Merchandising Representatives as Fixed-Term Employees

A month ago the Philippine Supreme Court promulgated a very interesting decision that has to do with trade merchandising representatives as fixed term and/or project employees. The case is Fontera Brands Phils., Inc. vs. Leonardo Largado and Teotimo Estrellado (G.R. No. 205300, March 18, 2015). Continue reading “Merchandising Representatives as Fixed-Term Employees”

Productivity Standards

Can you dismiss an employee on the basis of failure to meet sales or work quotas? The Supreme Court answered this question in the affirmative in ARMANDO ALILING, Petitioner, vs. JOSE B. FELICIANO, MANUEL F. SAN MATEO III, JOSEPH R. LARIOSA, and WIDE WIDE WORLD EXPRESS CORPORATION, Respondents. (G.R. No. 185829; April 25, 2012).

In Lim v. National Labor Relations Commission,35 the Court considered inefficiency as an analogous just cause for termination of employment under Article 282 of the Labor Code:

We cannot but agree with PEPSI that “gross inefficiency” falls within the purview of “other causes analogous to the foregoing,” this constitutes, therefore, just cause to terminate an employee under Article 282 of the Labor Code. One is analogous to another if it is susceptible of comparison with the latter either in general or in some specific detail; or has a close relationship with the latter. “Gross inefficiency” is closely related to “gross neglect,” for both involve specific acts of omission on the part of the employee resulting in damage to the employer or to his business. In Buiser vs. Leogardo, this Court ruled that failure to observed prescribed standards to inefficiency may constitute just cause for dismissal. (Emphasis supplied.)

It did so anew in Leonardo v. National Labor Relations Commission36 on the following rationale:

An employer is entitled to impose productivity standards for its workers, and in fact, non-compliance may be visited with a penalty even more severe than demotion. Thus,

 [t]he practice of a company in laying off workers because they failed to make the work quota has been recognized in this jurisdiction. (Philippine American Embroideries vs. Embroidery and Garment Workers, 26 SCRA 634, 639). In the case at bar, the petitioners’ failure to meet the sales quota assigned to each of them constitute a just cause of their dismissal, regardless of the permanent or probationary status of their employment. Failure to observe prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal. Such inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to complete the same within the allotted reasonable period, or by producing unsatisfactory results. This management prerogative of requiring standards may be availed of so long as they are exercised in good faith for the advancement of the employer’s interest. (Emphasis supplied.)

 In fine, an employee’s failure to meet sales or work quotas falls under the concept of gross inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for dismissal under Article 282 of the Code. However, in order for the quota imposed to be considered a valid productivity standard and thereby validate a dismissal, management’s prerogative of fixing the quota must be exercised in good faith for the advancement of its interest.

Worth reiterating is the employer’s duty to prove that it exercised its prerogative of fixing the quota in good faith; otherwise, it might not be able to successfully claim that the dismissal was legal.

Labor Law – Loss of Trust and Confidence

The Supreme Court had the opportunity of reiterating some well-known guidelines pertaining to dismissal due to loss of trust and confidence in the very recent case of M+W ZANDER PHILIPPINES, INC. and ROLF WILTSCHEK, versus TRINIDAD M. ENRIQUEZ, (G.R. No. 169173) promulgated just last week, i.e., June 5, 2009. You can read the facts of the case HERE. The central guidelines on loss of confidence as enunciated in this case are as follows:

Article 282 (c) of the Labor Code allows an employer to terminate the services of an employee for loss of trust and confidence. [28]  Certain guidelines must be observed for the employer to terminate an employee for loss of trust and confidence.  We held in General Bank and Trust Company v. Court of Appeals,[29] viz.:
[L]oss 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.[30]
The first requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be one holding a position of trust and confidence.
There are two classes of positions of trust: managerial employees and fiduciary rank-and-file employees.
Managerial employees are defined as 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.[31] They refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or a subdivision thereof, and to other officers or members of the managerial staff.[32] Officers and members of the managerial staff perform work directly related to management policies of their employer and customarily and regularly exercise discretion and independent judgment.[33]
The second class or fiduciary rank-and-file employees consist of cashiers, auditors, property custodians, etc., or those who, in the normal exercise of their functions, regularly handle significant amounts of money or property.[34] These employees, though rank-and-file, are routinely charged with the care and custody of the employer’s money or property, and are thus classified as occupying positions of trust and confidence.
The second requisite of terminating an employee for loss of trust and confidence is that there must be an act that would justify the loss of trust and confidence.[38] To be a valid cause for dismissal, the loss of confidence must be based on a willful breach of trust and founded on clearly established facts.[39]

Article 282 (c) of the Labor Code allows an employer to terminate the services of an employee for loss of trust and confidence. Certain guidelines must be observed for the employer to terminate an employee for loss of trust and confidence.  We held in General Bank and Trust Company v. Court of Appeals, viz.:

[L]oss 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 first requisite for dismissal on the ground of loss of trust and confidence is that the employee concerned must be one holding a position of trust and confidence.

There are two classes of positions of trust: managerial employees and fiduciary rank-and-file employees.

Managerial employees are defined as 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. They refer to those whose primary duty consists of the management of the establishment in which they are employed or of a department or a subdivision thereof, and to other officers or members of the managerial staff. Officers and members of the managerial staff perform work directly related to management policies of their employer and customarily and regularly exercise discretion and independent judgment.

The second class or fiduciary rank-and-file employees consist of cashiers, auditors, property custodians, etc., or those who, in the normal exercise of their functions, regularly handle significant amounts of money or property. These employees, though rank-and-file, are routinely charged with the care and custody of the employer’s money or property, and are thus classified as occupying positions of trust and confidence….

The second requisite of terminating an employee for loss of trust and confidence is that there must be an act that would justify the loss of trust and confidence.  To be a valid cause for dismissal, the loss of confidence must be based on a willful breach of trust and founded on clearly established facts.

The case also includes a discussion of when and when not to grant moral damages in labor cases, and when is a General Manager personally liable for an illegally dismissed employee’s labor claims. You can read the whole thing HERE.

Good Faith and Backwages

It seems to be almost SOP to award backwages in cases of illegal dismissal. However, in March of this year the Supreme Court had occasion to clarify that not all instances of illegal dismissal warrant an award of backwages. Such is the ruling of the Court in Jackqui R. Moreno vs. San Sebastian College-Recoletos, Manila (G.R. No. 175283; March 28, 2008).

Jackqui was a member of the permanent college faculty of San Sebastian. It seems she was one of the better teachers in the Accounting Department. She consistently landed among the five best teachers per yearly evaluation of the performance of teachers, and she was even asked to be the chairman of Business Finance and Accountancy for SY 2002-2003.

It was later on discovered, however, that Jackqui had unauthorized teaching assignments at the Centro Escolar University during the first semester of SY 2002-2003 and at the College of the Holy Spirit, Manila during SY 2000-2001 and SY 2001-2002 as well as during the first semester of SY 2002-2003. Said activities were violative of San Sebastian’s Faculty Manual and were punishable by suspension or dismissal.

In reply to a memorandum from the Dean of her college, Jackqui explained her side and mentioned that she merely wanted to improve her family’s poor financial conditions. A Special Grievance Committee was thereafter set up which eventually issued a resolution unanimously finding that Jackqui had violated the prohibition against a full-time faculty having an unauthorized external teaching load. San Sebastian approved and adopted the findings and recommendations of the grievance committee and sent Jackqui a letter informing her of the effectivity date of the termination of her employment.

Jackqui filed a labor case against San Sebastian. The labor arbiter found in favor of San Sebastian; the National Labor Relations Commission, however, reversed the labor arbiter’s decision; the Court of Appeals, on its part, reversed the Commission; and, finally, the Supreme Court reversed the Court of Appeals – in effect reinstating the Commission’s decision but with important modifications.

In upholding Jackqui’s stance that she was illegally dismissed, the Supreme Court agreed that she was guilty of misconduct, “However, said misconduct falls below the required level of gravity that would warrant dismissal as a penalty.” In support of this finding the Court cited its previous ruling in NLRC vs. Salgarino (497 SCRA 361, 375-376):

“Misconduct is defined as improper or wrong conduct.It is the trangression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character and implies wrongful intent and not mere error of judgment.The misconduct to be serious within the meaning of the act must be of such a grave and aggravated character and not merely trival or unimportant.Such misconduct, however serious, must nevertheless be in connection with the work of the employee to constitute just cause from his separation.

“In order to constitute serious misconduct which will warrant the dismissal of an employee under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or conduct complained of has violated some established rules or policies.It is equally important and required that the act or conduct must have been performed with wrongful intent.”

The Supreme Court went on to explain that it is the employer who has the burden of proving wrongful intent, and this San Sebastian failed to do: “In the present case, SSC-R failed to adduce any concrete evidence that Moreno indeed harbored perverse or corrupt motivations in violating the aforesaid school policy.” The Court noted that San Sebastian failed to submit evidence controverting Jackqui’s claim that she was “prompted to engage in illicit teaching activities in other schools, as she desperately needed to augment her income.” Incidentally, the Supreme Court also found the penalty of dismissal disproportionate to the offense; suspension, in its view, would have been sufficient.

Despite said finding of illegal dismissal, the Supreme Court decided to grant reinstatement but without backwages:

“In accordance with Durabuilt Recapping Plant & Co. v. National Labor Relations Commission [152 SCRA 328] the court may not only mitigate, but also absolve entirely, the liability of the employer to pay backwages where good faith is evident. Likewise, backwages may be withheld from a dismissed employee where exceptional circumstances are availing.

“In the present case, the good faith of SSC-R is apparent.The termination of Moreno from her employment cannot be said to have been carried out in a malevolent, arbitary or oppressive manner.Indeed, the only mistake of the respondent school has committed was to strictly apply the provisions of its Faculty Manual and its contract with Moreno without regard for the aforementioned special circumstances that were attendant in this case.Even then, Moreno’s right to procedural due process was fully respected, as she was given the required twin notices and ample opportunity to be heard. This fact was not even disputed by Moreno herself.” [Emphasis added]

The moral of the story, insofar as management is concerned, is: Always comply with due process when dismissing an employee. Whether or not a just cause for dismissal exists in a particular case is oftentimes a highly debatable issue. In this case the labor arbiter and the Court of Appeals thought there was no illegal dismissal; the NLRC and the Supreme Court thought otherwise. The Supreme Court, however, has the final say. But at least the Supreme Court saw that San Sebastian was in good faith and that, therefore, it was not liable to pay backwages.