Title
Del Rio vs. DPO Philippines, Inc.
Case
G.R. No. 211525
Decision Date
Dec 10, 2018
Employee voluntarily resigned; denied separation pay as no company practice or contractual basis existed for such entitlement.
unpaid salaries
accrued leave credits
separation pay

Case Summary (G.R. No. 211525)

Factual Background

Petitioner resigned from his employment effective October 7, 2009. On September 7, 2009, he submitted his notice of resignation, and DPO accepted it through a letter dated September 14, 2009. On October 11, 2009, DPO published in a newspaper that petitioner had resigned effective October 7, 2009.

After the effective date of his resignation, petitioner observed that he had not yet been paid his salary for the period September 16, 2009 to October 7, 2009. He then sought payment of his unpaid salaries, accrued leave credits, and separation pay, but DPO denied his demands.

In response to DPO’s position, the record reflected that petitioner, shortly before his resignation, had allegedly engaged in activities in direct competition with DPO in violation of a non-competition clause in his contract. DPO asserted that about ten days before petitioner’s resignation letter date (or on or about August 28, 2009), petitioner obtained registration from the Securities and Exchange Commission (SEC) for a corporation named Judphilan Foods with the same primary purpose as DPO. DPO claimed it was unhappy and disappointed with petitioner’s alleged disloyalty and betrayal. Nevertheless, DPO offered petitioner an amount of P110,692.75, inclusive of salary for September 16–30, 2009 and October 1–6, 2009, as well as thirteenth month pay, tax refund, and commissions for August and September 2009. Petitioner rejected the offer and insisted on additional claims, including separation pay and cash conversion of leave credits.

Labor Arbiter Proceedings

On October 9, 2009, petitioner filed a complaint with the Regional Arbitration Branch of the NLRC in Cebu City for recovery of his monetary claims. DPO denied liability and emphasized that petitioner was not entitled to separation pay because he voluntarily resigned. DPO also asserted that petitioner was not entitled to conversion of unused leave credits from 2006 to 2008 due to forfeiture under company policy, while his unused leave credits for 2009 had been applied as terminal leave after he tendered his resignation.

By a Decision dated June 25, 2010, the Labor Arbiter ruled in favor of petitioner and ordered DPO to pay him, among others, separation pay in the amount of P409,500.00, in addition to unpaid salary and other monetary components, for a total award of P520,192.75.

NLRC Ruling and CA Proceedings

DPO appealed to the NLRC. In its Decision dated January 26, 2011, the NLRC denied the appeal and affirmed in toto the Labor Arbiter’s Decision. DPO moved for reconsideration, but the NLRC denied it in its Resolution dated March 31, 2011.

DPO then filed a petition for certiorari with the CA, imputing grave abuse of discretion to the NLRC for sustaining the award of separation pay despite petitioner’s voluntary resignation. In the assailed Decision dated November 6, 2013, the CA affirmed with modification by deleting the separation pay award. The CA reasoned that an employee who voluntarily resigns is not entitled to separation pay unless one of the recognized exceptions is present: separation pay must be stipulated in the employment contract or CBA, or sanctioned by established employer practice or policy. The CA held that those exceptions did not obtain.

Petitioner’s Motion for Reconsideration was denied by the CA in a Resolution dated February 7, 2014. Hence, petitioner filed the present petition.

Issues Raised on Appeal

The Supreme Court identified the central issue as whether the CA was correct in deleting the award of separation pay in petitioner’s favor. Petitioner challenged the CA’s approach and faulted it for considering respondents’ arguments that petitioner asserted were raised only for the first time on appeal. Petitioner argued that the labor tribunals already made factual findings based on the evidence before them, and that the CA erred by disturbing those findings through belatedly raised theories. Specifically, petitioner contended that respondents’ position—that giving separation pay to resigned employees was not a practice but a means to encourage resignation in view of petitioner’s alleged objective to run down DPO’s business—should not have been considered. He also argued that respondents’ reliance on the resignations of other employees, Michael Legaspi and Felinio Martinez, was misplaced because those resignations allegedly occurred on October 15, 2009, after petitioner was already separated on October 7, 2009.

The Parties’ Contentions and the Supreme Court’s Evaluation

The Court rejected petitioner’s assertion that respondents’ arguments were untimely. It held that the cited arguments were timely raised before the Labor Arbiter and the NLRC, specifically in respondents’ Reply to petitioner’s Position Paper before the Labor Arbiter, in the Verified Memorandum of Appeal before the NLRC, and in DPO’s Motion for Reconsideration with the NLRC. The Court noted that respondents had repeatedly advanced these points to counter petitioner’s insistence that payment of separation pay to resigned employees constituted a company practice.

In those pleadings, respondents explained that the monetary benefits given to Legaspi and Martinez were awarded not as a generic company practice, but in connection with the circumstances surrounding their acts and resignation. Respondents asserted that the company sought to spare itself of the process and implications of termination by granting an alternative exit, described in substance as a promise or assurance that the employees would be paid a benefit if they tendered their resignation.

The Court also emphasized the review framework. While the findings of the NLRC, if supported by substantial evidence, are entitled to respect and finality, the CA may review those findings and reverse the NLRC when warranted. The Court added that while factual findings of the CA are generally not reviewed under Rule 45, exceptions exist, including when CA findings contradict those of the lower administrative bodies, as the case presented.

Legal Basis: Voluntary Resignation and Separation Pay Exceptions

The Supreme Court treated petitioner’s voluntary resignation as undisputed. It considered the resignation letter dated September 7, 2009 and noted that DPO admitted it. The Court then reaffirmed the controlling doctrine: a voluntarily resigned employee is not entitled to separation pay unless separation pay is stipulated in the employment contract or CBA, or is sanctioned by established employer practice or policy.

The Court held that the exceptions did not apply. It agreed with the CA that there was no employment contract and no CBA shown to contain any stipulation granting separation pay to resigning employees. It further held that petitioner failed to prove the existence of an established company practice or policy. Petitioner relied on the payslips of Legaspi and Martinez showing that they received separation pay after their resignations. The Court was not persuaded. It reiterated that for a benefit to be considered a company practice, it must have been granted over a long period and must be shown to have been consistent and deliberate.

The Court found the evidence insufficient to establish such practice. It observed that up to the effective date of petitioner’s resignation on October 7, 2009, there was no showing that DPO had made comparable payments to employees who voluntarily resigned. The first and only instance of the benefit, according to the Court, occurred on or after November 15, 2009, and this timing indicated that the payment was not part of a pre-existing practice but rather an arrangement to secure a “graceful exit” for Legaspi and Martinez.

Treatment of Legaspi and Martinez’s “Separation Pay”

On the specific circumstances of Legaspi and Martinez, the Court

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