Case Summary (G.R. No. 169207)
Key Dates
• September 1, 1999 – Employment commencement
• December 14–15, 2000 – Verbal and written notices of termination
• January 3, 2001 – Complaint for illegal dismissal filed with NLRC
• January 31, 2002 – Labor Arbiter decision in favor of Galera
• February 19, 2003 – NLRC reverses Labor Arbiter for lack of jurisdiction
• April 14, 2005 – Court of Appeals decision reinstates Labor Arbiter award
• March 25, 2010 – Supreme Court decision
Applicable Law
• 1987 Constitution (employment rights and due process)
• Labor Code of the Philippines (termination, due process, jurisdiction of Labor Arbiters and NLRC)
• Corporation Code (definition and appointment of corporate officers)
• IRR of Labor Code (employment permit requirements)
• Civil Code Article 32 (damages for property rights)
• Intellectual Property Code (works made in employment)
Employment Contract Terms
• Position: Managing Director, Mindshare Philippines; designated Vice-President in visa application
• Salary and Benefits: ₱3,924,000 annual salary; housing allowance up to ₱576,000/year; maintained company car and driver; insurance up to ₱300,000/year; participation in pension plan; 20 paid holidays/year; 15 sick leave days/year
• Termination Notice: Trial period of three months (one-week notice); thereafter three-months notice by either party, subject to summary dismissal for breach
Facts and Procedural History
Galera was hired effective September 1, 1999. WPP applied for her working visa only in January 2000, designating her Vice-President. On December 14, 2000, Steedman verbally informed Galera of her dismissal; a written termination letter arrived December 15. Galera filed for illegal dismissal, holiday pay, benefits, damages, and attorney’s fees before the NLRC.
Labor Arbiter Decision
On January 31, 2002, the Labor Arbiter found:
• WPP failed the two-notice rule and denied procedural due process
• No valid cause for dismissal was shown
• Galera’s performance was satisfactory
Awards included reinstatement, backwages ($120,000/year), business acquisition incentives, moral and exemplary damages, attorney’s fees, and costs.
NLRC Ruling
On February 19, 2003, the NLRC held that Galera was a corporate officer (Vice-President) and that her dismissal constituted an intra-corporate dispute beyond Labor Arbiter jurisdiction, properly cognizable by the SEC or Regional Trial Court. The NLRC set aside the Arbiter’s decision and dismissed Galera’s complaint.
Court of Appeals Decision
The Court of Appeals (April 14, 2005) reversed the NLRC:
• Determined that Galera’s board appointments were ultra vires under WPP’s by-laws and thus she remained a rank-and-file employee
• Applied the four-fold test (selection, payment, dismissal power, control of work methods) and found employer-employee relationship
• Held NLRC had jurisdiction and WPP illegally dismissed Galera, lacking substantive and procedural due process
• Ordered payment of backwages (US$120,000/year plus three-months notice), separation pay, unpaid benefits, moral and exemplary damages, attorney’s fees, and costs
Issues on Supreme Court Review
- Whether Galera was an employee or a corporate officer
- Whether the Labor Arbiter and NLRC had jurisdiction
- Whether WPP’s dismissal was substantively and procedurally illegal
- Whether Galera’s lack of prior employment permit precludes relief
Employee vs. Corporate Officer
Under Section 25, Corporation Code, corporate officers are those roles expressly provided by charter or by-laws. WPP’s by-laws allowed only one Vice-President (held by Webster) and five directors (all positions filled). Galera’s appointments were ultra vires and void until SEC-approved amended by-laws (effective February 16, 2001), which post-dated her dismissal. The employment contract specified employee status, control over wages and work methods, and disciplinary procedure external to the board. Accordingly, Galera was a regular employee.
Jurisdiction of Labor Arbiters and the NLRC
Article 217, Labor Code grants exclusive original jurisdiction to Labor Arbiters over termination disputes and related claims. The appellate court correctly exercised NLRC appellate jurisdiction. The NLRC’s contrary ruling for lack of jurisdiction
Case Syllabus (G.R. No. 169207)
Facts
- Jocelyn M. Galera, an American citizen, was recruited from the United States by John Steedman to work for WPP Marketing Communications, Inc. (WPP) in the Philippines.
- Galera signed an Employment Contract titled “Confirmation of Appointment and Statement of Terms and Conditions,” effective 1 September 1999.
- Four months into employment, WPP applied for her work visa and designated her as Vice President, a position she signed off under pressure to retain her status in the Philippines.
- On 14 December 2000, Galera was verbally notified by Steedman of her summary dismissal; a formal termination letter followed on 15 December 2000.
- On 3 January 2001, Galera filed a complaint for illegal dismissal and various unpaid benefits before the Labor Arbiter.
Employment Contract Terms
- Position: Managing Director, Mindshare Philippines; Annual Salary: ₱3,924,000; Start Date: 1 September 1999.
- Housing allowance capped at ₱576,000 per annum; provision of company car, driver, and insurance benefits up to ₱300,000 per annum.
- Reimbursement for relocation costs and air tickets up to US$5,000, subject to one‐year service.
- Participation in JWT Pension Plan, with possible future transfer to Mindshare Pension Plan.
- Entitlement to 20 days paid holiday per year; 15 days sick leave per year; inventions and know‐how assigned to the Company.
- Trial period of three months; thereafter, three months’ notice of termination required, subject to summary dismissal for breach and compulsory retirement at age 60.
Termination and Complaint
- Galera alleged lack of due process: only a five‐minute meeting and verbal notice, prohibited from reporting for work thereafter.
- She claimed illegal dismissal, unpaid holiday pay, service incentive leave, 13th month pay, incentives, moral and exemplary damages, and attorney’s fees.
- Complaint docketed as NLRC NCR Case No. 30-01-00044-01.
Labor Arbiter Decision
- Labor Arbiter Madriaga (31 January 2002) found respondents liable for illegal dismissal and failure to observe due process.
- Held that WPP did not comply with the two‐notice rule, deprived Galera of opportunity to defend, and lack