From Wenphil to Serrano, then back to

Wenphil 1

NLRC Commissioner Jovito C. Cagaanan2

Labor law practitioners and labor relation experts have, time and
again, raised in several fora, the unfairness of declaring illegal or
ineffectual dismissal made for just or authorized causes for failing to
comply with the requirements on statutory DUE PROCESS. They
asseverate that declaring such dismissals either as illegal or ineffectual
would have far-reaching consequences.

For one, it discourages investors, whether domestic or foreign, from

pouring in investments that can generate employment in the local
economy. For another, it can create absurd situations where there is a
just or authorized cause warranting dismissal of an employee but
simply because there happens to be a procedural infirmity involved in
the dismissal of the employee, its lack of compliance invalidates the
termination. They say that invalidating the dismissal would not serve
public interest. It may even encourage frivolous suits where even the
most notorious violators of company rules are being rewarded, by
invoking Due Process.

The legal basis for lawful termination of one’s employment is found

in the Philippine Constitution and the Labor Code. A person’s
employment constitutes “property” within the context of the
Constitutional protection that “no person shall be deprived of life,
liberty or PROPERTY without Due Process of Law.” (CALLANTA VS.
CARNATION PHIL., INC. 145 SCRA 286 (1986). And the burden to prove
there exists a valid ground for termination of employment rests with
the employer (AGOY VS. NLRC, 252 SCRA 588, January 30, 1996). The
failure to discharge such burden substantially means the dismissal was
illegal. For another, Section 3, Article XIII of the 1987 Philippine
Constitution assures the right of workers to security of tenure. And still,
we have Article 279 of the Labor Code and applicable jurisprudence
which prohibit dismissal of employees except for just or authorized
cause, and after due process.

Two requisites must concur to constitute a valid dismissal for just

cause, namely: 1) must be for any of the just causes under Article 282
1
EDITOR’S NOTE: This is an article shared by Labor Arbiter Dan C. Santos in
one of his lectures in Labor Law and Social Legislation.
2
Commissioner, Fifth Division, National Labor Relations Commission; Bachelor of
Arts in English- Liceo de Cagayan University; Bachelor of Laws (cum laude)
Silliman University; Professorial lecturer on Labor Standards, Labor Relations and
Labor Law Review Xavier University and Liceo de Cagayan University Colleges of
Law; 2003 Outstanding Silliman University Law Alumnus Awardee
of the Labor Code; and 2) the employee must be accorded Due Process
– basic of which are the opportunity to be heard and to defend himself
(OANIA VS. NLRC, 244 SCRA 668 (1995).

To comply with the due process requirement, two written notices

must be given to an employee before he may be lawfully dismissed for
just cause, namely: 1) The equivalent of a CHARGE, which is the first
notice, apprising the employee of the particular acts or omissions for
which his dismissal is sought and 2) Second notice, informing the
employee of his dismissal, to be issued only after the employee has
been given reasonable opportunity to answer and to be heard in his
defense (PAMPANGA II ELECTIC COOPERATIVE INC. VS. NLRC, G.R. No.
107541, November 16, 1995)

The Supreme Court had been see-sawing in its policy declarations

regarding dismissals with just or authorized causes, where the
statutory due process requirements have not been observed.

Prior to 1989, the rule followed then was that a dismissal or

termination is ILLEGAL if the employee was not given any notice to
comply with the statutory due process.

Then, on February 8, 1989, in an en banc ruling, the Supreme Court

promulgated what is now known as the WENPHIL DOCTRINE, in the
case of WENPHIL (WENDY PHILIPPINES) CORPORATION VS.NLRC, 170
SCRA 69, declaring that a dismissed employee, although not given any
notice and hearing provided just or authorized cause is duly proven, is
not entitled to reinstatement and to backwages because the presence
of just or authorized cause, as valid ground, renders the dismissal as
VALID. Hence, the employee has no right to return to his former
employment. The High Court concluded that reinstating the employee
and awarding him with backwages may just encourage the employee
to do even worse, and render a mockery of the rules of discipline that
all employees are required to observe. However, said the Supreme
Court, the employer shall not go scot-free. It must be held to account
for its failure to extend to the employee his right to an investigation
before effecting his dismissal, consistent with the requirement of the
Labor Code and jurisprudence forming part of the law of the land that
the dismissal of an employee must be for just or authorized cause, and
after due process. In committing an infraction on one’s statutory right
to due process, sanction must be imposed on the erring employer in
the form of an award of INDEMNITY to the employee, the amount of
which depends on the facts of each case and the gravity of the
omission committed by the employer. But in Wenphil, the amount of
indemnity imposed upon the erring employer was only the minimum
amount of P1,000.00.

BONIFACIO LAW JOURNAL | From Wenphil to Serrano, then Back to 28

Wenphil
 Thus, the rule that evolved under WENPHIL was that where the
employer had a valid reason to dismiss an employee (for just or
authorized cause) but the employer failed to follow the requirements
of statutory due process, the dismissal is sustained as VALID, but the
employer is penalized to pay an indemnity to the employee for the
violation of his right. The rule became known as the WENPHIL
DOCTRINE or the BELATED DUE PROCESS RULE.

Monitoring developments under the WENPHIL DOCTRINE over the

years, the Supreme Court noted that cases involving dismissal without
the requisite notice or hearing significantly increased, which led the
High Court to conclude that the imposition of penalty as sanction for
violation of the notice requirement was less than effective as
deterrent. It even observed that employers got rid of undesirable
employees by resorting to the practice of “dismiss now and pay later.”

In confronting the practice of employers in dismissing employees

now and paying indemnity later, the High Court decided to overturn
WENPHIL with another en banc ruling in the case of SERRANO VS.
NLRC & ISETANN DEPARTMENT STORE, G.R. No. 117040, promulgated
January 27, 2000, 323 SCRA 445. In abandoning the WENPHIL
DOCTRINE, the High Court declared that the violation by the employer
of the due process notice requirement in termination cases, anchored
on just or authorized causes, was NOT a denial of due process as
would nullify the termination. The dismissal is only deemed
INEFFECTUAL warranting the payment to the employee of full
backwages from the time of his dismissal up to finality of the decision
because it is only then that the dismissal for just or authorized cause
becomes judicially declared. The doctrine, thus, became known as the
SERRANO-ISETANN DOCTRINE which had been observed from January
27, 2000 up to November 17, 2004 when the Supreme Court again
jettisoned the Serrano doctrine with another en banc ruling in the case
of JENNY AGABON ET AL VS. NLRC, RIVIERA HOME IMPROVEMENTS,
INC., G.R. No. 158693, promulgated November 17, 2004.

In abandoning the Serrano Doctrine, the High court concluded that

the ruling in SERRANO failed to 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

BONIFACIO LAW JOURNAL | From Wenphil to Serrano, then Back to 29

Wenphil
 time his compensation was withheld from him up to the time
of his actual reinstatement.”

Clarifying and interpreting Article 279 of the Labor Code, the

Supreme Court declared that it simply means the termination is
ILLEGAL only if it is NOT for any of the JUST or AUTHORIZED causes
provided by law. Thus, payment of backwages, allowances and other
benefits to a dismissed employee including reinstatement is justified
only if the employee was UNJUSTLY (ILLEGALLY) DISMISSED.

Accordingly, under the AGABON ruling, the Supreme Court laid

down the rule that in cases involving dismissals for just or authorized
cause BUT WITHOUT OBSERVANCE OF THE STATUTORY DUE PROCESS
REQUIREMENTS or the requirements set forth by law, the better rule
is to abandon the SERRANO DOCTRINE and to follow and revert back
to WENPHIL, holding that the dismissal was for just or authorized
cause, hence considered VALID, but that sanction has to be imposed
on the erring employer in the form of INDEMNITY to be paid to the
employee which must this time be made STIFFER than those imposed
in WENPHIL inorder to achieve FAIR RESULTS by dispensing justice not
just to the employees but to the employers as well. Invalidating the
dismissal would not serve public interest. And the employee who is
clearly found guilty of conduct violative of Article 282 of the Labor
Code on just cause should not be protected by the Social Justice
Clause of the Constitution for the simple reason that Social Justice
should be used only to correct an INJUSTICE.

To borrow the words of Justice Isagani Cruz, the Supreme Court

tried to meet the “need to apply a balanced approach to labor-
management relation and dispense justice with an even hand in every
case.” For while labor laws are to be liberally construed in favor of the
workers, still the scales of justice must be balanced to equally protect
the rights of the employers (See PHIL. GEOTHERMAL, INC. VS. NLRC,
236 SCRA 371).

Labor and management, being interdependent and indispensable

partners in nation-building, the Supreme Court declared that the two
need each other to foster productivity and economic growth; hence,
the need to weigh and balance the rights and the welfare of both
employees and employers.

The new rule under the AGABON RULING is virtually reverting back
to WENPHIL, which states that where the dismissal is for just or
authorized cause, the lack of observance of the statutory due process
would not nullify the dismissal nor render it ineffectual. The dismissal
is sustained as VALID but the employer has to indemnify the
employee for the violation of his statutory right. Under the Agabon

BONIFACIO LAW JOURNAL | From Wenphil to Serrano, then Back to 30

Wenphil
ruling, the Supreme Court fixed the amount of indemnity at P30,000
but clarified that the amount of indemnity should take into special
consideration the gravity of the due process violation of the employer
and the facts obtaining in each case.3

3
EDITOR’S NOTE: In Agabon vs. NLRC, G.R. No. 158693, November 17, 2004,
when the dismissal is for just or authorized cause but due process was not
observed, the dismissal should be upheld. However, the employer should be held
liable for non-compliance with the procedural requirements of due process. In that
case, the amount of damages was fixed by the Supreme Court at 30,000 pesos.
The ruling in Agabon has however been modified by JAKA Food Processing v.
Pacot , G.R. No. 151378, March 28, 2005.
If the dismissal is based on a just cause under Article 282 but the employer failed
to comply with the notice requirement, the sanction to be imposed upon him
should be tempered because the dismissal process was in effect initiated by an
act imputable to the employee.
If the dismissal is based on an authorized cause under Article 283 but the
employer failed to comply with the notice requirement, the sanction to be imposed
should be stiffer because the dismissal process was initiated by the employer’s
exercise of his management prerogative. The amount of indemnity in that case
was 50,000 pesos.
BONIFACIO LAW JOURNAL | From Wenphil to Serrano, then Back to 31
Wenphil