EDGAR PERPETUO FERMIN E. HIPOL, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION- FIFTH DIVISION, UNION CEMENT CORPORATION AND/OR EDNEL V. PASCUAL RESPONDENTS.

Hipol versus Union Cement Corporation

The Case

This is a labor case about the most fragile ground for dismissal an employer can invoke: loss of trust and confidence. Edgar Hipol, a supervisor in the Motorpool Section of Union Cement Corporation, was dismissed after the company concluded that he had loaded company steel plates into a company vehicle, skipped the security inspection at the gate, and dropped the plates at a welding shop along the way. Hipol denied everything and filed a complaint for illegal dismissal. The case matters because it gathers in one decision the entire architecture of a valid trust and confidence dismissal, the quantum of proof an employer must meet, and the rules on computing backwages and separation pay when reinstatement is no longer possible.

Procedural History

Hipol filed an action for illegal dismissal before the Labor Arbiter. The Labor Arbiter ruled in his favor, finding that the company failed to establish the alleged theft, and ordered backwages, attorney's fees, and moral and exemplary damages. Both sides appealed to the National Labor Relations Commission. On September 4, 2006, the Commission's Fifth Division affirmed the Labor Arbiter but reduced the moral and exemplary damages. Both parties moved for reconsideration. On February 2, 2007, the Commission reversed itself, gave more weight to the testimonies of the company's witnesses, and dismissed Hipol's complaint for lack of merit. Hipol then came to the Supreme Court by a petition for certiorari under Rule 65, asking that the February 2, 2007 Resolution be annulled and set aside.

Facts

Hipol had been with Union Cement since 1996 and was promoted in 2003 to Supervisor, tasked with planning and acquiring spare parts for the company's equipment, with discretion over repairs, suppliers, and whether work would be done in house or by a contractor. In March 2004, the Motorpool Department Manager noticed a deformity at the rear door and back seat of the company's Suzuki Samurai. A quarry engineer said the damage may have been caused by two steel plates that Hipol had supposedly loaded into the vehicle, and an investigation led the company back to an incident on February 21, 2004.

On that day, the engineer chanced upon Hipol at the Motorpool and hitched a ride to the Plant, about five kilometers away. He noticed two sheet metal plates leaning upright on the back seat. The guard on duty recalled seeing Hipol drive out at about 12:07 in the afternoon and, when the guard stepped out to inspect the outgoing vehicle, Hipol did not stop. Before reaching the Plant, Hipol stopped at a welding shop where the plates were allegedly unloaded and received by the repairman. At the Plant, inspection of the vehicle showed no equipment or materials inside.

The company sent Hipol memoranda to explain the illegal transfer of company assets and his failure to undergo inspection. Hipol denied the allegations in his replies. An independent panel investigated and found him liable for refusing security inspection and for theft or pilferage, recommending dismissal for loss of trust and confidence. Hipol's defense was that he had stopped at the guardhouse, that he stopped at the welding shop only to check on his own jeep, and that the plates used on his jeep were bought from a supplier in December 2003, a claim corroborated by the repairman's notarized affidavit and by the supplier himself.

Issues

• Whether or not the National Labor Relations Commission committed grave abuse of discretion in finding Hipol liable for theft and in dismissing his evidence as a mere denial.
• Whether or not the company established a justifiable basis for losing its trust and confidence in Hipol.
• Whether or not Hipol is entitled to reinstatement and full backwages, or to separation pay in lieu of reinstatement, and how those awards are computed.

Applicable Provisions

Article 279 of the Labor Code, as cited by the Court, provides:

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.

This is the provision that entitles Hipol to relief once his dismissal is declared illegal, and it fixes the starting and ending points of the backwage computation.

Ruling

On the first issue, the Court held that the petition has merit. A petition for certiorari under Rule 65 corrects errors of jurisdiction and lies only where there is grave abuse of discretion, meaning a capricious and whimsical exercise of judgment so patent and gross as to amount to an evasion of a positive duty or a virtual refusal to perform the duty enjoined. The Court found exactly that in the Commission's reversal.

On the second issue, the Court laid down the requirements for a valid trust and confidence dismissal: the employee must hold a position of trust and confidence, and there must be an act that justifies the loss of trust. Hipol's supervisory rank was not disputed, but the company failed to show a justifiable basis. The Court stressed that the employer's evidence must clearly and convincingly establish the facts, resting on substantial grounds and not on arbitrariness, whims, caprices, or suspicion, otherwise the employee would remain eternally at the mercy of the employer. The logbook showed no untoward incident and no written record of any refusal to undergo inspection; the guard and the engineer reported the incident only days later; and the security report itself stated Hipol's destination even though he supposedly never stopped at the gate. No one else saw the plates, and the engineer's account was belied by the repairman's notarized affidavit, corroborated by the supplier, which the Court found more credible. No inventory or accounting confirmed any lost plates, and company plates for heavy equipment could hardly have been used on an ordinary jeep. The Court quoted its ruling in Prudential Guarantee and Assurance Employee Labor Union versus National Labor Relations Commission:

The burden of proof is upon the employer to show that the employee's termination from service is for a just and valid cause. The employer's case succeeds or fails on the strength of its evidence and not the weakness of that adduced by the employee, in keeping with the principle that the scales of justice should be tilted in favor of the latter in case of doubt in the evidence presented by them.

On the third issue, the Court held that Hipol is entitled to reinstatement and full backwages under Article 279, but since he had already sought employment abroad, reinstatement was no longer feasible and separation pay in lieu of reinstatement served the best interests of the parties. Following Bani Rural Bank versus de Guzman, where separation pay is ordered in lieu of reinstatement, backwages run from the time of dismissal until the finality of the decision ordering separation pay, and separation pay is computed from the time of illegal dismissal up to that same date of finality at one month pay per year of service.

Doctrine

• A dismissal based on loss of trust and confidence is valid only if the employee holds a position of trust and confidence and there is an act justifying the loss. For supervisors, loss of trust justifies termination, but the employer's evidence must clearly and convincingly establish the facts, resting on substantial grounds and not on arbitrariness, whims, caprices, or suspicion.
• The burden of proof is on the employer to show a just and valid cause for termination, and the employer's case succeeds or fails on the strength of its own evidence, not on the weakness of the employee's. The quantum is substantial evidence, that is, such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.
• Under Article 279 of the Labor Code, an illegally dismissed employee is entitled to reinstatement without loss of seniority rights and to full backwages from the time compensation was withheld up to actual reinstatement. Where separation pay is awarded in lieu of reinstatement, backwages run from dismissal until the finality of the decision, and separation pay is one month pay per year of service counted to that same date.

Disposition

The petition was granted; the February 2, 2007 Resolution was reversed and set aside, the September 4, 2006 Resolution was reinstated with the modification that, instead of reinstatement, the company was ordered to pay Hipol separation pay of one month pay per year of service and backwages from the time compensation was withheld up to the finality of the decision, with the other awards sustained and the records remanded to the Labor Arbiter for proper computation.

Remember This

Memorize the line that loss of trust and confidence must rest on substantial grounds and not on the employer's arbitrariness, whims, caprices, or suspicion, otherwise the employee would remain eternally at the mercy of the employer. Examiners use this case to test the two requisites of a trust and confidence dismissal, the substantial evidence standard borne by the employer, and the computation of backwages and separation pay when reinstatement is no longer feasible.