UNIVERSITY OF MANILA, REPRESENTED BY EMILY DE LEON AS PRESIDENT, DOING BUSINESS UNDER THE NAME AND STYLE BENGUET PINES TOURIST INN, PETITIONER, VS. JOSEPHINE P. PINERA, YOLANDA …

University of Manila versus Pinera

The Case

This is a labor case about three hotel employees of the Benguet Pines Tourist Inn in Baguio, an enterprise operated by the University of Manila, who were ordered to transfer to Manila, refused, and were then dismissed or cut off from their salaries. Josephine Pinera, Yolanda Calanza, and Leonora Songalia filed a complaint for illegal dismissal against the University. The case matters because the Supreme Court uses it to draw the dividing line between managerial employees and fiduciary rank-and-file employees in dismissals grounded on loss of trust and confidence, and to remind employers that the managerial prerogative to transfer workers is not absolute.

Procedural History

The Labor Arbiter ruled for the three employees, ordering the University to pay separation pay, full backwages, and a deficiency in thirteenth month pay, in the total amount of 863,422 pesos. The University appealed to the National Labor Relations Commission, which vacated the Labor Arbiter's decision, held that Calanza was validly dismissed for insubordination but awarded her 10,000 pesos in nominal damages for failure to observe the notice requirement, and dismissed the complaints of Pinera and Songalia for lack of merit. The employees moved for reconsideration, which was denied. They then filed a petition for certiorari with the Court of Appeals, which reversed the Commission and reinstated the Labor Arbiter's decision, finding no just cause for dismissal and no procedural due process. The Court of Appeals denied the University's motion for reconsideration. The University then filed a petition for review on certiorari with the Supreme Court.

Facts

The University of Manila, established by the Delos Santos family, also operated hotels and restaurants, among them the Benguet Pines Tourist Inn. Calanza, Pinera, and Songalia were hired in 1984, 1993, and 1999 respectively as receptionists and all-around employees. During the lifetime of the owners, the inn was managed by Attorney Ernesto Delos Santos. Upon the death of Cordelia Delos Santos, Doctor Emily De Leon became University President.

In December 2010, Calanza, then front desk clerk, was verbally told that twenty-five booklets of unused official receipts were missing, and the University treated her as accountable. She says she received no written notice to explain. In January 2011, the University issued a memorandum on the reshuffling of inn employees to avoid anomalies, referring to the missing booklets. Calanza was then directed to transfer to Manila; when she refused, she was terminated by letter for insubordination. Pinera was ordered in June 2011 to report to the University within forty-eight hours; when she refused, her salary was stopped, and security guards later broke into her room and dumped her belongings outside. Songalia was ordered to explain why she was reporting to a nearby inn owned by Attorney Delos Santos, then ordered to transfer to Manila; her salary was also withheld.

The three employees filed an illegal dismissal case. The University's evidence of their supposed breaches consisted largely of an affidavit of a co-employee and suspicions that they had sided with Attorney Delos Santos in a conflict among the owners and board members.

Issues

• Whether or not Calanza was validly dismissed for willful breach of trust and confidence, considering that she was a fiduciary rank-and-file employee and not a managerial employee.
• Whether or not Pinera and Songalia were validly dismissed for willful breach of trust and confidence.
• Whether or not the employees were dismissed for insubordination or willful disobedience when they refused the transfer order.
• Whether or not the University observed procedural due process in terminating the employees.

Applicable Provisions

The decision applies the twin requirements of a valid dismissal under the Labor Code. The Court states the rule as follows:

Under the Labor Code, there are twin requirements to justify a valid dismissal from employment: (a) the dismissal must be for any of the causes provided in Article 282 of the Labor Code (substantive aspect); and (b) the employee must be given an opportunity to be heard and to defend himself (procedural aspect).

This frames the whole case: the employer must prove both a just cause and the observance of due process.

On the burden of proof, the Court adopts this rule:

The burden of proof rests upon the employer to show that the disciplinary action was made for lawful cause or that the termination of employment was valid. In administrative and quasi-judicial proceedings, the quantum of evidence required is substantial evidence or "such relevant evidence as a reasonable mind might accept as adequate to support a conclusion." Thus, unsubstantiated suspicions, accusations, and conclusions of the employer do not provide legal justification for dismissing the employee. When in doubt, the case should be resolved in favor of labor pursuant to the social justice policy of our labor laws and the 1987 Constitution.

This governs the evaluation of the University's evidence against all three employees.

On the classes of employees vested with trust and confidence, the Court quotes Wesleyan University Philippines versus Reyes:

To the first class belong the managerial employees or those vested with the powers or prerogatives to lay down management policies and to hire, transfer, suspend, lay-off, recall, discharge, assign or discipline employees or effectively recommend such managerial actions. The second class includes those who in the normal and routine exercise of their functions regularly handle significant amounts of money or property. Cashiers, auditors, and property custodians are some of the employees in the second class.

This determines the degree of proof required against Calanza, a front desk clerk handling money and property.

On the stricter standard for fiduciary rank-and-file employees, the Court quotes Caoile versus National Labor Relations Commission:

[W]ith respect to rank-and-file personnel, loss of trust and confidence as ground for valid dismissal requires proof of involvement in the alleged events in question, and that mere uncorroborated assertions and accusations by the employer will not be sufficient. But, as regards a managerial employee, mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal. Hence, in the case of managerial employees, proof beyond reasonable doubt is not required, it being sufficient that there is some basis for such loss of confidence, such as when the employer has reasonable ground to believe that the employee concerned is responsible for the purported misconduct, and the nature of his participation therein renders him unworthy of the trust and confidence demanded by his position.

This is the standard the University failed to meet.

On the limits of the managerial prerogative to transfer, the Court quotes Blue Dairy Corporation versus National Labor Relations Commission:

The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion, bearing in mind the basic elements of justice and fair play. Having the right should not be confused with the manner in which that right is exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. In particular, the employer must be able to show that the transfer is not unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits.

This tests the validity of the Manila transfer orders and the refusal that followed.

Ruling

On the first issue, the Court held that Calanza was a fiduciary rank-and-file employee, because what matters is the actual work performed, not the job title. She handled guest payments and inn property. Against such an employee, the employer must present more stringent proof of actual breach and involvement. The lone affidavit of a co-employee was self-serving, and it was never explained how the receipts were kept or who else had access. The evidence therefore failed to show willful betrayal of trust.

On the second issue, the Court found the same defect for Pinera and Songalia. Their alleged moonlighting at the nearby inn and their supposed consent to theft of supplies by Attorney Delos Santos were not sufficiently established. What the records showed was a conflict among the owners and board members that spilled over onto the employees, with the University assuming the two had sided with Attorney Delos Santos.

On the third issue, the Court held that willful disobedience requires that the employee's conduct be willful and that the order violated be reasonable, lawful, made known, and related to the employee's duties. Here the transfer order, though dressed as a business prerogative, was issued with grave abuse of discretion: it demanded transfer within forty-eight hours, it was issued without regard to due process, and it was silent on what work awaited them in Manila. The subsequent withholding of salaries and forcible eviction showed the transfer was a retaliatory move. The employees therefore had valid reason to refuse, and the insubordination charge was a fabrication. The Court stressed that there must be reasonable proportionality between the disobedience and the penalty.

On the fourth issue, the Court held that procedural due process requires two written notices and a hearing or opportunity to be heard. Calanza received only a verbal notice and was summarily terminated. Pinera and Songalia were asked to explain, but no hearing was conducted and no second notice of dismissal was sent. Due process was not observed.

Doctrine

First, a dismissal is valid only if it rests on a just cause under Article 282 of the Labor Code and complies with procedural due process, and the burden of proving both lies with the employer by substantial evidence. Second, employees vested with trust and confidence fall into two classes, managerial employees and fiduciary rank-and-file employees such as cashiers, auditors, and property custodians, and the class is determined by actual work, not job title. Third, for fiduciary rank-and-file employees, loss of trust and confidence requires proof of actual involvement in the alleged events; mere uncorroborated assertions and suspicions will not suffice. Fourth, the managerial prerogative to transfer must be exercised without grave abuse of discretion, cannot be used as a subterfuge to remove an undesirable worker, and must not be unreasonable, inconvenient, or prejudicial to the employee. Fifth, insubordination is a valid cause for dismissal only if the conduct is willful and the order is reasonable, lawful, made known, and work-related, with reasonable proportionality between the disobedience and the penalty.

Disposition

The Supreme Court denied the University's petition and affirmed the Court of Appeals, which had reinstated the Labor Arbiter's award of separation pay, backwages, and thirteenth month pay deficiency to the three employees.

Remember This

Memorize the line that the managerial prerogative to transfer cannot be used as a subterfuge to rid the employer of an undesirable worker, and that fiduciary rank-and-file employees demand stricter proof of breach of trust. Examiners use this case for the two classes of employees vested with trust and confidence and for the limits on the employer's power to transfer.