DUNCAN ASSOCIATION OF DETAILMAN-PTGWO AND PEDRO A. TECSON, PETITIONERS, VS. GLAXO WELLCOME PHILIPPINES, INC. RESPONDENT.

Duncan Association of Detailman versus Glaxo Wellcome Philippines

The Case

This is a petition for review on certiorari brought by the Duncan Association of Detailman and Pedro A. Tecson against Glaxo Wellcome Philippines, Inc. The petitioners challenge the validity of a company policy that prohibits employees from having a relationship with, or marrying, an employee of a competitor company. The case matters because it is a novel question with constitutional overtones: it asks whether a private employer's conflict of interest policy violates the equal protection clause, and whether the transfer of an employee who defied that policy amounted to constructive dismissal. It is a study in the balance between management prerogative and the constitutional protection of labor.

Procedural History

Tecson was hired by Glaxo as a medical representative in October 1995. After he married Bettsy, an employee of Astra Pharmaceuticals, a competitor, Glaxo enforced its conflict of interest policy. The parties failed to resolve the matter at the grievance machinery level, so they submitted it to voluntary arbitration. The National Conciliation and Mediation Board rendered a decision declaring Glaxo's policy valid and affirming its right to transfer Tecson. Tecson then filed a petition for review with the Court of Appeals, which denied the petition and held that the policy was a valid exercise of management prerogatives. Tecson moved for reconsideration, but the appellate court denied the motion. The petitioners then filed this petition for review on certiorari with the Supreme Court.

Facts

Pedro A. Tecson was hired by Glaxo Wellcome Philippines, Inc. as a medical representative in October 1995. He signed a contract of employment stipulating that he would disclose to management any existing or future relationship by consanguinity or affinity with co-employees or employees of competing drug companies, and that should such relationship pose a possible conflict of interest, he would resign from the company. Glaxo's Employee Code of Conduct contained a similar provision, requiring disclosure and, if management perceived a conflict, exploring a transfer to a non-counterchecking position or preparation for employment outside the company after six months. Tecson was initially assigned to the Camarines Sur and Camarines Norte sales area.

Tecson entered into a romantic relationship with Bettsy, an employee of Astra Pharmaceuticals, a competitor of Glaxo. Bettsy was Astra's Branch Coordinator in Albay, supervising district managers and medical representatives and preparing marketing strategies. Even before they married, Tecson received reminders from his District Manager about the conflict of interest. They married in September 1998. In January 1999, his superiors informed him that the marriage gave rise to a conflict of interest and reminded him that he and Bettsy should decide which one would resign, though they wanted to retain him because he performed well. Tecson requested time, explaining that Astra was planning to merge with Zeneca and Bettsy planned to avail of a redundancy package. In August 1999, he again requested more time. In September 1999, he applied for a transfer to Glaxo's milk division, but his application was denied under Glaxo's least-movement-possible policy.

In November 1999, Glaxo transferred Tecson to the Butuan City, Surigao City, and Agusan del Sur sales area. He asked for reconsideration, but it was denied. He brought the matter to Glaxo's Grievance Committee, which remained firm and gave him until February 7, 2000 to comply with the transfer order. Tecson defied the order and continued acting as medical representative in the Camarines Sur and Camarines Norte area. During the grievance proceedings, he was paid his salary but was not issued samples of products competing with Astra's and was not included in product conferences regarding such products. Glaxo offered him a separation pay of one-half month pay for every year of service, or a total of 50,000 pesos, which he declined.

Issues

• Whether or not the Court of Appeals erred in ruling that Glaxo's policy against its employees marrying employees of competitor companies is valid, and in not holding that said policy violates the equal protection clause of the Constitution.
• Whether or not Tecson was constructively dismissed when he was transferred to a new sales territory and excluded from seminars and training sessions.

Applicable Provisions

Section 3, Article XIII of the Constitution provides:

The State shall regulate the relations between workers and employers, recognizing the right of labor to its just share in the fruits of production and the right of enterprises to reasonable returns on investments, and to expansion and growth.

This provision is the basis for the Court's holding that Glaxo has the right to protect its economic interests through a reasonable company policy.

Ruling

The Court denied the petition for lack of merit. On the first issue, the Court held that Glaxo's policy prohibiting an employee from having a relationship with an employee of a competitor company is a valid exercise of management prerogative. Glaxo has a right to guard its trade secrets, manufacturing formulas, marketing strategies, and other confidential information from competitors, especially since Glaxo and Astra are rival companies in the highly competitive pharmaceutical industry. The prohibition is reasonable because such relationships might compromise the company's interests. The Court quoted the appellate court:

The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However, an employee's personal decision does not detract the employer from exercising management prerogatives to ensure maximum profit and business success.

The Court also held that the policy does not violate the equal protection clause because the commands of that clause are addressed only to the state or those acting under color of its authority, and the equal protection clause erects no shield against merely private conduct. The exception, when the state has become entwined in the wrongful private conduct, is not present. The Court further noted that Glaxo did not impose an absolute prohibition against relationships; employees are free to cultivate relationships and marry persons of their own choosing. What the company seeks to avoid is a conflict of interest. Tecson was aware of the restriction when he signed his employment contract and when he entered into the relationship, so he is estopped from questioning the policy.

On the second issue, the Court held that Tecson was not constructively dismissed. Constructive dismissal is defined as a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee. None of these conditions are present. The record does not show that Tecson was demoted or unduly discriminated upon. Glaxo properly exercised its management prerogative in reassigning him. The Court quoted the appellate court:

In this case, petitioner's transfer to another place of assignment was merely in keeping with the policy of the company in avoidance of conflict of interest, and thus valid. Note that his wife holds a sensitive supervisory position as Branch Coordinator in her employer-company which requires her to work in close coordination with District Managers and Medical Representatives. Her duties include monitoring sales of Astra products, conducting sales drives, establishing and furthering relationship with customers, collection, monitoring and managing Astra's inventory. She therefore takes an active participation in the market war characterized as it is by stiff competition among pharmaceutical companies. Moreover, and this is significant, petitioner's sales territory covers Camarines Sur and Camarines Norte while his wife is supervising a branch of her employer in Albay. The proximity of their areas of responsibility, all in the same Bicol Region, renders the conflict of interest not only possible, but actual, as learning by one spouse of the other's market strategies in the region would be inevitable. Management's appreciation of a conflict of interest is therefore not merely illusory and wanting in factual basis.

The Court also cited Abbott Laboratories versus National Labor Relations Commission, where it upheld the right of a drug company to transfer or reassign its employee in accordance with operational demands, and quoted:

By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products is great. More so if such reassignments are part of the employment contract.

The Court noted that Glaxo gave Tecson several chances to eliminate the conflict, did not terminate him but only reassigned him to an area including his home province, and even considered the welfare of his family. This dispelled any suspicion of unfairness and bad faith.

Doctrine

A company policy prohibiting employees from having a relationship with or marrying employees of competitor companies is a valid exercise of management prerogative, provided it is reasonable under the circumstances and applied impartially. The equal protection clause is a restriction on the state, not on private conduct, unless the state has become entwined in the wrongful private conduct. The policy does not violate the equal protection clause because it does not impose an absolute prohibition against marriage; employees remain free to marry anyone of their choosing, and the policy only seeks to avoid a conflict of interest. An employee who knowingly and voluntarily enters into a contract of employment containing such a policy is estopped from questioning it. Constructive dismissal requires a quitting, an involuntary resignation resorted to when continued employment becomes impossible, unreasonable, or unlikely; when there is a demotion in rank or diminution in pay; or when a clear discrimination, insensibility, or disdain by an employer becomes unbearable to the employee. A valid transfer pursuant to a company policy against conflict of interest, without demotion or discrimination, does not amount to constructive dismissal.

Disposition

The petition is denied for lack of merit, and costs are assessed against the petitioners.

Remember This

The single line worth memorizing is that a company policy prohibiting employees from marrying employees of competitor companies is a valid exercise of management prerogative and does not violate the equal protection clause, because that clause restrains only the state and not private conduct. Examiners like to use this case to test the limits of management prerogative, the state action doctrine in equal protection, and the elements of constructive dismissal.