LABOR LAW REVIEW CASE MATRIX VII

Security of Tenure
TITLE
Duncan
Association of
DetailmanPTGWO v.
Glaxo
Wellcome
Philippines,
Inc.

FACTS
- Pedro A. Tecson signed a contract of
employment with Glaxo Wellcome
Philippines, Inc. (Glaxo) as medical
representative in October 1995.
- He agreed to study and abide by
existing company rules; to disclose to
management any existing or future
relationship by consanguinity or
affinity with co-employees or
employees of competing drug
companies and should management
find that such relationship poses a
possible conflict of interest, to resign
from the company.
- The same provision on disclosure of
relationship is provided in the
Employee Code of Conduct of Glaxo
and it further states that if
management perceives a conflict of
interest or a potential conflict
between such relationship and the
employees employment, it could
result in transfer to another
department in a non-counterchecking
position or preparation for
employment outside the company
after six months.
- But Tecson, with all helplessness of
the sort that often attends matters
that concern the heart, developed a
forbidden liking for Bettsy, an
employee of Astra Pharmaceuticals, a
competitor of Glaxo.
- For reasons unmistakably attributable
to feelings of love, their hearts
refused to pump blood into their

ISSUE/S
- WON Glaxos policy
against its
employees marrying
employees from
competitor
companies is a valid
exercise of
management
prerogative.

- WON the policy

violated the equal
protection clause of
the Constitution.

HELD
- YES.
- Glaxo has a right to guard its trade
secrets, manufacturing formulas,
marketing strategies and other
confidential programs and
information from competitors,
especially so that it and Astra are
rival companies in the highly
competitive pharmaceutical industry.
- The prohibition under the
circumstances is reasonable because
relationships of such nature might
compromise the interests of the
company.
- Glaxos right to protect its economic
interests cannot be denied as no less
than the Constitution recognizes the
right of enterprises to adopt and
enforce such a policy to protect its
right to reasonable returns on
investment and to expansion and
growth.
- While protection is provided to labor,
the law also recognizes
managements rights which are also
entitled to respect and enforcement
in the interest of fair play.
- NO.
- It is a settled principle that the
commands of the equal protection
clause are addressed only to the state
or those acting under the color of its
authority.
- The only exception occurs when the
state in any of its manifestations or
actions has been found to have

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DOCTRINE
- While protection is provided to
labor, the law also recognizes
managements rights which
are also entitled to respect and
enforcement in the interest of
fair play.
- It is a settled principle that the
commands of the equal
protection clause are
addressed only to the state or
those acting under the color of
its authority.
- The only exception occurs
when the state in any of its
manifestations or actions has
been found to have become
entwined or involved in the
wrongful private conduct.
- Constructive dismissal is
defined as quitting, an
involuntary resignation
resorted to when continued
employment becomes
impossible, unreasonable or
unlikely; when there is a
demotion in rank or diminution
in pay; or when a clear
discrimination, insensibility or
disdain by an employer
becomes unbearable to the
employee.

brains and so they suffered from a

major lapse of judgment and ended
up marrying in 1998.
- As conflict of interest arose according
to his superiors, Tecson was pulled
out of the Camarines sales area and
transferred to Butuan but he refused.
- The matter was initially brought to
Glaxos grievance committee but was
not resolved and so the NCMB had to
come in, which upheld the validity of
Glaxos policy on relationships.
- The Court of Appeals likewise found
for Glaxo citing the valid exercise of
management prerogatives.
-

- Whether or not
Tecson was
constructively
dismissed by his
transfer from
Camarines to
Butuan.

become entwined or involved in the

wrongful private conduct.
The exception is not presented in this
case.
The application of the policy was
made in an impartial and evenhanded manner, with due regard for
the lot of the employee.
From the wordings of the contractual
provision and the policy in its
employee handbook, it is clear that
Glaxo does not impose an absolute
prohibition against relationships
between its employees and those of
competitor companies.
It merely seeks to avoid a conflict of
interest between the employee and
the company that may arise out of
such relationships.
The company policy was clearly made
known to Tecson prior to his
employment; he is thus estopped from
questioning said policy.
A contract has the force of law
between the contracting parties and
must be complied with in good faith.
NO.
Constructive dismissal is defined as
quitting, an involuntary resignation
resorted to when continued
employment becomes impossible,
unreasonable or unlikely; when there
is a demotion in rank or diminution in
pay; or when a clear discrimination,
insensibility or disdain by an
employer becomes unbearable to the
employee.
None of these conditions are present
in the instant case.
Glaxo properly exercised its
management prerogative in
reassigning Tecson to Butuan City

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Star Paper
Corp. v.
Simbol

- Simbol and Dayrit were regular

employees of Star. They were single
when they first entered Star but then
decided to get married a few years
later. The same situation happened
between 2 more pairs of employees.
The assailed company policy reads:
1. New applicants will not be allowed
to be hired if in case he/she has a
relative, up to the 3rd degree of
relationship, already employed by
the company.
2. In case of two of our employees
(both singles one male and another
female) developed a friendly
relationship during the course of
their employment and then decided
to get married, one of them should
resign to preserve the policy stated
above.
- Simbol resigned on June 20, 1998

- WON the policy of

the employer
banning spouses
from working in the
same company
violates the rights of
the employee under
the Constitution and
the Labor Code or is
a valid exercise of
management
prerogative.

sales area to avoid conflict of interest.

- Tecson was warned against the
conflict of interest and after his
marriage, was given time to resolve
the conflict by either resigning from
the company or asking his wife to
resign from Astra.
- It was only when the problem could
not be resolved after several years of
waiting that Glaxo was constrained to
reassign Tecson to a sales area
different from that handled by his
wife for Astra.
- He was not terminated from
employment, only reassigned to
another area where his home
province was included.
- Glaxo even considered the welfare of
Tecsons family, dispelling any
suspicision of unfairness and bad
faith on the part of Glaxo..
- NO. Petitioners sole contention that
the company did not just want to have
2 or more of its employees related
between the third degree by affinity
and/or consanguinity is lame. That
the second paragraph was meant to
give teeth to the first paragraph of
the questioned rule is evidently not
the valid reasonable business
necessity required by the law.
- Respondents were hired after they
were found fit for the job, but were
asked to resign when they married a
co-employee.
- Petitioners failed to show how the
marriage of Simbol, then a Sheeting
Machine Operator, to Alma Dayrit,
then an employee of the Repacking
Section, could be detrimental to its
business operations.
- Neither did petitioners explain how

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- Since the finding of a bona fide

occupational qualification
justifies an employers nospouse rule, the exception is
interpreted strictly and
narrowly by these state courts.
There must be a compelling
business necessity for which
no alternative exists other
than the discriminatory
practice.To justify a bona fide
occupational qualification, the
employer must prove two
factors: (1) that the
employment qualification is
reasonably related to the
essential operation of the job
involved; and, (2) that there is
a factual basis for believing
that all or substantially all
persons meeting the
3

pursuant to the company policy, as

did one of the spouses in the other 2
relationships. The respondents each
signed a Release and Confirmation
Agreement. They stated therein that
they have no money and property
accountabilities in the company and
that they release the latter of any
claim or demand of whatever nature.

Agabon v.
NLRC

- Riviera Home Improvements, Inc.

employed petitioners Virgilio Agabon
and Jenny Agabon as gypsum board
and cornice installers.
- They were dismissed for
abandonment of work. Petitioners
assert that they were dismissed
because Riviera refused to give them
assignments unless they agreed to
work on a "pakyaw" basis.
- They did not agree on this
arrangement because it would mean
losing benefits as Social Security
System (SSS) members. Petitioners
also claim that Riviera did not comply
with the twin requirements of notice
and hearing.
- Riviera, on the other hand,
maintained that petitioners were not
dismissed but had abandoned their

- Whether or not
petitioners were
dismissed based on
a valid cause

- Whether or not
Riviera observed
due process in
terminating the

this detriment will happen in the case

of Wilfreda Comia, then a Production
Helper in the Selecting Department,
who married Howard Comia, then a
helper in the cutter-machine. The
policy is premised on the mere fear
that employees married to each other
will be less efficient. If we uphold the
questioned rule without valid
justification, the employer can create
policies based on an unproven
presumption of a perceived danger at
the expense of an employees right to
security of tenure.
- The failure of petitioners to prove a
legitimate business concern in
imposing the questioned policy
cannot prejudice the employees right
to be free from arbitrary
discrimination based upon
stereotypes of married persons
working together in one company.
- 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 Riviera. This was
not the first time they did this.
Previously, they did not report for
work because they were working for
another company. Riviera 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 consideration
in determining the penalty that
should be meted out to him.

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qualification would be unable

to properly perform the duties
of the job.

- Abandonment is the deliberate

and unjustified refusal of an
employee to resume his
employment. It is a form of
neglect of duty, hence, a just
cause for termination of
employment by the employer.
Requisites: (1) the failure to
report for work or absence
without valid or justifiable
reason; and (2) a clear
intention to sever employeremployee 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
4

work. In fact, Riviera sent two letters

to the last known addresses of the
petitioners advising them to report
for work.
- Petitioners did not report for work
because they had subcontracted to
perform installation work for another
company.

Jaka Food
Processing v.
Pacot

- Respondents were employees of Jaka

because the company was in dire
financial straits.
- However, the termination was
effected without Jaka complying with
the requirement regarding the
service of written notice upon the

services of the
petitioners

- What are the legal

implications when
an employee is
dismissed without
complying with the
notice requirement
under the Labor

- Riviera 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, this is not a
valid excuse because the law
mandates the twin notice
requirements to the employee's last
known address. Thus, it should be
held liable for non-compliance with
the procedural requirements of due
process.
- 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, however, must be stiffer
than that imposed in Wenphil. By
doing so, this Court would be able to
achieve a fair result by dispensing
justice not just to employees, but to
employers as well. Riviera was
ordered to pay each of the petitioners
the amount of P30,000.00 as nominal
damages for non-compliance with
statutory due process.
- The difference between this case and
the case of Agabon vs. NLRC is that
this case involves an authorized cause
(particularly retrenchment) under
Art. 283 while the Agabon case
involves a just cause under Art. 282.
The difference between the two is

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must be shown by clear proof

that it was deliberate and
unjustified.
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 employee's last
known address.

- If the dismissal is based on a

just cause under 282 and the
employer failed to comply with
the notice requirement, the
sanction on the employer
should be tempered because
the dismissal was initiated by
5

employees and the DOLE at least one

month before the intended date of
termination.
- The respondents filed a complaint
with the Labor Arbiter who ruled in
favor of the respondents.
- The NLRC initially affirmed the
decision of the Labor Arbiter but
subsequently reversed it decision
upon the filing of a Motion for
Reconsideration.
- On appeal, the Court of Appeals
reversed the decision of the NLRC
based on the ruling of the SC in the
case of Serrano vs. NLRC.

Code.

Industrial
Timber Corp.
v. Ababon

- SC rendered judgment finding:

- (1) the closure or cessation of ITC's
business valid, and
- (2) ordering ITC to pay separation
pay equivalent to one month pay or at
least one-half month pay for every
year of service, whichever is higher,
and P50,000.00 as nominal damages
to each employee, which damages are
for the failure of ITC to comply with

- Is ITC entitled to a
reduction or
deletion of the
nominal damages
awarded to the
employees
dismissed based on
an authorized cause
but was not
accorded due

that in a just cause, the employee is

the direct cause of the termination,
while in an authorized cause, the
main actor is usually the employer.
Because of the distinction, the SC
held that if the dismissal is based on a
just cause under 282 and the
employer failed to comply with the
notice requirement, the sanction on
the employer should be tempered
because the dismissal was initiated by
an act imputable to the employee. On
the other hand, if the cause of the
dismissal is one of the authorized
causes under 283, failure of the
employer to comply with the notice
requirement should merit a stiffer
sanction because the dismissal
process was initiated by the
employers exercise of management
prerogative.
In this case, the dismissal of the
respondents was indeed caused by
retrenchment due to financial losses
of the company (one of the authorized
causes). Therefore, Jaka is ordered to
pay P50,000 as indemnity (this is
greater than the P30,000 indemnity
for failure to comply with the notice
requirement if the dismissal is due to
a just cause as held in the case of
Agabon).
YES. Nominal damages reduced to
P10,000 per employee.
In the case at bar, there was valid
authorized cause considering the
closure or cessation of ITC's business
which was done in good faith and due
to circumstances beyond ITC's
control. ITC had ceased to generate
any income since its closure. Several
months prior to the closure, ITC

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an act imputable to the

employee.
- If the cause of the dismissal is
one of the authorized causes
under 283, failure of the
employer to comply with the
notice requirement should
merit a stiffer sanction
because the dismissal process
was initiated by the employers
exercise of management
prerogative.

- In the determination of the

amount of nominal damages
which is addressed to the
sound discretion of the court,
several factors are taken into
account:
the authorized cause
invoked, whether it was a
retrenchment or a closure or
6

the requirements of statutory due

process.
- To this judgment, ITC filed a Motion
for Partial Reconsideration seeking to
delete or reduce the nominal
damages awarded to each employee,
considering that since August 17,
1990 it had ceased operation of its
business and that the award involves
a huge amount considering that there
are 97 workers.

process?

experienced diminished income due

to high production costs, erratic
supply of raw materials, depressed
prices, and poor market conditions
for its wood products. It appears that
ITC had given its employees all
benefits in accord with the CBA upon
their termination.
- Thus, considering the circumstances
obtaining in the case at bar, SC
deemed it wise and just to reduce the
amount of nominal damages to be
awarded for each employee to
P10,000.00 each instead of
P50,000.00 each.

cessation of operation of the

establishment due to serious
business losses or financial
reverses or otherwise;
the number of employees to
be awarded;
the capacity of the
employers to satisfy the
awards, taken into account
their prevailing financial
status as borne by the
records;
the employer's grant of
other termination benefits in
favor of the employees; and

whether there was a bona

Equitable
Banking Corp.
v. Sadac

- Sadac was appointed as the banks

VP of the Legal Department. He later
became General Counsel.
- 9 lawyers from the department
addressed a letter to the board of
directors complaining of Sadacs
abusive conduct and petitioned for a
change in leadership in the
department.
- Sadac was then instructed to deliver
all materials in his custody in all the
cases he was handling. He then
requested for a full and formal
hearing. But his request was
unheeded.
- He then filed an illegal dismissal
case. The bank then terminated his
services.
- In a previous case, the SC held that

- How must
backwages be
computed?

- WON the salary

increases should be
considered in
computing the
backwages to be
awarded to Sadac.

- The current rule (Bustamante v.

NLRC) is that backwages should be
allowed to be recovered in full
without deduction and without
qualification pursuant to Art. 279 of
the Labor Code, i.e. without any
deduction of income the employee
may have derived from employment
elsewhere from the date of his
dismissal up to his reinstatement.
- NO. Article 279 mandates that an
employees full backwages shall be
inclusive of allowances and other
benefits or their monetary equivalent.
- A salary increase cannot be
interpreted as either an allowance or
a benefit. Salary increases are not
akin to allowances or benefits, and
cannot be confused with either.

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fide attempt to comply with

the notice requirements as
opposed to giving no notice
at all
- Backwages in general are
granted on grounds of equity
for earnings which a worker or
employee has lost due to his
illegal dismissal. It is not
private compensation or
damages but is awarded in
furtherance and effectuation of
the public objective of the
Labor Code. Nor is it a
redress of a private right but
rather in the nature of a
command to the employer to
make public reparation for
dismissing an employee either
due to the formers unlawful
act or bad faith.
- An unqualified award of
backwages means that the
7

there was EER between the bank and

Sadac and that he was illegally
dismissed. It was also found that the
bank disregarded the procedural
requirements in terminating his
employment.
- The issue remaining is the manner of
computation of the monetary award
to Sadac.
- Sadac claims that the total amount of
the award should include general
increases which he should have
earned during the period of his illegal
termination. He claims that his salary
is increased by 15% annually.
- On the other hand, the bank claims
that such salary increases should not
be included in the computation of
backwages. It argued that the award
of salary differentials is not allwed,
the rule being that upon
reinstatement, illegally dismissed
employees are to be paid their
backwages without deduction and
qualification as to any wage increases
or other benefits.

- If the intent were to include salary

increases as basis in the computation
of backwages, the same should have
been explicitly stated in the same
manner that the law used clear and
unambiguous terms in expressly
providing for the inclusion of
allowances and other benefits.
- The cases relied upon by Sadac are
inapplicable to this case.
- East Asiatic involved a situation
where there was ULP and the
employee was granted the whole
amount of salary plus the general
increases and bonuses she would
have received during the period of
lay-off.
- Millares dealt with computation of
the salary base used in computing the
separation pay.
- St. Louis of Tuguegarao involved the
issue of inclusion of fringe benefits in
computing backwages.

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employee is paid at the wage

rate at the time of his
dismissal.
- The base figure to be used in
the computation of backwages
is pegged at the wage rate at
the time of the employees
dismissal, inclusive of regular
allowances that the employee
had been receiving such as the
emergency living allowances
and the 13th month pay
mandated under the law.