The Supreme Court ruled that an employee who voluntarily resigns to accept a higher position in a related company cannot claim illegal dismissal against the former employer. This decision underscores the importance of distinguishing between voluntary resignation and involuntary termination, especially when employees move between companies with interlocking interests. It also clarifies that labor tribunals must respect corporate separateness unless clear evidence of fraud or malice justifies piercing the corporate veil.

Resignation or Retaliation? Unraveling a Case of Corporate Employment Shift

This case revolves around Emerita G. Malixi, who claimed illegal dismissal by Mexicali Philippines after resigning to take a position at Calexico Food Corporation, a franchisee of Mexicali. Malixi argued that her resignation was a condition for her promotion and that her subsequent termination was due to a sexual harassment complaint she filed against Mexicali’s operations manager. Mexicali countered that Malixi voluntarily resigned and that Calexico was a separate entity. The central legal question is whether Malixi’s resignation was truly voluntary and whether Mexicali could be held liable for her termination at Calexico.

The Labor Arbiter initially ruled in favor of Malixi, piercing the corporate veil and holding Mexicali liable for illegal dismissal. However, the National Labor Relations Commission (NLRC) reversed this decision, finding that Malixi had voluntarily resigned and that Mexicali and Calexico were separate entities. The Court of Appeals (CA) affirmed the NLRC’s decision. The Supreme Court then reviewed the case to determine whether the CA erred in upholding the NLRC’s ruling.

The Supreme Court first addressed the procedural issue of whether the NLRC properly reinstated Mexicali’s appeal. The Court emphasized that Section 6, Rule III of the 2005 Revised Rules of Procedure of the NLRC explicitly states that the appeal period is counted from the receipt of the decision by the counsel of record. Citing Ramos v. Spouses Lim, the Court reiterated that notice to counsel is effective notice to the client, but not the other way around. Since Mexicali’s counsel received the Labor Arbiter’s decision on October 15, 2009, the appeal filed on October 26, 2009, was deemed timely. Therefore, the NLRC did not err in reinstating the appeal.

The Court then addressed the argument that the NLRC improperly ruled on the merits of the case, despite it being a non-issue in the motion for reconsideration. The Supreme Court held that the NLRC acted within its authority, as Malixi had ample opportunity to present her case and evidence before the Labor Arbiter. Article 221 of the Labor Code allows the NLRC to decide cases based on position papers and other submitted documents, without strict adherence to technical rules of evidence. The Court emphasized that the NLRC is mandated to ascertain facts speedily and objectively, in the interest of due process.

Turning to the substantive issue of whether Malixi was illegally dismissed, the Supreme Court agreed with the CA and NLRC that she had voluntarily resigned from Mexicali. The Court defined resignation as the voluntary act of an employee who believes that personal reasons outweigh the exigency of service, leaving no other choice but to leave employment. As cited in Bilbao v. Saudi Arabian Airlines,

Resignation is the voluntary act of an employee who is in a situation where one believes that personal reasons cannot be sacrificed in favor of the exigency of the service, and one has no other choice but to dissociate oneself from employment. It is a formal pronouncement or relinquishment of an office, with the intention of relinquishing the office accompanied by the act of relinquishment. As the intent to relinquish must concur with the overt act of relinquishment, the acts of the employee before and after the alleged resignation must be considered in determining whether he or she, in fact, intended to sever his or her employment.

The Court found that Malixi’s resignation letter, expressing gratitude and regret, negated any claim of coercion. The inducement of a higher position and salary did not invalidate the voluntariness of her action. Unlike a dismissal, where the employee has no option, Malixi chose to resign for a better opportunity. Her managerial background also suggested she was not easily coerced.

Malixi argued that Mexicali and Calexico were essentially the same entity and that Mexicali retained control over her employment even after her transfer. However, the Court found no factual basis for piercing the corporate veil. Citing Kukan International Corporation v. Hon. Judge Reyes, the Court emphasized that a corporation has a separate personality from its stockholders and related corporations. Piercing the corporate veil requires clear and convincing evidence of fraud, illegality, or inequity. The existence of interlocking directors alone is insufficient to disregard corporate separateness.

To further clarify the requirements of piercing the corporate veil, the Supreme Court emphasized the necessity of proving that the two corporations must have distinct business locations and purposes and must have a different set of incorporators or directors.

The Court also examined whether an employer-employee relationship existed between Malixi and Mexicali at the time of the alleged dismissal. The four elements to determine an employer-employee relationship are (1) the selection and engagement of the employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control over the employee’s conduct. The Court found that Malixi failed to establish these elements with substantial evidence. Her payslips showed that she received her salary from Calexico, not Mexicali, after October 2008. There was no evidence that Mexicali controlled her work performance at Calexico. Since no employer-employee relationship existed, Malixi could not claim illegal dismissal against Mexicali.

The Court then addressed the NLRC’s order for Mexicali to reinstate Malixi at Calexico. The Court held that this order was erroneous because Calexico was not a party to the case. Citing Atilano II v. Judge Asaali, the Court reiterated that no one can be bound by a proceeding to which they are a stranger. Due process requires that a court decision only bind parties to the litigation.

FAQs

What was the key issue in this case?	The key issue was whether Emerita Malixi was illegally dismissed by Mexicali Philippines or whether she voluntarily resigned to work for Calexico Food Corporation. The court had to determine if Mexicali could be held liable for actions taken by Calexico.
What is the legal definition of resignation?	Resignation is defined as a voluntary act where an employee believes personal reasons outweigh their job’s demands and chooses to leave. It requires a clear intention to relinquish the position, accompanied by actions that demonstrate this intent.
What does it mean to “pierce the corporate veil”?	Piercing the corporate veil is a legal concept where a court disregards the separate legal personality of a corporation to hold its owners or directors liable for its actions. This is typically done when the corporation is used to commit fraud or injustice.
What are the elements to prove an employer-employee relationship?	The four elements are: (1) selection and engagement of the employee; (2) payment of wages; (3) power of dismissal; and (4) power of control over the employee’s conduct. All four elements must be substantially proven to establish the relationship.
Why was the NLRC’s order for reinstatement deemed erroneous?	The NLRC’s order was erroneous because it directed Mexicali to reinstate Malixi at Calexico, which was not a party to the case. Courts cannot issue orders that bind entities not involved in the legal proceedings due to due process considerations.
How is the appeal period for NLRC cases calculated?	The appeal period is counted from the date the counsel of record receives the Labor Arbiter’s decision, not when the client receives it. This ensures that legal representatives have adequate time to review and respond to the decision.
Can an employee claim illegal dismissal after voluntarily resigning?	Generally, no. If an employee voluntarily resigns, they cannot claim illegal dismissal unless they can prove they were coerced or forced to resign against their will. The intent to resign must be voluntary and clearly demonstrated.
What kind of evidence is needed to prove coercion in a resignation?	To prove coercion, an employee must present evidence showing they were forced or unduly influenced to resign. This might include threats, intimidation, or misrepresentation by the employer that left the employee with no real choice but to resign.

This case illustrates the importance of clear documentation and the distinction between voluntary resignation and involuntary termination. It also highlights the need for labor tribunals to respect the separate legal personalities of corporations unless there is compelling evidence of fraud or abuse. The ruling reinforces the principle that employees who voluntarily leave one company for better opportunities at another cannot later claim illegal dismissal against their former employer, absent proof of coercion or bad faith.

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: EMERTIA G. MALIXI, VS. MEXICALI PHILIPPINES, G.R. No. 205061, June 08, 2016