The Supreme Court has affirmed that employees who actively participate in internal power struggles within a company, defying management directives and undermining company operations, can be validly dismissed for serious misconduct and loss of trust. This ruling underscores the importance of employee loyalty and adherence to company policies, especially during periods of internal conflict. It clarifies the extent to which employees can involve themselves in company disputes without jeopardizing their employment, providing a clear precedent for employers dealing with similar situations.

Navigating Loyalty’s Labyrinth: When Internal Disputes Justify Dismissal

The case revolves around a power struggle within ZAMECO II Electric Cooperative, Inc., where two factions vied for control. During this tumultuous period, several employees sided with one faction and were subsequently dismissed by the opposing management. These employees then filed a case for illegal dismissal, claiming they were merely caught in the crossfire of the internal dispute. The central legal question is whether their actions constituted serious misconduct and a breach of trust, thereby justifying their dismissal.

The factual background involves a complaint filed with the National Electrification Administration (NEA) against the Board of Directors of ZAMECO II, leading to their removal. This decision was appealed, creating a division within the cooperative. The Cooperative Development Authority (CDA) also attempted to assert jurisdiction, further complicating the matter. Amidst this confusion, certain employees openly supported one faction, defying the orders of the existing management. As the Supreme Court emphasized in CASCONA v. Dominguez:

In the case at bench, the respondents committed several acts which constituted indirect contempt. The CDA issued the September 1, 2009 Memorandum stating that it had jurisdiction over ZAMECO II and could reinstate the former members of the Board of Directors. The CDA officials also issued Resolution No. 262, S-2009 and Special Order 2009-304 to interfere with the management and control of ZAMECO II. Armed with these issuances, the other respondents even tried to physically takeover ZAMECO II on October 22,2009. These acts were evidently against the March 13, 2009 decision of this Court and, thus, constituted indirect contempt against the Court.

The Court’s pronouncements highlight the importance of maintaining the status quo during legal disputes and refraining from actions that could preempt the final decision of the Court. In this case, the Interim Board of Directors of ZAMECO appointed by the NEA had the rightful jurisdiction and disciplinary authority over ZAMECO II. This authority extended to General Manager Engr. Farrales, enabling him to suspend and dismiss employees when justified.

The Labor Code of the Philippines provides the legal framework for employee dismissal, emphasizing the importance of both substantive and procedural due process. Article 279 of the Labor Code guarantees security of tenure, stating that:

Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause of when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement.

Article 282 outlines the just causes for dismissing an employee, including serious misconduct and willful disobedience. The Court defined misconduct as:

Misconduct is defined 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. To constitute a valid cause for the dismissal within the text and meaning of Article 282 of the Labor Code, the employee s misconduct must be serious i.e., of such grave and aggravated character and not merely trivial or unimportant.

In this case, the employees’ alignment with one faction, their defiance of management directives, and their participation in a civil action against the General Manager were deemed to be serious misconduct. They abandoned their duties as employees and actively worked against the interests of the cooperative.

Furthermore, the Court considered the element of loss of trust and confidence. For managerial employees, such as Gutierrez, Jr. and Venzon, a greater degree of fidelity and trust is expected. Their actions, therefore, constituted a breach of this trust, justifying their dismissal. It is important to note that while loss of trust and confidence should be genuine, it does not require proof beyond reasonable doubt. It is sufficient that there is some basis to believe that the employee is responsible for the misconduct. This principle balances the employee’s rights with the employer’s right to manage its operations effectively.

The ruling emphasizes that procedural due process was also observed in the dismissal of the employees. They were given written memoranda informing them of the charges against them and notices of termination, in accordance with the Labor Code. The Supreme Court ultimately sided with the employer, recognizing the right to manage its operations and maintain internal discipline. While the law protects workers’ rights, it does not authorize the oppression or self-destruction of the employer. The Court’s decision serves as a reminder that employees have a duty to remain loyal to their employer and to refrain from engaging in actions that could undermine the company’s operations.

FAQs

What was the key issue in this case?	The key issue was whether the employees’ actions during a power struggle within ZAMECO II constituted serious misconduct and a breach of trust, justifying their dismissal.
What is considered serious misconduct?	Serious misconduct is defined as an improper or wrong conduct that is willful in character and implies wrongful intent. It must be of such grave and aggravated character as to not be trivial or unimportant.
What is the legal basis for dismissing an employee for loss of trust and confidence?	Article 296(c) of the Labor Code states that loss of trust and confidence is a just cause for dismissal, provided the employee holds a position of trust and there is an act that justifies the loss of trust.
What is the difference between managerial and rank-and-file employees in terms of trust and confidence?	Managerial employees, due to their higher level of responsibility, are expected to exhibit a greater degree of fidelity and trust compared to rank-and-file employees. A breach of this trust can be grounds for dismissal.
What is procedural due process in employee dismissal?	Procedural due process requires that employees are given written notice of the charges against them and an opportunity to be heard before a decision is made. This ensures fairness and transparency in the dismissal process.
What role did the internal conflict within ZAMECO II play in the dismissal of the employees?	The internal conflict created a situation where the employees actively sided with one faction, defying management directives and undermining company operations. This was a key factor in determining that their actions constituted serious misconduct.
What does this case say about an employer’s right to manage its operations?	The case reinforces the employer’s right to manage its operations according to reasonable standards and norms of fair play. This includes the right to maintain internal discipline and to dismiss employees who engage in serious misconduct.
How does this ruling impact employees who find themselves in a similar situation?	This ruling serves as a cautionary tale for employees who find themselves in the middle of internal company disputes. It highlights the importance of remaining neutral and adhering to management directives to avoid jeopardizing their employment.
Does registering with the CDA oust the NEA of its supervisory jurisdiction?	No, the NEA’s power of supervision applies whether an electric cooperative remains as a non-stock cooperative or opts to register with the CDA as a stock cooperative.

In conclusion, this case underscores the delicate balance between protecting employees’ rights and upholding the employer’s right to manage its business effectively. Employees must exercise caution when navigating internal disputes, ensuring their actions do not constitute serious misconduct or a breach of trust. The Supreme Court’s decision serves as a valuable precedent for employers dealing with similar situations, providing clear guidelines for disciplinary actions.

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: MARY ANN G. VENZON, ET AL. vs. ZAMECO II ELECTRIC COOPERATIVE, INC., G.R. No. 213934, November 9, 2016