G.R. No. L-57895 December 29, 1983
J. WALTER THOMPSON CO. (PHIL.) and LYLE K. LITTLE, petitioners, vs. THE NATIONAL LABOR RELATIONS COMMISSION, ARBITRATION BRANCH NO. IV and RAUL L. CONTRERAS, respondents.

FACTS

Petitioner J. Walter Thompson Co. (Phil.) hired respondent Raul L. Contreras, an advertising executive previously employed in the United States. Contreras contends he was induced to resign from his higher-paying job and relocate to Manila for a definite three-year employment period with JWT. After about six months, a dispute arose when Contreras did not receive an expected salary increase and received a lower raise compared to his subordinates.
In August 1975, JWT’s management committee convened to investigate reports that Contreras was planning to establish a competing advertising agency and had attempted to recruit key JWT personnel to join him. Contreras was absent from the initial meeting due to illness. In a subsequent meeting, he was confronted with the allegations, asked to explain, and then requested to resign. Upon his refusal, JWT terminated his services on September 3, 1975, citing loss of confidence due to these acts of disloyalty. Contreras filed a complaint for illegal dismissal and damages.

ISSUE

Whether the dismissal of Raul L. Contreras on the ground of loss of confidence due to alleged disloyalty was valid, thereby precluding an award of damages for the unexpired portion of his alleged three-year employment contract.

RULING

The Supreme Court affirmed, with modification, the NLRC’s finding of illegal dismissal and the award of damages. The legal logic proceeds from the principle that loss of confidence, as a just cause for dismissal of a managerial employee, must be based on substantial evidence of an act prejudicial to the employer’s interests. The Court scrutinized the alleged acts of disloyalty—planning a competing business and recruiting company personnel.
While the employer presented allegations, the Court found the evidence insufficient to conclusively establish disloyalty warranting immediate termination before the contract’s expiration. Notably, Contreras did not establish a competing agency post-dismissal, and the employer itself had expressed satisfaction with his job performance. The dismissal was thus deemed unjustified. Consequently, Contreras was entitled to compensation for the remainder of his three-year term. However, applying equitable principles, the Court deducted the relocation expenses (P84,700) advanced by JWT from the NLRC’s awarded sum of P202,500. The net award of P117,800 was granted as compassionate justice, balancing the employer’s incurred costs against the employee’s contractual rights violated by the premature termination.