Indemnity in the Form of Nominal Damages as Award in a Labor Case

Indemnity in the Form of Nominal Damages as Award in a Labor Case

Nominal damages are adjudicated in order that a right of a plaintiff which has been violated or invaded by another may be vindicated or recognized without having to indemnify the plaintiff for any loss suffered by him. [Article 2221, Civil Code]

Nominal damages may likewise be awarded in every obligation arising from law, contracts, quasi-contracts, acts or omissions punished by law, and quasi-delicts, or where any property right has been invaded. [Agabon vs. NLRC, G.R. No. 158693, November 17, 2004]

In labor context, this contemplates a situation where the employee was dismissed without observance of statutory due process. This is the procedural requirement which is independent of the ground for dismissal or termination.

For instance, in the case of theft, whether or not the employee is guilty, and irrespective of the validity of the dismissal, the employee is entitled to notices and hearing. Failure to observe this procedure gives rise to liability for nominal damages as a form of indemnity to the right of employee that was transgressed by the employer.

According to the Supreme Court in Agabon, the bare act of failing to observe the notice requirement gives rise to nominal damages assessable against the employer and due the employee. The Labor Code indubitably entitles the employee to notice even if dismissal is for just cause, even if there is no apparent intent to void such dismissals deficiently implemented.

It has also been held that one’s employment, profession, trade, or calling is a “property right” and the

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wrongful interference therewith gives rise to an actionable wrong.

As to how much should the nominal damages be, it is left to the discretion of the court, or in labor cases, of the Labor Arbiter and the successive appellate levels. The authority to nominate standards governing the award of nominal damages has clearly been delegated to the judicial branch, and it will serve good purpose for the Court to provide such guidelines.

Considering that the affected right is a property right, there is justification in basing the amount of nominal damages on the particular characteristics attaching to the claimant’s employment. Factors such as length of service, positions held, and received salary may be considered to obtain the proper measure of nominal damages. After all, the degree by which a property right should be vindicated is affected by the estimable value of such right.

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due process requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the employee. This became known as the Wenphil or Belated Due Process Rule.

In Serrano vs. NLRC, the rule on the extent of the sanction was changed. It was held that the violation by the employer of the notice requirement in termination for just or authorized causes was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized cause.

Where the dismissal is for a just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights, as ruled in Reta vs. National Labor Relations Commission.

The indemnity to be imposed should be stiffer to discourage the abhorrent practice of “dismiss now, pay later,” which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer.

Learn how to Validly Terminate Employee in the Philippines with this Tutorial Video of Atty. Elvin

Read more on procedural due process discussion by Atty. Elvin:

Read more on procedural due process by Atty. Villanueva:

Twin Requirements of Notice and Hearing

Procedural Due Process for Other Types of Employment

Notice to Explain: Contents and Requirements

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