General Managers Are Not Always Corporate Officers: Understanding Corporate Structure in the Philippines

TLDR: The Supreme Court clarifies that a General Manager is not automatically considered a corporate officer unless explicitly stated in the corporation’s by-laws. This distinction is crucial for determining jurisdiction in labor disputes and protecting employee rights.

G.R. No. 171993, December 12, 2011 (MARC II MARKETING, INC. AND LUCILA V. JOSON, Petitioners, vs. ALFREDO M. JOSON, Respondent.)

Introduction

Imagine a scenario where a high-ranking employee, a General Manager no less, is suddenly terminated. Is this a simple labor dispute, or does it delve into the complexities of corporate governance? This question often arises in the Philippines, where the lines between employee and corporate officer can blur. The Supreme Court case of MARC II MARKETING, INC. vs. ALFREDO M. JOSON sheds light on this very issue.

In this case, Alfredo M. Joson, the General Manager of Marc II Marketing, Inc., was dismissed from his position. The central legal question was whether Joson was a corporate officer or a mere employee. The answer to this question determined whether the Labor Arbiter or the Regional Trial Court (RTC) had jurisdiction over the case. This distinction is critical because corporate officers have different rights and remedies compared to regular employees.

Legal Context: Defining Corporate Officers and Intra-Corporate Disputes

The legal landscape surrounding corporate officers and intra-corporate disputes in the Philippines is governed by the Corporation Code and relevant jurisprudence. Understanding key definitions is crucial.

• Corporate Officer: Individuals holding positions explicitly defined in the Corporation Code or the corporation’s by-laws. These typically include the President, Secretary, Treasurer, and any other positions specifically designated in the by-laws.
• Intra-Corporate Dispute: Conflicts arising from the internal relations of a corporation, such as disputes between stockholders, members, or between the corporation and its officers.

Article 217(a)2 of the Labor Code grants Labor Arbiters jurisdiction over termination disputes involving workers. However, the Supreme Court has consistently held that the dismissal of a corporate officer constitutes a corporate act and falls under the jurisdiction of the RTC, as these are considered intra-corporate controversies.

The Corporation Code, specifically Section 25, defines corporate officers as:

“Immediately after their election, the directors of a corporation must formally organize by the election of a president, who shall be a director, a treasurer who may or may not be a director, a secretary who shall be a resident and citizen of the Philippines, and such other officers as may be provided for in the by-laws.”

The key phrase here is “such other officers as may be provided for in the by-laws.” This seemingly simple clause becomes the crux of many jurisdictional disputes.

Case Breakdown: Joson’s Dismissal and the Battle for Jurisdiction

The story of Alfredo Joson’s dismissal is a complex one, involving corporate restructuring and family tensions.

• Early Days: Before Marc II Marketing, Inc. was officially incorporated, Joson was engaged as General Manager under a Management Contract with Lucila V. Joson, then President of Marc Marketing, Inc.
• Incorporation and Appointment: After Marc II Marketing, Inc. was incorporated, Joson continued as General Manager. The corporation’s by-laws listed the Chairman, President, Vice-President, Treasurer, and Secretary as corporate officers.
• Termination: In 1997, the corporation ceased operations and terminated Joson’s services.
• Labor Dispute: Joson filed a complaint for illegal dismissal, claiming his termination was due to personal animosity from Lucila Joson.

The company argued that Joson’s dismissal was an intra-corporate matter, falling under the jurisdiction of the SEC (now the RTC). The Labor Arbiter initially sided with Joson, but the NLRC reversed this decision, favoring the company’s argument. The Court of Appeals ultimately sided with the Labor Arbiter, which prompted the Supreme Court review.

The Supreme Court, in its analysis, emphasized the importance of the corporation’s by-laws. The Court quoted from Matling Industrial and Commercial Corporation v. Coros, a landmark case on this issue:

“Conformably with Section 25, a position must be expressly mentioned in the [b]y-[l]aws in order to be considered as a corporate office. Thus, the creation of an office pursuant to or under a [b]y-[l]aw enabling provision is not enough to make a position a corporate office.”

The Court further noted that:

“The board of directors has no power to create other corporate offices without first amending the corporate by-laws so as to include therein the newly created corporate office.”

Because the position of General Manager was not explicitly listed as a corporate office in Marc II Marketing’s by-laws, the Supreme Court ruled that Joson was not a corporate officer. Therefore, the Labor Arbiter had jurisdiction over the case.

Practical Implications: Protecting Employee Rights and Ensuring Proper Corporate Governance

This case has significant implications for both employees and corporations in the Philippines.

For employees in high-ranking positions, such as General Managers, it highlights the importance of understanding their status within the corporation. Just because you hold a high title doesn’t automatically make you a corporate officer with limited labor rights. Check the company by-laws.

For corporations, this ruling underscores the need for clear and precise corporate governance. If a company intends for a position to be considered a corporate office, it must explicitly state so in its by-laws. Failure to do so can lead to jurisdictional disputes and potential liabilities.

Key Lessons:

• Review your company’s by-laws: Ensure that all corporate officer positions are clearly defined.
• Amend by-laws when necessary: If creating new corporate officer positions, formally amend the by-laws to reflect these changes.
• Employees: Understand your status and rights within the corporation.

Frequently Asked Questions

Q: What happens if a company doesn’t specify corporate officers in its by-laws?

A: If a position isn’t listed in the by-laws, the person holding that position is generally considered an employee, regardless of their title or responsibilities.

Q: Can a Board Resolution create a corporate office?

A: No. A Board Resolution alone is insufficient. The corporation must amend its by-laws to formally create a new corporate office.

Q: What is the difference between a corporate officer and a regular employee?

A: Corporate officers have specific duties and responsibilities outlined in the Corporation Code and the company’s by-laws. They are typically elected by the board of directors and are involved in the overall management of the corporation. Regular employees, on the other hand, are hired to perform specific tasks and are subject to the supervision of their superiors.

Q: Why is it important to determine whether a person is a corporate officer or a regular employee?

A: The distinction is crucial for determining jurisdiction in labor disputes. Disputes involving corporate officers typically fall under the jurisdiction of the RTC, while disputes involving regular employees fall under the jurisdiction of the Labor Arbiter.

Q: What should I do if I’m unsure about my status as a corporate officer?

A: Consult with an attorney to review your company’s by-laws and your employment contract. An attorney can help you determine your status and advise you on your rights and remedies.

ASG Law specializes in labor law and corporate governance. Contact us or email hello@asglawpartners.com to schedule a consultation.