Title
7K Corp. vs. Albarico
Case
G.R. No. 182295
Decision Date
Jun 26, 2013
Employee terminated for alleged poor performance filed claims; arbitrator ruled illegal dismissal, awarding separation pay and backwages. Courts upheld decision, citing jurisdiction and equity.
water purifier company
separation pay
backwages

Case Summary (G.R. No. 182295)

Principal Statutory Framework and Venue

The dispute implicated the jurisdictional allocations under the Labor Code, particularly Art. 217 on the original and exclusive authority of Labor Arbiters over termination disputes, and Art. 262 on the authority of a Voluntary Arbitrator or panel of voluntary arbitrators “upon agreement of the parties” to hear and decide “all other labor disputes.” The Supreme Court evaluated whether a voluntary arbitrator, notwithstanding the perceived limits of the Submission Agreement dated 19 April 1993, could properly resolve the legality of the dismissal and award backwages as consequential relief.

Antecedent Employment History and Termination

The Supreme Court recounted that when Albarico was dismissed on 5 April 1993, he was a regular employee. He had been promoted several times, advancing from salesman to senior sales representative, and later to acting team field supervisor. His performance had also been recognized, including an award in 1992 for being one of the company’s top water purifier specialist distributors. The corporation terminated him, as it alleged, due to poor sales performance, and this termination led to his subsequent decision to pursue arbitration and claims for monetary benefits.

NCMB Voluntary Arbitration and the Submission Agreement

After he ceased reporting for work following the termination, Albarico submitted his money claims for arbitration before the NCMB. The issue submitted for voluntary arbitration, based on the Submission Agreement dated 19 April 1993, was whether Albarico was entitled to separation pay and the sales commission reserved for him by the corporation. While the NCMB case was pending, the dispute later took a procedural path that became significant in determining what issues were actually in controversy.

Subsequent NLRC Complaint and Forum Shopping Finding

During the pendency of the NCMB arbitration, Albarico filed a complaint before the arbitration branch of the NLRC for illegal dismissal with money claims including overtime pay, holiday compensation, commission, and food and travelling allowances. The labor arbiter rendered a decision in favor of Albarico, awarding separation pay in lieu of reinstatement, backwages, and attorneys’ fees. On appeal, the NLRC vacated the labor arbiter’s decision on the ground of forum shopping, explaining that the NCMB arbitration case was still pending. The NLRC’s decision expressly stated that the dismissal was without prejudice to the NCMB arbitration case, and it became final when no appeal was taken.

Conduct of the NCMB Case and the Parties’ Position Papers

The Supreme Court noted that on 17 September 1997, the corporation filed its position paper in the NCMB arbitration. The corporation denied that Albarico was terminated, and it claimed instead that he had voluntarily stopped reporting for work after receiving a verbal reprimand, thus portraying the situation as one involving abandonment of employment. Albarico, in response, manifested orally that he was adopting the position paper he had submitted to the labor arbiter, where he claimed that he was illegally dismissed. The Court further observed that petitioner’s later litigation posture was material to the jurisdictional controversy.

The NCMB Hearing and the Voluntary Arbitrator’s Decision

Almost twelve years after the filing of the NCMB case, the parties appeared at a hearing on 12 January 2005. Albarico manifested willingness to settle based on the labor arbiter’s decision ordering separation pay in lieu of reinstatement, backwages, and attorneys’ fees. The corporation countered that it was amenable to settlement but would pay only separation pay and sales commission as specified in the Submission Agreement dated 19 April 1993.

On 18 November 2005, the NCMB voluntary arbitrator rendered a decision finding the corporation liable for illegal dismissal. The arbitrator rejected the corporation’s theory of poor performance as supported by the promotions, salary increases, and awards received by Albarico. The arbitrator likewise held that Albarico could not have abandoned his job, because abandonment required clear proof of overt acts showing the employee’s intent not to work, and mere absence was not enough. The arbitrator treated the prompt filing of a complaint for illegal dismissal with a prayer for reinstatement as inconsistent with abandonment.

The voluntary arbitrator also found that Albarico had been dismissed without due process. However, reinstatement was considered no longer feasible because of the strained relationship of the parties. Accordingly, instead of reinstatement, the arbitrator awarded separation pay for two years at P4,456 per year, totaling P8,912. The arbitrator further awarded backwages amounting to P90,804, and awarded attorneys’ fees because Albarico had been compelled to file an action for illegal dismissal.

Petitioner’s CA Arguments and the CA’s Disposition

Petitioner appealed to the CA, alleging that the voluntary arbitrator committed grave abuse of discretion amounting to lack or excess of jurisdiction, particularly in awarding backwages and attorneys’ fees based on a finding of illegal dismissal that was said to be beyond the scope of the Submission Agreement. The voluntary arbitrator countered that illegality of dismissal was not explicitly included in the Submission Agreement, and it sought the setting aside of the awards for backwages and attorneys’ fees, contending that only separation pay and sales commission should be awarded.

The CA affirmed the voluntary arbitrator’s decision as to the core awards that petitioner challenged, but it eliminated the award of attorneys’ fees for lacking factual, legal, or equitable justification. Petitioner’s motion for partial reconsideration was denied, and petitioner thereafter elevated the matter to the Supreme Court.

The Supreme Court’s Issue

The Supreme Court framed the main issue as whether the CA committed reversible error in sustaining the voluntary arbitrator’s jurisdiction to decide the legality of the dismissal and Albarico’s entitlement to backwages, despite the absence of express stipulation of those matters in the Submission Agreement dated 19 April 1993.

Arguments on Jurisdiction and the Labor Code Provisions Implicated

Petitioner argued that under Art. 217 of the Labor Code, original and exclusive jurisdiction over termination disputes lay only with the labor arbiter of the NLRC. The Supreme Court rejected this understanding by emphasizing that Art. 217 itself is qualified by its “except as otherwise provided under this Code” clause. The Court relied on the statutory exception found in Art. 262, which allows voluntary arbitration “upon agreement of the parties” to hear and decide “all other labor disputes,” including those that may otherwise be under the labor arbiter’s original and exclusive jurisdiction.

The Supreme Court cited San Jose v. NLRC to explain that the exceptions contemplated by Article 217 encompass labor disputes that Article 262 may cover, and thus voluntary arbitrators may, through party agreement, assume jurisdiction over a termination dispute.

Scope of Submission and Whether Illegal Dismissal Was Necessarily Part of the Dispute

On the principal jurisdictional question, petitioner maintained that even if a voluntary arbitrator had jurisdiction over the termination dispute, the decision must remain limited to the issues explicitly contained in the Submission Agreement—specifically, Albarico’s entitlement to separation pay and sales commission. Petitioner asserted that the CA erred in concluding that separation pay was necessarily based on the allegation of illegal dismissal, because separation pay can be awarded even without illegal dismissal.

The Supreme Court acknowledged that separation pay may indeed be awarded for reasons other than illegal dismissal, including authorized causes such as redundancy, retrenchment, or installation of labor-saving devices under Art. 283. It also recognized that jurisprudence allows separation pay grounded on social justice, and in other recognized contexts, such as established company practice or circumstances tied to union-related arrangements. Nonetheless, the Court held that in the present case, none of those other contexts was actually invoked. There was no claim that separation pay was sought under an authorized cause, no allegation that it was demanded based on social justice considerations, and, critically, the record showed that the dispute over separation pay emanated solely from Albarico’s allegation that his dismissal was illegal.

Estoppel and Procedural History Supporting Necessarily Included Issues

The Supreme Court further relied on record-based considerations to show why the legality of dismissal was necessarily involved even if not expressly enumerated in the Submission Agreement. The corporation had acknowledged the issue of illegal dismissal in its position paper filed before the NCMB, even as it argued abandonment. The Court also noted that the NLRC had understood the NCMB arbitration case as resolving the legality of dismissal, and that the identity of the issue between the NCMB case and the NLRC case had formed the basis for the forum shopping ruling.

The Court held that petitioner was therefore estopped from claiming that the NCMB submission did not include the legality of dismissal. It reasoned that separation pay could not be decided meaningfully “in a vacuum,” because there had to be a basis for the conclusion that Albarico was either entitled to separation pay or not. Thus, the Court concluded that the voluntary arbitrator correctly assumed jurisdiction ov

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