ACESITE CORPORATION, HOLIDAY INN, JOHANN ANGERBAUER AND PHIL KENNEDY, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) AND LEO A. GONZALES, RESPONDENTS.

Acesite versus National Labor Relations Commission

The Case

This is a labor case about an illegally dismissed security chief. Acesite Corporation, which operated the Holiday Inn Manila, together with its officers Johann Angerbauer and Phil Kennedy, dismissed Leo Gonzales as Chief of Security for alleged gross disobedience and insubordination. Gonzales cried foul and claimed illegal dismissal. The case matters because it gathers in one decision the rules every labor law examinee must know: the two requisites of willful disobedience as a just cause, the two-notice rule of procedural due process, the proper penalty doctrine, the strained relations exception to reinstatement, and the solidary liability of corporate officers in illegal dismissal cases.

Procedural History

Gonzales first filed a complaint for illegal dismissal before the Labor Arbiter, but it was dismissed when he failed to appear in two consecutive hearings. He refiled the complaint, impleading Acesite as respondent. The Labor Arbiter dismissed the complaint for lack of merit, finding that Gonzales was dismissed for just cause and was not denied due process. Gonzales appealed to the National Labor Relations Commission, which reversed the Labor Arbiter. The Commission ordered reinstatement without loss of seniority rights, payment of backwages from May 16, 1998, 800,000 pesos as moral damages, an equal amount as exemplary damages, and ten percent attorney's fees. Acesite then filed a petition for certiorari before the Court of Appeals. The Court of Appeals affirmed the finding of illegal dismissal but modified the award: it ordered reinstatement or, if no longer feasible, separation pay, full backwages from May 14, 1998 subject to a one-week suspension, 100,000 pesos as moral and exemplary damages, and ten percent attorney's fees. Both Acesite and Gonzales filed separate petitions for review on certiorari before the Supreme Court, which were consolidated.

Facts

Leo Gonzales was hired in October 1993 as Chief of Security of the Manila Pavillion Hotel. When Acesite took over its operations in January 1995 and renamed it Holiday Inn Manila, Gonzales was retained in the same position. In March and April 1998 he took sick, emergency, and vacation leaves, using up all his leave credits for the year. On April 23, 1998, before his vacation leave expired, he applied for ten more days of emergency leave beginning April 30. Acesite claims it disapproved the application by telegram and asked him to report on April 30. Gonzales did not report. On that same day Acesite sent another telegram advising him that he was on unauthorized leave and requiring a written explanation within twenty-four hours and his return to work the next day.

On May 2, Gonzales's father sent a telegram saying Gonzales was recovering from a severe stomach disorder and would report on May 4. A medical certificate dated May 3, issued by a Doctor Laureano Gonzales, Jr., stated that Gonzales was under his care from April 30 to May 3. On May 4 Gonzales reported for work and met with Angerbauer, the Resident Manager. Their accounts differ: Angerbauer says Gonzales explained he had to go home to Abra, while Gonzales says he requested leave without pay from May 5 to 9, provisionally approved on condition that he email his explanation. That evening Gonzales sent his explanation by email and then left for Abra. Angerbauer sent an inter-office memo requiring explanation for the May 1 absence and for coming in late on May 4.

On May 5, Angerbauer sent Gonzales a telegram at his provincial address, a final advice to report for work immediately. Gonzales claims he received it only on the afternoon of May 7 and immediately returned to Manila on May 8, only to be barred from entering the premises. Unknown to him, on May 7 Angerbauer had issued a Notice of Termination effective immediately, citing gross disobedience or insubordination under the House Code of Discipline and Article 282 of the Labor Code. Gonzales filed his complaint for illegal dismissal on May 27, 1998.

Issues

• Whether or not Gonzales was dismissed for a just cause, specifically willful disobedience of the lawful orders of his employer.
• Whether or not Gonzales was afforded procedural due process under the two-notice rule.
• Whether or not Gonzales is entitled to reinstatement, backwages, fringe benefits, and damages.
• Whether or not the corporate officers Angerbauer and Kennedy are solidarily liable with Acesite.

Applicable Provisions

Article 282 of the Labor Code, as invoked by Acesite, provides:

Article 282. 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.

This is the just cause provision the employer relied on, and the Court measured Gonzales's conduct against it.

Article 277 of the Labor Code, as amended, provides:

Subject to the constitutional right of workers to security of tenure and their right to be protected against dismissal except for just and authorized cause and without prejudice to the requirement of notice under Article 283 of this Code, the employer shall furnish the worker whose employment is sought to be terminated a written notice containing a statement of the causes for termination and shall afford the latter ample opportunity to be heard and defend himself with the assistance of his representative if he so desires in accordance with company rules and regulations promulgated pursuant to guidelines set by the Department of Labor and Employment. 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. The burden of proving that the termination was for a valid or authorized cause shall rest on the employer.

This is the procedural due process provision, and it also places the burden of proof on the employer.

Ruling

On the first issue, the Court found no just cause. Willful disobedience requires the concurrence of two requisites: the employee's conduct must be willful or intentional, characterized by a wrongful and perverse attitude, and the order violated must be reasonable, lawful, made known to the employee, and must pertain to the duties he was engaged to discharge. The first requisite was absent. Gonzales's receipt of the telegram disapproving his leave was not shown, and he could not have disobeyed the May 5 telegram because he received it only on May 7. His immediate return to Manila negated a perverse attitude. The Court held that if he could be faulted at all, it was only for being too presumptuous that his leave would be approved, and that his unauthorized absences from May 5 to 7 warranted only suspension, not dismissal.

On the second issue, the Court agreed that the two-notice rule was not complied with. No notice apprised Gonzales of the charges against him, and no hearing was conducted. Company rules cannot be used to defeat the employee's rights, and employees cannot bargain away the right to notice and hearing.

On the third issue, the Court held that reinstatement was no longer possible because Gonzales held a position of trust and confidence as Chief of Security, and strained relations excused reinstatement. In lieu thereof, Acesite must pay separation pay of one month for every year of service. The Court deleted the moral and exemplary damages because bad faith, fraud, oppression, or a wanton manner of dismissal was not sufficiently proven.

On the fourth issue, the Court applied the rule that corporate officers are generally not personally liable for official acts, but the corporate veil may be pierced when the corporate personality is used to perpetuate fraud or an illegal act, evade an existing obligation, or confuse a legitimate issue.

Doctrine

Willful disobedience as a just cause under Article 282 requires two concurring requisites: a willful or intentional conduct characterized by a wrongful and perverse attitude, and an order that is reasonable, lawful, made known to the employee, and connected to his duties. Absent a perverse attitude, dismissal is too harsh a penalty.

Under Article 277, the employer must furnish a written notice stating the causes of termination and afford the employee ample opportunity to be heard. The burden of proving a valid cause rests on the employer. Company codes of discipline cannot dispense with these requirements.

Reinstatement may be excused on the ground of strained relations, especially for employees occupying positions of trust and confidence, in which case separation pay of one month for every year of service is awarded. Moral and exemplary damages require proof of bad faith, fraud, oppression, or a wanton manner of dismissal.

Disposition

The petitions were denied and the Court of Appeals decision was affirmed, with the modification that Acesite pays separation pay of one month for every year of service in lieu of reinstatement, and the moral and exemplary damages were deleted.

Remember This

Memorize the twin requisites of willful disobedience and the rule that a perverse attitude must concur. Examiners use this case for the two-notice rule, the proper penalty doctrine, and the strained relations exception to reinstatement.