Title
WPP Marketing Communications, Inc. vs. Galera
Case
G.R. No. 169207
Decision Date
Mar 25, 2010
American citizen Jocelyn Galera, recruited to work in the Philippines, was illegally dismissed as a regular employee, not a corporate officer, due to invalid appointment and lack of due process, but denied benefits for working without a proper permit.
illegal dismissal
employee benefits
backwages
A

Case Summary (G.R. No. 169207)

Factual Background

Jocelyn M. Galera was recruited from the United States by John Steedman to work for WPP Marketing Communications, Inc. in the Philippines and signed an employment contract commencing 1 September 1999 as “Managing Director Mindshare Philippines” with specified salary, housing allowance, insurance benefits, pension plan participation, holiday and sick-leave provisions, and a trial and notice period. WPP filed applications for a working visa designating her as Vice-President several months after her employment commenced. On 14 December 2000 Steedman verbally informed Galera of her termination and a written notice followed on 15 December 2000. Galera filed a complaint for illegal dismissal and attendant claims on 3 January 2001.

Labor Arbiter Proceedings and Award

Before the Labor Arbiter, Galera maintained she was an employee illegally dismissed without observance of due process. Labor Arbiter Edgardo M. Madriaga found respondents liable for illegal dismissal, concluded that WPP failed to comply with substantive and procedural due process including the two-notice rule, and awarded reinstatement without loss of seniority, backwages calculated at US$120,000 per year at an exchange rate stated in the award, various business acquisition and incentive remunerations, US tax protection, moral and exemplary damages in multi-million dollar amounts, and attorney’s fees equivalent to 10% of the total award.

NLRC Ruling on Jurisdiction

The First Division of the National Labor Relations Commission reversed the Labor Arbiter on jurisdictional grounds. The NLRC held that at the time of her removal Galera was a corporate officer — Vice-President of WPP — and that intra-corporate controversies involving the removal of officers were cognizable by the courts of general jurisdiction or the appropriate forum under principles embodied in P.D. No. 902-A and subsequent jurisprudence. The NLRC therefore set aside the Labor Arbiter’s decision and dismissed Galera’s complaint for lack of jurisdiction, and later denied her motion for reconsideration.

Court of Appeals Decision and Reasoning

On petition, the Court of Appeals reversed the NLRC. The appellate court reasoned that a person is a corporate officer only if appointed by the board pursuant to the Articles of Incorporation or By-Laws, and it found the board resolutions appointing Galera to officer and director positions ultra vires because WPP’s By-Laws then provided for only one vice-president and five directors. The CA held that the Amended By-Laws, which would have validated additional vice-presidents and directors, took effect only upon SEC approval on 16 February 2001, after Galera’s removal; therefore the appointments were void ab initio. Applying the four-fold test of employment (selection and engagement, payment of wages, power of dismissal, and control over means and methods), the CA concluded that the employment contract and the parties’ course of conduct established an employer-employee relationship. The CA found that WPP failed to prove just cause for termination and violated the two-notice rule, and it directed WPP to pay backwages, separation pay, unpaid benefits, pension value, holiday pay, moral and exemplary damages, attorney’s fees of 10% and costs, reducing some amounts fixed by the Labor Arbiter.

Issues Presented to the Supreme Court

The consolidated petitions raised, inter alia, whether the NLRC had jurisdiction because Galera was a corporate officer; whether, if the CA was correct that the NLRC had jurisdiction, the case should have been remanded to the Labor Arbiter for reception of evidence on the merits; whether an alien such as Galera could recover backwages and other employee benefits under Philippine law; whether the CA’s computation of backwages and separation pay complied with Article 279 of the Labor Code as argued by Galera; and whether the individual respondents should be held solidarily liable.

Supreme Court: Overview of the Ruling

The Supreme Court agreed with significant legal determinations of the Court of Appeals but articulated a separate dispositive conclusion. The Court agreed that Galera was an employee, that the NLRC had jurisdiction, and that WPP’s dismissal lacked substantive and procedural due process. The Court nonetheless set aside the Court of Appeals’ Decision and Resolution on the equitable ground that Galera had worked in the Philippines without securing the requisite employment permit prior to commencing work. The Court invoked the rule that an alien must obtain an employment permit before employment and held that Galera could not seek relief before the Court with “unclean hands.” The petitions were therefore partially granted and the CA’s Decision and Resolution were set aside, leaving the parties where they were.

Reasoning on Employee versus Corporate Officer Status

The Court analyzed corporate and contractual law. It stated that corporate officers derive their status from the Corporation Code or a corporation’s by-laws and that WPP’s by-laws then provided for only one vice-president and five directors. The Court found that the board resolutions purporting to create additional offices and to appoint Galera were ultra vires at the time they were enacted and that the subsequent stockholders’ vote and the filing of Amended By-Laws with the SEC did not validate those acts retroactively because the SEC approved the amendments only on 16 February 2001, after the dismissal. The Court also relied on the written employment contract and the parties’ practices, invoking the four-fold test, to conclude that Galera functioned as a regular employee rather than a corporate officer.

Jurisdictional Analysis under Labor Law and Securities Regulation Code

Having characterized Galera as an employee, the Court concluded that jurisdiction vested in the labor adjudicatory bodies. It cited Article 217 of the Labor Code for the Labor Arbiter’s original and exclusive jurisdiction over termination disputes and attendant claims, and contrasted that regime with Section 5.2 of Republic Act No. 8799, which transfers certain intra-corporate controversies to courts of general jurisdiction. The Court therefore held that the NLRC erred in dismissing Galera’s complaint for lack of jurisdiction.

Merits: Substantive and Procedural Due Process in Dismissal

On the merits, the Court found that WPP and its officers failed to substantiate the allegations of gross incompetence contained in Steedman’s termination letter and that documentary evidence submitted by Galera, including congratulatory letters, conflicted with the grounds asserted for dismissal. The Court reaffirmed the two-notice rule: the em

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