Unwritten Company Policy: A Recipe for Illegal Dismissal

Unwritten company policies, while seemingly convenient, can be a legal minefield, especially when they lead to employee dismissal. This case highlights the critical importance of clearly communicated, written policies and the dire consequences for employers who rely on undocumented rules. Employers beware: undocumented policies provide shaky ground for employee termination and can result in costly illegal dismissal cases.

G.R. No. 121975, August 20, 1998

INTRODUCTION

Imagine losing your job not because of poor performance, but because of a ‘company policy’ you were never informed about in writing. This was the reality for Samuel Bangloy, a radio station employee in this pivotal Philippine Supreme Court case. The case underscores a fundamental principle in labor law: employers must ensure their policies, especially those that can lead to termination, are clearly communicated and formally documented. At the heart of this dispute lies the question: can an employee be legally dismissed based on an unwritten company policy?

This case revolves around Manila Broadcasting Company’s (MBC) unwritten policy that considered employees resigned if they ran for public office. Samuel Bangloy, an MBC employee, sought leave to run for office, unaware of this policy. Upon his return after losing the election, he was dismissed. The Supreme Court ultimately sided with Bangloy, emphasizing the necessity of written and communicated company policies, especially when they impact job security.

LEGAL CONTEXT: MANAGEMENT PREROGATIVE VS. EMPLOYEE RIGHTS

Philippine labor law recognizes “management prerogative,” granting employers the right to manage their business and formulate policies. However, this prerogative is not absolute. It must be exercised in good faith and with due regard to the rights of employees. The Labor Code of the Philippines, specifically Article 282 (now Article 297 in renumbered version), outlines the just causes for termination of employment by an employer. One such cause is “willful disobedience or insubordination…of lawful orders of the employer or his duly authorized representative in connection with the work of the employee.”

However, for disobedience to be a valid ground for dismissal, several conditions must be met, as consistently held by Philippine jurisprudence. These conditions are:

• The employer’s order must be lawful and reasonable.
• The order must be known to the employee.
• The order must be connected with the employee’s duties.
• The employee’s disobedience must be willful or intentional.

In this case, MBC attempted to justify Bangloy’s dismissal based on a company policy. However, the critical question became: was this policy valid and effectively communicated to Bangloy? The Supreme Court delved into the validity and enforceability of unwritten company policies, particularly in the context of employee dismissal.

Relevant to this case is also Republic Act No. 6646, specifically Section 11(b), which states: “Any mass media columnist, commentator, announcer, or personality who is a candidate for any elective public office shall take a leave of absence from his work as such during the campaign period.” This law mandates a leave of absence, not resignation, for media personalities running for office, highlighting the legislative intent to protect both political participation and employment.

CASE BREAKDOWN: THE UNWRITTEN RULE AND ITS CONSEQUENCES

Samuel Bangloy, a production supervisor and radio commentator at DZJC-AM, owned by Manila Broadcasting Company (MBC), decided to run for Board Member in Ilocos Norte in 1992. He applied for a 50-day leave of absence, citing Republic Act No. 6646, which mandates leave for media personalities during campaign periods.

His leave application was returned with a memo stating MBC’s “company policy”: employees running for public office were considered resigned. Bangloy, seemingly unaware of this unwritten policy and perhaps relying on verbal assurances from his station manager, proceeded with his candidacy. He lost the election and attempted to return to work, but MBC refused, citing his supposed resignation.

MBC formally informed Bangloy of his termination, listing several reasons: the unwritten company policy, the supposed 30-day leave limit, the argument that RA 6646 didn’t apply to his ‘production supervisor’ role, and his return to work being ‘late’ according to their interpretation of RA 6646. Notably, MBC also stated his radio program was cancelled and his production supervisor position abolished.

Bangloy filed an illegal dismissal complaint. The Labor Arbiter ruled in his favor, finding illegal dismissal due to lack of due process and ordering reinstatement with backwages and damages. The National Labor Relations Commission (NLRC) affirmed the Labor Arbiter’s decision but removed the damages and attorney’s fees.

MBC elevated the case to the Supreme Court, arguing that the NLRC interfered with management prerogative and that Bangloy was aware of the policy. However, the Supreme Court sided with Bangloy and the NLRC. The Court emphasized the lack of evidence that the unwritten policy was effectively communicated to employees. Station Manager Medy Lorenzo even admitted in testimony that the policy was not written and was only verbally communicated, and Bangloy stated he was not present when such verbal announcement was made.

The Supreme Court highlighted the ambiguity and lack of formalization of the policy: “To begin with, petitioner apparently has never seen it fit to put the policy in writing… As important a rule as one which considers an employee who runs for public office resigned must be written and published so as to lend certainty to its existence and definiteness to its scope.”

Furthermore, the Court noted the conflicting signals Bangloy received, including the alleged verbal assurances from his station manager that leave was possible. The Court gave weight to Bangloy’s good faith belief that he could take a leave without resigning. The Supreme Court concluded:

“Considering the foregoing, we hold that the finding of the NLRC that in filing his certificate of candidacy for public office in 1992 private respondent acted in good faith, thinking that he could do so without resigning from the company, is supported by substantial evidence.”

While Bangloy technically overstayed his approved leave by 11 days, the Court deemed dismissal too harsh, citing the principle of proportionality in disciplinary actions and Bangloy’s six years of service with no prior offenses. Drawing a parallel to Dolores v. NLRC, where a longer unauthorized absence did not justify dismissal, the Court modified the NLRC decision, imposing a one-month suspension instead and adjusting the backwages accordingly. The core ruling of illegal dismissal and reinstatement was upheld.

PRACTICAL IMPLICATIONS: LESSONS FOR EMPLOYERS AND EMPLOYEES

This case serves as a stark warning to employers: unwritten policies, especially those concerning termination, are legally precarious. Relying on undocumented rules can lead to costly illegal dismissal suits and damage employer-employee relations. Clear, written, and properly disseminated company policies are not merely best practices; they are legal necessities.

For employees, this case reinforces the importance of understanding company policies and seeking clarification when in doubt. While verbal assurances might be given, documented policies provide stronger protection. Employees should always request written confirmation of important company rules, especially those affecting job security.

This ruling emphasizes the following key lessons:

• Formalize Policies: Critical company policies, especially those related to employee discipline and termination, must be in writing.
• Communicate Clearly: Policies must be effectively communicated to all employees, ideally upon hiring and through regular updates. Mere verbal communication, especially if disputed, is insufficient.
• Ensure Accessibility: Written policies should be easily accessible to employees, whether through manuals, handbooks, or digital platforms.
• Consistency is Key: Policies should be consistently applied to all employees to avoid claims of discrimination or unfair labor practices.
• Due Process: Even with written policies, employers must still follow due process in disciplinary actions, including providing notice and opportunity to be heard.

FREQUENTLY ASKED QUESTIONS (FAQs)

Q: Can a company dismiss an employee based on an unwritten policy?

A: It’s legally risky. As this case shows, Philippine courts generally require company policies, especially those leading to dismissal, to be written and clearly communicated to employees to be enforceable.

Q: What makes a company policy legally valid?

A: A valid company policy is lawful, reasonable, clearly written, properly communicated to employees, and consistently applied.

Q: Is verbal communication of a policy sufficient?

A: While verbal communication might be supplementary, it’s generally not sufficient for critical policies, especially those concerning termination. Written documentation is crucial for legal enforceability.

Q: What should an employee do if they are unsure about a company policy?

A: Employees should always seek clarification from their HR department or immediate supervisor and request a written copy of the policy in question.

Q: What is ‘management prerogative’ and what are its limits?

A: Management prerogative is the right of employers to manage their business and create policies. However, it is limited by labor laws, public policy, and the need to exercise it in good faith and with due regard for employee rights. It cannot be used to violate the law or circumvent employee rights.

Q: What is illegal dismissal in the Philippines?

A: Illegal dismissal occurs when an employee is terminated without just cause or due process, as defined by the Labor Code. Employees illegally dismissed are entitled to reinstatement, backwages, and potentially damages.

Q: What is the importance of due process in employee dismissal?

A: Due process requires employers to provide employees with notice of the charges against them and an opportunity to be heard before termination. Lack of due process can render a dismissal illegal, even if there is a just cause.

Q: Does RA 6646 require media personalities to resign if they run for public office?

A: No. RA 6646 mandates a leave of absence, not resignation, for mass media personalities who are candidates for public office.

Q: What are the potential consequences for companies with unwritten policies leading to dismissal?

A: Companies risk facing illegal dismissal cases, financial liabilities for backwages and potential damages, and damage to their reputation and employee morale.

Q: How can ASG Law help with labor law issues?

ASG Law specializes in Labor Law and Litigation, assisting both employers and employees in navigating complex labor issues. Contact us or email hello@asglawpartners.com to schedule a consultation.