Agabon Doctrine

1. Concept

“Agabon doctrine” – refers to jurisprudential rule that the dismissal of employees for just causes or authorized causes but without observance of procedural due process will be upheld subject to the employer being liable for nominal damages. (See: Agabon v. NLRC, En Banc, G.R. No. 158693, 17 November 2004)

Otherwise stated, so long as there is just cause or authorized cause that attended the dismissal of the employee, the dismissal or separation is valid even if procedural due process was not observed, subject to the employer being liable for nominal damages.

a. The Agabon case (2004)

The Agabon case involved Complainants who were employees and who were gypsum board and cornice installers. The Company which was engaged the business of selling and installing ornamental and construction materials. After not reporting for some time, the Company declared them to have abandoned their work. This prompted the Complainants to challenge their dismissal.

In resolving the case, the Supreme Court categorically overturned the Serrano doctrine and upheld the Wenphil doctrine with some modifications. Thus, the dismissal of the employees were upheld as they were found to have abandoned their work. Nonetheless, the employer was held liable for nominal damages due to the non-compliance of procedural due process.

b. Abandonment of Serrano doctrine, upholding of Wenphil doctrine w/ modifications

AGABON v. NLRC, supra.

⦁ [I]n Serrano, the rule on the extent of the sanction was changed. We held that the violation by the employer of the notice requirement in termination for just or authorized causes was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized cause.

⦁ The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases involving dismissals without requisite notices. We concluded that the imposition of penalty by way of damages for violation of the notice requirement was not serving as a deterrent. Hence, we now required payment of full backwages from the time of dismissal until the time the Court finds the dismissal was for a just or authorized cause.

⦁ Serrano was confronting the practice of employers to “dismiss now and pay later” by imposing full backwages.

⦁ We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code…

⦁ This means that the termination is illegal only if it is not for any of the justified or authorized causes provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if the employee was unjustly dismissed.

⦁ The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted us to revisit the doctrine.

⦁ After carefully analyzing the consequences of the divergent doctrines in the law on employment termination, we believe that in cases involving dismissals for cause but without observance of the twin requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be able to achieve a fair result by dispensing justice not just to employees, but to employers as well.

⦁ The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences.

⦁ This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy.

⦁ The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. The commitment of this Court to the cause of labor does not prevent us from sustaining the employer when it is in the right, as in this case. Certainly, an employer should not be compelled to pay employees for work not actually performed and in fact abandoned.

⦁ The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or malfeasance and whose continued employment is patently inimical to the employer. The law protecting the rights of the laborer authorizes neither oppression nor self-destruction of the employer.

c. Aagabon doctrine

AGABON v. NLRC, supra.

⦁ Where the dismissal is for a just cause…, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights, as ruled in Reta v. National Labor Relations Commission. The indemnity to be imposed should be stiffer to discourage the abhorrent practice of “dismiss now, pay later,” which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer.

⦁ Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss suffered by him.

⦁ As enunciated by this Court in Viernes v. National Labor Relations Commissions, an employer is liable to pay indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due process. The Court, after considering the circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the employee’s one month salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the employee’s right to statutory due process which was violated by the employer.

⦁ The violation of the petitioners’ right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances. Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at P30,000.00. We believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this fundamental right granted to the latter under the Labor Code and its Implementing Rules.

NB: Currently, the nominal damages is at Php50,000.00 due to economic changes. The Agabon case was promulgated in 2004.

2. Commentary

For cases wherein there exists a just cause or authorized cause but lacked procedural due process, the main difference between Wenphil case and Serano case is the on the status of the dismissal and the consequences.

In Wenphil, the dismissal is upheld but the employer is sanctioned with nominal damages. On the other hand, in Serrano, dismissal is rendered ineffective resulting in the employer liable for all the consequences of illegal dismissal, including full backwages.

As pointed out in the Agabon case, the Serrano doctrine my be prone to abuse by employees would simply invoke procedural due process even if there is a just cause or authorized cause.

For instance, an employee who defrauded an employer resulting in theft of over a million of pesos may claim non-observe of procedural due process. Under the Serrano doctrine, the employee would win the illegal dismissal case and be rewarded with full backwages, separation pay, damages, and attorney’s fees. This is patently unfair and unjust to the employer.

The Agabon case thus sought to remedy the situation by finding a balance between the interests of the employer and the employees. The resolution was that the Wenphil doctrine would be upheld but the employer would be subjected to a reasonable penalty for violating the rights of the employee to procedural due process.

/Updated: January 21, 2023

Similar Posts