G.R. No. 108891 . July 17, 1995.
JRS BUSINESS CORPORATION, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION (Fifth Division) and ROBERT A. NACARIO, respondents.

FACTS

Petitioner JRS Business Corporation employed private respondent Robert A. Nacario in 1980, later promoting him to Station Manager of its Davao branch. In September 1988, an internal audit revealed a cash shortage of P145,564.33. Nacario was directed to explain the shortage. Subsequently, he was replaced as officer-in-charge, instructed to report to his replacement, and finally, on October 12, 1988, was placed on forced leave without pay pending investigation. Nacario filed a complaint for illegal dismissal on February 6, 1989, claiming his indefinite forced leave constituted constructive dismissal.
The Labor Arbiter dismissed Nacario’s complaint. On appeal, the NLRC reversed the decision, ruling that Nacario was illegally dismissed. The NLRC found the evidence against him—primarily unverified affidavits from co-employees who were not presented for cross-examination—to be hearsay and without probative value. It also noted his long and dedicated service. However, instead of ordering reinstatement, the NLRC awarded separation pay, citing that reinstatement would not be conducive to industrial peace given the loss of trust and confidence in a managerial employee.

ISSUE

Whether the NLRC committed grave abuse of discretion in finding that Nacario was illegally dismissed and in awarding separation pay in lieu of reinstatement.

RULING

The Supreme Court affirmed the NLRC decision, finding no grave abuse of discretion. The Court upheld the NLRC’s evaluation of the evidence. The affidavits implicating Nacario were unverified, and the affiants were not presented as witnesses, rendering them hearsay and lacking probative value. Notably, the cashier, Elizabeth Paulino, later executed an affidavit solely admitting liability and absolving Nacario. The employer’s own internal auditor found Nacario’s explanations reasonable, and the company admitted it was still studying his liability. Thus, the charges were unsubstantiated.
Regarding the remedy, the Court affirmed the award of separation pay in lieu of reinstatement. For a managerial employee, the essence of employment is the employer’s trust and confidence. When this is eroded, as the NLRC correctly determined from the circumstances of the case, reinstatement is no longer viable. The grant of separation pay is an acceptable alternative. The Court modified the decision to order petitioner to indemnify Nacario P1,000.00 for violating labor rules on preventive suspension, which must not exceed 30 days, whereas Nacario was placed on indefinite forced leave without pay.