Dear PAO,
Are the individual corporate officers equally liable with the employer corporation for illegal dismissal cases?
Giezette
Dear Giezette,
The answer to your query depends on whether a director or officer willfully and knowingly voted for or assented to a patently unlawful acts of the corporation in illegally dismissing an employee or is guilty of gross negligence or bad faith in directing the affairs of the corporation leading to such unlawful termination.
To explain further, allow me to lead your attention to our pertinent laws and jurisprudence. To this end, please be advised of Section 30 of Republic Act (RA) 11232, otherwise known as the Revised Corporation Code of the Philippines, viz.:
“Section. 30. Liability of Directors, Trustees or Officers. – Directors or trustees who willfully and knowingly vote for or assent to patently unlawful acts of the corporation or who are guilty of gross negligence or bad faith in directing the affairs of the corporation or acquire any personal or pecuniary interest in conflict with their duty as such directors or trustees shall be liable jointly and severally for all damages resulting therefrom suffered by the corporation, its stockholders or members and other persons. x x x.” (Emphasis and underscoring supplied)
The provision above serves as the legal basis for holding a corporate director or officer solidarily liable with a corporation. This principle is further clarified in Kho v. Magbanua (GR 237246, July 24, 2019), penned by Associate Justice Estela Perlas-Bernabe:
“It is settled that a corporation is a juridical entity with legal personality separate and distinct from those acting for and in its behalf and, in general, from the people comprising it. As a juridical entity, a corporation may act only through its directors, officers, and employees. As such, obligations incurred by the corporation, acting through its directors, officers, and employees, are its sole liabilities, and these persons should not be held jointly and solidarily liable with the corporation. However, being a mere fiction of law, this corporate veil can be pierced when such corporate fiction is used: (a) to defeat public convenience or as a vehicle for the evasion of an existing obligation; (b) to justify wrong, protect or perpetuate fraud, defend crime, or as a shield to confuse legitimate issues; or (c) as a mere alter ego or business conduit of a person, or is so organized and controlled and its affairs are so conducted as to make it merely an instrumentality, agency, conduit, or adjunct of another corporation.
“Fundamental in the realm of labor law that corporate directors, trustees, or officers can be held solidarily liable with the corporation when they assent to a patently unlawful act of the corporation, or when they are guilty of bad faith or gross negligence in directing its affairs, or when there is a conflict of interest resulting in damages to the corporation, its stockholders, or other persons.
“However, it bears emphasis that a finding of personal liability against a director, trustee, or a corporate officer requires the concurrence of these two (2) requisites, namely: (a) a clear allegation in the complaint of gross negligence, bad faith or malice, fraud, or any of the enumerated exceptional instances; and (b) clear and convincing proof of said grounds relied upon in the complaint sufficient to overcome the burden of proof borne by the complainant.” (Emphasis and Underscoring Supplied)
Stated otherwise, a corporate officer cannot be held personally liable for the liabilities of the corporation absent any finding that he or she willfully and knowingly assented to patently unlawful acts of the latter, or is guilty of bad faith or gross negligence in directing its affairs, or is guilty of conflict of interest resulting in damages thereto. In Guillermo v. Uson (GR 198967, March 7, 2016), penned by Chief Justice Diosdado Peralta, the high court, citing several cases, held:
“The subsequent cases of McLeod v. NLRC, Spouses Santos v. NLRC and Carag v. NLRC, have all established, save for certain exceptions, the primacy of Section 31 of the Corporation Code in the matter of assigning such liability for a corporation’s debts, including judgment obligations in labor cases. x x x Personal liability attaches only when, as enumerated by the said Section 31 of the Corporation Code, there is a [willful) and knowing assent to patently unlawful acts of the corporation, there is gross negligence or bad faith in directing the affairs of the corporation, or there is a conflict of interest resulting in damages to the corporation. x x x
“It also bears emphasis that in cases where personal liability attaches, not even all officers are made accountable. Rather, only the “responsible officer,” i.e., the person directly responsible for and who “acted in bad faith” in committing the illegal dismissal or any act violative of the Labor Code, is held solidarily liable, x x x
“The common thread running among the aforementioned cases, however, is that the veil of corporate fiction can be pierced, and responsible corporate directors and officers or even a separate but related corporation, may be impleaded and held answerable solidarily in a labor case, even after final judgment and on execution, so long as it is established that such persons have deliberately used the corporate vehicle to unjustly evade the judgment obligation, or have resorted to fraud, bad faith or malice in doing so. The key element is the presence of fraud, malice or bad faith. Bad faith, in this instance, does not connote bad judgment or negligence but imports a dishonest purpose or some moral obliquity and conscious doing of wrong; it means breach of a known duty through some motive or interest or ill will; it partakes of the nature of fraud.” (Emphases and underscoring supplied)
We hope that we are able to answer your queries. This advice is based solely on the facts you have narrated and our appreciation of the same. Our opinion may vary when other facts are changed or elaborated.
Thank you for your continued trust and support.
Editor’s note: Dear PAO is a daily column of the Public Attorney’s Office. Questions for Chief Acosta may be sent to [email protected].
