G.R. No. 106771 - Alhambra Industries, Inc. vs. National Labor Relations Commission

ALHAMBRA Industries, Inc., a Filipino cigar and cigarette manufacturing and distribution company, employed Danilo Rupisan on a six‐month probationary basis as a salesman.

Article 277, paragraph (b) of the Labor Code of the Philippines as amended by R.A. 6715, which mandates that an employer furnish a written notice stating the causes of termination and afford the employee an opportunity to be heard.

Rule XIV, Book V of the Omnibus Rules Implementing the Labor Code, which further details the procedures for security of tenure, notice, hearing, and final decision on dismissal.

From December 9–12, 1989, ALHAMBRA conducted a surprise audit of Rupisan’s records, uncovering alleged irregularities.

On January 3, 1990, Rupisan was summoned to the Head Office where the alleged violations of company policies and rules were conveyed.

On January 8, 1990, Rupisan was placed under a one‐month preventive suspension for serious breaches of company policies as reflected in the audit.

Rupisan protested the suspension on January 22, 1990, vehemently denying the charges and asserting that earlier clearance of his accountabilities on December 30, 1989, rendered the charges academic.

On February 6, 1990, a day before the suspension was due to end, ALHAMBRA effected Rupisan’s termination, effective February 8, 1990, without furnishing him a copy of the audit report which formed the basis for his dismissal.

Rupisan instituted a complaint for illegal dismissal, unpaid wages or commissions, and later amended the suit to include illegal suspension and damages.

Labor Arbiter Donato G. Quinto, Jr. found that although Rupisan’s dismissal was for a just cause based on the evidence (including admissions and counterarguments regarding cash shortages, neglect, and disobedience), the employer failed to observe due process by not providing him with a copy of the audit report.

Consequently, the Labor Arbiter awarded backwages, unpaid salary, separation pay in lieu of reinstatement, and commissions for related sales.

The National Labor Relations Commission (NLRC) on appeal upheld the finding of due process violation yet ordered his reinstatement in lieu of separation pay, reasoning that Rupisan could have explained his side if given the opportunity.

ALHAMBRA petitioned under Rule 65 of the Rules of Court, seeking a declaration that Rupisan was validly dismissed and contending that he should not be reinstated but instead be paid separation pay.

Rupisan, while also insisting on separation pay instead of reinstatement, became the focal point of the controversy regarding the proper remedy for the procedural lapse.

Whether the failure to furnish the audit report and secure a hearing constitutes a violation of Rupisan’s due process rights under both statutory and constitutional provisions.
Whether, notwithstanding the finding of just cause for dismissal by the Labor Arbiter, the absence of procedural due process warrants an order for reinstatement with backwages instead of a damages award.
Whether the NLRC abused its discretion by basing its decision solely on the due process violation without addressing the determination of just cause for termination.
What is the proper remedial measure when an employer fails to comply with the due process requirements even if the substantive grounds for dismissal are established.