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ISABELA-I ELECTRIC COOP. v. VICENTE B. DEL ROSARIO

FACTS:

On January 29, 1996, Isabela-I Electric Cooperative, Inc. hired Vicente B. Del Rosario, Jr. as a Financial Assistant. He quickly rose through the ranks and was promoted to the positions of Acting Management Internal Auditor and then Management Internal Auditor. Del Rosario had a monthly salary of P30,979.00 exclusive of other benefits and had never received any complaints about his performance.

In January 2011, Isabela-I Electric Cooperative approved a reorganization plan, declaring all positions vacant. Del Rosario and other employees expressed opposition to the reorganization but it was implemented in June 2011. Del Rosario, along with other employees, filled out application forms indicating their preferred positions. While on vacation leave in October 2012, Del Rosario received two letters from Isabela-I Electric Cooperative. The first letter appointed him as a probationary Area Operations Manager, and the second contained four office memoranda which included his area of assignment, his order to cease acting as management internal auditor, and the appointment of his subordinate as officer-in-charge of the Auditing Department. Del Rosario reluctantly accepted his appointment even though he had issues with it and requested to be reinstated to his former position in January 2013. Isabela-I Electric Cooperative did not act on his request, leading to Del Rosario filing a complaint for illegal dismissal.

Del Rosario claimed that he was constructively dismissed as his new position had a lower salary rank and lesser responsibilities compared to his former position. He also argued that his former position was not abolished and was given to an employee with lesser qualifications. Isabela-I Electric Cooperative justified the reorganization under the Electric Power Industry Reform Act of 2001 and argued that Del Rosario suffered no diminution in compensation and that his new appointment was based on a valid reorganization. The Labor Arbiter dismissed the complaint, but the National Labor Relations Commission (NLRC) reversed the decision and declared Del Rosario to have been illegally transferred and/or demoted resulting in his unlawful constructive dismissal. The NLRC ordered Isabela-I Electric Cooperative to reinstate Del Rosario to his former position and pay him the salary differential, moral and exemplary damages, and attorney's fees. The NLRC's decision was affirmed by the Court of Appeals.

ISSUES:

  1. Was respondent constructively dismissed when he got appointed to the new position of Area Operations Management Department Manager in lieu of his former position as Management Internal Auditor?

  2. Whether there was a demotion or diminution of responsibilities.

  3. Whether the transfer and/or demotion of Vicente B. Del Rosario, Jr. was illegal.

  4. Whether Isabela-1 Electric Coop., Inc. should reinstate and restore Vicente B. Del Rosario, Jr. to his former position.

RULING:

  1. The NLRC and Court of Appeals correctly ruled that respondent was demoted without sufficient cause. Demotion involves a situation in which an employee is relegated to a subordinate or less important position constituting a reduction to a lower grade or rank, with a corresponding decrease in duties and responsibilities, and usually accompanied by a decrease in salary. This was exactly what happened to respondent. The Court did not agree with petitioner's claim that respondent's appointment to a new position was not a demotion, as the responsibilities he used to discharge in his former position had been significantly reduced.

  2. Yes, there was a demotion or diminution of responsibilities. The Court held that the new position of the respondent entailed less responsibilities and less qualifications than his former position as Management Internal Auditor. It was established that the respondent's former position covered the different financial aspects of the cooperative, while the new position limited his responsibilities to collection and operation. Therefore, there was a palpable diminution of responsibilities, resulting in a demotion.

  3. The Court declared that the transfer and/or demotion of Vicente B. Del Rosario, Jr. was illegal. Isabela-1 Electric Coop., Inc. was ordered to immediately reinstate and restore Vicente B. Del Rosario, Jr. to his former position as Management Internal Auditor.

PRINCIPLES:

  • An employer is free to regulate all aspects of employment, including the transfer of employees, but this right should not be exercised with unbridled discretion. The transfer should not be unreasonable, inconvenient, or prejudicial to the employee, and should not involve a demotion constituting constructive dismissal. (Philippine Industrial Security Agency Corporation vs. Percival Aguinaldo)

  • Diminution in rank involves a reduction to a lower grade or rank, with a corresponding decrease in duties, responsibilities, and usually accompanied by a decrease in salary. (Court's interpretation)

  • Diminution of responsibilities can be considered a demotion, even if the employee retained the same job title.

  • The "totality of circumstances rule" must be considered in determining whether there was a demotion.

  • A demotion may involve a reduction in duties, responsibilities, status, or rank, and may or may not involve a reduction in salary.

  • An employee who is unjustly dismissed from employment is entitled to reinstatement without loss of seniority rights and other privileges, as well as full backwages, inclusive of allowances and other benefits or their monetary equivalent computed from the time the compensation was withheld up to actual reinstatement.

  • A demotion without justifiable cause may be considered as bad faith, which may warrant the award of moral and exemplary damages.

  • A transfer and/or demotion is deemed illegal if it is not made in accordance with existing laws, collective bargaining agreement, or employment contract.

  • An illegal transfer and/or demotion may warrant the reinstatement and restoration of the employee to his/her former position.

  • In cases of illegal transfer and/or demotion, the employee may be entitled to salary differentials, moral damages, exemplary damages, attorney's fees, and legal interest on the monetary awards.