In J’ Marketing Corporation v. Iguiz, the Supreme Court reiterated the importance of adhering to both substantive and procedural due process in employee termination cases. The Court emphasized that employers must provide substantial evidence to justify the termination and strictly comply with the twin-notice rule, ensuring employees have a fair opportunity to defend themselves. This ruling reinforces the constitutional right of workers to security of tenure and serves as a crucial reminder for employers to act judiciously and transparently in all dismissal proceedings.

Dismissal in Disarray: Did J’ Marketing Corporation Follow the Rules?

The case revolves around Fernando S. Iguiz, a collector/credit investigator for J’ Marketing Corporation (JMC), who was terminated for alleged dishonesty and breach of trust. JMC claimed Iguiz collected payments without issuing official receipts and failed to remit certain amounts. Iguiz contested his dismissal, arguing that JMC did not provide sufficient evidence or follow the proper procedure. The Labor Arbiter initially dismissed Iguiz’s complaint, but the National Labor Relations Commission (NLRC) reversed this decision, finding that Iguiz was illegally dismissed. The Court of Appeals (CA) affirmed the NLRC’s ruling, leading JMC to appeal to the Supreme Court. The central legal question is whether JMC provided sufficient evidence of a just cause for dismissal and followed the required procedural due process.

The Supreme Court, in analyzing the case, underscored the two-fold requirement of due process in employee dismissal: substantive and procedural. Substantive due process requires that the dismissal be for a just or authorized cause, as outlined in Articles 282, 283, and 284 of the Labor Code. Procedural due process, on the other hand, mandates that the employee is given an opportunity to be heard and to defend themselves. As the Court noted, it may entertain questions of law when the factual findings of the lower bodies are in conflict, such as in this case.

In this case, JMC terminated Iguiz’s employment based on Article 282(c) of the Labor Code, citing fraud or willful breach of trust. The Court, however, found that JMC failed to provide substantial evidence to support this claim. According to the Court in Tiu v. NLRC:

the loss of trust and confidence must be based on willful breach of the trust reposed in the employee by his employer. Ordinary breach will not suffice; it must be willful. Such breach is willful if it is done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently. Stated otherwise, it must be based on substantial evidence.

The evidence presented by JMC consisted primarily of a summarized list from its credit supervisor, Marlon Sonio, and belatedly obtained affidavits from customers. The Court noted that Iguiz was not given the opportunity to question Sonio’s report or to examine any supporting documents. Moreover, the affidavits were obtained more than three weeks after the initial report, raising concerns about their reliability and the fairness of the investigation.

Furthermore, the Supreme Court scrutinized JMC’s compliance with procedural due process, emphasizing the importance of the twin-notice rule. This rule requires that the employer furnish the employee with two written notices: the first, informing the employee of the grounds for termination, and the second, notifying the employee of the employer’s decision to dismiss. Additionally, the employer must conduct a hearing or conference to allow the employee to present evidence and rebut the charges.

The Court found that JMC’s actions fell short of these requirements. While JMC issued a memorandum asking Iguiz to explain his actions, it only provided him with 24 hours to respond, which the Court deemed insufficient. Citing the case of Naranjo v. Biomedica Health Care, Inc., the Court emphasized that the employee must be given a “reasonable opportunity” to prepare their defense, which should be at least five calendar days from receipt of the notice. This timeline allows them to adequately assess the charges against them.

The court referenced the case of King of Kings Transport, Inc. v. Mamac, which outlined the proper steps for terminating employees:

(1) The first written notice to be served on the employees should contain the specific causes or grounds for termination against them, and a directive that the employees are given the opportunity to submit their written explanation within a reasonable period. “Reasonable opportunity” under the Omnibus Rules means every kind of assistance that management must accord to the employees to enable them to prepare adequately for their defense. This should be construed as a period of at least five (5) calendar days from receipt of the notice to give the employees an opportunity to study the accusation against them, consult a union official or lawyer, gather data and evidence, and decide on the defenses they will raise against the complaint, xxx.

(2) After serving the first notice, the employers should schedule and conduct a hearing or conference wherein the employees will be given the opportunity to: (1) explain and clarify their defenses to the charge against them; (2) present evidence in support of their defenses; and (3) rebut the evidence presented against them by the management. During the hearing or conference, the employees are given the chance to defend themselves personally, with the assistance of a representative or counsel of their choice. Moreover, this conference or hearing could be used by the parties as an opportunity to come to an amicable settlement.

(3) After determining that termination of employment is justified, the employers shall serve the employees a written notice of termination indicating that: (1) all circumstances involving the charge against the employees have been considered; and (2) grounds have been established to justify the severance of their employment.

The Court also noted that JMC asked Iguiz to sign an administrative investigation report without providing him with sufficient information about the basis of the investigation or the charges against him. This further undermined the fairness of the proceedings. Additionally, JMC cited a previous offense of shortage in collection, even though Iguiz had already explained the situation and tendered full payment. The Court ruled that this past offense could not be invoked as corroborating evidence without adhering to procedural due process.

As the Supreme Court explained:

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.

However, given the strained relationship between JMC and Iguiz, reinstatement was deemed no longer feasible. As such, separation pay was deemed more appropriate.

Therefore, the Supreme Court affirmed the CA’s decision, upholding the NLRC’s ruling that Iguiz was illegally dismissed. The Court ordered JMC to pay Iguiz backwages, separation pay, moral and exemplary damages, and attorney’s fees. This decision underscores the importance of both substantive and procedural due process in termination cases and serves as a reminder for employers to adhere to these requirements strictly.

FAQs

What was the key issue in this case?	The key issue was whether J’ Marketing Corporation (JMC) illegally dismissed Fernando S. Iguiz by failing to provide substantial evidence of a just cause and by not adhering to procedural due process requirements. The Supreme Court examined whether JMC met the standards for terminating an employee based on dishonesty and breach of trust.
What is substantive due process in employment termination?	Substantive due process means that there must be a valid and just cause for terminating an employee, such as those listed in Articles 282, 283, and 284 of the Labor Code. The employer must prove that the employee’s actions or omissions warrant dismissal based on the law.
What is procedural due process in employment termination?	Procedural due process requires employers to follow specific steps when terminating an employee, including providing written notices and conducting a hearing or conference. This ensures the employee has an opportunity to be heard and defend themselves against the charges.
What is the twin-notice rule?	The twin-notice rule requires employers to provide two written notices to the employee: the first, informing the employee of the grounds for termination; and the second, notifying the employee of the decision to dismiss. These notices must be provided with reasonable opportunity for the employee to respond.
What constitutes a ‘reasonable opportunity’ to respond to a notice of termination?	A ‘reasonable opportunity’ generally means a period of at least five calendar days from receipt of the notice, allowing the employee to study the charges, consult with counsel, gather evidence, and prepare their defense. Shorter timeframes, like 24 hours, are typically deemed insufficient.
What kind of evidence is required to prove ‘loss of trust and confidence’ as a ground for termination?	To prove ‘loss of trust and confidence,’ the employer must provide substantial evidence showing that the employee willfully breached the trust reposed in them. This requires demonstrating that the employee’s actions were intentional, knowing, and without justifiable excuse.
What happens if an employer fails to follow due process in terminating an employee?	If an employer fails to follow due process, the dismissal is considered illegal. The employee may be entitled to reinstatement, backwages, separation pay, moral and exemplary damages, and attorney’s fees.
Can past offenses be used as grounds for termination?	Yes, past offenses can be considered as part of the just or valid cause for termination, but only if the employee was previously censured, reprimanded, or investigated for those offenses. Past offenses cannot be invoked without adhering to procedural due process.
What is the significance of the J’ Marketing Corporation v. Iguiz case?	This case underscores the importance of adhering to both substantive and procedural due process in employee termination cases. It reinforces the constitutional right of workers to security of tenure and reminds employers to act judiciously and transparently in dismissal proceedings.

The Supreme Court’s decision in J’ Marketing Corporation v. Iguiz serves as a critical reminder for employers in the Philippines to ensure that all employee terminations are conducted with strict adherence to both substantive and procedural due process. Employers must provide concrete evidence to support the grounds for dismissal and give employees a fair opportunity to defend themselves. Failure to comply with these requirements can result in significant legal repercussions.

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: J’ Marketing Corporation, G.R. No. 211522, September 04, 2019