JENNY M. AGABON AND VIRGILIO C. AGABON, PETITIONERS, VS. NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. AND VICENTE ANGELES, RESPONDENTS.

Agabon versus Riviera Home Improvements

The Case

This is a petition for review filed by spouses Jenny and Virgilio Agabon against their former employer, Riviera Home Improvements, Incorporated, and its manager Vicente Angeles, together with the National Labor Relations Commission. The petitioners were gypsum board and cornice installers who were dismissed from work and who then sued for illegal dismissal. The case matters because it squarely presents the doctrinal question of what happens when an employer has a valid or just cause to dismiss an employee but fails to observe the procedural requirements of notice and hearing. The Supreme Court uses this case to revisit and ultimately abandon its earlier ruling in the Serrano case, and to clarify the sanctions for what is called belated due process.

Procedural History

The petitioners filed a complaint for illegal dismissal and money claims before the Labor Arbiter, who ruled in their favor and declared the dismissal illegal, awarding backwages, separation pay, and other monetary claims. On appeal, the National Labor Relations Commission reversed the Labor Arbiter, finding that the petitioners had abandoned their work and were not entitled to backwages or separation pay, and denying the money claims for lack of evidence. The petitioners then filed a petition for certiorari with the Court of Appeals, which affirmed the finding of abandonment but ordered the payment of certain money claims. The petitioners came to the Supreme Court on a petition for review, raising the sole issue of whether they were illegally dismissed.

Facts

The petitioners were employed as installers beginning in January 1992 until February 1999, when they were dismissed for abandonment of work. They claimed that when they reported for duty in February 1999, the employer refused to give them assignments unless they agreed to work on a piece-rate or pakyaw basis, which they refused because it would mean losing their social security benefits. They also claimed that the employer failed to comply with the twin requirements of notice and hearing.

The employer, on the other hand, maintained that the petitioners were not dismissed but had abandoned their work. The employer sent two letters to the petitioners' last known addresses advising them to report for work, and its manager even telephoned one petitioner to inform him of a new assignment. However, the petitioners did not report because they had subcontracted to perform installation work for another company, and they had also demanded a wage increase. When this was not granted, they stopped reporting for work and filed the illegal dismissal case. The record showed that in January 1996, the petitioners had also failed to report for work because they were working for another company, and the employer had warned them that they would be dismissed if this happened again.

Issues

• Whether or not the petitioners were illegally dismissed, or whether their dismissal was for a just cause, namely abandonment of work.
• Whether or not the employer's failure to observe the procedural requirements of notice and hearing renders the dismissal illegal, or merely subjects the employer to sanctions.

Applicable Provisions

Article 282 of the Labor Code enumerates the just causes for termination by the employer, and 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 the latter's representative in connection with the employee's work; (b) Gross and habitual neglect by the employee of his duties; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d) 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 representative; and (e) Other causes analogous to the foregoing.

This provision bears on the case because abandonment is treated as a form of neglect of duty, which is a just cause for termination.

The procedure for terminating an employee is found in the Omnibus Rules Implementing the Labor Code, which provides:

Standards of due process: requirements of notice. – In all cases of termination of employment, the following standards of due process shall be substantially observed: For termination of employment based on just causes as defined in Article 282 of the Code: (a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side; (b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and (c) A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. In case of termination, the foregoing notices shall be served on the employee's last known address.

This provision is central because the employer failed to comply with these notice requirements.

Article 279 of the Labor Code on security of tenure provides:

Article 279. Security of Tenure. – In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. 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 provision bears on the case because the Court interprets it to mean that reinstatement and backwages are justified only if the employee was unjustly dismissed, that is, dismissed without just or authorized cause.

Ruling

On the first issue, the Court ruled that the petitioners were not illegally dismissed. Their dismissal was for a just cause, namely abandonment of work. The Court defined abandonment as the deliberate and unjustified refusal of an employee to resume his employment, and a form of neglect of duty. For a valid finding of abandonment, two factors must be present: first, the failure to report for work or absence without valid or justifiable reason; and second, a clear intention to sever the employer-employee relationship, with the second as the more determinative factor. The Court found that the petitioners were frequently absent because they had subcontracted for installation work for another company, which clearly showed the intention to sever the employment relationship. This was not the first time they had done this, as they had done the same in 1996 and had been warned. The Court quoted the rule that an employee who deliberately absents himself from work without leave for the purpose of looking for a job elsewhere is considered to have abandoned his job, and applied it with more reason where the employees were absent because they were already working for another company.

On the second issue, the Court ruled that the dismissal should be upheld despite the procedural infirmity, but that the employer should be held liable for non-compliance with the procedural requirements of due process. The Court revisited its ruling in the Serrano case, which had held that a dismissal for just cause but without due process was ineffectual and required the payment of full backwages. The Court found that the Serrano ruling did not consider the full meaning of Article 279, which states that an employee who is unjustly dismissed is entitled to reinstatement and backwages. The Court reasoned that the termination is illegal only if it is not for any of the just or authorized causes provided by law, and that payment of backwages is justified only if the employee was unjustly dismissed. The Court therefore abandoned the Serrano doctrine and returned to the earlier Wenphil rule, but with stiffer sanctions. The Court held:

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights. The indemnity to be imposed should be stiffer to discourage the abhorrent practice of dismiss now, pay later. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer.

The Court noted that the employer's excuse that sending notices would have been useless because the petitioners no longer resided at their last known addresses was not valid, because the law mandates the twin notice requirements to the employee's last known address.

Doctrine

• Abandonment of work is a just cause for termination under Article 282 of the Labor Code, being a form of neglect of duty. For a valid finding of abandonment, there must be a failure to report for work without valid or justifiable reason, and a clear intention to sever the employer-employee relationship, shown by overt acts.
• An employee who is absent from work because he is already working for another company has clearly shown an intention to sever the employment relationship and may be dismissed for abandonment.
• Where the dismissal is for a just or authorized cause but the employer fails to observe the procedural requirements of notice and hearing, the dismissal is not nullified, nor is it rendered illegal or ineffectual. However, the employer must indemnify the employee for the violation of his statutory right to due process, and the indemnity must be stiffer than a mere nominal sum to deter the practice of dismiss now, pay later.
• Reinstatement and full backwages under Article 279 of the Labor Code are warranted only when the employee is unjustly dismissed, that is, dismissed without just or authorized cause.

Disposition

The Supreme Court denied the petition and affirmed the decision of the Court of Appeals, but modified it to order the employer to pay each petitioner nominal damages for the failure to observe the procedural requirements of due process.

Remember This

Remember the rule: a valid cause for dismissal cures the absence of procedural due process, but the employer must still pay indemnity, not backwages. Examiners like to use this case to test whether you know the difference between substantive and procedural due process, and to distinguish the Agabon rule from the abandoned Serrano doctrine.