In Colegio San Agustin-Bacolod vs. Montaño, the Supreme Court addressed the legality of an employee’s dismissal for serious misconduct and breach of trust, despite a long tenure with the company. The Court ruled that while length of service is a factor, it cannot outweigh the seriousness of the misconduct. The decision emphasizes that employees in positions of trust must adhere strictly to company policies, and violations can lead to valid termination. This case underscores the importance of upholding company rules and policies, even when an employee has a long and previously unblemished record.

When Lenience Leads to Liability: Charting the Boundaries of Misconduct in Academic Governance

The case of Colegio San Agustin-Bacolod (CSA-Bacolod) vs. Melinda M. Montaño arose from a complaint filed by Montaño, a former school registrar, against CSA-Bacolod for illegal suspension, illegal dismissal, and other monetary claims. Montaño had been employed by CSA-Bacolod for many years, eventually becoming the school registrar. Her employment was terminated after complaints arose concerning her decision to allow students with incomplete academic requirements to participate in graduation ceremonies. The central legal question was whether Montaño’s actions constituted serious misconduct and breach of trust, thereby justifying her dismissal, and whether there was a valid diminution of her benefits.

CSA-Bacolod contended that Montaño’s actions violated established school policies and demonstrated a breach of the trust reposed in her as the school registrar. Montaño defended her actions by claiming that she was merely following a long-standing practice and that her decisions were influenced by humanitarian reasons, with the consent of parents and endorsements from the deans. She argued that her actions did not warrant dismissal and that there was a diminution of her salary, a violation of the Labor Code. The Labor Arbiter (LA) initially ruled in favor of Montaño, finding her suspension and dismissal illegal. However, the National Labor Relations Commission (NLRC) reversed the LA’s decision, declaring that Montaño was validly dismissed.

The Court of Appeals (CA) then reversed the NLRC’s decision and reinstated the LA’s decision with modifications, leading CSA-Bacolod to file a petition for review on certiorari with the Supreme Court. The Supreme Court’s analysis centered on whether Montaño’s actions constituted just cause for termination under the Labor Code. Article 297 of the Labor Code outlines the grounds for termination by an employer, including serious misconduct and breach of trust. Misconduct is defined as an improper or wrong conduct, a transgression of an established rule, and must be willful in character, implying wrongful intent rather than a mere error in judgment. In this context, the Court scrutinized whether Montaño’s actions met the criteria for serious misconduct.

The Supreme Court, aligning with the NLRC’s perspective, concluded that Montaño did indeed commit serious misconduct. This determination was rooted in her conscious and willful transgression of the university’s established rule regarding graduation rites. The university’s memorandum clearly stated that students must fulfill all academic requirements to participate in graduation ceremonies. Despite being responsible for enforcing this policy, Montaño knowingly allowed ineligible students to march, thereby violating the established rule. The Court found unconvincing Montaño’s defense that she was merely following a prior practice, asserting that such a practice, even if it existed, did not excuse the violation of a clear school policy.

Furthermore, the Court rejected the argument that letters from students and their parents, endorsed by the deans, absolved Montaño of misconduct. As the school registrar, she should have referred the matter to the appropriate authorities instead of independently allowing ineligible students to participate in the graduation rites. In addition to serious misconduct, the Court also determined that Montaño’s actions constituted a breach of trust and confidence, another valid ground for termination under the Labor Code. Loss of trust and confidence arises when an employee fraudulently and willfully commits acts in violation of the trust reposed by the employer. The Court noted that Montaño, as the school registrar, held a position of trust, responsible for maintaining accurate student records.

Her willful decision to allow ineligible students to march demonstrated a violation of this trust, thereby justifying her dismissal. The length of Montaño’s employment, spanning 30 years, did not outweigh the gravity of her offense. While acknowledging her long tenure, the Court emphasized that once trust is betrayed, it is difficult to restore the employment relationship. Concerning Montaño’s preventive suspension, the Court found that CSA-Bacolod acted within its rights. An employer may preventively suspend an employee if their continued employment poses a serious threat to the employer’s property. Given Montaño’s role as registrar and her access to student records, the Court reasoned that her continued presence during the investigation could potentially lead to the tampering of records.

Having established the validity of Montaño’s dismissal, the Court reversed the CA’s decision regarding backwages, separation pay, moral and exemplary damages, and attorney’s fees, as these are not warranted in cases of just dismissal. However, the Court upheld the CA’s finding regarding the diminution of benefits. The Labor Code protects employees from any reduction in benefits that have ripened into established practice or are founded on a written contract. Montaño argued that her basic salary was reduced, even though her total compensation remained the same.

The Court agreed, noting that there was no evidence of Montaño receiving an honorarium prior to her reappointment. The breakdown of her compensation, with a portion designated as an honorarium, effectively reduced her basic pay, resulting in a diminution of benefits prohibited by the Labor Code. Consequently, the Court ordered CSA-Bacolod to pay Montaño the salary differential amounting to P54,218.16, with a legal interest of six percent per annum from the finality of the decision until full payment.

In sum, the Supreme Court’s ruling in Colegio San Agustin-Bacolod vs. Montaño clarifies the boundaries of employee misconduct and the circumstances under which dismissal is justified. The decision reinforces the importance of adhering to established policies and upholding the trust placed in employees, especially those in positions of responsibility. While length of service is considered, it does not excuse serious breaches of company policies or acts of misconduct. However, employers must also respect employees’ rights and refrain from diminishing their benefits.

FAQs

What was the key issue in this case?	The key issue was whether the school registrar’s actions of allowing ineligible students to participate in graduation ceremonies constituted serious misconduct and breach of trust, justifying her dismissal, and whether there was a valid diminution of her benefits.
What is considered serious misconduct under the Labor Code?	Serious misconduct is an improper or wrong conduct that is willful in character, implying wrongful intent and a transgression of an established rule related to the employee’s duties. It must be of such a grave and aggravated nature as to render the employee unfit to continue working for the employer.
What constitutes a breach of trust and confidence?	A breach of trust and confidence occurs when an employee fraudulently and willfully commits acts in violation of the trust reposed by the employer. The employee must hold a position of trust, and the employer must sufficiently establish the employee’s act that would justify the loss of trust and confidence.
Can an employee be dismissed for serious misconduct even after many years of service?	Yes, while length of service is a factor to consider, it cannot outweigh the seriousness of the misconduct. Once trust and confidence are betrayed, it becomes difficult to restore the employment relationship, even if the employee has a long and previously unblemished record.
What is diminution of benefits, and is it allowed under the Labor Code?	Diminution of benefits occurs when an employer unilaterally reduces, diminishes, discontinues, or eliminates benefits that have ripened into established practice or are founded on a written contract. Such actions are generally prohibited under the Labor Code.
What is the basis for awarding salary differentials in this case?	The salary differentials were awarded because the school reduced the employee’s basic pay by reclassifying a portion of her existing salary as an honorarium, even though her total compensation remained the same. This was deemed a diminution of benefits, entitling her to the difference.
Was the employee entitled to backwages and separation pay?	No, because the Supreme Court found that the employee was validly dismissed for just cause (serious misconduct and breach of trust), she was not entitled to backwages, separation pay, moral and exemplary damages, or attorney’s fees.
What is the significance of the Colegio San Agustin-Bacolod vs. Montaño ruling?	The ruling reinforces the importance of adhering to established policies and upholding the trust placed in employees, especially those in positions of responsibility. It clarifies the circumstances under which dismissal is justified and underscores that length of service does not excuse serious breaches of company policies or acts of misconduct.

This case serves as a reminder to both employers and employees regarding the importance of adhering to company policies and maintaining trust in the workplace. While employers have the right to terminate employees for just cause, they must also respect employees’ rights and refrain from diminishing their benefits. The ruling provides valuable guidance on what constitutes serious misconduct and breach of trust, helping to ensure fair and equitable treatment in the workplace.

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: Colegio San Agustin-Bacolod vs. Montaño, G.R. No. 212333, March 28, 2022