Separate and distinct liability

Corporations act only through its directors, officers or employees. Under this corporate rule, can they be held jointly and severally liable for illegal acts of the corporation? This is one of the issues raised in this case of Manny against a clothing manufacturer (OTC).

Manny was hired as the probationary HRD manager of OTC on September 2, 1999. As the expiration of his six months probationary term was getting closer, Manny felt OTC’s unfair and discriminatory treatment at work. The last straw came when the company’s accounting manager, Ed, was appointed as concurrent HRD manager by its president, Mr. Sy. Manny learned about this company move only after Ed had accepted his appointment and after Mr. Sy had informed all concerned about Ed’s new appointment.

So Manny filed his undated irrevocable resignation letter effective at the close of office hours on March 15, 2000. Thereafter he filed a complaint with the labor arbiter (LA) for illegal dismissal against OTC, its president Mr. Sy, its chairman Mr. Lao and Medy, the finance manager. Manny claimed that he had been constructively dismissed. OTC and the officials he sued, on the other hand, averred that he voluntarily resigned as shown by the irrevocable resignation letter he filed allegedly on March 1, 2000 effective March 15, 2000.

The LA however agreed with Manny and issued a decision in his favor on August 15, 2001. The LA said Manny was forced to resign because of the attendant hostile and discriminatory working environment set by OTC and its officials. Hence the LA found OTC and its corporate officers jointly and severally liable to pay Manny his back-wages, separation pay, illegally deducted salaries for six days, proportionate 13th month pay, attorney’s fees, moral and exemplary damages.

OTC and the corporate officers questioned this decision of the LA. They contended among others, that assuming OTC is indeed liable to Manny for illegal dismissal, the LA erred in holding its corporate officers jointly and severally liable with the company since there was no proof or finding that they have personally acted in bad faith or with malice with respect to Manny’s resignation. Were they correct?

Yes. A corporation, as a juridical entity, may really act only through its director, officers and employees. But the obligations incurred as a result of the directors’ and officers’ acts as corporate agents are not their personal liability but the direct responsibility of the corporation they represent. As a rule, they are only solidarily liable with the corporation for the illegal termination of the services of employees if they acted with malice or bad faith.

In the present case, malice or bad faith on the part of So, Lao and Medy, as corporate officers of OTC was not sufficiently proven to justify a ruling holding them jointly and severally liable with the company. So only OTC should be held liable for the payment of back-wages, separation pay, 13th month pay, illegally deducted salaries, moral and exemplary damages and attorney’s fees (Penaflor vs. Outdoor Clothing Manufacturing Corporation et. al. G.R. 177114, April 13, 2010).

Note: Books containing compilation of my articles on Labor Law and Criminal Law (Vols. I and II) are now available. Call tel. 7249445.

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