Midas Touch Food Corp. vs. NLRC

G.R. No. 111639 (July 29, 1996)

Facts:

Petitioner Midas Touch Foods Corporation (Midas) operates a chain of restaurants and hired Iris Fe B. Isaac as its Operations Manager on September 16, 1986. Isaac was responsible for establishing management schemes, formulating company policies, and overseeing various operational aspects of the business. She was given considerable autonomy, including the authority to appoint Alice Te as the Commissary Manager.

On June 15, 1987, Isaac received a termination letter citing "lack of confidence," but this was retracted on July 7, 1987, allowing her to continue her role. In October 1987, Alice Te was investigated for alleged theft of food supplies, which led to her resignation on November 3, 1987. On the same day, Isaac allegedly admitted to Luy, the President of Midas, that she owned a competing canteen named Food Center. Consequently, on November 6, 1987, Isaac was terminated again for loss of confidence.

Isaac filed a complaint for illegal dismissal on March 9, 1988. The Labor Arbiter initially ruled in favor of Midas, finding the dismissal valid but ordering the company to pay Isaac separation pay and other dues. Both parties appealed to the National Labor Relations Commission (NLRC), which reversed the Labor Arbiter's decision, declaring Isaac's dismissal illegal and ordering Midas to pay back wages, separation pay, and other benefits.

Petitioners Luy and Chu contested the NLRC's decision, arguing that they should not be held personally liable for Isaac's dismissal, as they were not her direct employers.

Legal Issues:

1. Was the dismissal of Iris Fe B. Isaac valid based on loss of confidence?
2. Did the petitioners provide sufficient evidence to justify the dismissal?
3. Were Luy and Chu personally liable for the monetary awards granted to Isaac?

Arguments:

Petitioners' Arguments:

• The dismissal was justified due to loss of confidence stemming from Isaac's alleged admission of ownership of a competing canteen and misuse of company resources.
• They contended that the Labor Arbiter's decision should be upheld, as it found the dismissal valid.

Respondent's Arguments:

• Isaac argued that the evidence against her was hearsay and lacked proper investigation, asserting that she was not given a chance to defend herself before her termination.
• She claimed that the allegations of misconduct were unsubstantiated and that her actions did not warrant a loss of confidence.

Court's Decision and Legal Reasoning:

The Supreme Court affirmed the NLRC's decision, emphasizing that the dismissal was illegal due to the lack of procedural due process. The Court highlighted the following points:

1. Due Process: The Court reiterated that an employee must be given proper notice and an opportunity to be heard before dismissal. Isaac was not afforded this right, as the termination letter was effective immediately without prior notice of the charges against her.

2. Loss of Confidence: While loss of confidence is a valid ground for dismissal, it must be based on actual breaches of duty. The Court found that the petitioners failed to substantiate their claims against Isaac. The evidence presented was largely hearsay and did not meet the burden of proof required to justify the dismissal.

3. Personal Liability of Officers: The Court ruled that Luy and Chu could not be held personally liable for the monetary awards since they were not Isaac's direct employers. Their roles as corporate officers did not equate to personal liability unless they acted with malice or bad faith, which was not established in this case.

Significant Legal Principles Established:

• The requirement of due process in employment termination, which includes the right to notice and a hearing, is fundamental and must be observed regardless of the employee's position.
• The doctrine of loss of confidence must be supported by substantial evidence, and mere suspicion or unverified claims are insufficient to justify dismissal.
• Corporate officers are not personally liable for employment-related claims unless they engage in unlawful acts or demonstrate bad faith in their corporate duties.