The Supreme Court held that Harland B. Kemplin, President of United Tourist Promotions (UTP), was illegally dismissed because UTP failed to follow the proper procedure for terminating an employee. This case underscores the importance of due process in employment termination, requiring employers to provide clear notice of charges and a fair opportunity for employees to respond, reinforcing the constitutional right to security of tenure.

Expired Contract or Illegal Termination? The Case of the Cease and Desist Letter

In 1995, Ariel D. Jersey formed United Tourist Promotions (UTP) with the assistance of Harland B. Kemplin and Mike Dunne. Kemplin was employed as President of UTP in 2002 for a fixed term of five years, subject to renewal. Although the contract expired in 2007, Kemplin continued to serve as president, even entering into advertisement agreements on behalf of UTP in 2009. However, on July 30, 2009, UTP sent Kemplin a letter stating his employment contract had expired and ordering him to cease and desist from entering UTP premises. This action led Kemplin to file a complaint for illegal dismissal, among other claims.

The core legal question revolves around whether Kemplin’s dismissal was valid, considering his continued service beyond the initial fixed-term contract and the manner in which UTP terminated his employment. The Labor Arbiter (LA) and the National Labor Relations Commission (NLRC) both ruled in favor of Kemplin, finding that his fixed-term employment had been converted to a regular one due to his continued service. The Court of Appeals (CA) affirmed these rulings, emphasizing that UTP failed to comply with the procedural requirements for a lawful termination. Now, the Supreme Court examines the merits of the petition.

The Supreme Court, in affirming the lower courts’ decisions, focused on the critical aspect of due process in employment termination. The Court emphasized that under Article 280 of the Labor Code, Kemplin’s employment had transitioned into a regular one. This article states:

ART. 280. Regular and casual employment. – The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer…

Given his status as a regular employee, Kemplin was entitled to security of tenure, meaning he could only be dismissed for just cause and after being afforded procedural due process. The Court highlighted that the letter sent to Kemplin ordering him to cease and desist from entering UTP premises was insufficient to meet the legal requirements for termination. The Court then cited Unilever Philippines, Inc. v. Maria Ruby M. Rivera, clarifying that the procedural requirements are: a first written notice, a hearing or conference, and a written notice of termination.

Procedural due process requires that an employee be given clear notice of the charges against them and an opportunity to be heard. As the Court explained in Lawrence v. National Labor Relations Commission:

Considering that Lawrence has already been fired, the belated act of LEP in attempting to show a just cause in lieu of a nebulous one cannot be given a semblance of legality. The legal requirements of notice and hearing cannot be supplanted by the notice and hearing in labor proceedings…

UTP’s failure to specify the grounds for termination clearly and provide Kemplin with a chance to respond violated these requirements. The court found that the company’s reliance on Kemplin’s expired contract and vague references to criminal suits did not suffice as just cause for dismissal. The pendency of a criminal suit, the Court noted, does not automatically justify termination.

UTP argued that Kemplin’s actions, including alleged improprieties and the blocking of UTP’s website, justified his termination. However, the Court noted that these issues were raised belatedly, only in the position paper filed before the Labor Arbiter. The Court emphasized that informing an employee of the reasons for loss of trust and confidence after the dismissal does not satisfy due process requirements.

Despite finding that Kemplin was illegally dismissed, the Supreme Court modified the CA’s decision regarding reinstatement and the 13th-month benefit. Citing APO Chemical Manufacturing Corporation v. Bides, the Court acknowledged the doctrine of strained relations, which provides an exception to the rule of reinstatement when the relationship between the employer and employee has deteriorated to the point where a productive working environment is no longer possible.

Given the accusations and counter-accusations between Kemplin and UTP, the Court deemed reinstatement impractical and instead awarded separation pay. Moreover, the Court reversed the award of the 13th-month benefit, citing Torres v. Rural Bank of San Juan, Inc., as Kemplin, as President, held a managerial position and was therefore not entitled to this benefit.

FAQs

What was the key issue in this case?	The key issue was whether Harland B. Kemplin was illegally dismissed by United Tourist Promotions (UTP), considering his continued service beyond his fixed-term employment contract and the manner of his termination. The Court reviewed if UTP followed the correct procedure and had just cause for the dismissal.
What does security of tenure mean?	Security of tenure means that an employee can only be dismissed for just cause and after being afforded due process, which includes notice and an opportunity to be heard. This right is constitutionally protected in the Philippines.
What are the requirements for due process in employee termination?	Due process in employee termination requires the employer to provide a written notice specifying the grounds for termination, an opportunity for the employee to be heard and present their defense, and a written notice of termination. These notices should clearly outline the reasons for dismissal and give the employee a chance to respond.
What is the doctrine of strained relations?	The doctrine of strained relations allows for the payment of separation pay instead of reinstatement when the relationship between the employer and employee has deteriorated to the point where a productive working environment is no longer possible. This is considered an exception to the general rule of reinstatement.
What is considered a managerial employee?	A managerial employee is one who formulates management policies and implements management programs. In this context, they are not entitled to 13th-month pay.
How is separation pay calculated?	Separation pay is typically calculated at the rate of one month’s pay for every year of service, with a fraction of at least six months considered as one whole year. The amount is based on the employee’s salary at the time of dismissal.
What happens if an employer does not follow due process?	If an employer does not follow due process, the dismissal may be considered illegal, and the employee may be entitled to reinstatement with back wages, or separation pay if reinstatement is not feasible. The employer may also be liable for damages.
Can criminal charges against an employee be grounds for termination?	The mere pendency of criminal charges against an employee is not, by itself, sufficient grounds for termination. The employer must still prove that the employee’s actions constitute just cause for dismissal, such as loss of trust and confidence.

The Supreme Court’s decision in this case underscores the importance of adhering to due process requirements when terminating employees in the Philippines. While employers have the prerogative to manage their businesses, they must exercise this right within the bounds of the law, respecting employees’ right to security of tenure. The ruling clarifies the application of the strained relations doctrine and the entitlement to 13th-month pay, providing valuable guidance for employers and employees alike.

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: United Tourist Promotions v. Kemplin, G.R. No. 205453, February 05, 2014