Procedural Due Process in Termination: The Indispensable Step to Lawful Dismissal

TLDR: Even when an employee commits a serious offense warranting dismissal, Philippine law mandates strict adherence to procedural due process. This case highlights that failing to provide proper notice and opportunity to be heard, even in cases of proven misconduct, can render a dismissal illegal in procedure, entitling the employee to indemnity.

G.R. No. 119912, March 19, 1998

Introduction

Imagine losing your job after decades of service. The grounds for dismissal might be serious – perhaps an act of dishonesty – but what if the process leading to that dismissal was flawed? In the Philippines, labor law doesn’t just focus on the ‘what’ (the offense) but also the ‘how’ (the procedure). The case of Felixberto Biantan v. National Labor Relations Commission underscores a critical principle: even with a valid reason to terminate employment, employers must meticulously follow procedural due process. Failure to do so, as this case demonstrates, can lead to legal repercussions and the obligation to compensate the dismissed employee.

Felixberto Biantan, after 30 years with Victorias Milling Co., Inc. (VICTORIAS), found himself dismissed for alleged involvement in anomalous battery sales. While the company believed it had just cause, the Supreme Court shed light on the crucial aspect of due process, impacting not just Mr. Biantan, but all employers and employees in the Philippines.

The Cornerstone of Fairness: Legal Context of Due Process in Termination

Philippine labor law, rooted in the constitutional right to security of tenure, heavily regulates employee dismissal. The Labor Code of the Philippines, specifically Article 294 (formerly Article 279), emphasizes that no employee can be dismissed without just cause and due process. This isn’t merely a suggestion; it’s a legal mandate designed to protect workers from arbitrary termination.

Just cause refers to valid reasons for termination directly attributable to the employee’s fault, such as serious misconduct, fraud, or gross neglect of duty. However, even when just cause exists, the dismissal is not automatically lawful. Procedural due process, the ‘how’ of termination, must be strictly observed.

The Supreme Court, in numerous decisions, has consistently outlined the requirements of procedural due process in termination cases. These are often summarized as the ‘two-notice rule’:

1. Notice of Intent to Dismiss: The employer must issue a written notice informing the employee of the charges against them, providing detailed grounds for the proposed dismissal, and giving them an opportunity to explain their side.
2. Notice of Termination: After a hearing or investigation, and if the employer still finds grounds for dismissal, a second written notice must be issued informing the employee of the decision to terminate, stating clearly the reasons for dismissal and considering the employee’s defense.

Between these two notices, the employee must be given a reasonable opportunity to be heard, to present evidence, and to confront witnesses, if any. This process ensures fairness and allows the employee to defend their position before a final decision is made. As the Supreme Court has articulated, “the essence of due process is simply to be heard, or as applied to administrative proceedings, an opportunity to explain one’s side or an opportunity to seek reconsideration.”

Biantan vs. NLRC: A Case of Just Cause, Flawed Procedure

Felixberto Biantan’s long tenure at VICTORIAS began in 1957. By 1987, he had climbed the ranks to Head of the Salvage and Disposal Section. His world turned upside down in 1989 when internal audits revealed irregularities in the sale of company batteries.

VICTORIAS’ audit representatives discovered two instances where brand new batteries were sold as either “deteriorated” or “discarded”. The company suspected Mr. Biantan’s involvement. Notices to explain were issued, and Mr. Biantan submitted a written denial. An in-plant investigation followed, and based on witness statements and company records, VICTORIAS concluded Mr. Biantan was principally involved.

He was placed under preventive suspension, and his request for a formal investigation to confront witnesses was denied. Ultimately, VICTORIAS terminated Mr. Biantan’s employment, citing his role in the anomalous transactions. The Labor Arbiter initially sided with the company, finding just cause for dismissal. The National Labor Relations Commission (NLRC) affirmed this decision.

However, the Supreme Court saw a critical flaw. While the NLRC and Labor Arbiter focused on the just cause aspect, the Solicitor General pointed out a significant oversight: procedural due process. The Supreme Court agreed. The in-plant investigation, while conducted, did not afford Mr. Biantan the crucial opportunity to confront witnesses and present his defense in a formal hearing. This procedural lapse, the Court held, was a violation of his right to due process.

As the Supreme Court emphasized:

“It is a well-known rule that before an employer may dismiss an employee, the latter must be afforded due process which means, among others, the opportunity to confront the witnesses against him and to adduce evidence in his defense.”

Despite finding substantial evidence supporting just cause for dismissal due to Mr. Biantan’s involvement in the fraudulent sales, the Supreme Court ruled that the lack of procedural due process was undeniable. Therefore, while upholding the dismissal itself, the Court ordered VICTORIAS to indemnify Mr. Biantan for the procedural error.

Practical Takeaways: Due Process is Non-Negotiable

The Biantan case serves as a stark reminder that in Philippine labor law, just cause alone is insufficient for a lawful dismissal. Employers must meticulously adhere to procedural due process. This ruling has significant implications for businesses and employees alike.

For Employers:

• Strictly Observe the Two-Notice Rule: Always issue a Notice to Explain and a subsequent Notice of Termination in writing, clearly outlining the charges and reasons for dismissal.
• Conduct Fair Investigations: Provide a genuine opportunity for the employee to be heard. This may involve formal hearings where the employee can confront witnesses and present evidence. In-plant investigations are acceptable, but must be fair and allow for employee participation.
• Document Everything: Maintain thorough records of all notices, investigation proceedings, and evidence presented. Proper documentation is crucial in defending against illegal dismissal claims.
• Seek Legal Counsel: When facing employee disciplinary issues, especially those that could lead to termination, consult with a labor lawyer to ensure full compliance with due process requirements.

For Employees:

• Know Your Rights: Understand your right to security of tenure and due process. Familiarize yourself with the two-notice rule and the right to be heard.
• Participate in Investigations: Respond to Notices to Explain promptly and thoroughly. Present your side of the story and any evidence you have.
• Seek Legal Advice: If you believe you have been unjustly dismissed or denied due process, consult with a labor lawyer to assess your options and protect your rights.

Key Lessons

• Just cause is not enough: Even with valid grounds for dismissal, procedural due process is mandatory.
• Procedural lapses have consequences: Failure to observe due process can lead to indemnity payments, even if the dismissal itself is upheld.
• Fairness is paramount: Philippine labor law prioritizes fairness and due process in all employment termination cases.

Frequently Asked Questions (FAQs)

Q: What is ‘just cause’ for dismissal?

A: Just cause refers to valid reasons for terminating an employee based on their actions or faults. Common examples include serious misconduct, insubordination, gross neglect of duty, fraud, and loss of trust and confidence.

Q: What is ‘procedural due process’?

A: Procedural due process is the legally required procedure an employer must follow when dismissing an employee. It primarily involves the two-notice rule: a Notice to Explain and a Notice of Termination, with an opportunity for the employee to be heard in between.

Q: What happens if an employer has just cause but fails to follow due process?

A: As illustrated in the Biantan case, the dismissal may be considered illegal in procedure. While the employee might not be reinstated if just cause is proven, they are typically entitled to nominal damages or indemnity for the procedural lapse.

Q: What kind of indemnity is usually awarded for lack of due process?

A: The amount of indemnity can vary, but it is often nominal, as in the Biantan case where ₱1,000.00 was awarded. The purpose is to compensate for the procedural violation, not to negate the just cause for dismissal.

Q: Is an in-plant investigation sufficient for due process?

A: Yes, an in-plant investigation can be part of due process, but it must be fair and provide the employee a real opportunity to present their side, which may include confronting witnesses and submitting evidence. Simply conducting an internal inquiry without employee participation may be deemed insufficient.

Q: What should an employee do if they receive a Notice to Explain?

A: Take the Notice to Explain seriously. Respond in writing, addressing all the charges against you, and present any evidence or explanation you have. Seek advice from a labor lawyer if needed.

Q: Can an employee be preventively suspended during an investigation?

A: Yes, preventive suspension is allowed, but it should be for a reasonable period and only if the employee’s continued presence poses a serious and imminent threat to the employer’s property or operations.

ASG Law specializes in Labor Law and Employment Disputes. Contact us or email hello@asglawpartners.com to schedule a consultation.