A’ PRIME SECURITY SERVICES, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), HON. ARBITER VALENTIN GUANIO, AND OTHELLO MORENO, RESPONDENTS.

A’ Prime Security Services versus Moreno

The Case

This is a special civil action for certiorari brought by A’ Prime Security Services, Incorporated, against the National Labor Relations Commission and its Second Division, Labor Arbiter Valentin Guanio, and the private respondent, security guard Othello Moreno. The petitioner seeks to annul the decision of the National Labor Relations Commission, which affirmed with modification the Labor Arbiter’s ruling that Moreno was illegally dismissed. This case matters because it addresses the use of the corporate veil to circumvent labor laws, the distinction between probationary and regular employment, and the requisites for a valid dismissal of a regular employee.

Procedural History

On February 23, 1989, Othello Moreno filed a complaint with the Department of Labor and Employment, Arbitration Branch, National Capital Region, against A’ Prime Security Agency, Incorporated, for illegal dismissal, illegal deduction, and underpayment of wages. The case was assigned to Labor Arbiter Valentin Guanio.

On November 28, 1989, the Labor Arbiter rendered a decision ordering the petitioner to reinstate Moreno to his former position with the status of a regular employee, to pay his backwages from the time of his unlawful dismissal until reinstatement, and to refund the monthly deduction of twenty pesos from his salary. The claim for underpayment of wages was dismissed for lack of merit.

The petitioner appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter’s decision with modification. The Commission vacated and set aside the order for the refund of the twenty-peso monthly deductions and ruled that the backwages due should in no case exceed a period of three years. In all other respects, the appealed decision stood. The petitioner’s motion for reconsideration was denied. Undaunted, the petitioner came to the Supreme Court via the present petition for certiorari, alleging grave abuse of discretion amounting to lack or excess of jurisdiction.

Facts

Moreno had been working as a security guard for a year with Sugarland Security Services, Incorporated, which he alleged was a sister company of the petitioner. On January 30, 1988, he was rehired as a security guard by A’ Prime and assigned to the same post at the United States Embassy Building along Roxas Boulevard in Manila. He was among those absorbed by the petitioner when it took over the security contracts of its sister company with the United States Embassy. Moreno alleged that he was forced to sign new probationary contracts of employment for six months, and that on August 1, 1988, his employment was terminated.

The petitioner alleged that Moreno was hired on a probationary basis and that he was caught sleeping on post on March 17, 1988, for which he received a last warning. On March 25, 1988, he figured in a quarrel with another security guard which resulted in a near shootout. At the end of his probationary employment, he was given a psychological test, and on the basis of the foregoing, the petitioner told him that his probationary employment had come to an end because he did not pass the company standard and could not be hired as a regular employee.

Before the Labor Arbiter, the petitioner did not deny Moreno’s allegations that Sugarland was its sister company and that it absorbed Sugarland’s security contracts and security guards. The petitioner raised this denial only belatedly in its petition before the Supreme Court, presenting no supporting evidence. The Court also noted a resignation letter from Moreno which appeared to have been written and submitted at the instance of the petitioner, bearing the company’s form and wordings more of a waiver and quitclaim, and not acknowledged before a notary public.

Issues

• Whether or not Moreno’s employment with A’ Prime Security Services, Incorporated was just a continuation of his employment with Sugarland Security Services, Incorporated.
• Whether or not Moreno was a regular or probationary employee of the petitioner.
• Whether or not Moreno’s dismissal was illegal.

Applicable Provisions

Section 1, Rule 9 of the Rules of Court provides:

Allegations not specifically denied deemed admitted. Material averment in the complaint, other than those as to the amount of damage, shall be deemed admitted when not specifically denied. Allegations of usury are deemed admitted if not denied specifically and under oath.

This rule bears on the case because the petitioner’s failure to deny the material allegations that Sugarland was its sister company and that it absorbed Sugarland’s security contracts and personnel meant those averments were deemed admitted.

Section 3, Rule 1 of the Revised Rules of the National Labor Relations Commission provides:

Suppletory application of Rules of Court and jurisprudence. In the absence of any applicable provision in these Rules, and in order to effectuate the objectives of the Labor Code, the pertinent provisions of the Revised Rules of Court of the Philippines and prevailing jurisprudence may, in the interest of expeditious labor justice and whenever practicable and convenient, be applied by analogy or in a suppletory character and effect.

This provision allows the Rules of Court to apply suppletorily to proceedings before the National Labor Relations Commission, making the rule on deemed admissions applicable to the petitioner’s failure to deny.

Ruling

On the first issue, the Court ruled that Moreno’s employment with A’ Prime was a continuation of his employment with Sugarland. The allegations that Sugarland was a sister company of A’ Prime and that the latter absorbed the security contracts and security guards of Sugarland with the United States Embassy were neither denied nor controverted before the Labor Arbiter. Under the Rules of Court, applied suppletorily to the National Labor Relations Commission, material averments in the complaint are deemed admitted when not specifically denied. The petitioner’s belated claim that the two companies were separate and distinct juridical entities was a bare allegation unsupported by evidence. The Court refused to sanction the practice of some companies which, shortly after a worker has become a regular employee, effect the transfer of the same employee to another entity whose owners are the same or identical, in order to deprive the employee of the benefits and protection he is entitled to under the law.

On the second issue, the Court held that Moreno became a regular employee upon completion of his six-month period of probation. He started working on January 30, 1988 and completed the probationary period on July 27, 1988. Thus, at the time he was dismissed on August 1, 1988, he was already a regular employee with security of tenure. There was no basis for subjecting him to a new probationary or temporary employment on January 30, 1988, considering that he was already a regular employee when he was absorbed by A’ Prime from Sugarland, its sister company.

On the third issue, the Court ruled that Moreno’s dismissal was illegal. The dismissal was presumably based on the results of his behavioral and neuropsychological tests and on his violation of a company rule on sleeping on post. The Court agreed with the National Labor Relations Commission’s assessment that the test appeared to have been conveniently contrived to be conducted, and its result produced, on the very day of his dismissal. The Court also found a discrepancy in the results of the test, which suggested that the evaluator’s mind was already preconditioned towards buttressing the intent of terminating Moreno’s employment.

As to the alleged violations of sleeping on post and quarrelling with a co-worker, the Court noted that these were first infractions. The petitioner’s own Circular Number 1, dated March 16, 1983, governing discipline, suspension, and separation from the service of security guards, provides:

SECTION VIII - SLEEPING ON POST. Any Security/Lady guard who is found sleeping while on post shall be punished as follows: 1st Offense - Warning 2nd Offense - 30 days suspension without pay 3rd Offense - Dismissal

SECTION IX - CHALLENGING A POSTED SECURITY/LADY GUARD AND SUPERIORS. Any Security/Lady guard who challenges, assaults, provokes and insults an officially posted Security/Lady guard shall be punished: 1st Offense - One (1) month suspension 2nd Offense - Dismissal

As the infractions were first offenses, they were not punishable by dismissal and were not valid grounds for terminating Moreno’s employment. Moreover, Moreno was not given a chance to contest his dismissal and was deprived of an opportunity to be heard. The Court concluded that the dismissal of Moreno, a regular employee, was without any just, legal, and valid basis.

Doctrine

Material averments in a complaint before the Labor Arbiter are deemed admitted when not specifically denied, applying the Rules of Court suppletorily to the National Labor Relations Commission. A company cannot use the veil of corporate personality to transfer a regular employee to another entity with the same or identical owners shortly after the worker has become regular, in order to deprive the employee of the benefits and protection of labor laws. A probationary employee who completes the probationary period becomes a regular employee with security of tenure and may only be dismissed for a just or authorized cause. Where a company’s own rules prescribe graduated penalties for first offenses, dismissal for a first infraction is illegal. A dismissal effected without giving the employee an opportunity to be heard violates due process.

Disposition

The Supreme Court dismissed the petition and affirmed the decision and resolution of the National Labor Relations Commission, with no pronouncement as to costs.

Remember This

Remember that a probationary employee who completes the six-month period becomes a regular employee, and a transfer between sister companies cannot reset that clock to deprive the worker of security of tenure. Examiners like to use this case to test the interplay between corporate fiction, probationary employment, and the requirement of just cause with due process for a valid dismissal.