The Supreme Court ruled that employers cannot blame employees for losses caused by the employer’s disorganized systems and inept personnel. In this case, an employee was wrongly accused of theft due to the company’s poor inventory management. The Court emphasized that doubts in evidence must be resolved in favor of the employee, protecting their rights against unfair accusations and penalties stemming from the employer’s operational deficiencies. This decision reinforces the principle that employers must bear the responsibility for their internal system failures rather than unjustly penalizing workers.

Faulty Inventory: Can a Company’s Disorganization Lead to Unfair Theft Accusations?

Cathay Pacific Steel Corporation suspended Dominador Malabunga, Jr., one of its machinists, after accusing him of stealing an aluminum level belonging to the Fabrication Unit. The company alleged that Malabunga returned the Fabrication Unit’s level to cover up the loss of his own. An investigation followed, relying on statements from warehouse personnel and Fabrication Unit workers. Conflicting accounts emerged, particularly regarding the condition of the returned tool. The central question became: Can an employer penalize an employee based on accusations arising from its own flawed inventory system?

The Labor Arbiter initially sided with Cathay Pacific, finding substantial evidence to support the suspension. However, the National Labor Relations Commission (NLRC) reversed this decision, emphasizing the self-serving nature of the affidavits and the illogical premise that Malabunga would return the stolen item. The NLRC highlighted the warehouseman’s failure to immediately address discrepancies and the lack of direct evidence linking Malabunga to the theft. The Court of Appeals (CA) then overturned the NLRC’s ruling, reinstating the Labor Arbiter’s decision, stating there was reasonable ground to believe that Malabunga was responsible for the theft of the aluminum level assigned to the respondent’s Fabrication Unit.

The Supreme Court, however, sided with Malabunga, emphasizing that in labor cases, doubts should be resolved in favor of the employee. The Court scrutinized the conflicting evidence, particularly the statement of warehouseman Narvasa, who declared that the aluminum level returned by Malabunga was “untarnished” and unique. This directly contradicted the claims of the Fabrication Unit workers who said that the aluminum level returned was engraved with the word “Fabrication” and had the familiar dent.

The Court also noted the lack of an official report regarding the loss of the Fabrication Unit’s aluminum level, which further undermined the company’s accusations. Considering that there was no official report of the incident from the Fabrication Unit, the court could not depend on the statements of the Fabrication Unit workers, which were deemed unnecessary and uncalled for and served as an afterthought. The Court said that, “the aluminum level was declared lost at the same time it was found, in which case – using common sense and logic – there could be no loss at all. As far as respondent is concerned, the Fabrication Unit’s aluminum level was never lost.”

Moreover, the Supreme Court criticized Cathay Pacific’s inefficient system of monitoring and recording tools, noting the absence of security features and identifying marks. The court emphasized that an effective system of property identification, recording and monitoring is needed in order to prevent these situations. The court reasoned that the employer cannot conveniently put the blame on its employees in order to make up for or cover its losses caused by its own disorganized system and inept personnel.

The Supreme Court cited Article 4 of the Labor Code, which states that “all doubts in the implementation and interpretation of the provisions of this Code, including its implementing rules and regulations, shall be resolved in favor of labor.” Building on this principle, the Court emphasized that employers bear the responsibility for implementing effective systems to prevent losses and ensure accountability. The ruling serves as a reminder that companies must prioritize fairness and due process when dealing with employee disciplinary actions, especially when the accusations stem from systemic failures.

In illegal suspension cases, the burden of proof rests on the employer to show that the suspension was for a just or authorized cause and that due process was observed. In this case, Cathay Pacific failed to provide sufficient evidence to justify Malabunga’s suspension. The Court highlighted the contradictions in the testimonies and the lack of a proper system for tracking company property.

This decision underscores the importance of employers maintaining organized and transparent systems for managing company property. It also highlights the judiciary’s commitment to protecting workers from unfair labor practices. The Court made reference to a past ruling in the case of Asuncion v. National Labor Relations Commission, 414 Phil. 329, 341-342 (2001), stating that:

From the foregoing, there are serious doubts in the evidence on record as to the factual basis of the charges against petitioner. These doubts shall be resolved in (his) favor in line with the policy under the Labor Code to afford protection to labor and construe doubts in favor of labor. The consistent rule is that if doubts exist between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter.

The Supreme Court’s decision in Malabunga vs. Cathay Pacific Steel Corporation serves as a strong deterrent against employers who seek to unfairly penalize employees for problems caused by their own operational inefficiencies. It also affirms the employee’s right to security of tenure and reinforces the principle that employers must shoulder the responsibility for maintaining organized and transparent systems within their organizations.

FAQs

What was the central issue in this case?	The central issue was whether an employer could validly suspend an employee based on accusations of theft stemming from the employer’s disorganized inventory system. The court examined the evidence to determine if the employer had sufficient grounds for the suspension.
What did the Labor Arbiter initially decide?	The Labor Arbiter initially dismissed Malabunga’s complaint, siding with Cathay Pacific and finding substantial evidence to support the suspension. This decision was based on the written statements of the company’s witnesses.
How did the NLRC rule on the case?	The NLRC reversed the Labor Arbiter’s decision, finding the suspension to be without factual basis. They noted the self-serving nature of the affidavits and the illogical premise that Malabunga would return the stolen item.
What was the Court of Appeals’ decision?	The Court of Appeals overturned the NLRC’s ruling and reinstated the Labor Arbiter’s decision. They held that there was reasonable ground to believe that Malabunga was responsible for the theft.
What did the Supreme Court ultimately decide?	The Supreme Court sided with Malabunga, reversing the Court of Appeals’ decision and reinstating the NLRC’s ruling. The court emphasized that doubts should be resolved in favor of the employee and criticized the company’s disorganized inventory system.
What role did the warehouseman’s testimony play in the Supreme Court’s decision?	The warehouseman’s testimony was crucial because it contradicted the claims of the Fabrication Unit workers. The warehouseman stated that the returned item was “untarnished,” suggesting it was not the Fabrication Unit’s missing level.
What does the Labor Code say about resolving doubts in labor cases?	The Labor Code states that all doubts in the implementation and interpretation of its provisions should be resolved in favor of labor. This principle guided the Supreme Court’s decision in this case.
What is the significance of this ruling for employers?	This ruling emphasizes the importance of employers maintaining organized and transparent systems for managing company property. It serves as a deterrent against unfairly penalizing employees for problems caused by the employer’s operational inefficiencies.
What is the significance of this ruling for employees?	For employees, this ruling reinforces their right to security of tenure and provides protection against unfair accusations and penalties. It affirms that employers must bear the responsibility for maintaining organized and transparent systems within their organizations.

In conclusion, the Supreme Court’s decision in this case reinforces the principle that employers cannot unfairly penalize employees for issues stemming from the company’s own operational deficiencies. It serves as a crucial reminder of the importance of due process and fairness in labor relations, urging employers to focus on improving their systems rather than unjustly blaming their workforce.

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: DOMINADOR MALABUNGA, JR. VS. CATHAY PACIFIC STEEL CORPORATION, G.R. No. 198515, June 15, 2015