Title
Santiago D.J. Sillano vs. JGC Philippines, Incorporated
Case
G.R. No. 273562
Decision Date
Feb 24, 2025
Employee's program ownership dispute; suspension/termination legality; damages & benefits claims denied.
labor law
property
benefits
A

Case Summary (G.R. No. 273562)

Factual Background

JGC engaged in design engineering and construction management. While employed by JGC, Sillano developed the subject computer programs. In January 2004, Sillano and JGC began a dispute over ownership of these programs. Sillano asserted that he, as creator, owned the programs, while JGC countered that it owned any work product developed by employees within the course of employment. During this dispute, Sillano activated security features of the programs, making them inaccessible and ineffective for JGC’s business projects.

On January 14, 2004, JGC served Sillano with a Notice to Explain and Notice of Preventive Suspension, citing unauthorized destruction, tampering, taking, or concealment of company records, and failure to comply with official orders or perform assigned duties. On January 15, 2004, JGC sent a demand letter directing Sillano to unlock the security features of the programs. On the same day, Sillano submitted his written explanation and stated that, as a compromise, he would adjust a time-lock mechanism, but he refused to remove the security features altogether. JGC then served Sillano with a final demand on January 22, 2004 to unlock the security features and to turn over the source codes and related documentation. On January 27, 2004, Sillano contested his preventive suspension, claiming JGC had not yet established ownership.

On February 16, 2004, JGC issued a Notice of Termination finding that Sillano committed willful disobedience of lawful and reasonable orders by violating company rules and policies in disregard of authority and by deliberately refusing orders to unlock and surrender the source codes of the programs. JGC later filed a complaint before the NLRC on March 15, 2004 for breach of employment agreement. In the meantime, Sillano pursued claims before the IPO and also filed a criminal complaint alleging violation of Section 217 of the Intellectual Property Code. On April 2, 2004, Sillano likewise filed the instant complaint before the NLRC for illegal dismissal and related money claims.

In the NLRC complaint, Sillano alleged that his refusal to remove the security features was anchored on his claim of ownership. He asserted that, as owner, he had authority to protect the programs against unauthorized users. He also argued that his employment contracts did not state that developing computer programs was among his functions, nor that JGC automatically became owner of programs created as an employee. He maintained that allowing JGC and co-employees to use the programs did not constitute abandonment or waiver of his ownership.

JGC argued that it owned the programs because Sillano created them within his employment and in performance of regularly assigned duties using company facilities and resources. Thus, JGC asserted it could order Sillano to remove the security features and unlock the programs, and that Sillano’s refusal amounted to insubordination and a ground for dismissal.

Labor Arbiter and NLRC Proceedings

The Labor Arbiter (LA) ruled that Sillano’s dismissal had just cause and that procedural due process had been complied with. Accordingly, the LA dismissed Sillano’s complaint for illegal dismissal and denied his monetary claims, attorney’s fees, and damages.

Sillano appealed to the NLRC. Attached to his appeal was an IPO-issued Writ of Preliminary Injunction ordering JGC to desist from using, copying, reproducing, and modifying the programs created by Sillano. On June 27, 2008, the NLRC dismissed Sillano’s appeal due to non-perfection, because he failed to attach a Certification of Non-Forum Shopping. Sillano moved for reconsideration, attaching his Verification and Certification and also an IPO Decision dated September 28, 2007 declaring him owner and enjoining JGC from using the programs, while ordering JGC to pay him actual and moral damages aggregating PHP 800,000.00. The NLRC denied the motion.

Before the Supreme Court, Sillano had already obtained a CA ruling on certiorari. On September 22, 2009, the CA ordered remand to the NLRC for resolution on the merits, and that ruling became final and executory on October 13, 2009. After endorsement of records to the NLRC’s Second Division in 2019, proceedings continued, including conferences for amicable settlement. The IPO later issued an alias writ of execution on November 25, 2011 implementing its September 28, 2007 Decision.

On July 31, 2019, the NLRC reversed the Labor Arbiter. It held that Sillano’s preventive suspension was valid, but it found that Sillano was illegally dismissed. The NLRC explained that JGC complied with the requisites under prevailing jurisprudence to legally impose preventive suspension. It considered that Sillano was a Senior Engineer and posed a serious and imminent threat to JGC’s property, including documentary evidence under his custody, while investigation was ongoing. It also held that the suspension did not exceed thirty days. The NLRC found that JGC complied with procedural due process in terminating Sillano.

On substantial due process and just cause, however, the NLRC ruled against JGC. It found that JGC failed to establish the willful disobedience or insubordination ground as a just and valid cause. It held that there was no showing that Sillano’s refusal to remove the security features was tainted with wrongful or perverse attitude. It emphasized that when Sillano was dismissed in 2004, ownership of the programs had yet to be established by a competent authority. Thus, although the NLRC opined that JGC had grounds to order removal of security measures as it viewed the programs as its property, Sillano as creator had an equally valid ground to refuse compliance. The NLRC considered the IPO’s September 28, 2007 ruling recognizing Sillano as rightful owner and concluded that Sillano had the right to refuse to comply with JGC’s order to remove security features. The NLRC awarded separation pay and backwages computed until finality of the decision, while dismissing other claims for lack of merit.

After denial of partial reconsideration, the case was elevated to the CA.

Issues Framed on Appeal

In the CA, the parties’ contentions required resolution of three main matters: first, whether JGC validly placed Sillano under preventive suspension; second, whether Sillano’s dismissal complied with procedural due process requirements and, inherently, whether the dismissal had substantial basis; and third, whether Sillano was entitled to moral and exemplary damages in the amount of PHP 500,000.00, to unpaid earned benefits under the EWSF of PHP 83,232.14, to employer’s contributions under the EWSF of PHP 3,240.90 per month, to the monetary equivalent of multipurpose leave benefits, to the yearly 13th month pay, and to attorney’s fees.

Ruling of the Court of Appeals

On preventive suspension, the CA affirmed the NLRC’s conclusion that the suspension was valid. The CA ruled that JGC complied with the requisites for preventive suspension. It found that ownership of the computer program was not yet ascertained at the time of suspension. It treated Sillano’s act of restricting access as posing a serious and imminent threat to JGC’s interests, pending investigation and a definitive ruling from the IPO on copyright ownership. The CA also found that there was no showing the suspension exceeded the maximum thirty-day period under law.

On procedural due process, the CA held that it was properly complied with, albeit without substantial due process. It found that JGC gave notice requirements, allowed Sillano an opportunity to explain, and informed him of the termination and its reasons. It then addressed substantial due process by examining the dismissal ground of willful disobedience of lawful and reasonable orders. The CA noted that Sillano’s employment agreements, both at the Junior Engineer stage and upon promotion to Senior Engineer, did not mention creating, writing, or developing computer programs as part of his duties. It further found no agreement between JGC and Sillano as to program ownership, nor any agreement that programs created by Sillano as employee would be owned by JGC. The CA therefore concluded that Sillano was the owner of the programs. On that basis, it held that JGC’s orders to unlock and surrender the source codes could not be regarded as lawful or reasonable, and that the absence of this requisite rendered the dismissal devoid of substantial due process.

For money claims, the CA affirmed the NLRC. It found insufficient evidence to support moral and exemplary damages. It also held that unpaid employment benefits could not be granted because the record lacked evidence that entitlement had been raised before the labor tribunals. It emphasized that Sillano had only denominated the claims as “unpaid salaries” in his complaint and position papers, and that he raised these claims only on appeal, which could not be entertained. Finally, it found attorney’s fees unwarranted because the circumstances for such award were not present. The CA denied Sillano’s petition and affirmed the NLRC.

Sillano’s motion for reconsideration was likewise denied. The CA described his arguments as a rehash of issues previously raised and criticized misleading claims related to purported misreading of its decision and conflicting jurisprudence. It also refused to relax rules to entertain issues raised for the first time on appeal, noting that Sillano had belatedly submitted evidence on benefits and attributed the omission to prior counsel, but the CA ruled that clients were bound by counsel’s mistakes.

Arguments on Review to the Supreme Court

Before the Supreme Court, Sillano sought reversal of the CA decision and resolution. He assailed the CA’s handling of alleged errors in understanding the NLRC’s rulings and alleged constitutional infirmity. He contended that the CA modified the final IPO ruling when it ruled the preventive suspension legal. He argued that the IPO had held that copyright subsisted from

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