RUFINA SORIANO, PETITIONER, VS. THE NATIONAL LABOR RELATIONS COMMISSION AND KINGLY COMMODITIES TRADERS AND MULTI-RESOURCES, INC., RESPONDENTS.

Soriano versus National Labor Relations Commission

The Case

This is a petition for certiorari brought by Rufina Soriano against the National Labor Relations Commission and her former employer, Kingly Commodities Traders and Multi-Resources, Incorporated. Soriano, who rose to Vice-President for Marketing, was dismissed for loss of confidence after irregularities in her department came to light. She asks the Supreme Court to annul the labor commission's decision and to restore the more generous award of the labor arbiter. The case matters because it fixes the standards for preventive suspension, for the supervisory responsibility of a managerial employee, and for computing separation pay and backwages on a salary base that includes regular allowances.

Procedural History

Soriano filed a complaint for illegal suspension and dismissal against the corporation and two of its senior officers, asking for reinstatement with backwages, moral and exemplary damages, medical expenses, and attorney's fees. The labor arbiter ruled in her favor, ordering separation pay, six months of backwages, moral damages, exemplary damages, and attorney's fees equivalent to ten percent of the award. The corporation appealed. The National Labor Relations Commission modified the award, deleting the moral and exemplary damages and reducing the backwages to three months, while adjusting the separation pay and retaining attorney's fees. Soriano then came to the Supreme Court on a petition for certiorari, seeking to annul the commission's decision and to revive the labor arbiter's award.

Facts

Soriano began working with the corporation in November 1977 as Investment Counselor and eventually became Vice-President for Marketing. On 18 September 1984 she was charged with allowing or failing to supervise and monitor the activities of the investment counselors in her department. The charges included the signing of a contract opening a client's account by an investment counselor without authority from the client, transfers of funds between accounts without the clients' knowledge and authority, unauthorized foreign currency transactions with clients, and unauthorized approval of leave for members of her department, all resulting in loss of confidence in her. She was preventively suspended and required to explain.

Two days later she submitted her detailed answer. On 27 September 1984 the Executive Vice-President and General Manager found her explanation unsatisfactory and notified her that the corporation had lost confidence in her ability to discharge her functions, and terminated her services.

The irregularities centered on a client named Panemanglor. An investment counselor, Sofia Nazareno, opened his account and signed the agreement and signature card in his name, which was highly irregular. Funds were later moved between accounts without his knowledge, and Soriano herself approved a payment instruction and a subsequent transfer. When Panemanglor's demand letter reached her through her superior, Guil Rivera, she confirmed the irregularity in a memorandum but failed to discipline the erring employee, although that was within her power. Panemanglor later sued the corporation before the Securities and Exchange Commission. Both the labor arbiter and the commission found that strained relations made reinstatement not feasible.

Issues

• Whether or not the corporation violated Soriano's right to due process by placing her under preventive suspension without a prior hearing.
• Whether or not the true reason for her dismissal was the personal grudge harbored against her by Guil Rivera.
• Whether or not the corporation discriminated against her by not dismissing the two supervisors of the erring counselor.
• Whether or not Soriano was responsible for the unauthorized acts of her subordinates, such that her dismissal for loss of confidence was lawful.
• Whether or not the salary base for separation pay and backwages should include her regular allowances, and whether or not attorney's fees were properly awarded.

Applicable Provisions

Section 3 of Rule Fourteen, Book Five of the Omnibus Rules Implementing the Labor Code provides:

Preventive suspension may be necessary for the protection of the company, its operations and assets, pending investigation of the alleged malfeasance or misfeasance on the part of officers or employees of the company and pending a decision on the part of the company.

This is the rule the Court invokes to hold that the preventive suspension was not an arbitrary act amounting to bad faith.

Article 2208, paragraph 5, of the Civil Code provides:

In the absence of a stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except when the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.

The Court cites this to strip the award of attorney's fees down to a nominal amount, since bad faith on the part of the employer was not proven.

Ruling

On the first issue, the Court held that preventive suspension does not in itself prove that the company had prejudged the employee's guilt. Given the very senior and sensitive character of her position as head of a line department, and the unauthorized transactions just discovered, the suspension was not arbitrary and capricious.

On the second issue, the Court found that the alleged personal motive of Rivera was no more than conjecture and was not sufficiently established. It added that even if personal ill will had been clearly proven, a serious question would arise whether the corporation itself could be held liable absent clear authorization, approval, or adoption of the act.

On the third issue, the Court held that the corporation must be accorded reasonable latitude in determining who among erring officers should be punished and to what extent. It presumably found it unnecessary to terminate the two section heads, who were much lower in the corporate hierarchy.

On the fourth issue, the Court upheld the commission's finding that as a managerial employee and department head, Soriano was expected to monitor the daily activities of her counselors and the transactions of clients. Had she followed the practice of personally meeting new clients, she could have noticed the unauthorized signature; having approved the payment instruction and the transfer, she could have suspected an irregularity. Her argument that she could not be expected to monitor day-to-day acts missed the point, which was her duty to adopt ways and means of keeping herself sufficiently informed. The Court observed that her logic would mean the more senior the position, the slighter the responsibility, leaving the chief executive officer with little or none.

On the fifth issue, the Court held that the salary base should include not only basic salary but also regular allowances. It included her basic salary of 3,000 pesos a month and living allowance of 2,400 pesos a month, but excluded commissions, travels equivalent, and commission in trading personal clients. Since bad faith was not proven, the award of attorney's fees had no real basis and was reduced to a nominal 1,500 pesos.

Doctrine

Preventive suspension is a protective measure, not a penalty, and does not by itself show that the employer has prejudged the employee's guilt. A managerial employee bears the responsibility of adopting ways and means of keeping sufficiently informed of the activities of subordinates, and failure to do so may justify dismissal for loss of confidence. The employer has reasonable latitude in deciding whom among erring employees to punish and to what extent. In computing separation pay and backwages, the salary base includes basic salary and regular allowances, but not commissions that depend on actual market transactions. Attorney's fees are not recoverable absent bad faith, and under Article 2208, paragraph 5, of the Civil Code may be reduced to a nominal amount.

Disposition

The Court dismissed the petition for lack of merit and modified the commission's decision to award Soriano separation pay of 37,800 pesos, backwages of 16,200 pesos, and attorney's fees of 1,500 pesos, for a total of 55,500 pesos.

Remember This

Memorize this line: preventive suspension is not punishment, and the higher the managerial position, the greater the duty to keep informed. Examiners use this case to test the salary base for separation pay and backwages, which includes regular allowances but excludes commissions.