EN BANC

JENNY M. AGABON and G.R. No. 158693

VIRGILIO C. AGABON,
Petitioners, Present:

Davide, Jr., C.J.,

Puno,
Panganiban,
Quisumbing,
Ynares-Santiago,
Sandoval-Gutierrez,
- versus - Carpio,
Austria-Martinez,
Corona,
Carpio-Morales,
Callejo, Sr.,
Azcuna,
Tinga,
Chico-Nazario, and
Garcia, JJ.
NATIONAL LABOR RELATIONS
COMMISSION (NLRC), RIVIERA
HOME IMPROVEMENTS, INC. Promulgated:
and VICENTE ANGELES,
Respondents. November 17, 2004
x ---------------------------------------------------------------------------------------- x

DECISION

YNARES-SANTIAGO, J.:

This petition for review seeks to reverse the decision[1] of the Court of Appeals dated
January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of National
Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-00.

Private respondent Riviera Home Improvements, Inc. is engaged in the business of

selling and installing ornamental and construction materials. It employed petitioners
Virgilio Agabon and Jenny Agabon as gypsum board and cornice installers on

January 2, 1992[2] until February 23, 1999 when they were dismissed for
abandonment of work.

Petitioners then filed a complaint for illegal dismissal and payment of money
[3]
claims and on December 28, 1999, the Labor Arbiter rendered a decision declaring
the dismissals illegal and ordered private respondent to pay the monetary claims. The
dispositive portion of the decision states:

WHEREFORE, premises considered, We find the termination of the complainants illegal.

Accordingly, respondent is hereby ordered to pay them their backwages up to November
29, 1999 in the sum of:

1. Jenny M. Agabon - P56, 231.93

2. Virgilio C. Agabon - 56, 231.93

and, in lieu of reinstatement to pay them their separation pay of one (1) month for every
year of service from date of hiring up to November 29, 1999.

Respondent is further ordered to pay the complainants their holiday pay and service
incentive leave pay for the years 1996, 1997 and 1998 as well as their premium pay for
holidays and rest days and Virgilio Agabons 13th month pay differential amounting to
TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount
of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT
& 93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY
THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93)
Pesos for Virgilio Agabon, as per attached computation of Julieta C. Nicolas, OIC,
Research and Computation Unit, NCR.

SO ORDERED.[4]

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners
had abandoned their work, and were not entitled to backwages and separation pay.
The other money claims awarded by the Labor Arbiter were also denied for lack of
[5]
evidence.
Upon denial of their motion for reconsideration, petitioners filed a petition for
certiorari with the Court of Appeals.

The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal
because they had abandoned their employment but ordered the payment of money
claims. The dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is REVERSED
only insofar as it dismissed petitioners money claims. Private respondents are ordered to
pay petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well
as their service incentive leave pay for said years, and to pay the balance of petitioner
Virgilio Agabons 13th month pay for 1998 in the amount of P2,150.00.

[6]
SO ORDERED.

Hence, this petition for review on the sole issue of whether petitioners were illegally

dismissed.[7]

Petitioners assert that they were dismissed because the private respondent refused
to give them assignments unless they agreed to work on a pakyaw basis when they
reported for duty on February 23, 1999. They did not agree on this arrangement
because it would mean losing benefits as Social Security System (SSS) members.
Petitioners also claim that private respondent did not comply with the twin

requirements of notice and hearing.[8]

Private respondent, on the other hand, maintained that petitioners were not dismissed

but had abandoned their work.[9] In fact, private respondent sent two letters to the
last known addresses of the petitioners advising them to report for work. Private
respondents manager even talked to petitioner Virgilio Agabon by telephone
sometime in June 1999 to tell him about the new assignment at Pacific Plaza Towers
involving 40,000 square meters of cornice installation work. However, petitioners did
not report for work because they had subcontracted to perform installation work for
another company. Petitioners also demanded for an increase in their wage to P280.00
per day. When this was not granted, petitioners stopped reporting for work and filed
[10]
the illegal dismissal case.
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are
accorded not only respect but even finality if the findings are supported by substantial
evidence. This is especially so when such findings were affirmed by the Court of

Appeals.[11] However, if the factual findings of the NLRC and the Labor Arbiter are
conflicting, as in this case, the reviewing court may delve into the records and
[12]
examine for itself the questioned findings.

Accordingly, the Court of Appeals, after a careful review of the facts, ruled that
petitioners dismissal was for a just cause. They had abandoned their employment and
were already working for another employer.
To dismiss an employee, the law requires not only the existence of a just and valid
cause but also enjoins the employer to give the employee the opportunity to be heard
[13]
and to defend himself. Article 282 of the Labor Code enumerates the just causes
for termination by the employer: (a) serious misconduct or willful disobedience by
the employee of the lawful orders of his employer or the latters representative in
connection with the employees 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 his 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 representative; and (e) other causes
analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume his

employment.[14] It is a form of neglect of duty, hence, a just cause for termination of

employment by the employer.[15] For a valid finding of abandonment, these two

factors should be present: (1) the failure to report for work or absence without valid
or justifiable reason; and (2) a clear intention to sever employer-employee
relationship, with the second as the more determinative factor which is manifested by
overt acts from which it may be deduced that the employees has no more intention to
work. The intent to discontinue the employment must be shown by clear proof that it
[16]
was deliberate and unjustified.
In February 1999, petitioners were frequently absent having subcontracted for an
installation work for another company. Subcontracting for another company clearly
showed the intention to sever the employer-employee relationship with private
respondent. This was not the first time they did this. In January 1996, they did not
report for work because they were working for another company. Private respondent
at that time warned petitioners that they would be dismissed if this happened again.
Petitioners disregarded the warning and exhibited a clear intention to sever their
employer-employee relationship. The record of an employee is a relevant
[17]
consideration in determining the penalty that should be meted out to him.

In Sandoval Shipyard v. Clave,[18] we held that an employee who deliberately

absented from work without leave or permission from his employer, for the purpose
of looking for a job elsewhere, is considered to have abandoned his job. We should
apply that rule with more reason here where petitioners were absent because they
were already working in another company.
The law imposes many obligations on the employer such as providing just
compensation to workers, observance of the procedural requirements of notice and
hearing in the termination of employment. On the other hand, the law also recognizes
the right of the employer to expect from its workers not only good performance,

adequate work and diligence, but also good conduct[19] and loyalty. The employer
may not be compelled to continue to employ such persons whose continuance in the
[20]
service will patently be inimical to his interests.

After establishing that the terminations were for a just and valid cause, we now
determine if the procedures for dismissal were observed.

The procedure for terminating an employee is found in Book VI, Rule I, Section
2(d) of the Omnibus Rules Implementing the Labor Code:

Standards of due process: requirements of notice. In all cases of termination of

employment, the following standards of due process shall be substantially observed:

I. For termination of employment based on just causes as defined in Article 282 of

the Code:

(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to explain
his side;

(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond to the
charge, present his evidence or rebut the evidence presented against him; and

(c) A written notice of termination served on the employee indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination.

In case of termination, the foregoing notices shall be served on the employees last known
address.

Dismissals based on just causes contemplate acts or omissions attributable to the

employee while dismissals based on authorized causes involve grounds under the
Labor Code which allow the employer to terminate employees. A termination for an
authorized cause requires payment of separation pay. When the termination of
employment is declared illegal, reinstatement and full backwages are mandated under
Article 279. If reinstatement is no longer possible where the dismissal was unjust,
separation pay may be granted.

Procedurally, (1) if the dismissal is based on a just cause under Article 282, the
employer must give the employee two written notices and a hearing or opportunity to
be heard if requested by the employee before terminating the employment: a notice
specifying the grounds for which dismissal is sought a hearing or an opportunity to be
heard and after hearing or opportunity to be heard, a notice of the decision to dismiss;
and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the
employer must give the employee and the Department of Labor and Employment
written notices 30 days prior to the effectivity of his separation.

From the foregoing rules four possible situations may be derived: (1) the dismissal is
for a just cause under Article 282 of the Labor Code, for an authorized cause under
Article 283, or for health reasons under Article 284, and due process was observed;
(2) the dismissal is without just or authorized cause but due process was observed; (3)
the dismissal is without just or authorized cause and there was no due process; and
(4) the dismissal is for just or authorized cause but due process was not observed.

In the first situation, the dismissal is undoubtedly valid and the employer will not
suffer any liability.

In the second and third situations where the dismissals are illegal, Article 279
mandates that the employee is entitled to reinstatement without loss of seniority
rights and other privileges and full backwages, inclusive of allowances, and other
benefits or their monetary equivalent computed from the time the compensation was
not paid up to the time of actual reinstatement.

In the fourth situation, the dismissal should be upheld. While the procedural infirmity
cannot be cured, it should not invalidate the dismissal. However, the employer should
be held liable for non-compliance with the procedural requirements of due process.

The present case squarely falls under the fourth situation. The dismissal should be
upheld because it was established that the petitioners abandoned their jobs to work
for another company. Private respondent, however, did not follow the notice
requirements and instead argued that sending notices to the last known addresses
would have been useless because they did not reside there anymore. Unfortunately
for the private respondent, this is not a valid excuse because the law mandates the
[21]
twin notice requirements to the employees last known address. Thus, it should be
held liable for non-compliance with the procedural requirements of due process.

A review and re-examination of the relevant legal principles is appropriate and timely
to clarify the various rulings on employment termination in the light of Serrano v.
[22]
National Labor Relations Commission.

Prior to 1989, the rule was that a dismissal or termination is illegal if the employee
was not given any notice. In the 1989 case of Wenphil Corp. v. National Labor

Relations Commission,[23] we reversed this long-standing rule and held that the
dismissed employee, although not given any notice and hearing, was not entitled to
reinstatement and backwages because the dismissal was for grave misconduct and
insubordination, a just ground for termination under Article 282. The employee had a
violent temper and caused trouble during office hours, defying superiors who tried to
pacify him. We concluded that reinstating the employee and awarding backwages
may encourage him to do even worse and will render a mockery of the rules of

discipline that employees are required to observe.[24] We further held that:

Under the circumstances, the dismissal of the private respondent for just cause should be
maintained. He has no right to return to his former employment.

However, the petitioner must nevertheless be held to account for failure to extend to
private respondent his right to an investigation before causing his dismissal. The rule is
explicit as above discussed. The dismissal of an employee must be for just or authorized
cause and after due process. Petitioner committed an infraction of the second
requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and
conduct an investigation as required by law before dismissing petitioner from
employment. Considering the circumstances of this case petitioner must indemnify the
private respondent the amount of P1,000.00. The measure of this award depends on the
facts of each case and the gravity of the omission committed by the employer.[25]

The rule thus evolved: where the employer had a valid reason to dismiss an
employee but did not follow the due process requirement, the dismissal may be
upheld but the employer will be penalized to pay an indemnity to the employee. This
became known as the Wenphil or Belated Due Process Rule.

On January 27, 2000, in Serrano, the rule on the extent of the sanction was
changed. We held that the violation by the employer of the notice requirement in
termination for just or authorized causes was not a denial of due process that will
nullify the termination. However, the dismissal is ineffectual and the employer must
pay full backwages from the time of termination until it is judicially declared that the
dismissal was for a just or authorized cause.

The rationale for the re-examination of the Wenphil doctrine in Serrano was the
significant number of cases involving dismissals without requisite notices. We
concluded that the imposition of penalty by way of damages for violation of the
notice requirement was not serving as a deterrent. Hence, we now required payment
of full backwages from the time of dismissal until the time the Court finds the
dismissal was for a just or authorized cause.

Serrano was confronting the practice of employers to dismiss now and pay later
by imposing full backwages.

We believe, however, that the ruling in Serrano did not consider the full meaning
of Article 279 of the Labor Code which states:

ART. 279. Security of Tenure. In 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 other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from the time
his compensation was withheld from him up to the time of his actual reinstatement.

This means that the termination is illegal only if it is not for any of the justified
or authorized causes provided by law. Payment of backwages and other benefits,
including reinstatement, is justified only if the employee was unjustly dismissed.

The fact that the Serrano ruling can cause unfairness and injustice which elicited
strong dissent has prompted us to revisit the doctrine.

To be sure, the Due Process Clause in Article III, Section 1 of the Constitution
embodies a system of rights based on moral principles so deeply imbedded in the
traditions and feelings of our people as to be deemed fundamental to a civilized
society as conceived by our entire history. Due process is that which comports with
[26]
the deepest notions of what is fair and right and just. It is a constitutional restraint
on the legislative as well as on the executive and judicial powers of the government
provided by the Bill of Rights.

Due process under the Labor Code, like Constitutional due process, has two
aspects: substantive, i.e., the valid and authorized causes of employment termination
under the Labor Code; and procedural, i.e., the manner of dismissal. Procedural due
process requirements for dismissal are found in the Implementing Rules of P.D. 442,
as amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule
[27]
I, Sec. 2, as amended by Department Order Nos. 9 and 10. Breaches of these due
process requirements violate the Labor Code. Therefore statutory due process should
be differentiated from failure to comply with constitutional due process.

Constitutional due process protects the individual from the government and
assures him of his rights in criminal, civil or administrative proceedings; while
statutory due process found in the Labor Code and Implementing Rules protects
employees from being unjustly terminated without just cause after notice and hearing.

In Sebuguero v. National Labor Relations Commission,[28] the dismissal was for

a just and valid cause but the employee was not accorded due process. The dismissal
was upheld by the Court but the employer was sanctioned. The sanction should be in
the nature of indemnification or penalty, and depends on the facts of each case and
the gravity of the omission committed by the employer.

[29]
In Nath v. National Labor Relations Commission, it was ruled that even if the
employee was not given due process, the failure did not operate to eradicate the just
causes for dismissal. The dismissal being for just cause, albeit without due process,
did not entitle the employee to reinstatement, backwages, damages and attorneys
fees.

Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc.
[30]
v. National Labor Relations Commission, which opinion he reiterated in Serrano,
stated:

C. Where there is just cause for dismissal but due process has not been properly
observed by an employer, it would not be right to order either the reinstatement of the
dismissed employee or the payment of backwages to him. In failing, however, to comply
with the procedure prescribed by law in terminating the services of the employee, the
employer must be deemed to have opted or, in any case, should be made liable, for the
payment of separation pay. It might be pointed out that the notice to be given and the
hearing to be conducted generally constitute the two-part due process requirement of law
to be accorded to the employee by the employer. Nevertheless, peculiar circumstances
might obtain in certain situations where to undertake the above steps would be no more
than a useless formality and where, accordingly, it would not be imprudent to apply the
res ipsa loquitur rule and award, in lieu of separation pay, nominal damages to the
employee. x x x.[31]

After carefully analyzing the consequences of the divergent doctrines in the law
on employment termination, we believe that in cases involving dismissals for cause
but without observance of the twin requirements of notice and hearing, the better rule
is to abandon the Serrano doctrine and to follow Wenphil by holding that the
dismissal was for just cause but imposing sanctions on the employer. Such sanctions,