FACTS:
The petition involves Imasen Philippine Manufacturing Corporation and respondents Ramonchito T. Alcon and Joann S. Papa. Imasen is a domestic corporation engaged in the manufacture of auto seat-recliners and slide-adjusters. They hired Alcon and Papa as manual welders in 2001.
On October 5, 2002, Imasen's security guard, Cyrus A. Altiche, came across Alcon and Papa having sexual intercourse on the floor of the "Tool and Die" section, using a piece of carton as a mattress. Altiche reported this to another security guard, Danilo S. Ogana. Ogana conducted a follow-up inspection, during which Alcon picked up the carton allegedly used by Alcon and Papa and returned it to its original place. Altiche submitted a report of the incident to Imasen’s Finance and Administration Manager.
Imasen issued inter-office memoranda informing Alcon and Papa of the incident and directing them to explain themselves. The respondents claimed they were merely sleeping in the "Tool and Die" section and that other employees were present, making the act charged impossible.
After a formal hearing, Imasen terminated the respondents' services due to gross misconduct. The respondents filed a complaint for illegal dismissal before the Labor Arbiter (LA). The LA dismissed the complaint for lack of merit and found Alcon and Papa guilty of gross misconduct with due process.
The National Labor Relations Commission (NLRC) affirmed the LA's decision, stating that Imasen had sufficient evidence to justify the dismissal. The Court of Appeals (CA), however, nullified the NLRC's ruling. The CA agreed with the labor tribunals regarding the infraction committed but disagreed with the dismissal penalty. The CA reduced the penalty to a three-month suspension and ordered Imasen to reinstate the respondents with back wages.
Imasen filed a petition for review, arguing that the act constitutes serious misconduct justifying dismissal, and questioning the CA's award of back wages. The respondents argue that the elements of serious misconduct are not present and support the CA's ruling.