G.R. No. L-48705 February 9, 1989
EDUARDO V. REYES, petitioner, vs. MINISTER OF LABOR and PACWOOD, INCORPORATED, respondents.

FACTS

Petitioner Eduardo Reyes was employed by private respondent Pacwood, Inc., eventually attaining the position of Sales Manager. On November 3, 1975, the company reported to the Department of Labor that Reyes had resigned effective November 12, 1975. Reyes contested this, claiming illegal dismissal and demanding payment of sales commissions. The Labor Arbiter found that Reyes did not resign, but also ruled he was not entitled to the claimed commissions. Noting Reyes was a managerial employee and that a strained relationship characterized by loss of trust existed, the Arbiter ordered his separation from service with an award of P2,000 as separation pay instead of reinstatement.
Both parties appealed to the National Labor Relations Commission (NLRC). The NLRC affirmed the factual findings but modified the relief, ordering Pacwood to pay backwages from the date of dismissal until the Arbiter’s decision, amounting to P16,000, in lieu of separation pay. Upon further appeal, the Secretary of Labor upheld the Labor Arbiter’s original award of P2,000 separation pay, effectively reversing the NLRC’s grant of backwages. Reyes filed this petition for certiorari, arguing the Secretary of Labor committed grave abuse of discretion.

ISSUE

Whether the Secretary of Labor committed grave abuse of discretion in awarding separation pay instead of backwages to the illegally dismissed managerial employee.

RULING

The Supreme Court dismissed the petition, finding no grave abuse of discretion. The legal logic centers on the appropriate relief for a dismissed employee where the basis for termination is loss of trust and confidence, which is a valid ground for dismissing a managerial employee. The Court clarified that an award of backwages is the general rule for illegal dismissals attributable to the employer’s unlawful act or bad faith. However, the circumstances here justified a different remedy.
The Labor Arbiter, NLRC, and Secretary of Labor unanimously found that the employer-employee relationship was severed due to a strained relationship and loss of confidence, a finding supported by evidence, including Reyes’s own admission of antagonizing a major client’s officer. For a managerial employee, loss of confidence is a recognized just cause for termination. While the dismissal was technically illegal because the company failed to prove a valid resignation, the underlying justification of lost trust made reinstatement impracticable and inequitable. Consequently, separation pay, not backwages, was the equitable relief. The Secretary of Labor’s decision to revert to this award was within his discretionary authority to determine appropriate remedies based on the specific facts, particularly the nature of the employee’s position and the cause of the estrangement. The Court accorded respect to this expertise, finding no jurisdictional error or capricious disregard of evidence in his order.