In the Philippines, an employee’s dismissal must be for a just cause, but what happens when an employee disobeys a direct order? The Supreme Court, in BDO Unibank, Inc. v. Nerbes, clarified that not every act of disobedience warrants dismissal, especially when the employee’s actions are based on a reasonable belief and not characterized by a wrongful attitude. This ruling underscores the importance of considering the employee’s intent and the proportionality of the penalty in labor disputes.

When Union Rights Clash with Employer Directives: A Case of Willful Disobedience?

Nestor Nerbes and Armenia Suravilla, employees of Equitable PCI Bank (now BDO Unibank), were elected as President and Executive Vice President of their labor union. Citing the Collective Bargaining Agreement (CBA), they requested full-time leave to focus on union duties. The bank denied their request due to a pending appeal questioning their election victory. Despite the denial, Nerbes and Suravilla proceeded with their leave, leading to their dismissal for serious misconduct and willful disobedience. The central legal question is whether their refusal to comply with the bank’s order justified their termination, or if their actions were based on a reasonable interpretation of their rights under the CBA and labor laws.

The Labor Code of the Philippines outlines the grounds for terminating an employee. Article 282 (now Article 296) states that an employer may terminate employment for:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his employer or representative in connection with his work…

For willful disobedience to be a valid ground for dismissal, two elements must concur: the employee’s conduct must be willful, characterized by a wrongful attitude, and the order violated must be reasonable, lawful, and related to the employee’s duties. The Supreme Court examined whether Nerbes and Suravilla’s actions met these criteria, focusing on their intent and the reasonableness of their belief in their entitlement to union leave. It emphasized that misconduct must be of a grave and aggravated character to warrant dismissal. The Court also referenced

Yabut v. Manila Electric Company, et al., G.R. No. 190436, January 16, 2012, 663 SCRA 92, 105, defines Misconduct as an improper or wrong conduct. It is a transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment.

The Court acknowledged that Nerbes and Suravilla intentionally did not report for work, but it found that their actions lacked the wrongful and perverse attitude required for willful disobedience. They based their belief on the CBA and Department Order No. 09, which, according to their interpretation, allowed them to assume their positions immediately after being proclaimed winners. This interpretation, even if incorrect, was deemed a good-faith belief, particularly since the bank continued paying their salaries for a period. This indicated a tacit recognition of their entitlement to union leaves.

The Court also considered the proportionality of the penalty. Dismissal is a severe penalty, and not every instance of insubordination warrants such a harsh outcome. The Court, in balancing the interests of labor and management, highlighted the importance of protecting workers’ rights while recognizing the employer’s prerogative to manage its business. In this case, the Court weighed the employees’ length of service and the absence of prior offenses against the bank’s claim of willful disobedience. Ultimately, the Court found the penalty of dismissal disproportionate to the offense.

Building on this principle, the Supreme Court addressed the Compromise Agreement between BDO Unibank and Suravilla, which aimed to settle the case regarding her claims. While the Court approved the agreement and granted the bank’s motion to withdraw its petition concerning Suravilla, it also protected the rights of the lawyer, Atty. Jabla. The Court recognized that lawyers are entitled to reasonable compensation for their services, even if a client settles a case without their direct involvement.

The Court cited Malvar v. Kraft Foods Philippines, Inc., et al., G.R. No. 183952, September 9, 2013, emphasizing that clients should not compromise cases behind their attorneys’ backs to avoid paying stipulated fees. The court referenced Section 24 of Rule 138 of the Rules of Court, which provides that an attorney is entitled to reasonable compensation, considering the importance of the case, the extent of services rendered, and the attorney’s professional standing. The Court determined that 10% of the settlement amount was a reasonable fee for Atty. Jabla’s services but held Suravilla solely liable for the payment, absent proof of collusion between the bank and Suravilla to deprive Atty. Jabla of his fees.

Regarding Nerbes’ case, the Court affirmed his illegal dismissal and his entitlement to reinstatement and backwages. Citing Bustamante, et al. v. NLRC, et al., 265 Phil. 61 (1996), the Court clarified that illegally dismissed employees are entitled to full backwages without limitations. However, considering the significant time that had passed since his dismissal, the Court deemed reinstatement impractical. Instead, it awarded separation pay equivalent to one month’s salary for every year of service up to the date of his dismissal. This remedy balances the employee’s right to security of tenure with the realities of a long-standing labor dispute.

FAQs

What was the key issue in this case?	The key issue was whether the employees’ refusal to return to work, despite the employer’s order, constituted willful disobedience justifying their dismissal. The Court looked at the employee’s intent and the reasonableness of their belief in their actions.
What is willful disobedience as a ground for dismissal?	Willful disobedience requires a lawful order from the employer, the employee’s knowledge of the order, and a deliberate and unjustified refusal to comply, characterized by a wrongful attitude. The disobedience must also relate to the employee’s duties.
What factors did the Court consider in determining whether the dismissal was justified?	The Court considered the reasonableness of the employer’s order, the employee’s intent and good faith belief in their actions, the proportionality of the penalty, and the employee’s length of service and prior employment record.
What is the significance of the Compromise Agreement in this case?	The Compromise Agreement settled the case regarding one of the employees. Although approved, it did not extinguish the lawyer’s right to compensation for services rendered.
What are an illegally dismissed employee’s rights?	An illegally dismissed employee is generally entitled to reinstatement, full backwages, and other benefits. However, in certain circumstances, separation pay may be awarded in lieu of reinstatement.
How are attorney’s fees determined in labor cases?	Attorney’s fees are determined based on the importance of the case, the extent of services rendered, the attorney’s professional standing, and other relevant factors outlined in the Rules of Court and the Code of Professional Responsibility.
Can an employer be held liable for an employee’s attorney’s fees?	An employer can be held solidarily liable with the employee for attorney’s fees if it is proven that they colluded to deprive the attorney of their rightful compensation.
What is the difference between backwages and separation pay?	Backwages compensate for lost income due to illegal dismissal, while separation pay is provided to help the employee transition to new employment. They are distinct remedies with different purposes.

This case reinforces the principle that dismissal should be a last resort, especially when an employee’s actions are based on a reasonable, albeit incorrect, interpretation of their rights. It also highlights the importance of protecting attorney’s rights to compensation, even in settled cases.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: BDO Unibank, Inc. v. Nerbes, G.R. No. 208735, July 19, 2017