Isabela-I Electric Coop. v. Del Rosario
REITERATIONFacts
The Antecedents: Petitioner Isabela-I Electric Cooperative, Inc. (ISELCO-I) hired respondent Vicente B. Del Rosario, Jr. as Financial Assistant in 1996. He was promoted to Management Internal Auditor. In January 2011, ISELCO-I approved a reorganization plan, declaring all positions vacant. Respondent opposed this and was later informed he was on "hold-over capacity." He applied for new positions and was eventually appointed as probationary Area Operations Manager while on vacation leave in October 2012. This new position had a lower salary rank and lesser responsibilities than his former position. He was the only CPA among ISELCO-I employees, yet a non-CPA was appointed as officer-in-charge of the Auditing Department. Respondent wrote to management expressing concern about the demotion and requesting reinstatement to his former position, but received no action. Procedural History: Respondent filed a complaint for illegal dismissal and damages, claiming constructive dismissal due to unlawful demotion. The Labor Arbiter dismissed the complaint, finding the reorganization valid. The National Labor Relations Commission (NLRC) reversed, ruling that respondent was illegally transferred/demoted, resulting in constructive dismissal, and ordered reinstatement with backwages, salary differential, moral and exemplary damages, and attorney's fees. The Court of Appeals affirmed the NLRC's finding of constructive dismissal but deleted the award of salary differential. The NLRC denied ISELCO-I's motion for reconsideration. The Court of Appeals denied ISELCO-I's motion for reconsideration. The Petition: ISELCO-I filed a petition for review on certiorari with the Supreme Court, assailing the Court of Appeals' dispositions. The Court considered the arguments presented by both parties.
Issue(s)
Was respondent Vicente B. Del Rosario, Jr. constructively dismissed when he was appointed to the new position of Area Operations Management Department Manager instead of his former position as Management Internal Auditor, considering the alleged demotion and diminution in salary? Did the reorganization undertaken by Isabela-I Electric Cooperative, Inc. constitute a valid exercise of management prerogative, or was it a guise for an illegal demotion and constructive dismissal of the respondent, warranting damages and reinstatement?
Ruling
The petition is DENIED. The Decision dated December 21, 2015, and Resolution dated July 7, 2016, of the Court of Appeals in CA-G.R. SP No. 134712 are AFFIRMED with MODIFICATION. Vicente B. Del Rosario, Jr. was declared to have been illegally transferred and/or demoted. Isabela-1 Electric Coop., Inc. is ordered to immediately reinstate and/or restore Vicente B. Del Rosario, Jr. to his former position as Management Internal Auditor and to pay him salary differential, moral damages, exemplary damages, attorney's fees, and legal interest.
Ratio Decidendi
On the Issue of Constructive Dismissal and Demotion; and Diminution in Salary: The Court affirmed the findings that respondent Vicente B. Del Rosario, Jr. was constructively dismissed due to an illegal demotion. Management's prerogative to transfer employees is not absolute and must be exercised without grave abuse of discretion. A transfer constitutes constructive dismissal if it is unreasonable, prejudicial, involves a demotion, or results in diminution of salaries. The new position entailed significantly reduced responsibilities and had a lower salary rank. A demotion occurs when an employee is relegated to a subordinate position, constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities. Even without diminution in salary, a demotion in terms of rank, responsibilities, and status alone is sufficient to constitute constructive dismissal. On the Issue of the Validity of Reorganization and Management Prerogative; and Damages and Reinstatement: While acknowledging the employer's right to reorganize, ISELCO-I's exercise of this prerogative was tainted with arbitrariness and bad faith, used as a guise to remove respondent without justifiable cause. The respondent's former position was not abolished, and he possessed all the qualifications to continue holding it. The totality of circumstances indicated that respondent was indeed demoted and constructively dismissed. The Court reinstated the award of salary differential, moral damages, and exemplary damages, finding that ISELCO-I acted in bad faith. Article 279 of the Labor Code mandates reinstatement without loss of seniority rights and privileges and full backwages for employees unjustly dismissed. The award of attorney's fees was also deemed proper, and legal interest was imposed on the monetary awards.
Main Doctrine
A demotion in rank, even without a corresponding diminution in salary, constitutes constructive dismissal if it involves a reduction in duties, responsibilities, status, or rank, and is done without sufficient cause or justification. Management prerogative in reorganization is not absolute and must be exercised without grave abuse of discretion, bearing in mind the basic element of justice and fair play.