June 01 2005
The National Labour Relations Commission recently upheld a Labour Court judgment dismissing an action for unlawful termination due to the employee's failure to prove the fact of termination. In this case, Evelyn Cabug v Prudential Guarantee Assurance Inc, the commission upheld the employer's argument that the complaint lacked foundation because the employee was not terminated and was even given the option of returning to work.
Employees are vested with security of tenure so their employment cannot be terminated without cause. Employers consequently bear the burden of proving the validity of termination. However, they are required to do so only if the existence of the employer-employee relationship and the fact of termination are established. There is no explicit ruling by the Supreme Court as to who is obliged to prove these two points; the Labour Code is also silent on this question. However, it is axiomatic that the complainant has the burden of affirmatively alleging and substantiating the jurisdictional requisites of his or her action. Therefore, where the employer in an unlawful termination case denies having terminated the employee, the latter must prove the termination by substantial evidence.
The issue of non-termination usually arises in cases where the employer has verbally asked the employee to resign and the latter has construed this as dismissal. However, non-termination is not commonly invoked by an employer as a principal defence: since the employment has not been effectively terminated, the employer may be liable to reinstate the employee to his or her position, which the employer may well be reluctant to do. Under these circumstances, the employer's usual recourse is to claim abandonment of work. However, this argument is difficult to sustain as the Supreme Court has ruled, in a long line of cases, that the immediate filing of a complaint for unlawful termination negates the claim of abandonment.
Prudential Guarantee Assurance Incorporated (PGA) hired Evelyn Cabug in a managerial position as head of the Accounts Receivable Division on the strong recommendation of Diane Alibudbud, who was then the assistant vice president of PGA. In her position, Cabug had access to information which was of great importance to PGA's business of non-life insurance, such as the names of clients, their contact numbers and addresses, and details of their accounts, including the expiry dates of their policies. In December 2003 Alibudbud resigned from the company and joined PGA's competitor. On January 7 2004 Cabug and Alibudbud were seen having lunch in a restaurant. PGA feared that Alibudbud, in an attempt to prove her worth to her new employer, would try to pry important company information from Cabug. Through its assistant vice president for human resources, PGA advised Cabug that it did not look good, and bordered on the suspicious, for her to be seen having lunch with Alibudbud, given that the latter was working for PGA's competitor.
After this, Cabug stopped reporting for work. She filed a case for unlawful termination against PGA with the Labour Court, claiming that she had been terminated from employment without just cause and due process simply for eating out with a friend. PGA, instead of using abandonment of work as a defence, focused on the aspect of non-termination and offered reinstatement. During the parties' simultaneous submission of position papers before the Labour Court, Cabug did not ask for reinstatement but merely requested that she be awarded back pay. The Labour Court dismissed the complaint, stating that Cabug had failed to prove by substantial evidence the fact of dismissal. Cabug then appealed to the National Labour Relations Commission.
The commission, upholding the decision of the Labour Court, stated that there was no unlawful termination precisely because the fact of the termination had not been proven. It held that the employee had not only failed to prove the fact of dismissal, but had even submitted evidence which contradicted her claim, as her own incident report showed that management had only asked her to resign. The commission found that there was no action on the part of the employer that could be construed as termination. It further noted that there was no documentary evidence of termination (ie, a show-cause letter or a memo of dismissal), and that the employer had manifested its willingness to reinstate the employee to her former position. In addition, the lack of a request for reinstatement coupled with the offer for reinstatement by the employer strengthened the argument that there was no dismissal. The commission therefore dismissed the action for unlawful termination on the basis that there was no termination in the first place.
PGA argued that it did not dismiss Cabug, as it was Cabug who had abandoned work; PGA further maintained that it was willing to reinstate her. Given these facts, two possible defences were available: abandonment or non-termination. Many employers are unwilling to rely on non-termination as a principal defence in such cases because of the liability to reinstate the employee. In this particular case, however, the defence counsel preferred this course as the Supreme Court had previously found that the immediate filing of a complaint for illegal dismissal negates the abandonment defence. The non-termination argument, coupled with an offer of reinstatement, was a much stronger defence, given that it is the employee who has the burden of proving the fact of termination. The employer's offer of reinstatement and the employee's refusal to heed the offer reinforced PGA's defence of non-termination. The action for unlawful termination was thus without foundation, which justified the dismissal of the complaint.
Even in cases where there has been termination without cause, thus making an employer liable to reinstate an employee with full back pay at the conclusion of the case, an immediate offer of reinstatement is a good damage limitation measure. The employee is put in the position of making a decision not to return and is thus unable to claim that he or she was illegally prevented from working, or charge the company for lost earnings or back pay. Even if the employee accepts the offer of reinstatement, the employer is at least able to make use of the employee's services. In either case, the employer avoids the liability to pay the employee full back pay, which can be very costly as cases can easily drag on for up to five years before they are finally resolved.
For further information on this topic please contact Ernesto Caluya at JGLaw (Jimenez Gonzales Liwanag Bello Valdez Caluya & Fernandez) by telephone (+63 2 815 9071) or by fax (+63 2 817 3251) or by email (firstname.lastname@example.org).
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