his staff member Dumart Ledisma to assist the NCH personnel. In the process, they were accosted by Foundation personnel because the pull out was not properly documented. When Rio's immediate supervisor, Mercedes Torres, inquired about the welding machines, Rio claimed that the machine being pulled out was his personal equipment.

On October 3, 2011, Rio received a Notice to Explain requiring him to answer, within forty-eight hours, why he should not be dismissed for concealing the receipt of freebies from the Foundation's supplier and for declaring that the welding machine was his personal property. Rio asked for a seven-day extension, which was initially denied but then granted for three days. He filed his reply on October 11, 2011, denying the charges. On November 4, 2011, he received a Notice of Termination of Employment for serious misconduct, a Class E offense, and willful breach of trust. He then filed his complaint for illegal dismissal and money claims.

Issues

• Whether or not Rio was deprived of his right to procedural due process when he was terminated from service.
• Whether or not Rio was deprived of his right to substantive due process when he was terminated from service.
• Whether or not the National Labor Relations Commission acted with grave abuse of discretion in ruling that Rio was not illegally terminated.
• Whether or not Rio is entitled to full backwages, the company share in the provident fund, separation pay, moral and exemplary damages, and attorney's fees.

Applicable Provisions

Article 282 of the Labor Code, as cited in the decision, provides:

An employer may terminate employment for the following causes: Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work; Gross and habitual neglect by the employee of his duties; Fraud or willful breach by the employee of the trust reposed in him by his employer or duly authorized representative; 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 representatives; and Other causes analogous to the foregoing.

This is the substantive yardstick: the dismissal must rest on one of these just causes, here serious misconduct and willful breach of trust.

Ruling

On procedural due process, the Court held that the requirement was complied with. Procedural due process mandates that the employee be given a notice of the charge, an ample opportunity to be heard, and a notice of termination. The Notice to Explain informed Rio of the charges and of the possibility of termination if they were proven, and the Notice of Termination followed after the charge was considered. The Court stressed that the employer must give a written notice indicating that all circumstances involving the charge have been considered and the grounds established as justification of the severance of employment.

On substantive due process, the Court held that the dismissal was for just causes under Article 282. On serious misconduct, the Court defined misconduct as the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implying wrongful intent and not mere error in judgment. For serious misconduct to justify dismissal, it must be serious, related to the performance of the employee's duties, and show that the employee has become unfit to continue working for the employer. The Foundation's Employee Handbook classified theft or stealing and unlawful possession of property as a Class E offense punishable with dismissal even on a first offense, and Rio violated company rules when he suppressed the information that freebies had been delivered and tried to pass off the welding machine as his personal property.

On willful breach of trust, the Court laid down two requisites: first, the employee concerned must be holding a position of trust and confidence; and second, there must be an act that would justify the loss of trust and confidence. Involving a managerial employee, the mere existence of a basis to believe that the employee has breached the trust of his employer would suffice for his dismissal. Rio was undisputed to be a managerial employee, and his act of lying constituted a breach of the Foundation's trust and confidence.

On the monetary claims, the Court found no sufficient justification to award them. Rio presented no basis for a share in the provident fund, and the retirement plan provided for forfeiture of his shares upon dismissal for cause. Because the dismissal was for a just cause and due process was observed, he was not entitled to back wages and separation pay. There being neither bad faith nor fraud, and his wages not having been unlawfully withheld, he was not entitled to damages or attorney's fees. Finally, the Court found no grave abuse of discretion, which exists only when the tribunal acts in a capricious, whimsical, arbitrary, or despotic manner in the exercise of judgment as to be equivalent to lack of jurisdiction.

Doctrine

A valid dismissal requires both substantive and procedural due process. Procedural due process requires a notice of the charge, an ample opportunity to be heard, and a notice of termination. Substantive due process requires that the dismissal be for a just or authorized cause under Article 282 of the Labor Code. Serious misconduct, to justify dismissal, must be serious, related to the employee's duties, and show that the employee has become unfit to continue working. Willful breach of trust requires that the employee hold a position of trust and confidence and that there be an act justifying the loss of trust; as to managerial employees, the mere existence of a basis to believe that the employee breached the employer's trust suffices. An employee validly dismissed for cause is not entitled to back wages, separation pay, damages, or attorney's fees.

Disposition

The petition was dismissed, and the decision of the National Labor Relations Commission upholding Rio's dismissal was sustained.

Remember This

Memorize the line that for a managerial employee, the mere existence of a basis to believe that he has breached the trust of his employer suffices for dismissal. Examiners use this case to test the twin notices of procedural due process and the lowered evidentiary standard for loss of confidence as to managerial employees.