Cases: Willful Disobedience

1. Transfer of employees

Transfer of employees is a management prerogative.

Running a business is filled with difficulties and challenges, particularly when it comes to managing human resource. As such, the employer is given a wide latitude to regulate all aspects of employment via the management prerogative – to ensure the success of the company and continued employment of the employees.

Management prerogative includes the right to transfer employees. There, are however, limitations to the exercise of this right by the employer to transfer employees. It should be done in good faith and with due regard to the rights of the employees.

Indeed, the right of the employer to transfer the employees in the interest of the efficient and economic operation of its business cannot be seriously challenged. That is its prerogative. The only limitation on the discretion of management in this regard is its mala fides. The only time the employer cannot exercise this right is where it is vitiated by improper motive and is merely a disguised attempt to remove or punish the employee sought to be transferred. (BPI Employees Union-ALU v. NLRC, G.R. No. L-69746-47, L-76842-44 and L-76916-17, 31 March 1989)

The employer’s right to transfer employees is particularly important for roles or positions that require movement from one location to another, particularly for fieldwork or branch assignments.

ABBOT LABORATORIES (PHILIPPINES), INC. v. BOBADILLA, G.R. No. 76959, 12 October 1987

• [The employee – a Medical Representative – was dismissed for his unjustified refusal to be transferred from his location.]

• The hiring, firing, transfer, demotion, and promotion of employees has been traditionally identified as a management prerogative subject to limitations found in law, a collective bargaining agreement, or general principles of fair play and justice. This is a function associated with the employer’s inherent right to control and manage effectively its enterprise. Even as the law is solicitous of the welfare of employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. The [freedom] of management to conduct its own business affairs to achieve its purpose cannot be denied…

• As a general rule, the right to transfer or reassign an employee is recognized as an employer’s exclusive right and the prerogative of management.

• We [the Supreme Court] agree with the Labor Arbiter’s conclusions that:

• [Management prerogative] flows from ownership and from the established rule that labor law does not authorize the substitution of judgment of the employer in the conduct of his business, unless it is shown to be contrary to law, morals or public policy…

• [A]bbott, in accordance with the demands and requirements of its marketing and sales operations, adopted a policy to hire only sales applicants who are willing to accept assignments in the provinces anywhere in the Philippines, and to move into and live in the territory assigned to them.

• The existence and implementation of this policy are clearly discernible from the questions appearing in the application form under the heading:” TO BE FILLED BY SALES APPLICANTS ONLY,” and the fact that Abbott, depending upon the needs of its marketing and sales operations, periodically made transfers or reassignment of its sales people.

• [The employee] was precisely hired because he manifested at the outset as a job applicant his willingness to follow the conditions of his employment. In line with the policy, as practiced, Abbott, thru Jaime Victa, issued an inter-office correspondence transferring [the employee] to a newly opened sales territory-the Cagayan Region, comprising the provinces of Cagayan, Nueva Vizcaya and Isabela. According to [the employers], [the employee] was selected as PMR for the region primarily because he was a veteran and seasoned PMR who can operate immediately with minimum training and supervision.

• That [the employee] is a veteran and seasoned PMR is admitted. In fact, it is even conceded by [the employers] that [the employee] was the leader of his peers in PED as indicated in the letter dated 20 December 1982 of Jaime Victa to [the employee]. That the Cagayan Region is relatively inaccessible cannot be debated. That the territory needed a responsible PMR who could work under the least supervision is a judgment of [the employers]. And that this judgment was arrived at upon consultations among the PED Marketing Manager Jaime Victa, the Director for Administration Francisco Lim, and the General Manager A. C. Bout has been proven by [the employers].

• It appearing, therefore, that the order to transfer [the employee] is based upon a judgment of his employer Abbott, which judgment to transfer is in the with a company practice which is not contrary to law, morals or public policy, hence, beyond the competence of this office to question, the refusal of [the employee] to obey the lawful order of Abbott is gross insubordination — a valid cause for dismissal.

• [The employee] asserted that the true reason for his transfer was the personal ill motives on the part of respondent Victa who resented the derogatory remarks attributed to him, as purportedly shown in Victa’s memoranda dated 20 December 1982 and 26 April 1983. However, a cursory reading of said memoranda in question who show that the same were legitimately issued by Victa in the exercise of his functions as PED Manager. And the fact that complainant never lifted a finger to formally question said memoranda is a mute admission on his part that the allegations therein are true.

• [The employee] also alleged that his transfer was a demotion. However, no explanation was given much less any evidence presented in support of the allegation. On the other hand, it is clear that there was no change in complainant’s position and salary, privileges and benefits he was receiving while in Manila. With respect to the sales commission, Abbott claimed that had complainant accepted the assignment, he could have earned more because the sales prospects in the Cagayan Territory, which comprises Nueva Vizcaya, Isabela and Cagayan Province were much higher than the territory assigned to him in Manila. Besides, the assignment offered an important avenue for future promotion, respondent concluded.

• Therefore, Bobadilla had no valid reason to disobey the order of transfer. He had tacitly given his consent thereto when he acceded to the petitioners’ policy of hiring sales staff who are willing to be assigned anywhere in the Philippines which is demanded by the petitioners’ business.

• By the very nature of his employment, a drug salesman or medical representative is expected to travel. He should anticipate reassignment according to the demands of their business. It would be a poor drug corporation which cannot even assign its representatives or detail men to new markets calling for opening or expansion or to areas where the need for pushing its products is great. More so if such reassignments are part of the employment contract.

Personal inconvenience alone cannot excuse the employee from disobeying a valid transfer done in good faith by the employer. In Homeowners Savings and Loan Association, Inc. v. Cabatbat, the employee – a Branch Accountant – was dismissed for her refusal to be transferred from one branch to another.

HOMEOWNERS SAVINGS AND LOAN ASSOCIATION, INC. v. CABATBAT, G.R. No. 97067, 26 September 1996

• This was the very same situation was faced in Phil. Telegraph and Telephone Corp. v. Laplana. In that case, the employee, Alicia Laplana, was cashier at the Baguio City Branch of PT&T who was directed to transfer to the company’s branch office of Laoag City. In refusing the transfer, the employee averred that she had established Baguio City as her permanent residence and that such transfer will involve additional expenses on her part, plus the fact that an assignment for a far place will be a big sacrifice for her as she will be kept away from her family which might adversely affect her efficiency. In ruling for the employer, the Court upheld the transfer from one city to another within the country as valid as long as there is no bad faith on the part of the employer. We [the Supreme Court] held then:

“Certainly, the Court cannot accept the proposition that when an employee opposes his employer’s decision to transfer him to another work place, there being no bad faith or underhanded motives on the part of either party, it is the employee’s wishes that should be made to prevail.”

• Surely, [the employee herein] is better situated than Alicia Laplana in the above-cited case. The distance between her new assignment in Urdaneta, Pangasinan, and her place of residence in Malabago, Calasiao, Pangasinan, is only about thirty (30) kilometers. On the other hand, the distance between Baguio City and Laoag City is definitely beyond thirty (30) kilometers. Since we ruled that the transfer of Alicia from Baguio to Laoag was valid, we see no reason to resolve that the transfer of [the employee] from San Carlos to Urdaneta is improper, absent any showing of bad faith on the part of [the employer] in effecting the transfer. [The employee’s] refusal to obey the transfer order constitutes willful disobedience of a lawful order of her employer sanctioned under Article [296] of the Labor Code and, therefore, warrants dismissal.

Further, the employer may validly demote and then transfer an employee “because of his failure to observe proper diligence in his work, and also because of his indolence, habitual tardiness and absences.”

The employee may likewise be transferred pending investigation in order to protect company properties, avoid tampering/destruction of evidence, and refrain from negative influencing of or colluding with co-employees.

RUIZ v. WENDEL OSAKA REALTY CORP.,G.R. No. 189082, 11 July 2012

• [The employee – an Executive Assistant – was transferred pending an investigation against her. Subsequently, she left and filed an illegal dismissal case challenging her transfer.]

• As the executive assistant of the president, [the employee] undeniably occupied a sensitive position that required her employer’s utmost trust and confidence. [The employers] had the right to reassign her the moment that confidence was breached. It has been shown that such breach proved that she was no longer fit to discharge her assigned tasks…

• Having lost his trust and confidence in [the employee], respondent Delfin had the right to transfer her to ensure that she would no longer have access to the companies’ confidential files.

• Although it is true that [the employee] has yet to be proven guilty, respondents had the authority to reassign her, pending investigation. As held in Blue Dairy Corporation and/or Aviguetero and Miguel v. NLRC and Recalde:

• Re-assignments made by management pending investigation of irregularities allegedly committed by an employee fall within the ambit of management prerogative. The purpose of reassignments is no different from that of preventive suspension which management could validly impose as a disciplinary measure for the protection of the company’s property pending investigation of any alleged malfeasance or misfeasance committed by the employee.

• When [the employee] was assigned to Cavite, there was an ongoing investigation of the charges filed against her. It is undisputed that she refused to fill up, for no justifiable reasons, the questionnaire distributed by her employer to determine who among those who had access to the confidential files was responsible for their taking. Furthermore, a witness had executed an Affidavit claiming that she found the missing files, and that her husband told her that it was [the employee] who handed those files to him. Lastly, the person who supposedly received these documents from [the employee] did not deny or rebuke the statements made by his wife.

• We rule that the foregoing reasons and circumstances are sufficient to justify [the employer’s] transfer of [the employee].

• An employer’s decision to transfer an employee, if made in good faith, is a valid exercise of a management prerogative, although it may result in personal inconvenience or hardship to the employee. We have already ruled that the transfer of the employment of [the employee] to Cavite was not motivated by bad faith. Thus, any resulting inconvenience or hardship on her part is of no moment.

• [I]t is important to note that [the employee] worked for four months in Cavite before giving up on her job. Initially, she accepted the reassignment and had no issues with the fact that her residence was far from her new workplace. She was never dismissed from employment; she simply decided to stop going to work. It is obvious from the facts of this case that she resigned from work. Inevitably, her Complaint for illegal dismissal should be dismissed.

When a transfer is a ploy or subterfuge to rid of employees, such would be declared invalid and would open the employer to liabilities for illegal dismissal. Thus, when 57 security guards were directed to transfer from Basilan to San Juan City, Metro Manila, it was held that such was not done in good faith, to wit:

ESCOBIN v. PEFTORK INTEGRATED SERVICES, INC., G.R. No. 118159, 15 April 1998

• First, it was grossly inconvenient for [the employees], who were residents and heads of families residing in Basilan, to commute to Manila. In Yuco Chemical Industries, Inc. vs. Ministry of Labor and Employment, the transfer to Manila of two workers, who were also studying in Tarlac, was held to be grossly inconvenient. The distance to Manila from Basilan is considerably greater than that from Tarlac. Such transfer would have necessarily entailed separation of the employees from their families.

• Second, [the employees] were not provided with funds to defray their transportation and living expenses. [The employees], not unknown to their employer, earned only P1,500 to P2,500 a month before they were placed on reserve status, after which they remained jobless. Furthermore, being residents of Basilan, [the employees] would have required living arrangements in Manila which, in turn, would have entailed additional expenses on their part.

• Third, [the employers] argues that it sent transportation money to [the employees]. However, the recipients of such funds are not parties in this case. Moreover, the alleged transportation allowance was given only after [the employees] had already been terminated from service. The letter purportedly granting transportation allowance to other security guards was dated August 12, 1991, which was after [the employees] had been dismissed June 28, 1991.

• Fourth, no reason was given by [the employers] explaining why it had failed to inform [the employees] of their specific security assignments prior to their departure from Basilan. If indeed the postings were to be made in Basilan, there would have been no necessity for [the employees] to report to Manila and no justification for [the employer’s] insistence on their compliance with its directive. Since [the employers] did not provide transportation and living allowances, and since, in the first place, [the employees] could have been easily informed of their new assignments right there in Basilan, there was no reason for [the employees] to travel all the way to Manila.

Consequently, circumstantial evidence can reveal or show whether an employee transfer was done in good faith or for removing an undesirable employee in the workplace.

POCKETBELL PHILIPPINES, INC. v. ALINAS, G.R. No. 106843, 20 January 1995

• [The employee – an Accounting Supervisor – was dismissed after he refused to be transferred to Davao City as part of the management’s plan to get rid of him.]

• [The employer] admits that after removing [the employee] from the position of Accounting Supervisor, it offered him various other positions, but did not allow him to occupy those positions. [The employer] justifies its refusal on the ground that “[it] doubts the loyalty of the private respondent [because] the position of the [the employee] is one of trust and confidence.

• To be sure the question of loyalty was never brought up in the discussion between [the employer] and [the employee]. By offering [the employee] various positions in the company, i.e., Budget Officer, Staff Assistant to the Finance manager, and then marketing and Sales Supervisor, the [the employer] affirmed its trust and confidence in him. In its memorandum of March 11, 1988 transferring [the employee] to Davao City, [the employer] in fact stated that the choice of [the employee] was based on its judgment that [the employee] was “the most qualified to reverse the losing streak of Pocketbell, Davao.”

• It thus appears that the various positions promised (Budget officer and Staff Assistant to the Finance Manager) to [the employee] were never really intended to be given to him. The promises were made only to cover up the new management’s real intention to remove him from his position as Accounting Supervisor. This was because the new management “doubted” his loyalty but could not otherwise prove its doubts or suspicion. The NLRC was right in finding that the circumstances leading to the termination of his employment clearly showed that “the management was really bent on removing [him].” In fact [the employee] was told that the new management was “uncomfortable” with him and for this reason it offered to give him separation pay. As he refused separation pay, he was given the Davao City assignment, which the management knew he would not accept.

• We [the Supreme Court] agree that normally it is the prerogative of the employer to transfer and reassign employees according to the requirements of its business… But we also said in [the] Laplana case:

• But like all other rights, there are limits. The managerial prerogative to transfer personnel must be exercised without grave abuse of discretion and putting to mind the basic elements of justice and fair play. Having the right must be exercised. Thus, it cannot be used as a subterfuge by the employer to rid himself of an undesirable worker. Nor then the real reason is to penalize an employee for his union activities and thereby defeat his right of self-organization. But the transfer can be upheld when there is no showing that it is unnecessary, inconvenient and prejudicial to the displaced employee.

• In the case at bar, the invocation of the right to transfer employees was a mere pretext or subterfuge resorted to by [the employer] to rid itself of an employee with whom it felt “uncomfortable.”

In one case, the transfer of working students was considered invalid considering it was grossly inconvenient and there was no genuine business urgency.

YUCO CHEMICAL INDUSTRIES, INC. v. MINISTRY OF LABOR AND EMPLOYMENT, G.R. No. L-75656 28 May 1990

• Firstly, it was grossly inconvenient to private respondents. They are working students. When they received the transfer memorandum directing their relocation to Manila within seven days from notice, classes had already started. The move from Tarlac to Manila at such time would mean a disruption of their studies. Secondly, there appears to be no genuine business urgency that necessitated their transfer. As well pointed out by [the employees’] counsel, the fabrication of aluminum handles for ice boxes does not require special dexterity. Many workers could be contracted right in Manila to perform that particular line of work.

As such, while the employer has the right to transfer employees “in pursuit of its legitimate interests,” this management prerogative “should be exercised without grave abuse of discretion and with due regard to the basic elements of justice and fair play, such that if there is a showing that the transfer was unnecessary or inconvenient and prejudicial to the employee, it cannot be upheld.”

a. Employer’s waiver of right to transfer

The employer may contract away its right to transfer an employee.

This waiver should be expressly provided in the contract of employment. Consequently, when an employee claimed that the employer supposedly waived the right to transfer by specifying the position in the employment contract, it was held to be insufficient. “Before such right [to transfer or re-assign] can be deemed to have been waived or contracted away, the stipulation to that effect must be clearly stated so as to leave no room to doubt the intentions of the parties. The mere specification in the employment contract of the position to be held by the employee is not such stipulation.”

Again, the employee’s right to security of tenure “does not give him such a vested right in his position as would deprive the company of its prerogatives to change his assignment or transfer him where he will be most useful.”

2. Change of position or work

Transfer of position or change of work is also a management prerogative.

In the pursuit of its legitimate business interest, management has the prerogative to transfer or assign employees from one office or area of operation to another provided there is no demotion in rank or diminution of salary, benefits, and other privileges; and the action is not motivated by discrimination, made in bad faith, or effected as a form of punishment or demotion without sufficient cause. The right of employees to security of tenure does not give them vested rights to their positions to the extent of depriving management of its prerogative to change their assignments or to transfer them. (Coca-Cola Bottlers Philippines, Inc. v. Del Villar, G.R. No. 163091, 06 October 2010)

This privilege is inherent in the right of employers to control and manage their enterprise effectively. (Mendoza v. Rural Bank of Lucban, G.R. No. 155421, 07 July 2004)

While transfer of employees resulting in change of position or work is an aspect of management prerogative, there are rules to be observed in doing as so in order to avoid an invalid transfer that might lead to an illegal or constructive dismissal.

Concerning the transfer of employees, these are the following jurisprudential guidelines: (a) a transfer is a movement from one position to another of equivalent rank, level or salary without break in the service or a lateral movement from one position to another of equivalent rank or salary; (b) the employer has the inherent right to transfer or reassign an employee for legitimate business purposes; (c) a transfer becomes unlawful where it is motivated by discrimination or bad faith or is effected as a form of punishment or is a demotion without sufficient cause; (d) the employer must be able to show that the transfer is not unreasonable, inconvenient, or prejudicial to the employee. (Rural Bank of Cantilan, Inc. v. Julve, G.R. No. 169750, 27 February 2007)

If the transfer is valid after complying with the above guideliens, the employee cannot refuse a valid transfer of position or change of work because it is against “her wishes” and that such is “not commensurate to her self-worth or personal qualifications.” Thus, on the basis of the qualifications, “training and performance of the employee, the prerogative to determine the place or station where he or she is best qualified to serve the interests of the company belongs to the employer.”

BENGUET ELECTRIC COOPERATIVE v. FIANZA, G.R. No. 158606, 09 March 2004

• [The employee – a Property Custodian – was dismissed after refusing her reassignment as a bill distributor following a company restructuring.]

• [T]he scope and limits of the exercise of management prerogative must be balanced against the security of tenure given to labor. In this jurisdiction, we recognize that management has a wide latitude to regulate, according to his own discretion and judgment, all aspects of employment, including the freedom to transfer and reassign employees according to the requirements of its business. On the other hand, the transfer of an employee may constitute constructive dismissal when it amounts to “an involuntary resignation resorted to when continued employment is rendered impossible, unreasonable or unlikely; when there is a demotion in rank and/or a diminution in pay; or when a clear discrimination, insensibility or disdain by an employer becomes unbearable to the employee.

• In cases when an employee’s position is abolished due to corporate restructuring, the law, in general, permits the severance of the employer-employee relationship, provided that certain requirements are met. In the instant case, [the employee] was not terminated from employment, but was transferred to another department.

• Management’s prerogative of transferring and reassigning employees from one area of operation to another in order to meet the requirements of the business is generally not constitutive of constructive dismissal. Thus, in Philippine Japan Active Carbon Corporation v. NLRC, the Court ruled:

• It is the employer’s prerogative, based on its assessment and perception of its employees’ qualifications, aptitudes, and competence, to move them around in the various areas of its business operations in order to ascertain where they will function with maximum benefit to the company. An employee’s right to security of tenure does not give him such a vested right in his position as would deprive the company of its prerogative to change his assignment or transfer him where he will be most useful. When his transfer is not unreasonable, nor inconvenient, nor prejudicial to him, and it does not involve a demotion in rank or a diminution of his salaries, benefits, and other privileges, the employee may not complain that it amounts to a constructive dismissal.

• The employer has the burden of proving that the transfer of an employee is for valid and legitimate grounds. Particularly, for a transfer not to be considered a constructive dismissal, the employer must be able to show that such transfer is not unreasonable, inconvenient, or prejudicial to the employee; nor does it involve a demotion in rank or a diminution of his salaries, privileges and other benefits.

• [T]he reorganization of BENECO was done in good faith, and that the transfer would not be unreasonable, inconvenient or prejudicial to the employee. [The employers], therefore, have discharged the burden of proving that the transfer was not unreasonable, inconvenient or prejudicial to the employee.

• Since it has likewise been established that there would be no demotion of titular rank, or diminution of salaries, benefits and other privileges, the remaining issue to be resolved is whether the duties and functions exercised by a Bill Distributor would amount to a demotion.

• We [the Supreme Court] are not persuaded that there is a significant disparity between the position of a Property Custodian and that of a Bill Distributor that amounts to a demotion tantamount to a constructive dismissal. Admittedly, one is an office job and the other would require travel. However, the position of a Bill Distributor is not purely mechanical labor. As [the employee] herself points out, a Bill Distributor may receive, entertain and address problems, complaints and requests from member-consumers, and the position thus involves the exercise of discretion. Similar transfers and re-assignments of employees have been upheld, such as the transfer of a union president from his position of messenger clerk in a hotel to purely office work. Mere incidental inconvenience is not sufficient to warrant [the employee’s] claims of constructive dismissal.

• [The employee] has not presented any evidence to substantiate her claim that her reassignment as a Bill Collector was prompted by the malevolence or bad faith of management. Indeed, [the employee] was not the only employee affected by the transfer; another employee, Josephine Calinao, was likewise transferred, and she assumed her position without protest. [The employee] cannot complain of constructive dismissal because this transfer was against her wishes and not commensurate to her self-worth or personal qualifications. “Certainly, the Court cannot accept the proposition that when an employee opposes his employer’s decision to transfer him to another work place, there being no bad faith or underhanded motives on the part of either party, it is the employee’s wishes that should be made to prevail.” On the basis of the qualifications, training and performance of the employee, the prerogative to determine the place or station where he or she is best qualified to serve the interests of the company belongs to the employer.

• Moreover, the position of a Bill Distributor is undoubtedly crucial to the operations of the Petitioner BENECO. As an electric cooperative, its lifeblood hinges on the proper collection of revenues from its clients. To consider this position “demeaning”, “menial” or “servile” reveals arrogance.

• [The employee’s] refusal to obey the transfer order constitutes willful disobedience of a lawful order of her employer sanctioned under Article [296] of the Labor Code and, therefore, warrants dismissal. It must be noted that during the preliminary conference, [the employee] was advised that BENECO was willing to reinstate her, but because her position as Property Custodian was no longer existing, she would have to report for work as Bill Distributor. [The employee] refused this offer. She must now bear the consequences of her refusal.

Where an employee was part of the reshuffling of the organization resulting in the change of his position from appraiser to clerk-MERALCO collection, the transfer was considered valid.

“[The employee’s] transfer was made in pursuit of [the employer’s] policy to ‘familiarize bank employees with the various phases of bank operations and further strengthen the existing internal control system’ of all officers and employees. [Jurisprudence has held that] employees may be transferred — based on their qualifications, aptitudes and competencies — to positions in which they can function with maximum benefit to the company. There appears no justification for denying an employer the right to transfer employees to expand their competence and maximize their full potential for the advancement of the establishment. [The employee] was not singled out; other employees were also reassigned without their express consent.”

However, in one case involving the transfer of an employee from food technologist in the laboratory to a worker in the vegetable processing section, it was considered invalid as it resulted in “a demeaning and humiliating work condition,” to wit:

BLUE DAIRY CORPORATION v. RECALDE, G.R. No. 129843, 14 September 1999

• In the present case, [the employers] failed to justify [the employee’s] transfer from the position of food technologist in the laboratory to a worker in the vegetable processing section. We recall that what triggered [the employee’s] transfer was the 21 October incident where she was found to have allegedly utilized company vehicle in looking for a new residence during office hours without permission from management. In [the employers’] view, she was dishonest such that they lost their trust and confidence in her. Yet, it does not appear that [the employee] was provided an opportunity to refute the reason for the transfer. [The employers] merely relied on the narrations of the company driver. Nor was [the employee] notified in advance of her impending transfer which was, as we shall elucidate later, a demotion in rank.

• We [the Supreme Court] find insignificant the submission of [the employers] that “the coring of lettuce together with other production jobs connected therewith is one of the most important aspects of the corporation’s existence” and that “those assigned to the vegetable processing section are mostly professionals like teachers, computers secretaries and forestry graduates.” Rather, the focus should be on the comparison between the nature [the employee’s] work in the laboratory and in the vegetable processing section. As food technologist in the laboratory, she occupied a highly technical position requiring use of her mental faculty. As a worker in the vegetable processing section, she performed mere mechanical work. It was virtually a transfer from a position of dignity to a servile or menial job. … the radical change in Recalde’s nature of work unquestionably resulted in, as rightly perceived by her, a demeaning and humiliating work condition.

On the other hand, the re-assignment of an employee from Executive Secretary to the Executive Vice President and General Manager to a Production Secretary was considered a valid transfer. The employee’s “assignment as Production Secretary of the Production Department was not unreasonable as it did not involve a demotion in rank (her rank was still that of a department secretary) nor a change in her place of work (the office is in the same building), nor a diminution in pay, benefits, and privileges. It did not constitute a constructive dismissal.”

a. Employee promotion

Employees may refuse a promotion.

A transfer is different from a promotion. A transfer is “a movement from one position to another which is of equivalent rank, level or salary, without break in service.” Conversely, a promotion is “the advancement from one position to another with an increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in salary.”

On the other hand, a demotion involves “a situation where an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary.”

DOSCH v. NORTHWEST AIRLINES, INC., En Banc, G.R. No. L-51182, 05 July 1983

• [The employee – an American and a Philippine/Country Manager – was dismissed after he refused his promotion to Director of International Sales which required him to relocate to Minneapolis, U.S.A.]

• We [the Supreme Court] must, however, rightly treat the Jenkins letter as directing the promotion of [the employee] from his position as Philippine manager to Director of International Sales in Minneapolis, U.S.A. It is not merely a transfer order alone… “it is more in the nature of a promotion that a transfer, the latter being merely incidental to such promotion.” The inter-office communication of Vice President Jenkins is captioned “Transfer” but it is basically and essentially a promotion for the nature of an instrument is characterized not by the title given to it but by its body and contents… The communication informed [the employee] that effective August 18, 1975, he was to be promoted to the position of Director of International Sales, and his compensation would be upgraded and the payroll accordingly adjusted. [The employee] was, therefore, advanced to a higher position and rank and his salary was increased and that is a promotion… It has been held that promotion denotes a scalar ascent of an officer or an employee to another position, higher either in rank or salary…

• There is no law that compels an employee to accept a promotion, as a promotion is in the nature of a gift or a reward, which a person has a right to refuse. When [the employee] refused to accept his promotion to Director of International Sales, he was exercising a right and he cannot be punished for it as qui jure suo utitur neminem laedit. He who uses his own legal right injures no one.

In a subsequent case, the employees were dismissed for insubordination after refusing to be transferred following a Relocation and Restructuring Program. The employer confirmed that the transfer came with it a promotion.

PHILIPPINE TELEGRAPH & TELEPHONE CORPORATION v. PT&T PROGRESSIVE WORKERS UNION-NFLU-KMU, G.R. No. 152057, 29 September 2003

• In its position with the labor arbiter, the [employer] adverted that when the [employees] were transferred, they were also promoted, thus:

“[The employees] are being moved to branches where the [they] will function with maximum benefit to the company and they were in fact promoted not demoted from a lower job-grade to a higher job-grade and receive even higher salaries than before. Thus, transfer of [the employees] would not also result in diminution in pay benefit and privilege since the salaries of the [the employees] would be receiving a bigger salary if not the same salary plus additional special relocation package. Although the increase in the pay is not significant this however would be translated into an increase rather than decrease in their salary because [the employees] who were transferred from the city to the province would greatly benefit because it is of judicial notice that the cost of living in the province is much lower than in the city. This would mean a higher purchasing power of the same salary previously being received by the [the employees].”

• Indeed, the increase in the [the employees’] responsibility can be ascertained from the scalar ascent of their job grades. With or without a corresponding increase in salary, the respective transfer of the [the employees] were in fact promotions, following the ruling enunciated in Homeowners Savings and Loan Association, Inc. v. NLRC:

“[P]romotion, as we defined in Millares v, Subido, is the advancement from one position to another with an increase in duties and responsibilities as authorized by law, and usually accompanied by an increase in salary. Apparently, the indispensable element for there to be a promotion is that there must be an advancement from one position to another or an upward vertical movement of the employees rank or position. Any increase in salary should only be considered incidental but never determinative of whether or not a promotion is bestowed upon an employee. This can be likened to the upgrading of salaries of government employees without conferring upon the, the concomitant elevation to the higher positions.”

• The admissions of the [employer] are conclusive on it. An employee cannot be promoted, even if merely as a result of a transfer, without his consent. A transfer that results in promotion or demotion, advancement or reduction or a transfer that aims to lure the employee away from his permanent position cannot be done without the employee’s consent.

• There is no law that compels an employee to accept a promotion for the reason that a promotion is in the nature of a gift or reward, which a person has a right to refuse. Hence, the exercise by the [the employees] of their right cannot be considered in law as insubordination, or willful disobedience of a lawful order of the employer. As such, there was no valid cause for [the employees’] dismissal.

A promotion is usually accompanied by additional duties and responsibilities, and not necessarily a corresponding increase in pay. Even if there is an salary bump that goes with the promotion, the employee may personally choose not to take up the promotion considering that added, new, or more tasks will be the result. The employee might not be prepared, suited, or have other legitimate reasons (e.g. health, family, etc.).

b. Employee demotion

Demotion involves “a situation in which an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary.”

JULIE BAKESHOP v. ARNAIZ, G.R. No. 173882, 15 February 2012

• [The employees – Chief Bakers – were dismissed after their refusal to be transferred or reassigned to utility/security personnel.]

• We [the Supreme Court] agree with the CA in ruling that the transfer of respondents amounted to a demotion. Although there was no diminution in pay, there was undoubtedly a demotion in titular rank. One cannot deny the disparity between the duties and functions of a chief baker to that of a utility/security personnel tasked to clean and manage the orderliness of the outside premises of the bakeshop. [The employees] were even prohibited from entering the bakeshop. The change in the nature of their work undeniably resulted to a demeaning and humiliating work condition.

The Julie Bakeshop case illustrates that a demotion is not always limited to decrease in salary or benefits. It is broad enough to cover substantial cut in duties and responsibilities, especially if it results in a demotion of a titular rank.

In ICT Marketing Services Inc. (Sykes Marketing Services, Inc.) v. Sales, the employee – Customer Service Representative (CSR) or Telephone Service Representative (TSR) – was forced to resign from being moved from one account to another resulting in the diminution of her salaries, privileges, and benefits, among others. Thus:

“In effect, [the employee’s] transfer to the Bank of America account was not only unreasonable, unfair, inconvenient, and prejudicial to her; it was effectively a demotion in rank and diminution of her salaries, privileges and other benefits. She was unfairly treated as a new hire, and eventually her salaries, privileges and other benefits were withheld when [the employer] refused to certify her and instead placed her on floating status. Far from being an ‘accommodation’ as [the employer] repeatedly insists, [the employee] became the victim of a series of illegal punitive measures inflicted upon her by the [the employer].”

Employers should thus take precaution when transferring employees that might result in a demotion as it can lead to a constructive dismissal case.

3. Marriage between co-employees

A company policy against marriage between co-employees require a reasonable business necessity to be valid.

STAR PAPER CORPORATION v. SIMBOL, G.R. No. 164774, 12 April 2006

• [The employees were forced to resign in view of the company policy against marriage between co-employees.]

• We [the Supreme Court] are called to decide an issue of first impression: whether the policy of the employer banning spouses from working in the same company violates the rights of the employee under the Constitution and the Labor Code or is a valid exercise of management prerogative.

• We do not find a reasonable business necessity in the case at bar.

• [The employer’s] sole contention that “the company did not just want to have two (2) or more of its employees related between the third degree by affinity and/or consanguinity” is lame…

• It is significant to note that in the case at bar, [the employees] were hired after they were found fit for the job, but were asked to resign when they married a co-employee. [The employers] failed to show how the marriage of Simbol, then a Sheeting Machine Operator, to Alma Dayrit, then an employee of the Repacking Section, could be detrimental to its business operations. Neither did [the employers] explain how this detriment will happen in the case of Wilfreda Comia, then a Production Helper in the Selecting Department, who married Howard Comia, then a helper in the cutter-machine. The policy is premised on the mere fear that employees married to each other will be less efficient. If we uphold the questioned rule without valid justification, the employer can create policies based on an unproven presumption of a perceived danger at the expense of an employee’s right to security of tenure.

• [The employers] contend that their policy will apply only when one employee marries a co-employee, but they are free to marry persons other than co-employees. The questioned policy may not facially violate Article 136 of the Labor Code but it creates a disproportionate effect and under the disparate impact theory, the only way it could pass judicial scrutiny is a showing that it is reasonable despite the discriminatory, albeit disproportionate, effect. The failure of [the employers] to prove a legitimate business concern in imposing the questioned policy cannot prejudice the employee’s right to be free from arbitrary discrimination based upon stereotypes of married persons working together in one company.

• Lastly, the absence of a statute [or law] expressly prohibiting marital discrimination in our jurisdiction cannot benefit [the employers]. The protection given to labor in our jurisdiction is vast and extensive that we cannot prudently draw inferences from the legislature’s silence that married persons are not protected under our Constitution and declare valid a policy based on a prejudice or stereotype. Thus, for failure of [the employers] to present undisputed proof of a reasonable business necessity, we rule that the questioned policy is an invalid exercise of management prerogative… (Emphasis supplied.)

In the above-cited Star Paper Corporation case, the Supreme Court does not categorically rule out the possibility of a valid company policy against marriage between co-employees. Otherwise stated, if it can be shown that there is indeed a reasonable business necessity for such policy, then the employer may use it as just cause for employment termination. This can be shown in the next section where a policy against marriage between employees of a competitor company was upheld to be valid and enforceable.

4. Marriage between employees of competitor company

A company policy against marriage of an employee with a competitor company’s employee has been declared valid.

Thus, in Tecson v. Glaxo Wellcome Philippines, Inc., the employee – a Medical Representative – was validly dismissed after his refusal to be re-assigned from Camarines Sur-Camarines North sales area to Butuan City-Surigao City and Agusan del Sur areas. This was in response to his having married an employee of a competitor company in violation of his employer’s company policies.

TECSON v. GLAXO WELLCOME PHILIPPINES, INC., supra.

• The stipulation in [the employee’s] contract of employment with [the employer] being questioned by [the employee] provides:

“10. You agree to disclose to management any existing or future relationship you may have, either by consanguinity or affinity with co-employees or employees of competing drug companies. Should it pose a possible conflict of interest in management discretion, you agree to resign voluntarily from the Company as a matter of Company policy.”

• The same contract also stipulates that [the employee] agrees to abide by the existing company rules of [the employer], and to study and become acquainted with such policies. In this regard, the Employee Handbook of [the employer] expressly informs its employees of its rules regarding conflict of interest:

“1. Conflict of Interest

“Employees should avoid any activity, investment relationship, or interest that may run counter to the responsibilities which they owe Glaxo Wellcome.

“Specifically, this means that employees are expected:

“a. To avoid having personal or family interest, financial or otherwise, in any competitor supplier or other businesses which may consciously or unconsciously influence their actions or decisions and thus deprive Glaxo Wellcome of legitimate profit.

“b. To refrain from using their position in Glaxo Wellcome or knowledge of Company plans to advance their outside personal interests, that of their relatives, friends and other businesses.

“c. To avoid outside employment or other interests for income which would impair their effective job performance.

“d. To consult with Management on such activities or relationships that may lead to conflict of interest.

“1.1. Employee Relationships

“Employees with existing or future relationships either by consanguinity or affinity with co-employees of competing drug companies are expected to disclose such relationship to the Management. If management perceives a conflict or potential conflict of interest, every effort shall be made, together by management and the employee, to arrive at a solution within six (6) months, either by transfer to another department in a non-counter checking position, or by career preparation toward outside employment after Glaxo Wellcome. Employees must be prepared for possible resignation within six (6) months, if no other solution is feasible.”

• [The employer’s] policy prohibiting an employee from having a relationship with an employee of a competitor company is a valid exercise of management prerogative.

• [The employer] has a right to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors, especially so that it and Astra are rival companies in the highly competitive pharmaceutical industry.

• The prohibition against personal or marital relationships with employees of competitor companies upon [the employer’s] employees is reasonable under the circumstances because relationships of that nature might compromise the interests of the company. In laying down the assailed company policy, [the employer] only aims to protect its interests against the possibility that a competitor company will gain access to its secrets and procedures.

• That [the employer] possesses the right to protect its economic interests cannot be denied. No less than the Constitution recognizes the right of enterprises to adopt and enforce such a policy to protect its right to reasonable returns on investments and to expansion and growth. Indeed, while our laws endeavor to give life to the constitutional policy on social justice and the protection of labor, it does not mean that every labor dispute will be decided in favor of the workers. The law also recognizes that management has rights which are also entitled to respect and enforcement in the interest of fair play.

• As held in a Georgia, U.S.A case, it is a legitimate business practice to guard business confidentiality and protect a competitive position by even-handedly disqualifying from jobs male and female applicants or employees who are married to a competitor. Consequently, the court ruled than an employer that discharged an employee who was married to an employee of an active competitor did not violate Title VII of the Civil Rights Act of 1964. The Court pointed out that the policy was applied to men and women equally, and noted that the employer’s business was highly competitive and that gaining inside information would constitute a competitive advantage.

• In any event, from the wordings of the contractual provision and the policy in its employee handbook, it is clear that [the employer] does not impose an absolute prohibition against relationships between its employees and those of competitor companies. Its employees are free to cultivate relationships with and marry persons of their own choosing. What the company merely seeks to avoid is a conflict of interest between the employee and the company that may arise out of such relationships. As succinctly explained by the appellate court, thus:

The policy being questioned is not a policy against marriage. An employee of the company remains free to marry anyone of his or her choosing. The policy is not aimed at restricting a personal prerogative that belongs only to the individual. However, an employee’s personal decision does not detract the employer from exercising management prerogatives to ensure maximum profit and business success…

• [T]he assailed company policy which forms part of [the employer’s] Employee Code of Conduct and of its contracts with its employees, such as that signed by [the employee], was made known to him prior to his employment. [The employee], therefore, was aware of that restriction when he signed his employment contract and when he entered into a relationship with Bettsy. Since [the employee] knowingly and voluntarily entered into a contract of employment with [the employer], the stipulations therein have the force of law between them and, thus, should be complied with in good faith.” He is therefore estopped from questioning said policy.

In contrast to the Star Paper Corporation case where the employer failed to show a reasonable business necessity, the Glaxo Wellcome Philippines’ case was able to establish the legitimate business necessity for the policy – namely “to guard its trade secrets, manufacturing formulas, marketing strategies and other confidential programs and information from competitors.””

5. Policy when employee deemed resigned

A company policy declaring an employee deemed resigned for violating a company policy was held valid. In the ABS-CBN case below, a company policy considers running for public office as indicative of one’s intention to resign and thus would result in the separation from one’s employment.

YMBONG v. ABS-CBN BROADCASTING CORPORATION, G.R. No. 184885, 07 March 2012

• [The employee – a Television Talent – was considered resigned after running for public office as provided for in the company policies.]

• This is not the first time that this Court has dealt with a policy similar to Policy No. HR-ER-016. In the case of Manila Broadcasting Company v. NLRC, this Court ruled:

• What is involved in this case is an unwritten company policy considering any employee who files a certificate of candidacy for any elective or local office as resigned from the company. Although §11(b) of R.A. No. 6646 does not require mass media commentators and announcers such as private respondent to resign from their radio or TV stations but only to go on leave for the duration of the campaign period, we think that the company may nevertheless validly require them to resign as a matter of policy. In this case, the policy is justified on the following grounds:

• Working for the government and the company at the same time is clearly disadvantageous and prejudicial to the rights and interest not only of the company but the public as well. In the event an employee wins in an election, he cannot fully serve, as he is expected to do, the interest of his employer. The employee has to serve two (2) employers, obviously detrimental to the interest of both the government and the private employer.

• In the event the employee loses in the election, the impartiality and cold neutrality of an employee as broadcast personality is suspect, thus readily eroding and adversely affecting the confidence and trust of the listening public to employer’s station.

• ABS-CBN, like Manila Broadcasting Company, also had a valid justification for Policy No. HR-ER-016. Its rationale is embodied in the policy itself, to wit:

• ABS-CBN BROADCASTING CORPORATION strongly believes that it is to the best interest of the company to continuously remain apolitical. While it encourages and supports its employees to have greater political awareness and for them to exercise their right to suffrage, the company, however, prefers to remain politically independent and unattached to any political individual or entity.

• Therefore, employees who [intend] to run for public office or accept political appointment should resign from their positions, in order to protect the company from any public misconceptions. To preserve its objectivity, neutrality and credibility, the company reiterates the following policy guidelines for strict implementation.

• We [the Supreme Court] find no merit in the employee’s argument that “[his] automatic termination… was a blatant [disregard] of [his] right to due process” as he was “never asked to explain why he did not tender his resignation before he ran for public office as mandated by [the subject company policy].” The employee’s overt act of running for councilor of Lapu-Lapu City is tantamount to resignation on his part. He was separated from ABS-CBN not because he was dismissed but because he resigned. Since there was no termination to speak of, the requirement of due process in dismissal cases cannot be applied to Ymbong. Thus, ABS-CBN is not duty-bound to ask him to explain why he did not tender his resignation before he ran for public office as mandated by the subject company policy. (Emphasis supplied.)

In the above-cited case, it should be stressed that the employer did not dismiss the employee; rather, it was the employee who resigned in relation to the company policy declaring those who run for public office as deemed resigned.

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/Updated: January 9, 2023