Wensha Spa Center v. Yung
Wensha Spa Center, Inc. and/or Xu Zhi Jie v. Loreta T. Yung, G.R. No. 185122, August 16, 2010
- Labor Law
- Procedural (Remedial Law)
- illegal dismissal
- loss of trust and confidence
- two-notice requirement
- Feng Shui master
- due process in termination
- backwages
- reinstatement vs separation pay
- strained relations
- corporate officer solidary liability
- NLRC
- Court of Appeals
I. Facts of the Case
Wensha Spa Center, Inc. employed Loreta T. Yung as Administrative Manager through its president, Xu Zhi Jie. Loreta was dismissed after Xu and a Feng Shui master allegedly advised that her “aura” did not match Xu’s, while Wensha claimed the real ground was loss of trust and confidence based on complaints and an investigation.
Loreta filed an illegal dismissal case. The Labor Arbiter and the NLRC dismissed her complaint, but the Court of Appeals reversed and awarded backwages and damages, prompting Wensha and Xu to seek review before the Supreme Court.
Loreta transferred from Manmen Services Co., Ltd. to Wensha at Xu Zhi Jie’s instance, first working for Xu as personal assistant and interpreter at ₱12,000.00 monthly salary, and was later promoted to Administrative Manager on May 18, 2004.
August 10, 2004
Xu and a Feng Shui master explored Wensha’s premises; Loreta was asked to leave her office, and Xu required her to take a one-month leave with pay.
September 10, 2004
Upon Loreta’s return, Xu and his wife asked her to resign, allegedly because a Feng Shui master said her aura did not match Xu’s; Loreta refused and was told she could no longer continue working.
September 10, 2004
Loreta filed a case for illegal dismissal with the NLRC against Xu and Wensha the same afternoon.
August 31, 2004
Wensha asserted that it terminated Loreta’s employment on August 31, 2004 for loss of trust and confidence after complaints and an investigation.
The Labor Arbiter Francisco Robles dismissed Loreta’s complaint, finding it more probable that the dismissal was based on loss of trust and confidence and finding Loreta’s theory about being dismissed for being a “mismatch” implausible.
December 29, 2006
The NLRC affirmed the Labor Arbiter’s decision, stating that Wensha was still considering proper action when Loreta left and that a September 10, 2004 letter asked Loreta to clarify matters which she declined due to having already filed a case.
Loreta moved for reconsideration before the NLRC, which was denied; she then went to the Court of Appeals via certiorari.
The Court of Appeals reversed and held that the NLRC committed grave abuse of discretion in appreciating the factual bases for dismissal; it noted evidentiary irregularities (including affidavits treated as mere photocopies and not properly executed under oath) and ordered payment of backwages, benefits, moral and exemplary damages, and attorney’s fees.
Wensha and Xu filed a petition for review on certiorari before the Supreme Court, arguing that the employee’s dismissal was for a valid cause and that Xu should not be held solidarily liable.
August 16, 2010
The Supreme Court found that the cause for dismissal was questionable, held that due process requirements were not complied with due to lack of the required notices, modified the Court of Appeals ruling (including rulings on reinstatement feasibility and monetary awards), and rejected solidary liability of Xu absent findings of bad faith or malice.
II. Issues
Whether or not Loreta T. Yung was illegally dismissed for lack of a valid cause and failure to observe due process requirements in termination.
Whether or not the Court of Appeals committed reversible error in reversing the NLRC and Labor Arbiter on the factual basis for Loreta T. Yung’s dismissal.
Whether or not Xu Zhi Jie may be held solidarily liable with Wensha Spa Center, Inc. for Loreta T. Yung’s illegal dismissal.
III. Ruling
Whether or not Loreta T. Yung was illegally dismissed for lack of a valid cause and failure to observe due process requirements in termination.
Loreta’s dismissal was illegal because the employer failed to comply with the required due process notice requirements and the purported basis for termination was not sufficiently established.
How the Court reasoned
- Security of tenure protects an employee from being removed except for just/correct cause and after compliance with procedural due process.
- The Court held that the employer failed to discharge its burden of proving the validity of the dismissal with substantial evidence.
- The Court found the asserted cause for dismissal to be questionable in light of the parties’ narration of events and the circumstances surrounding the alleged “mismatch” advice.
- The Court ruled that due process was not complied with because the employee received no required notices prior to termination.
- The Court applied the rule that termination requires two notices: first, a notice informing the employee of the charges with opportunity to explain, and second, the notice that termination will follow after consideration of the employee’s side.
- Because the dismissal was illegal, the employee was entitled to monetary consequences under labor law, subject to modification as to the form of relief consistent with the Court’s findings.
“The law requires that two notices be given to an employee prior to a valid termination: the first notice is to inform the employee of the charges against her with a warning that she may be terminated from her employment and giving her reasonable opportunity within which to explain her side, and the second notice is the notice to the employee that upon due consideration of all the circumstances, she is being terminated from her employment.”
Rule applied
Constitutional security of tenure; Article 297 [formerly Article 279] of the Labor Code (standards for termination); Article 115 of the Labor Code; and the two-notice requirement under the Labor Code and applicable procedural rules implementing termination of employment
Whether or not the Court of Appeals committed reversible error in reversing the NLRC and Labor Arbiter on the factual basis for Loreta T. Yung’s dismissal.
The Court of Appeals did not commit reversible error in reversing the NLRC and Labor Arbiter, but the Supreme Court modified the awards and reliefs ordered by the CA.
How the Court reasoned
- While findings of fact of the NLRC and Labor Arbiter are generally accorded respect, the Court recognized that the CA may intervene when factual findings are not congruent or when there is grave abuse of discretion in the appreciation of evidence.
- The Supreme Court examined the records and found the CA’s approach to the factual and evidentiary issues to be supportable as to the conclusion that the dismissal was not justified.
- The Court specifically focused on the due process deficiency (absence of the required notices) which independently supports illegality of dismissal.
- The Court adjusted the CA’s disposition by modifying reinstatement feasibility and the monetary awards in accordance with labor-law rules governing illegal dismissal remedies.
Rule applied
Rule 45, Rules of Court (petition for review on certiorari); established exception in labor cases where the CA may disturb factual findings of quasi-judicial agencies when there is grave abuse of discretion in appreciation of facts
Whether or not Xu Zhi Jie may be held solidarily liable with Wensha Spa Center, Inc. for Loreta T. Yung’s illegal dismissal.
Xu Zhi Jie could not be held solidarily liable with Wensha in the absence of findings that he acted with malice or bad faith.
How the Court reasoned
- Solidary liability of corporate officers in labor disputes is not automatic; it requires proof that the corporate officer acted in bad faith or with malice.
- The Supreme Court reviewed the basis for attributing liability to Xu and found no sufficient findings to justify solidary liability.
- Accordingly, the Court rejected the CA’s imposition of solidary liability and limited liability in line with the requirements of the doctrine.
“Nevertheless, the Court finds merit in the argument of petitioner Xu that the CA erred in ruling that he is solidarily liable with Wensha.”
Rule applied
Doctrine on solidary liability of corporate officers in labor cases (requires proof of bad faith or malice on the part of the officer)
Doctrines
Under the security of tenure guarantee, a worker can only be terminated from employment for cause and after due process.
The law requires two notices before a valid termination: (1) a notice informing the employee of the charges with warning that she may be terminated and giving a reasonable opportunity to explain, and (2) a second notice informing the employee that, after consideration of the explanation, she is being terminated.
An illegally dismissed employee is entitled to reinstatement and full backwages, but when reinstatement is no longer feasible, separation pay may be awarded under the doctrine of strained relations, consistent with labor jurisprudence.
Solidary liability of corporate officers in labor cases requires proof that the officer acted with malice or bad faith; absent such proof, the officer cannot be held solidarily liable.
Final Disposition
WHEREFORE, the petition is PARTLY GRANTED. The assailed Court of Appeals decision dated May 28, 2008 and resolution dated October 23, 2008 are MODIFIED in that the dismissal is declared illegal for failure to observe due process and because the asserted cause is not sufficiently supported, with the monetary awards adjusted accordingly, and Xu Zhi Jie is not held solidarily liable with Wensha Spa Center, Inc. in the absence of proof of bad faith or malice.
Notes
The dismissal rationale was tied by the employee to a Feng Shui-based “mismatch” explanation, while the employer invoked complaints and an investigation allegedly leading to loss of trust and confidence; the Supreme Court emphasized due process and insufficiency of the employer’s substantiation.