D. M. CONSUNJI, INC., PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION, HON. ALCESTIS A. MANGAHAS AND APOLINARIO AGBAYANI, RESPONDENTS.

Consunji versus National Labor Relations Commission

The Case

This is a petition for review brought by D. M. Consunji, Incorporated against the National Labor Relations Commission, the labor arbiter Ma. Alcestis A. Mangahas, and its former camp administrator Apolinario Agbayani. The company asks the Supreme Court to set aside the labor tribunal's ruling that Agbayani was illegally dismissed from his overseas assignment in Brunei. The case matters because it draws the boundary of an employer's privilege to dismiss a managerial employee on the ground of loss of confidence, and because it fixes what a wrongfully dismissed contractual employee may recover and what he may not.

Procedural History

Agbayani filed a complaint for illegal dismissal with the Philippine Overseas Employment Administration after the company refused his demands. The labor arbiter, Ma. Alcestis A. Mangahas, decided in his favor, awarding the salary for the unexpired portion of his contract, reimbursement of his re-entry visa fee and return plane fare, the shipment or cash equivalent of his personal belongings including his car, and attorney's fees equivalent to ten percent of the total award. The company appealed to the National Labor Relations Commission, which affirmed the arbiter's decision in full. The company then came to the Supreme Court on a petition for review, and the Court modified the award.

Facts

In November 1981, D. M. Consunji, Incorporated hired Apolinario Agbayani as Camp Administrator of its New Istana Construction Project in Brunei, at a monthly salary of 800 dollars for a period of two years. As camp administrator he was responsible for camp security and safety, camp maintenance, employee services, and rest and recreation. He left for Brunei on December 20, 1981, and while there he bought a car which he used for rest and recreation postal services and camp maintenance.

In May 1982, the company required Agbayani to return to Manila and report to its president on a sit-down strike that had occurred in the camp. The company gave him a one-way ticket back. After he submitted his report in June 1982, he tried to confirm his flight back to Brunei but was told it had been cancelled, and the company informed him that the Brunei office had advised Manila to hold him. On his own initiative, he secured a re-entry visa and a return plane ticket. Meanwhile, he was detailed to the company's security department and continued to be paid his overseas salary rate.

On June 26, 1982, the company terminated his services, effective June 30, 1982. When the company ignored his demands for his salary up to termination, separation pay, reimbursement of his visa fee and plane ticket, and the shipment of his personal belongings including his car, he filed the complaint for illegal dismissal. The company's defense was that, as a managerial employee, he had failed to integrate the various facets of his work and had not come up to the standard requirements of his position.

Issues

• Whether or not Apolinario Agbayani was justifiably dismissed before the expiration of his two-year contract on the ground of loss of confidence.
• Whether or not he is entitled to reimbursement of his re-entry visa fee, his return plane fare, and the cost or shipment of his car.
• Whether or not the award of attorney's fees equivalent to ten percent of the total judgment award is proper.

Applicable Provisions

Article 111, paragraph b, of the Labor Code provides:

No attorney's fees, negotiation fees or similar charges of any kind arising from any collective bargaining agreement shall be imposed on any individual member of the contracting union: Provided, however, That attorney's fees may be charged against union funds in an amount to be agreed upon by the parties. Any contract, agreement or arrangement of any sort to the contrary shall be null and void.

The Court read this provision as a limitation on the amount of attorney's fees a lawyer may recover in proceedings for the recovery of wages, and applied it to reduce the award.

Ruling

On the first issue, the Court held that Agbayani was a managerial employee, one vested with powers or prerogatives to lay down and execute management policies or to hire, transfer, suspend, lay off, recall, discharge, assign or discipline employees, or to effectively recommend such actions. As such he could be terminated for lack of confidence, and the employer has a much wider discretion in terminating managerial personnel than rank-and-file employees. But that prerogative must be exercised without abuse of discretion, and the rules of fairness and due process still apply. The Court held that loss of confidence cannot be left to the sole discretion of the employer, and it quoted with approval the rule from General Bank and Trust Company versus Court of Appeals:

However, loss of confidence should not be simulated. It should not be used as a subterfuge for causes which are improper, illegal, or unjustified. Loss of confidence may not be arbitrarily asserted in the face of overwhelming evidence to the contrary. It must be genuine, not a mere afterthought to justify earlier action taken in bad faith.

The company's only evidence was a memorandum directing Agbayani to give priority to the rest and recreation program, which the Court found equivocal and no proof of breach of trust. The dismissal was therefore unjustified, and he was entitled to his wages for the unexpired portion of his contract, amounting to 14,400 dollars corresponding to eighteen months at 800 dollars monthly.

On the second issue, the Court ruled for the company. The company did not induce or order Agbayani to procure the re-entry visa or the return plane ticket; he did so on his own initiative, so reimbursement was not justified. Neither could the company be made to reimburse or ship his car, which he bought on his own initiative without the company's approval and consent, and which he did not need for company purposes.

On the third issue, the Court found the award of ten percent of the total judgment, roughly 28,800 pesos, utterly excessive and unreasonable, given the simple nature of the litigation, the questions involved being neither novel nor difficult, the quantity and character of the services rendered, and the length of time the case had been pending. It reduced the attorney's fees to 4,000 pesos.

Doctrine

A managerial employee may be dismissed on the ground of loss of confidence, and the employer enjoys a wider discretion in terminating managerial personnel than rank-and-file employees. That discretion, however, is not absolute: it must be exercised without abuse of discretion, and the rules of fairness and due process apply. Loss of confidence must be genuine and based on clear proof; it cannot be simulated, used as a subterfuge for improper, illegal, or unjustified causes, arbitrarily asserted against overwhelming contrary evidence, or raised as a mere afterthought to justify earlier action taken in bad faith. An employee dismissed without just cause is entitled to the wages corresponding to the unexpired portion of his employment contract. Expenses an employee incurs on his own initiative, without the employer's inducement or consent, are not chargeable to the employer. Attorney's fees in labor cases are strictly construed and limited, and may be reduced when the circumstances warrant.

Disposition

The Court modified the decision, holding the company liable only for the equivalent of 14,400 dollars in Philippine currency as salary for the unexpired portion of the contract, plus 4,000 pesos as attorney's fees, with no costs.

Remember This

The single line to memorize is that loss of confidence must be genuine, not a mere afterthought to justify earlier action taken in bad faith. Examiners use this case to test the wider but still bounded discretion to dismiss managerial employees, and the rule that a dismissed contractual employee recovers only the salary for the unexpired term, not self-incurred expenses.