G.R. No. 166208 - King of Kings Transport, Inc. vs. Mamac

Case Summary (G.R. No. 166208)

Facts

Mamac was hired as a bus conductor on April 29, 1999. He was required to file a Conductor’s Trip Report after each trip showing ticket openings/closings; the company audited these reports and used Irregularity Reports to document discrepancies and solicit written explanations from employees. On audit of Mamac’s October 28, 2001 Trip Report, KKTI discovered that several sold tickets had been declared as returned, allegedly causing a loss of Php 890. Mamac submitted a written explanation attributing the error to confusion arising from an unrelated incident (a smashed windshield and early termination of a trip). On November 26, 2001 KKTI issued a termination letter effective November 29, 2001, alleging fraud based on the October 28 incident and referencing prior offenses since 1999. Mamac filed a complaint for illegal dismissal and other money claims. Labor Arbiter dismissed the complaint; the NLRC modified that dismissal and awarded indemnity for failure to comply with due process; the Court of Appeals affirmed just cause but found procedural due process lacking and awarded full backwages and 13th-month pay. The Supreme Court reviewed the CA decision under Rule 45.

Procedural History

Labor Arbiter (Sept. 16, 2002): Complaint dismissed for lack of merit.
NLRC (Aug. 29, 2003): Modified the Labor Arbiter decision and awarded indemnity of Php 10,000 for failure to comply with due process. Motion for reconsideration denied (Nov. 14, 2003).
Court of Appeals (Sept. 16, 2004): Affirmed dismissal for just cause but found procedural due process violated and awarded full backwages and 13th-month pay following Serrano doctrine.
Supreme Court (G.R. No. 166208, June 29, 2007): Partly granted petition; modified awards.

Issues Presented to the Supreme Court

Whether the CA erred in awarding full backwages despite denying the petition for certiorari.
Whether KKTI complied with procedural due process before terminating Mamac.
Whether the CA erred in awarding 13th-month pay contrary to PD 851.

Legal Standards on Procedural Due Process in Termination

Under Article 277 of the Labor Code and the implementing Omnibus Rules, procedural due process for dismissals for just causes requires substantial observance of: (1) a written notice served on the employee specifying the grounds for termination and giving reasonable opportunity to explain in writing; (2) a hearing or conference during which the employee may respond, present evidence, and be assisted by a representative or counsel; and (3) a written notice of termination specifying that grounds for dismissal have been established after due consideration. “Reasonable opportunity” has been construed as at least five calendar days from receipt of the first notice to enable the employee to prepare a defense, consult counsel or union representatives, and gather evidence. The first notice must contain a detailed narration of facts and circumstances, specific company rules or policies violated, or the particular grounds under Article 282 charged against the employee; a general description of the charge is insufficient.

Court’s Analysis — Substantive Cause

The Supreme Court accepted the CA’s determination that Mamac’s act of declaring sold tickets as returned constituted fraud or dishonesty and therefore a just cause for dismissal under the Labor Code. The substantive basis for termination was not the subject of reversal.

Court’s Analysis — Procedural Due Process: Application to the Facts

The Court found that KKTI failed to comply with the procedural due process requirements for the following reasons:

No written first notice or charge sheet was served specifying the particulars of the alleged offense and the grounds for termination. A mere verbal appraisal or conference informing the employee of charges does not satisfy the first notice requirement; consultations or conferences cannot substitute for written notice and hearing.
KKTI’s Irregularity Reports, to the extent they were used as notice, were deficient: they provided only general descriptions of alleged offenses, did not identify specific company rules violated, and did not cite which grounds under Article 282 were invoked. Such “standard” or generic reports do not meet the statutory particulars required to intelligently frame a defense.
No hearing or conference was conducted where Mamac could clarify, present evidence, or rebut management’s evidence. Although Mamac submitted a written explanation concerning the October 28 report, he was unaware that dismissal proceedings were underway and was surprised by the termination letter that relied on that incident together with prior alleged infractions. The presence of a written explanation does not cure the absence of an opportunity for oral presentation and evidentiary discourse required by the Omnibus Rules.

Sanction for Failure to Observe Due Process

The Court addressed the appropriate remedial measure. The CA had awarded full backwages following Serrano v. NLRC, but the Supreme Court noted that Serrano’s approach awarding full backwages for procedural defect had been superseded by Agabon v. NLRC, which established that an employer that dismisses without complying with due process should be made to indemnify the employee with nominal

Case Syllabus (G.R. No. 166208)

Background and Central Question

The central legal question presented to the Court is whether a verbal appraisal of the charges against an employee constitutes a breach of procedural due process in termination proceedings.
The case is a petition for review under Rule 45 from the September 16, 2004 Decision of the Court of Appeals (CA) in CA-GR SP No. 81961 and from the CA’s December 2, 2004 Resolution denying reconsideration.
The CA had affirmed the dismissal of respondent Santiago O. Mamac for just cause, but awarded full backwages for procedural due process violations and granted 13th-month pay; petitioners contest those remedies and the CA’s procedural due process ruling.

Parties and Employment Relationship

Petitioner King of Kings Transport, Inc. (KKTI) is a public transportation corporation managed by Claire Dela Fuente and Melissa Lim.
Respondent Santiago O. Mamac was initially hired as a bus conductor by Don Mariano Transit Corporation (DMTC) on April 29, 1999.
Many DMTC employees, including respondent, were transferred to KKTI after KKTI’s incorporation and acquisition of new buses.
Respondent was elected president of the company-recognized union by KKTI employees, the Kaisahan ng mga Kawani sa King of Kings (KKKK), which was registered with the Department of Labor and Employment (DOLE).

Company Disciplinary Procedure and Paperwork

Respondent was required to accomplish a "Conductor’s Trip Report" after each trip, which records the ticket opening and closing for the day; the company audits these reports.
Where the company discovers an irregularity, it prepares an "Irregularity Report" describing the nature and details of the irregularity.
The employee concerned is asked to explain the incident by making a written statement or counter-affidavit on the back of the same Irregularity Report.
After considering the employee’s written explanation, the company determines whether to accept the explanation or impose a penalty; that decision is to be stated on the Irregularity Report and furnished to the employee.

Facts Giving Rise to the Dispute

Upon audit of Mamac’s October 28, 2001 Conductor’s Trip Report, KKTI noted that several sold tickets had been declared as returned tickets, allegedly causing an income loss to KKTI of PhP 890.
No Irregularity Report was prepared specifically for the October 28, 2001 incident, but KKTI nevertheless requested a written explanation from respondent.
In his written explanation, respondent stated the erroneous declaration was unintentional; he recounted that the bus’s windshield was smashed during the trip, forcing an early termination of the trip to report the incident to police, and that this caused confusion in preparing the trip report.
On November 26, 2001, respondent received a termination letter, effective November 29, 2001, alleging the October 28 irregularity constituted fraud and citing prior offenses since 1999 as additional grounds for dismissal.

Procedural History

December 11, 2001: Respondent filed a Complaint for illegal dismissal, illegal deductions, nonpayment of 13th-month pay, service incentive leave, and separation pay, denying misconduct and alleging anti-union motive and lack of due process.
April 3, 2002: KKTI filed its Position Paper asserting just cause based on cumulative misconduct, alleging observance of due process, and disputing monetary entitlement on basis that respondent was paid on commission.
September 16, 2002: Labor Arbiter Ramon Valentin C. Reyes dismissed respondent’s Complaint for lack of merit.
Respondent appealed to the National Labor Relations Commission (NLRC).
August 29, 2003: NLRC modified the Labor Arbiter’s decision, ordering KKTI to indemnify complainant PhP10,000 for failure to comply with due process prior to termination; other findings were affirmed.
November 14, 2003: NLRC denied KKTI’s motion for reconsideration.
Respondent filed petition for certiorari before the Court of Appeals.
The CA affirmed that there was just cause for dismissal, sustained the finding of procedural due process failure, and—applying Serrano v. NLRC—modified the NLRC indemnity to an award of full backwages from termination until finality and granted 13th-month pay.
KKTI sought review before the Supreme Court.

Issues Presented to the Supreme Court

Whether the CA erred in awarding full backwages to respondent despite denial of certiorari by KKTI.
Whether the CA erred in ruling that KKTI did not comply with procedural due process requirements before dismissing respondent.
Whether the CA erred in awarding 13th-month pay contrary to Presidential Decree No. 851.

Applicable Statutory and Rule Provisions (as stated in the source)

Article 277 of the Labor Code (Miscellaneous Provisions): requires that the employer furnish a written notice containing a statement of the causes for termination and afford the worker ample opportunity to be heard and to defend himself with assistance if desired; burden of proving termination was for valid or authorized cause rests on the employer.
Section 2 of the Implementing Rule (Standard