KWIKWAY ENGINEERING WORKS, PETITIONER, VS. NATIONAL LABOR RELATIONS COMMISSION AND ROSALINDA VARGAS, RESPONDENTS.

Kwikway Engineering Works versus National Labor Relations Commission and Rosalinda Vargas

The Case

This is a petition for certiorari brought by Kwikway Engineering Works, a corporation engaged in the fabrication of machine parts, against the National Labor Relations Commission and its former employee Rosalinda Vargas, who had served as bookkeeper and secretary of the company's Cubao branch. The company asks the Supreme Court to annul the Commission's resolution affirming the Labor Arbiter's order of reinstatement with backwages. The case matters because it draws together two rules every labor lawyer must hold in tension: that loss of trust and confidence is a just cause for dismissing an employee who occupies a position of responsibility, and that even a dismissal for just cause is defective without the twin requirements of notice and hearing, for which the employer pays an indemnity.

Procedural History

Rosalinda Vargas filed a complaint against Kwikway Engineering Works before the Labor Arbiter. The Labor Arbiter rendered a decision directing her reinstatement to her former position with backwages. The company appealed to the National Labor Relations Commission, which affirmed the Labor Arbiter's decision. The company then came to the Supreme Court by petition for certiorari under Rule 65 of the Rules of Court, seeking annulment of the Commission's resolution on the ground of grave abuse of discretion.

Facts

Rosalinda Vargas was employed by Kwikway Engineering Works as bookkeeper and secretary of its Cubao branch. As bookkeeper, it was her duty to fill up the check vouchers, indicating the name of the customer agent and the amount payable to each, before the vouchers were presented to the agents for signing. She also handled the personnel funds of the branch.

On March 20, 1986, the newly designated branch manager discovered that several blank vouchers already bore the signatures of the mechanic agents. Confronted, the branch cashier, Marina Corpus, said that Vargas was aware of the practice. Vargas explained that the procedure had been the practice since the time of the former branch manager, although the former manager later denied this. The branch manager reported the matter to the head office, and the company's assistant vice president conducted an investigation. The following day, Vargas and Corpus were placed under preventive suspension for an indefinite period on the ground of loss of trust and confidence, in connection with several check vouchers.

Sometime in the last week of April 1986, Vargas went to the head office upon instruction of the company and was informed of the result of the investigation. The company offered her a chance to resign with separation pay, which she accepted. It later turned out that Vargas knew the cashier had once made a customer agent sign a blank voucher for 2,700 pesos while reporting a larger amount of 2,900 pesos in the company's books, and yet Vargas continued not to comply with company procedure and never reported the anomalies.

Issues

• Whether or not the dismissal of Rosalinda Vargas was for a just and valid cause.
• Whether or not Rosalinda Vargas was deprived of her constitutional right to due process.

Applicable Provisions

Article 278, paragraph b, of the Labor Code, as amended, governs the notice requirement for termination, and the Labor Arbiter's quoted findings measure the company's conduct against it:

Subject to the provisions of Article 277, in all cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and to his backwages computed from the time his compensation was withheld from him up to the time of his reinstatement.

The decision invokes this provision in holding that the confrontation Vargas was allegedly given was not the equivalent of the written notice the law requires.

Section 4, Rule XIV of the Implementing Rules of the Labor Code limits preventive suspension, and the Court quotes it in finding the indefinite suspension unlawful:

The employer shall thereafter reinstate the worker in his former or in a substantially equivalent position or the employer may extend the period of suspension provided that during the period of extension, he pays the wages and other benefits due to the worker.

This rule bears on the case because the indefinite preventive suspension imposed on Vargas amounted to a dismissal and exceeded the thirty-day limit.

Ruling

On the first issue, the Court ruled in favor of the company. The rule is settled that if there is sufficient evidence to show that the employee has been guilty of breach of trust, or that the employer has ample reason to distrust the employee, the labor tribunal cannot justly deny the employer the authority to dismiss. Loss of trust justifies termination especially for supervisors or personnel occupying positions of responsibility, and the mere existence of a basis for believing that the employee has breached the employer's trust is sufficient; it does not require proof beyond reasonable doubt. Vargas's position involved a high degree of responsibility requiring trust and confidence, closely tied to the financial interests of the company. Although she had no direct participation in the cashier's dishonesty, her non-performance of her duties, which opened the door to the anomalies, was sufficient to breach the trust and confidence of her employer.

On the second issue, the Court ruled against the company. The twin requirements of notice and hearing are essential elements of due process in dismissal cases: notice informs the employee of the employer's intent to dismiss and the reason, while hearing affords an opportunity to answer and defend before dismissal is effected. Neither can be dispensed with without running afoul of the due process requirement of the 1987 Constitution. The records showed no formal notice of the charge before the suspension, and no adequate opportunity to defend. The Court added that the indefinite preventive suspension amounted to a dismissal and violated the thirty-day limit in the implementing rules.

Doctrine

First, loss of trust and confidence is a just cause for dismissal where the employee holds a position of responsibility involving money matters, and the employer need only show a basis for the belief that trust was breached, not proof beyond reasonable doubt. Second, the employer must still comply with the twin requirements of notice and hearing under Article 278 of the Labor Code; a mere confrontation is not the written notice the law requires. Third, a preventive suspension for an indefinite period amounts to a dismissal and violates the thirty-day limit under Section 4, Rule XIV of the Implementing Rules. Fourth, where the dismissal is for a just cause but due process was not observed, the employer is liable for an indemnity, fixed here at 1,000 pesos.

Disposition

The petition was granted; the Commission's resolution ordering reinstatement with three years of backwages was reversed and set aside, and the company was ordered to pay Vargas an indemnity of 1,000 pesos.

Remember This

Memorize this line: a dismissal may be for a just cause and still be defective for want of due process, and the remedy is indemnity, not reinstatement. Examiners use this case to test the loss of trust doctrine for employees handling funds, and the rule that an indefinite preventive suspension is itself a dismissal.