Lucila is the President of Marc Marketing. She engages the services of Alfredo where the latter received compensation. When Marc Marketing is being winded up, she designated Alfredo as her General Manager.
In 1994, Marc II was officially incorporated while Marc Marketing was made non-operational. However, Alfredo continued to discharge his duties under Marc II.
In Aug 1994, Alfredo was appointed by the BoD of Marc II as one of its corporate officers. His job title is General Manager and his function is a managing director.
In Jun 1997, Marc II decided to stop its operations and informed Alfredo about it. Alfredo was apprised of the termination of his services as Gen. Manager since it would no longer be necessary for winding up.
Aggrieved, he filed with the Labor Arbiter for Reinstatement and Money Claim against Marc II.
- Labor Arbiter found Alfredo Joson’s dismissal as illegal. Basis: No 1-month notice, etc.
- NLRC affirmed Labor Arbiter’s Decision dated Oct 2022
- CA declared the Labor Arbiter to have jurisdiction. Remanded to NLRC for determination of monetary awards for Alfredo.
- Marc II appealed to SC.
Issue and Ruling
Is Alfredo Joson an employee or a corporate officer?
Joson is an Employee. His designation as a General Manager was not expressly provided in the by-laws, hence not a corporate office. His office as General Manager was only created under an enabling provision (‘enabling’ BoDs to create positions) and is also not provided under RCCP Sec. 24.
Who are corporate officers? → Those who are given that character either by the Corporation Code or by the corporation’s by-laws. (Sec. 25 last phrase) quoting Mattling Industrial vs. Coros
Reason: To allow a corporate office to be created (or removed) by an enabling clause is to violate the Constitutionally-protected right of security of tenure.Mattling vs. Coros
An employee occupies no office and generally is employed not by the action of the directors or stockholders but by the managing officer of the corporation who also determines the compensation to be paid to such employee. – Easycall Communication vs. King
Is the board resolution designating Joson as GM not enough?
Yes, not enough. The Board Resolution making Alfredo’s GM position as a corporate office does not change the fact that he is an employee. The certification does not amount to amendment of by-laws. Moreover, CA has observed that it is a mere fabrication and afterthought.
How about the fact that Joson is a stockholder and director?
The fact that Alfredo was also a director and stockholder, does not automatically make the case an intra-corporate controversy falling under RTC. Not all conflicts between stockholders and the corporation are intra-corporate. Relationship of the parties must be considered (Here, Joson’s relationship is not created by the bylaws)
Other proofs he is only an employee:
- GM position not offered to him as a BoD/SH of Marc II
- He was terminated by Lucila, not by the Board.
Jurisdiction therefor properly belongs with the Labor Arbiter and not with the RTC.
Who has jurisdiction over this case: Labor Arbiter (dismissal of employees) or RTC (dismissal of officers)?
Labor Arbiter has original and exclusive jurisdiction over cases involving the dismissal of workers or employees.
RTC has jurisdiction when the person is a corporate officer. This is regarded as a corporate act or intra-corporate controversy. Under PD 902-A, (RTC or SEC) intra-corporate controversies include controversies in the election or appointments of directors, trustees, officers or managers of such corporations. In other words, The relationship of the parties and the nature of the controversy must be considered.
Is Alfredo’s termination illegal?
No. Legal but without proper observance of due process
(1) Marc II failed to comply the one-month prior written notice rule to the employee. It was effected on the same date; (2) DOLE was not give written notice one month before it ceased its operations. (3) Alfredo was not paid separation pay.
Why should DOLE be notified?
Reasons for closure: Article 283 of Labor Code: Serious business losses or financial reverses and the employer must convincingly prove the same and not merely to death the tenurial rights of employees. Requisites (a) Notice to the employee and DOLE; (b) bona fide business losses; (c) termination pay equal to one month pay or 1/2 month pay for every year of service whichever is higher.
Reason: Not only for employees to look for other employment but for DOLE to verify the cause of termination
Isn’t “poor sales” equal to serious business losses?
Not equal. In this case, “poor sales” is not equal to serious business losses. But an employer can still close the business as long as it is not for the purpose of circumventing the tenurial rights of employees. No law may compel anybody to continue business.
Why is separation pay mandatory? When is it not required?
Separation pay is a statutory obligation on the part of the employer and a demandable right on the part of the employee, except only where the closure or cessation of operations was due to serious business losses. State policy: treating labor as a primary social economic force, affording full protection to its rights as well as its welfare.