“J” MARKETING CORPORATION REPRESENTED BY ITS BRANCH MANAGER ELMUNDO DADOR, PETITIONER, VS. CESAR L. TARAN, RESPONDENT.

J" Marketing Corporation versus Taran

The Case

This is a labor case about a resignation that was never meant to be a pure goodbye. "J" Marketing Corporation, an appliance and motorcycle dealer with a branch in Tacloban City, asks the Supreme Court to overturn the grant of separation pay and rest day pay to Cesar Taran, its former credit investigator and collector, who resigned in 1993 after more than a decade of service. The case matters because it tests the general rule that a voluntarily resigning employee is not entitled to separation pay, and the exception that arises when the employer itself promised that benefit as the very reason for the resignation.

Procedural History

Taran filed a complaint for illegal dismissal and holiday differential before the National Labor Relations Commission, Regional Arbitration Branch Number Eight, in Tacloban City. The Labor Arbiter ruled in his favor, ordering the company to pay separation pay, rest day pay, and attorney's fees. On the company's appeal, the National Labor Relations Commission affirmed with modification, reducing the rest day pay to cover only the period from February 1990 to February 1993. The company's motion for reconsideration was denied.

The company then went to the Court of Appeals on a petition for certiorari, arguing grave abuse of discretion. The Court of Appeals denied the petition for lack of merit, and denied reconsideration as well. The company came to the Supreme Court by petition for review, imputing grave abuse of discretion to the Court of Appeals. The Supreme Court noted the procedural lapse, since a petition for review under Rule 45 should allege reversible errors, but chose to treat the allegations of grave abuse as statements of reversible errors of law and resolved the petition on the merits.

Facts

From February 1981 to February 28, 1993, Cesar Taran worked as credit investigator and collector for "J" Marketing Corporation. In February 1993, he told the branch officer in charge, Hector Caludac, that he intended to resign effective March 1, 1993. On February 13, 1993, Caludac sent him a memorandum requiring him to submit a formal resignation letter, and on February 15, 1993, Taran filed his resignation letter, citing physical illness and poor performance.

Taran later claimed that before he resigned, he had a verbal arrangement with the company: he would formally tender his resignation, and in exchange the company would pay him one hundred percent separation pay and other benefits. After several follow-ups, the company failed to pay. In July 1993, he filed a complaint for illegal dismissal and holiday differential.

The company countered that Taran had failed to meet his collection quota in 1991 and 1992, that he had been investigated for illegal custody of a colored television unit, and that his resignation was voluntary, triggered by ill health and inefficiency. The company denied any verbal agreement. The Labor Arbiter, the National Labor Relations Commission, and the Court of Appeals all found that a verbal agreement existed, and that without the assurance of benefits Taran would not have resigned.

Issues

• Whether or not the respondent is entitled to any benefit under the law after having resigned voluntarily from his employment.
• Whether or not the respondent's claim for rest day pay differential has been partly barred by prescription.

Applicable Provisions

Article 291 of the Labor Code provides:

All money claims arising from employer-employee relations accruing during the effectivity of this Code shall be filed within three years from the time the cause of action accrued; otherwise they shall be forever barred.

This provision governs the respondent's claim for rest day pay, which the Court limited to the three years counted backward from the filing of the complaint.

Ruling

On the first issue, the Court held that the respondent is entitled to separation pay, even though he resigned voluntarily. The Court began with the general rule: there is no provision in the Labor Code granting separation pay to voluntarily resigning employees. Separation pay may be awarded only in cases of installation of labor-saving devices, redundancy, retrenchment, closing or cessation of business operations, disease of an employee whose continued employment is prejudicial to himself or his co-employees, or illegal dismissal where reinstatement is no longer feasible. An employee who voluntarily resigns is not entitled to separation pay, except when it is stipulated in the employment contract or collective bargaining agreement, or is sanctioned by established employer practice or policy.

None of these grounds was present. Yet the Court affirmed the award, because the company, through its branch officer in charge, had promised the benefit as the very inducement for the resignation. The Court relied on its earlier ruling in Alfaro versus Court of Appeals: an employer who agrees to extend such a benefit as an incident of the resignation should not be allowed to renege on the commitment. Caludac represented the company and oversaw the respondent's work, so the respondent could not be faulted for relying on his representations. The Court also found it immaterial that the respondent had initially pleaded illegal dismissal, since he did not pursue that course and focused on his claim for separation pay. The practice of allowing an employee to resign instead of being terminated for just cause, so as not to smear his employment record, is commonly practiced and is not illegal.

On the second issue, the Court upheld the award of rest day pay but affirmed its reduction. Although the respondent was paid monthly, the vouchers showed he was actually paid on the number of days worked, making him for all intents and purposes a daily paid employee entitled to rest day pay. Applying Article 291, the Court held that the claim filed in July 1993 could reach back only to July 1990, and that any claim before that date had prescribed.

Doctrine

An employee who voluntarily resigns is not entitled to separation pay, except when it is stipulated in the employment contract or collective bargaining agreement, or sanctioned by established employer practice or policy. But where the employer promises separation benefits as the consideration for the resignation, the employer is bound by that commitment and cannot renege on it. Money claims arising from employer-employee relations prescribe in three years from accrual under Article 291 of the Labor Code, so a claimant recovers only benefits falling within the three years preceding the filing of the complaint.

Disposition

The petition was denied, and the Decision and Resolution of the Court of Appeals were affirmed; the respondent kept his separation pay and his rest day pay for the period beginning July 1990.

Remember This

Memorize this line: a voluntarily resigning employee gets no separation pay unless the contract, a collective bargaining agreement, company practice, or the employer's own promise provides it, and an employer who uses that promise to procure the resignation cannot renege. Examiners use this case to test the exception to the no-separation-pay rule and the three-year prescriptive period for money claims.