Title
Lugawe vs. Pacific Cebu Resort International, Inc.
Case
G.R. No. 236161
Decision Date
Jan 25, 2023
Employee claimed constructive dismissal after HR functions were transferred; court ruled it was a valid management prerogative, finding she voluntarily abandoned her job.
constructive dismissal
transfer of functions
management prerogative

Case Summary (G.R. No. 236161)

Factual Background: Restructuring After the Company Takeover

The antecedent facts centered on PCRI’s change in ownership and subsequent reorganization. Sometime in October 2013, PCRI underwent a takeover after Filipinas (PREFAB BLDG) Systems Inc. (FILSYSTEMS) bought the shares of the Japanese owners. Before the takeover, PCRI and FILSYSTEMS executed a Memorandum of Agreement obligating FILSYSTEMS to maintain the continuity of the service records and the regular employment status of PCRI’s 104 regular employees, and to pay the legally mandated benefits to each employee. A General Assembly of the regular employees occurred on September 2, 2013, followed by a Mediation Assistance and Intervention on September 6, 2013 to allow the parties to present concerns and proposals related to the transition to new management.

After new management took over on October 5, 2013, Lugawe alleged that PCRI immediately removed key functions from her HR office and transferred them to the Finance Department headed by Christine Almaden (Almaden). She identified the transferred functions as including tracking of employees’ leave credits, timekeeping, reviewing and monitoring attendance records and schedules, implementation of payroll and attendance policies, payroll processing, distribution of payslips, preparation and processing of government-mandated benefits, and handling of employees’ concerns. Lugawe also claimed that she lost one of two HR assistants to the Finance Department and that she was deprived of discretion in hiring. She asserted that the removal and related organizational changes effectively rendered her a “lame duck” HR Officer/Manager and that PCRI intended to edge her out gradually.

According to Lugawe, PCRI further deprived her of access to employees’ records and reports and required her to report to and receive instructions from Almaden, whereas she previously reported to the General Manager. She also claimed that other functions were taken away, including administration of Security Services transferred to the Engineering Department under Rey Belandres (Belandres), and supervision over company drivers transferred to the Finance Department and to the General Manager. Lugawe relied on a job posting on JobStreet.com dated January 6, 2014 that listed “Compensation & Benefits” as a required skill for an HR Manager, which she argued supported PCRI’s plan to restore functions only after she vacated the position.

Lugawe’s grievances also involved alleged disdainful treatment. She claimed that General Manager Shum accused her of incompetence and “doing nothing,” and that Shum coordinated with another employee for the list of employees affected by typhoon Yolanda instead of going through her. She also alleged that Almaden attempted to remove her name as an authorized signatory for government-related transactions. Finally, she alleged that PCRI failed to act on her complaint against Belandres regarding alleged anomalies in a Security Services Contract with Probe Security Agency.

Development of the Dispute: Sick Leave, Filing of Complaint, and PCRI’s Response

On December 10, 2013, Lugawe fell ill and took sick leave. She claimed she was required by Shum to report the next day to address a leaking faucet in the HR office comfort room, despite her sick leave, and she complied at Shum’s insistence. Her sick leave reportedly lasted until December 12, 2013. Instead of returning to work on December 13, 2013, Lugawe filed a Complaint for constructive dismissal with the NLRC Regional Arbitration Branch No. VII in Cebu City, seeking separation pay in lieu of reinstatement, along with prayer for payment of 13th month pay for 2013 and other allowances. She later filed an Amended Complaint dated January 16, 2014, adding claims for separation pay in lieu of reinstatement, moral damages, and attorney’s fees.

PCRI denied that Lugawe was constructively dismissed and asserted that she abandoned her work after her approved sick leave expired on December 12, 2013. PCRI claimed it was not aware that Lugawe filed her constructive dismissal complaint on December 13, 2013. Lugawe took a compensation day-off on December 14 and another leave on December 15 due to alleged fever. PCRI was allegedly informed by its accounting officer, Mary Ann Bunac, that Lugawe would be absent from December 16 to 18, 2013 due to illness. On December 16, 2013, HR Officer Jeanette Apolinario (Apolinario) allegedly told PCRI’s Finance Controller Sabbas Cheung (Cheung) that Lugawe would no longer return to work after she received her 13th month pay. Later that day, Cheung received a text message from Lugawe stating that she would no longer report for duty.

Because PCRI remained unaware of Lugawe’s constructive dismissal complaint, it sent a letter dated January 7, 2014 directing Lugawe to submit a written explanation regarding her unauthorized absences and her text message to Cheung within two days from receipt. Lugawe did not respond. PCRI thus considered her conduct as job abandonment.

PCRI also defended the transfer of functions as a valid management prerogative. It denied any demotion in rank or diminution in pay or benefits, asserting that Lugawe retained her HR Officer/Manager position and related salary and benefits. PCRI characterized the transfer of payroll-related, security-guard supervision, and van-driver supervision functions as a legitimate internal control and performance improvement measure. It also asserted that Lugawe was overloaded with overlapping functions and that the prior management structure lacked proper mechanisms of control, transparency, and checks and balances. PCRI claimed that only three of six personnel assigned to Lugawe were reassigned, while Apolinario and two nurses remained part of Lugawe’s staff. To show good faith, PCRI emphasized that it did not hire an outsider to replace Lugawe, but instead appointed Apolinario, Lugawe’s former assistant, to assume an HR Officer/Manager position with reduced functions. PCRI also denied any discriminatory treatment that would have made continued employment unbearable. It treated the altercation between Lugawe and Belandres as a personal matter among co-employees.

Labor Arbiter’s Ruling: Constructive Dismissal Found

In its Decision dated June 30, 2014, the Labor Arbiter ruled that Lugawe was constructively dismissed, which it treated as equivalent to an illegal dismissal. The Labor Arbiter ordered PCRI to pay backwages of P331,214.80, separation pay of P250,649.00, attorney’s fees of P59,186.38, and moral damages of P10,000.00, and dismissed other claims for lack of merit.

The Labor Arbiter concluded that the transfer of functions from Lugawe’s position amounted to a “demotion”, because management stripped her of true duties and responsibilities as HR Officer/Manager. It held that by relegating her to a “lame duck” HR Officer and Manager role, Lugawe had been constructively dismissed, and thus her acts from December 13, 2013 onward did not constitute abandonment.

NLRC Proceedings: Affirmance with Modified Monetary Awards

PCRI appealed to the NLRC. In its November 28, 2014 Decision, the NLRC dismissed PCRI’s appeal and affirmed the Labor Arbiter’s finding of constructive dismissal, with modifications only as to amounts. It ordered PCRI to pay Lugawe an aggregate of PHP 516,420.83 in the concept of separation pay, backwages, moral damages, and attorney’s fees. PCRI’s motion for reconsideration was denied in a February 27, 2015 Resolution.

The NLRC reasoned that PCRI, under the guise of streamlining and organizational restructuring, allegedly created a situation that made Lugawe feel she was no longer needed, compelling her to give up employment. It characterized the removal of major functions and key personnel from the HR Department as reducing Lugawe to a mere office clerk or lame duck HR Manager. Together with alleged insulting, disdainful, and discriminatory acts, the NLRC concluded that continued employment became unbearable, amounting to constructive dismissal. It maintained the finding that Lugawe’s refusal to return to work did not amount to abandonment. The NLRC tempered the Labor Arbiter’s award by reducing the amount from PHP 614,890.08 to PHP 516,420.83.

Court of Appeals Proceedings: Grave Abuse of Discretion and Reversal

PCRI filed a Petition for Certiorari dated May 8, 2015 before the CA. During the pendency of the certiorari petition, procedural events unfolded involving Lugawe’s motion for execution and PCRI’s requests for inhibition and extensions. In an Order dated July 13, 2015, the Labor Arbiter denied PCRI’s motion for inhibition and issued a writ of execution based on a recomputed judgment amount of PHP 614,890.08.

In its April 6, 2017 Decision, the CA reversed the NLRC and set aside the Labor Arbiter and NLRC rulings, granting PCRI’s petition. The CA ordered Lugawe to return PHP 489,565.58 to PCRI, and provided that the amount would earn six percent (6%) per annum interest from the finality of the judgment. In its November 8, 2017 Resolution, the CA denied Lugawe’s motion for reconsideration.

The CA held that the NLRC committed grave abuse of discretion in affirming constructive dismissal despite alleged insufficiency of evidence. The CA ruled that Lugawe had voluntarily resigned and was therefore not entitled to separation pay, backwages, and damages.

Issues Presented and the Court’s Approach on Rule 45 Review

Lugawe elevated the controversy to the Supreme Court via a Petition for Review on Certiorari under Rule 45, assigning errors that, in essence, questioned the CA’s evaluation of evidence and factual conclusions, its ruling of voluntary resignation, and its deletion of her monetary award with an order for return to PCRI.

The Court reiterated that a Rule 45 petition is limited to questions of law. It also explained that, as a general rule, it does not re-evaluate facts. However, it recognized that the case presented conflicting findings between the

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