G.R. No. L-41459 December 18, 1987
NATIONAL LABOR UNION, petitioner, vs. THE HONORABLE SECRETARY OF LABOR and PACIFIC MILLS, INC., respondents.

FACTS

Juan Tamondong, employed by Pacific Mills, Inc., was placed under preventive suspension in August 1973 after the company filed an application for clearance to terminate his services on grounds of loss of confidence. The suspension was later lifted, and Tamondong reported for work for one day before going on an unauthorized leave. The company subsequently issued a memorandum placing him back on suspension, which amounted to a constructive dismissal.
The compulsory arbitrator found the suspension illegal and ordered reinstatement with backwages. On appeal, the National Labor Relations Commission (NLRC) found that the company failed to prove just cause for dismissal and, crucially, failed to serve the mandatory advance notice of termination required by law. The NLRC thus held the company liable for separation pay instead of ordering reinstatement. The Secretary of Labor sustained this decision.

ISSUE

Whether the NLRC and the Secretary of Labor erred in awarding separation pay instead of ordering the reinstatement of Juan Tamondong.

RULING

The Supreme Court denied the petition and affirmed the award of separation pay. The legal logic hinges on the applicable law at the time of Tamondong’s constructive dismissal in August 1973. The governing statute was the Termination Pay Law ( Republic Act No. 1052 , as amended), which was only repealed upon the effectivity of the Labor Code on November 1, 1974.
Under the Termination Pay Law, an employer could terminate employment with or without just cause. The critical obligation imposed on the employer for a dismissal without just cause was to serve an advance notice on the employee—one month in advance or one-half month for every year of service, whichever was longer. Liability for separation pay arose from the failure to serve this required notice, not merely from the absence of just cause for dismissal. Consistent jurisprudence held that under this law, even an abusive dismissal without just cause only entitled the employee to separation pay (and potentially moral damages), not reinstatement.
Given the NLRC’s unappealed finding that Pacific Mills, Inc. failed to serve the mandatory notice, the award of separation pay equivalent to one-half month’s pay for each of Tamondong’s 13 years of service was correct under the then-prevailing legal regime. The Court deemed it unnecessary to re-examine the existence of just cause. Furthermore, the petition was procedurally infirm for failure to exhaust administrative remedies, as an appeal from the Secretary of Labor’s decision should have been taken to the President, not directly to the Supreme Court.