G.R. No. 121905 May 20, 1999
VITARICH CORPORATION, DANILO SARMIENTO and ONOFRE SEBASTIAN, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION AND ISAGANI E. RECODO, respondents.

FACTS

Private respondent Isagani Recodo was a long-time employee of Vitarich Corporation, rising to the position of Sales Manager. In 1992, following an audit, he was required to explain alleged violations of company policies concerning cash advances and the use of collections for operational expenses. Recodo provided clarifications, stating the “vales” were for business expenses and that using collections was unavoidable due to delays in fund replenishment. Subsequently, he was instructed by his new supervisor, Onofre Sebastian, to reduce the account receivables of a salesman, Rex Cordova. Recodo negotiated with Cordova, successfully reducing the amount from P800,000 to P250,000.
Despite this improvement, Recodo was directed to explain why he should not be terminated for allegedly failing to immediately “ground” Cordova as per a memorandum and for other credit policy violations. Recodo explained he received an incomplete fax of the memo and postponed the grounding to secure Cordova’s accounts, which yielded positive results. The company’s own Head of Personnel found no defensible ground for termination. Nevertheless, Vitarich dismissed Recodo on October 15, 1992, for insubordination and violation of company policies.

ISSUE

Whether the National Labor Relations Commission committed grave abuse of discretion in affirming the Labor Arbiter’s finding that Recodo was illegally dismissed.

RULING

The Supreme Court ruled that the NLRC did not commit grave abuse of discretion. The legal logic centers on the requirement for a valid dismissal based on loss of trust and confidence for a managerial employee. While an employer is granted wide latitude in dismissing such employees, the loss of trust must be substantiated by proof of a willful breach or a wrongful intent that renders the employee unworthy of trust. The Court found Vitarich failed to meet this burden.
Recodo’s act of postponing the grounding of the salesman was not an act of insubordination but a managerial discretion exercised in good faith to better serve the company’s interest, as evidenced by the significant reduction in account receivables. His explanations for the audit findings were plausible and not refuted by concrete evidence of fraud or willful violation. The company’s own personnel investigation concluded there was no defensible ground for termination. Therefore, the dismissal was without just cause. The NLRC correctly applied the principle of social justice, which presumes good faith on the part of the employee and places the burden of proving a valid dismissal on the employer. Its reversal of its own earlier decision to reinstate the Labor Arbiter’s ruling was a commendable adherence to this mandate, not a grave abuse of discretion.