FACTS:

The petitioners, SHS Perforated Materials, Inc., Winfried Hartmannshenn, and Hinrich Johann Schumacher, are involved in a case regarding the respondent, Manuel Diaz, who was hired by SHS as Manager for Business Development on probationary status. Diaz's performance was deemed unsatisfactory, and Hartmannshenn expressed his dissatisfaction, resulting in Diaz allegedly offering to resign. On November 16, 2005, Hartmannshenn was unable to reach Diaz, and upon his arrival in the Philippines, he notified Diaz but claimed to have not received the messages. Hartmannshenn instructed the withholding of Diaz's salary, resulting in Diaz serving a demand letter and resignation letter to SHS.

Additionally, there is another case involving the respondent, Paulo Adlawan, who worked as a Technical Sales Representative for Schumacher Housing Systems, Inc. (SHS). Adlawan's salary was withheld due to alleged failure to report for work and lack of work accomplishments. He then filed a complaint for illegal dismissal, seeking 13th month pay, damages, attorney's fees, and unpaid salary. The NLRC ruled in favor of SHS, stating that the withholding of Adlawan's salary was a valid exercise of management prerogative, and that he had voluntarily resigned. The Court of Appeals (CA) later reversed this decision, declaring the withholding of Adlawan's salary as invalid and ruling it as an illegal dismissal. The CA awarded separation pay to Adlawan. SHS subsequently filed a petition for review before the Supreme Court, presenting various issues for resolution regarding Adlawan's constructive dismissal and voluntary resignation.

ISSUES:

1. Whether the withholding of respondent's salary was justified.

2. Whether Article 116 of the Labor Code applies in cases where there is uncertainty whether an employee has worked and is entitled to his salary.

3. Whether respondent is entitled to his salary for the period in question.

4. Whether respondent was constructively dismissed.

5. Whether the unlawful withholding of the respondent's salary amounts to constructive dismissal.

6. Whether the respondent, as a probationary employee, is entitled to security of tenure.

RULING:

1. The withholding of respondent's salary was not justified. The management prerogative of an employer does not include the right to temporarily withhold salary/wages without the consent of the employee. It is unlawful to withhold any amount from the wages of a worker without the worker's consent, except under the circumstances provided in Article 113 of the Labor Code.

2. Article 116 of the Labor Code applies, and it is unlawful to withhold an employee's wages without the worker's consent, except under the circumstances provided in Article 113. In this case, there was no showing that the withholding of respondent's wages fell under the exceptions provided in Article 113, making the withholding unlawful.

3. The court ruled that respondent is entitled to his salary for the period in question. Although it cannot be determined with certainty whether respondent worked for the entire period, the doubt between the evidence presented by the employer and the employee must be tilted in favor of the latter. Petitioners failed to satisfy their burden of proof, therefore, respondent is presumed to have worked during the period and is entitled to his salary.

4. The court ruled that respondent was constructively dismissed. The unlawful withholding of his salary made it impossible, unreasonable, or unlikely for respondent to continue working. It is of no consequence that he served his resignation letter on the last day of the payroll period. The significant factor is that respondent prepared and served his resignation letter right after being informed that his salary was being withheld. This action is inconsistent with voluntary resignation and bolsters the finding of constructive dismissal.

5. The Court agrees with the Labor Arbiter and the Court of Appeals that the unlawful withholding of the respondent's salary amounts to constructive dismissal. The withholding of the salary does not fall under any of the circumstances provided under Article 113 of the Labor Code. The employer failed to establish with certainty that the respondent did not work during the period in question.

6. The respondent, although a probationary employee, is entitled to security of tenure. The Constitution guarantees the right of all workers to security of tenure, without distinction between probationary and regular employees. Probationary employees cannot be dismissed except for cause or for failure to qualify as regular employees.

PRINCIPLES:

• Factual findings of the lower courts are generally conclusive, but a review of the records is necessary when there are contradictory factual findings.

• Management prerogative refers to the right of an employer to regulate all aspects of employment, but it does not include the right to temporarily withhold salary/wages without the employee's consent.

• It is unlawful to withhold any amount from the wages of a worker without the worker's consent, except under the circumstances provided in Article 113 of the Labor Code.

• Article 116 of the Labor Code prohibits the withholding of wages and kickbacks without the consent of the worker.

• Any withholding of an employee's wages by an employer may only be allowed in the form of wage deductions under the circumstances provided in Article 113 of the Labor Code.

• Administrative tribunals exercising quasi-judicial functions are bound by law and practice to observe the fundamental and essential requirements of due process. They must use every and all reasonable means to ascertain the facts in each case speedily and objectively, without regard to technicalities of law or procedure, all in the interest of due process.

• When there is doubt between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of the latter, in line with the policy mandated by Articles 2 and 3 of the Labor Code to afford protection to labor and construe doubts in favor of labor.

• Constructive dismissal exists when an act of clear discrimination, insensibility, or disdain by an employer becomes so unbearable on the part of the employee that it would foreclose any choice by him except to forego his continued employment. It exists where there is cessation of work because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving a demotion in rank and a diminution in pay.

• The mere withholding of an employee's salary does not constitute constructive dismissal. However, if the withholding of salary is unlawful and makes it impossible, unreasonable, or unlikely for the employee to continue working, then it can be considered as constructive dismissal.

• Probationary employees who are unjustly dismissed during the probationary period are entitled to reinstatement and payment of full backwages and other benefits. This is regardless of their probationary status and they should be treated the same as regular employees.

• Probationary employees are entitled to security of tenure, as guaranteed by Section 3 (2) Article 13 of the Constitution. The right to security of tenure applies to all workers, regardless of their employment status.

• The doctrine of strained relations allows for the payment of separation pay as an acceptable alternative to reinstatement when the working relationship between the employee and employer has been severely strained. This liberates the employee from an oppressive work environment and releases the employer from the obligation of keeping an employee it no longer trusts.

• Corporate directors and officers are only solidarily liable with the corporation for termination of employment if done with malice or bad faith. Bad faith implies dishonest purpose or moral obliquity and conscious doing of wrong. To hold officers and directors personally liable, there must be evidence that they acted maliciously or in bad faith in terminating the employee's employment.