JESUS B. LOPEZ, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION (NLRC) SECOND DIVISION, HON. COMMISSIONERS ANGELITA GACUTAN, VICTORIANO CALAYCAY, RAUL AQUINO, MAYNILAD WATER…

Lopez versus Maynilad Water Services

The Case

This is a petition for review on certiorari brought by Jesus B. Lopez, a Senior Engineering Assistant of Maynilad Water Services assigned to the Sampaloc area, against the National Labor Relations Commission, its Second Division commissioners, and his former employer. Lopez was dismissed after a customer complained that he had contracted to repair her water meter for a fee and never returned to do the work. The labor arbiter found the dismissal illegal; the Commission reversed and declared it legal; the Court of Appeals affirmed. The case matters because it fixes the test for serious misconduct as a just cause for dismissal, and it settles that an employee who takes outside work from his employer's own customer commits a conflict of interest that justifies the loss of trust and confidence, even where the employer suffers no pecuniary damage.

Procedural History

Lopez filed a complaint for illegal dismissal before the labor arbiter, claiming he was dismissed without just cause. The labor arbiter ruled in his favor, declaring the dismissal illegal and ordering Maynilad to reinstate him without loss of seniority rights and to pay full backwages and attorney's fees, while disallowing moral and exemplary damages.

On appeal, the National Labor Relations Commission set aside the labor arbiter's decision and entered a new one declaring the dismissal legal, though it ordered Maynilad to pay Lopez financial assistance as a measure of compassionate justice. Lopez's motion for reconsideration was denied, so he filed a petition for certiorari before the Court of Appeals. The Court of Appeals dismissed the petition and affirmed the Commission. His motion for reconsideration having been denied, Lopez came to the Supreme Court by petition for review on certiorari under Rule 45 of the Rules of Court.

Facts

On April 21, 1998, Regina M. Gopez wrote to Maynilad alleging that she had entered into an agreement with Lopez, Maynilad's Senior Engineering Assistant assigned to the Sampaloc area, to repair her water meter for a fee, and that despite paying 500 pesos, Lopez never returned to fix the defective meter. The next day, the Head of Technical Operations for the Sampaloc Sector issued a memorandum requiring Lopez to answer the allegations.

Lopez denied the charges. He claimed he never received any amount from Gopez and had even advised her to file a proper job order for her meter concerns. Maynilad formed an Ad-Hoc Investigation Panel, which recommended his dismissal after finding that he had committed serious misconduct in contracting unauthorized work for a fee. On September 10, 1998, Lopez was served a notice of termination.

Both the Commission and the Court of Appeals found as fact that Lopez had entered into a contractual agreement with Gopez and had received money from her through a conduit. The Commission, however, held that the infraction was not serious misconduct because Maynilad suffered no pecuniary loss, treating it instead as a violation of the policy on conflict of interest and a ground for dismissal based on loss of trust and confidence.

Issues

• Whether or not the dismissal of Lopez was valid on the ground of serious misconduct.
• Whether or not the absence of pecuniary damage to Maynilad negates the just cause for dismissal.
• Whether or not the award of financial assistance to Lopez may stand.

Applicable Provisions

The decision applies the just causes for termination of employment under Article 282 of the Labor Code, which provides:

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; (c) Fraud or willful breach by the employee of the trust reposed in him by his employer or 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 representatives; and (e) Other causes analogous to the foregoing.

This is the provision under which Maynilad's termination of Lopez must be measured, and the Court construes the phrase serious misconduct within it.

Ruling

On the first issue, the Court held that the dismissal was valid. Misconduct is improper or wrong conduct, a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, implying wrongful intent and not mere error of judgment. To be serious, the misconduct must be grave and aggravated, and it must be connected with the employee's work. The Court laid down the test thus:

Thus, for misconduct or improper behavior to be a just cause for dismissal, (a) it must be serious; (b) must relate to the performance of the employee's duties; and, (c) must show that the employee has become unfit to continue working for the employer.

By contracting with Gopez, Lopez engaged in a business that competed with Maynilad's and came into conflict of interest with it; he could not serve himself and his employer at the same time at the latter's expense. As a measure of self-preservation against acts inimical to its interests, an employer has the right to dismiss an employee found committing acts of dishonesty and disloyalty, and the law, in protecting workers, authorizes neither oppression nor self-destruction of the employer.

On the second issue, the Court held that the lack of damage was inconsequential. What is abhorrent and punishable is the act of contracting unauthorized work for a fee, regardless of whether it caused damage to the company. Damage aggravates the charge, but its absence does not mitigate nor negate the employee's liability. The Court found the penalty of dismissal reasonable and appropriate as a valid exercise of management prerogative, since Maynilad prescribes disciplinary sanctions for employees who engage in conflict of interest activities despite management disapproval.

On the third issue, the Court deleted the financial assistance. Financial assistance may be given as a measure of social justice in exceptional circumstances and as an equitable concession, but it is allowed only where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character. Lopez was dismissed for serious misconduct, so the award had no basis.

Doctrine

For misconduct to be a just cause for dismissal under Article 282 of the Labor Code, three elements must concur: it must be serious; it must relate to the performance of the employee's duties; and it must show that the employee has become unfit to continue working for the employer. An employee who contracts unauthorized work for a fee with his employer's own customer commits a conflict of interest and a breach of the trust reposed in him, and the absence of pecuniary damage to the employer neither mitigates nor negates his liability, because the heart of the charge is the crooked attitude of the employee towards his employer. Financial assistance, as a measure of social justice, is granted only where the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character.

Disposition

The petition was denied; the Court of Appeals decision and resolution were affirmed with modification, and the award of 13,260 pesos as financial assistance to Lopez was deleted for lack of basis. Maynilad won.

Remember This

Memorize the three-element test for serious misconduct, and the line that damage aggravates the charge but its absence does not mitigate nor negate liability. Examiners use this case to test conflict of interest and loss of trust and confidence in dismissal cases, and to test when financial assistance may be awarded to a dismissed employee.