G.R. No. 158244 . August 9, 2005.
ERNESTO PONCE AND MANUEL C. BALIGNASAY, Petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), INNODATA PHILIPPINES CORP., INNODATA PROCESSING CORP. (INNODATA CORPORATION) and TODD SOLOMON, Respondents.

FACTS

Innodata Philippines Corporation, engaged in data processing, faced chronic project delays. A company study attributed this to habitual employee tardiness and absenteeism. Consequently, Innodata implemented a Revised 1998 Absenteeism and Tardiness Policy, which reduced allowable absences and increased penalties. The employees’ union challenged this policy through the grievance machinery, and the parties agreed to submit the issue to voluntary arbitration. Pending this arbitration, Innodata terminated Ernesto Ponce on August 3, 1998, for violating the new policy. On August 21, 1998, the Voluntary Arbitrator declared the 1998 Revised Policy null and void for lack of proper consultation and for diminishing vested employee rights. On this same date, Manuel Balignasay was also terminated under the same policy.
Both petitioners filed complaints for illegal dismissal. The Labor Arbiter ruled in their favor, ordering reinstatement with full back wages, reasoning that the policy’s implementation should have been suspended pending the arbitration ruling. The NLRC reversed this decision, finding the dismissals valid as the policy was later upheld. The Court of Appeals affirmed the NLRC. The petitioners elevated the case to the Supreme Court.

ISSUE

Whether the dismissal of petitioners Ponce and Balignasay was valid despite the subsequent final affirmation of the 1998 Revised Policy’s validity.

RULING

Yes, the dismissal was valid. The Supreme Court affirmed the decisions of the NLRC and the Court of Appeals. The core legal principle applied is that the final and executory judgment upholding the validity of the 1998 Revised Policy retroacts to the date of the policy’s issuance. Consequently, the policy is deemed valid ab initio (from the beginning). The petitioners’ termination, which was based on violations of this policy, is therefore justified and rooted in a cause existing at the time of their dismissal.
The Court rejected the argument that the policy was invalid at the time of dismissal because it was under arbitration. A later final ruling validating a company policy cures any prior defect from the time of its issuance. Since the Supreme Court itself had already affirmed with finality the policy’s validity in a separate proceeding, it became the law of the case. The policy was a legitimate exercise of management prerogative to ensure business efficiency. The petitioners’ excessive absences constituted willful neglect of duty, a just cause for termination under Article 282 of the Labor Code. Thus, their dismissals were for a lawful and substantive cause.