Property rules

Illegally dismissed

Joe was hired by MPhils. Corp. as its logistics officer. He steadily rose from the ranks and became the company’s supervisor at the logistics and purchasing department.

In 2004, the company conducted a random drug test. Joe was randomly chosen among its employees who would be tested for illegal drug use. Through an intracompany correspondence, the employees were informed that they were selected for random drug testing to be conducted on the same day that they received the correspondence.


Joe was duly notified that he was scheduled to be tested after lunch on that day. His receipt of the notice was evidenced by his signature on the correspondence.

At around 11:30 a.m. of the same day, Joe received a phone call from his wife’s colleague who informed him that a bombing incident occurred near his wife’s work station in Israel. He immediately proceeded to the Israeli Embassy to confirm the news on the alleged bombing incident.


Before he left the office on the day of the random drug test, he first informed the secretary of his department, Irene, at around 12:30 p.m. that he will give preferential attention to the emergency phone call that he just received. He also told her that he would be back at the office as soon as he has resolved his predicament.

Joe returned to the company’s office in the early evening of the same day. When he was finally able to charge his cell phone at the office, he received a text message from a member of the Drug Watch Committee who conducted the drug test, informing him to participate in the said drug test. He immediately called up the committee member to explain the reasons for his failure to submit himself to the random drug test that day. He also proposed that he would submit to a drug test the following day at his own expense.

Few days later, Joe received a Show Cause Notice requiring him to explain in writing why he should not be charged with “unjustified refusal to submit to random drug testing.” Joe did as instructed.

Despite his explanation, the Investigating Panel found Joe guilty of “unjustified refusal to submit to random drug testing” and recommended a penalty of four working weeks suspension without pay, instead of termination, due to the presence of mitigating circumstances. In the same deport, the Investigating Panel also recommended that petitioner corporation should review its policy on random drug testing, especially of the ambiguities cast by the term “unjustified refusal.”

The company’s AVP, however, recommended that the respondent be terminated from employment instead of merely being suspended. The AVP opined that even if Joe did not refuse outright to take the random drug test, he avoided the same.

On Valentine’s Day, Joe received a letter terminating him on the same date.

Aggrieved, Joe filed an illegal dismissal complaint against the company and its president, Ed.


Q: Is an Anti-Drugs Policy a valid exercise of its management prerogative?

A: Yes, it is a valid exercise of its management prerogative. An employee may be penalized with the penalty of termination for the first offense if he or she failed to take the random drug test as scheduled, and as stated under the company policy.

Q: Is the exercise of such managerial prerogative subject to limitations?

A: Yes. While the adoption and enforcement by a company of an Anti-Drugs Policy is recognized as a valid exercise of its management prerogative as an employer, such exercise is not absolute and unbridled.

Managerial prerogatives are subject to limitations provided by law, collective bargaining agreements, and the general principles of fair play and justice. In the exercise of its management prerogative, an employer must therefore ensure that the policies, rules and regulations on work-related activities of the employees must always be fair and reasonable and the corresponding penalties, when prescribed, commensurate to the offense involved and to the degree of the infraction.

Q: Is MPhils.’ Anti-Drug Policy fair and reasonable?

A: No. The policy was not clear on what constitutes “unjustified refusal.” To be sure, the term “unjustified refusal” could not possibly cover all forms of “refusal” as the employee’s resistance, to be punishable by termination, must be “unjustified.” It is on this area where MPhils. had fallen short of making it clear to its employees—as well as to management—as to what types of acts would fall under the purview of “unjustified refusal.” Even MPhils.’ own Investigating Panel recognized this ambiguity when itself said that the term “refusal” casts certain ambiguities and should be clearly defined.

Q: Is the penalty of termination imposed by MPhils.’ Anti-Drug Policy reasonable?

A: No. Company policies and regulations are generally valid and binding between the employer and the employee unless shown to be grossly oppressive or contrary to law—as in the case at bar. Recognizing the ambiguity in the subject policy, the corporation’s Anti-Drug Policy is excessive in terminating an employee for his “unjustified refusal” to subject himself to the random drug test on first offense, without clearly defining what amounts to an “unjustified refusal.”

In fact, the unreasonableness of the penalty of termination as imposed in this case is further highlighted by a fact admitted by the company itself: that for the 10-year period that Joe had been employed by MPhils., he did not have any record of a violation of its company policies.

Q: Given that the term “refusal” casts certain ambiguities above ambiguity, how then should the matter be appreciated and resolved?

A: Article 4 of the Labor Code, as amended, provides “[a]ll doubts in the implementation and interpretation of the provisions of [the Labor] Code, including its implementing rules and regulations, shall be resolved in favor of labor.” In Article 1702 of the New Civil Code, a similar provision states that “[i]n case of doubt, all labor legislation and all labor contracts shall be construed in favor of the safety and decent living for the laborer.”

Applying these provisions of law to the circumstances in the case at bar, it is not fair for this Court to allow an ambiguous policy to prejudice the rights of an employee against illegal dismissal.

Q: Can Ed, the president of MPhils., be held personally liable for the illegality of Joe’s dismissal?

A: No. Ed should not be held personally liable for Joe’s dismissal as he acted in good faith and within the scope of his official functions as then president of MPhils. A corporation has a personality separate and distinct from its officers and board of directors who may only be held personally liable for damages if it is proven that they acted with malice or bad faith in the dismissal of an employee. Absent any evidence on record that Ed acted maliciously or in bad faith in effecting the termination of respondent, plus the apparent lack of allegation in the pleadings of Joe that Ed acted in such manner, the doctrine of corporate fiction dictates that only petitioner corporation should be held liable for the illegal dismissal of Joe.

(Source: Mirant (Phils.) vs. Caro, G.R. No. 181490, April 23, 2014)

Ma. Soledad Deriquito-Mawis President, Philippines Association of Law Schools; Dean, Lyceum of the Philippines University; Senior Partner, Gatchalian Castro & Mawis Law Office

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