G.R. No. 123646 July 14, 1999
NAZARIO C. AUSTRIA, petitioner, vs. NATIONAL LABOR RELATIONS COMMISSION, ABETO A. UY and PHILIPPINE STEEL COATING CORPORATION, respondents.

FACTS

Petitioner Nazario C. Austria was hired as Credit and Collection Manager by private respondent Philippine Steel Coating Corporation (PHILSTEEL) on December 19, 1985. On August 11, 1987, they entered into a “Confidentiality Agreement” where Austria agreed not to disclose confidential company information. On August 17, 1989, Austria was terminated on the grounds that he allegedly disclosed confidential information to prospective competitors and undertook activities beyond his official duties. The specific incident involved a July 13, 1989 telefax message sent by Felix Lukban (Austria’s child’s godfather) to PHILSTEEL’s Australian supplier, Bliss Fox Manufacturing Corporation (BLISS FOX), inquiring about the purchase price of machinery for a steel galvanizing plant on behalf of an unnamed client. PHILSTEEL’s President, Abeto Uy, was informed of this by BLISS FOX representative Charles Villa, who allegedly stated that Lukban identified his contact at PHILSTEEL as “Rudy Austria.” Austria denied any knowledge of the telefax. After investigations on August 5 and 17, 1989, where Austria admitted his close relationship with Lukban and discussed plans for a rival business, he was terminated. Austria filed a case for illegal dismissal. The Labor Arbiter found the dismissal legal, citing loss of trust, but awarded separation pay. The NLRC affirmed the legality of dismissal but ordered an indemnity for procedural due process violations. Austria elevated the case to the Supreme Court via petition.

ISSUE

Whether the National Labor Relations Commission committed grave abuse of discretion in upholding the validity of petitioner Austria’s dismissal based on loss of trust and confidence.

RULING

The Supreme Court GRANTED the petition, ruling that the dismissal was illegal. The Court held that the employer, PHILSTEEL, failed to discharge its burden of proving by substantial evidence that the dismissal was for a just cause. The evidence presented by PHILSTEEL, primarily the testimonies of its officers regarding the statements made by Charles Villa, was hearsay and insufficient. The alleged admission by Lukban identifying Austria as his contact was not established by competent evidence, as Villa was not presented as a witness. The close relationship between Austria and Lukban and Austria’s admissions about discussing a rival business were not, by themselves, conclusive proof of a breach of the confidentiality agreement or of willful betrayal of trust. The Court found the evidence against Austria to be based on suspicions and speculations, not on the required substantial evidence. Consequently, the dismissal was declared illegal. PHILSTEEL was ordered to pay Austria’s heirs back wages, allowances, other benefits, and death benefits from August 17, 1989 up to March 15, 1997 (the date of Austria’s death as indicated in the records), with legal interest plus attorney’s fees.