FACTS:

The case involves a petition for review on certiorari assailing the decision of the Court of Appeals affirming the decision of the National Labor Relations Commission (NLRC) and Labor Arbiter finding the dismissal of the private respondent, Lito Cagampan, as valid.

Cagampan was the Acting Power Use Coordinator of Central Pangasinan Electric Cooperative, Inc. (CENPELCO). He received a check for partial payment for the installation of a transformer in a customer's building. The customer complained that Cagampan did not issue a receipt for the payment. It was then discovered that Cagampan knowingly entered into an unauthorized contract and accepted payment without authorization.

As a result, Cagampan was found guilty of violating the company's Code of Ethics and Discipline and was dismissed from service. He filed a complaint for illegal dismissal, seeking backwages, damages, and reinstatement. The Labor Arbiter dismissed the complaint but ordered CENPELCO to pay Cagampan separation pay.

Both parties appealed to the NLRC, which affirmed the Labor Arbiter's decision. Cagampan's motion for reconsideration was denied, while CENPELCO's request to reconsider the award of separation pay was also denied. CENPELCO then filed a petition for certiorari with the Court of Appeals, challenging the award of separation pay. The petition was dismissed for lack of merit.

CENPELCO filed a petition for review on certiorari before the Supreme Court, arguing that the award of separation pay to Cagampan, who was legally dismissed for gross misconduct and acts of dishonesty, is contrary to existing jurisprudence. The Court of Appeals upheld the award of separation pay, citing compassionate justice and Cagampan's long years of service.

The Supreme Court reversed the decision, stating that separation pay should not be awarded in this case. The Court cited Section 7, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code, which provides that separation pay shall be allowed only when the employee is validly dismissed for causes other than serious misconduct or acts reflecting on his moral character. In this case, Cagampan was found to have been validly dismissed for violations of company rules and serious misconduct. The Court emphasized that the employee's length of service should not be used as a justification for moderating the penalty of dismissal, as it would reward disloyalty and undermine the principles of social justice. The decision of the Court of Appeals was reversed and set aside.

ISSUES:

1. Whether the Court of Appeals erred in affirming the award of separation pay to the private respondent who was legally dismissed for gross misconduct and acts of dishonesty.

RULING:

1. The petition is granted. The Court holds that separation pay should not be awarded to the private respondent. While long years of service may generally be considered for the award of separation benefits, in this case, the Court finds that the private respondent's violation reflects a lack of loyalty and betrayal of the company. Therefore, the award of separation pay is not justified. The Decision of the Court of Appeals affirming the award of separation pay is reversed and set aside.

PRINCIPLES:

• An employee who is dismissed for any of the just causes under Article 282 of the Labor Code shall not be entitled to termination pay, unless provided for by a collective bargaining agreement or voluntary employer policy or practice. Separation pay shall only be allowed if the employee is validly dismissed for causes other than serious misconduct or those reflecting on his moral character.

• Separation pay is granted as a measure of social justice.

• If an employee's length of service is to be regarded as a justification for moderating the penalty of dismissal, it may become a prize for disloyalty, thereby undermining the efforts of labor to cleanse its ranks of undesirables.