SC: Employer’s ‘resign or face charges’ ultimatum is constructive dismissal

The Supreme Court (SC) has ruled that a Cebu-based automotive company illegally dismissed a tire recapping team leader with more than 20 years of service after management repeatedly pressured him to resign under threat of criminal prosecution.

In a decision promulgated on Aug. 26, 2026 and penned by Associate Justice Hernando, the SC First Division granted the petition of Niño Rio Gabrillo and reversed the Court of Appeals (CA), which had reinstated the dismissal of his illegal dismissal complaint against Tri-J Marketing, Inc.

“The ultimatum presented to him—resignation or criminal prosecution—cannot be regarded as a voluntary choice,” the SC said. “Such coercive conduct is sufficient to constitute constructive dismissal.”

Tri-J was ordered to pay Gabrillo full backwages, separation pay in lieu of reinstatement, P30,000 in moral damages, P30,000 in exemplary damages, and attorney’s fees equal to 10 percent of the total award.

Audit, accusations, and an ‘act of mercy’

Tri-J, a joint venture corporation owned and managed by its founder Angel Guadalquiver and his children, runs vehicle repair services and sells automotive accessories through seven branches in Cebu City.

Gabrillo joined the company in 1997. Over the years, he received several loyalty and service awards and rose to team leader of the tire recapping section, where all recapping operations involving moldblow tires fell under his responsibility.

Trouble started when an audit turned up alleged discrepancies in the inventory of camelbacks, the rubber material bonded onto tire casings to produce recapped tires. On Jan. 4, 2019, Gabrillo was served a Notice to Explain over discrepancies in the measurements and weight of the camelbacks.

According to Gabrillo, management then began pushing him to resign over alleged losses of about P400,000. He said Guadalquiver accused him of selling the materials to customers, a charge he denied, pointing out that the premises were monitored by closed-circuit television cameras and that company property could not leave without a gate pass.

Gabrillo claimed Guadalquiver later presented him with a prepared resignation letter and warned that criminal charges would be filed if he refused. He said he was first offered P148,000 as separation pay, which was later cut to P30,000 in financial assistance. A final offer of P50,000 followed, which he said Guadalquiver told him to accept as an “act of mercy,” or face theft charges.

Gabrillo refused to resign. Meanwhile, the company’s Human Resources (HR) Department kept following up through text messages, telling him his financial assistance had been processed and would be released once he signed a resignation letter.

When Gabrillo reported for work on Feb. 11, 2019, he said he was no longer allowed inside and was told he had been dismissed. Two days later, HR texted him asking when he and his wife could visit “regarding the termination notice.”

Tri-J, for its part, denied firing Gabrillo. It said he was merely under administrative investigation, had been given the chance to explain, and had stopped reporting for work, thereby abandoning his job. It admitted that a notice of termination had been prepared but said this was never served.

Conflicting rulings

The Labor Arbiter dismissed Gabrillo’s complaint for “utter lack of merit,” finding that the pending investigation did not amount to actual or constructive dismissal.

The National Labor Relations Commission (NLRC) reversed this, finding the accusations against Gabrillo vague and unsupported, and holding that the threats of prosecution and the uncontroverted text messages showed his employment had been effectively terminated before the administrative process was completed.

The CA, however, set aside the NLRC ruling. It held that an offer to resign in lieu of administrative proceedings is not, by itself, constructive dismissal, and that Gabrillo had abandoned his job.

Because of the conflicting factual findings of the three tribunals, the SC said it was justified in reviewing the records, an exception to the rule that the Court is not a trier of facts.

‘Dismissal in disguise’

The SC stressed that the absence of a formal termination notice does not rule out illegal dismissal, describing constructive dismissal as a “dismissal in disguise.”

It exists, the Court explained, when an employer’s acts make continued employment “impossible, unreasonable, or unlikely,” leaving the employee with no real option except to resign.

While the SC recognized that an employer may offer an employee the option to resign during an ongoing investigation as a way of parting amicably, it said such an option “must be genuinely voluntary, free from coercion, and completely open to refusal.”

“The repeated threats of criminal prosecution transformed what appeared to be an option into an ultimatum incompatible with the voluntariness required of a valid resignation,” the Court said.

The SC also found that Tri-J failed to prove a just cause for dismissal. Quoting the NLRC with approval, it noted that the company never explained why “all the blame was heaped on complainant Gabrillo even when there were apparently many other employees in the recapping department who may be responsible for the alleged irregularities.”

Tri-J could not invoke loss of trust and confidence under Article 297 of the Labor Code either, the Court said, since it presented only an unauthenticated job description that was not shown to have been given to Gabrillo, and no competent evidence linking him to any deliberate misconduct. “Mere suspicion, speculation, or unsubstantiated accusations are insufficient,” it said.

The claim of abandonment likewise failed. The SC pointed out that Gabrillo consistently refused to resign and promptly filed a complaint for illegal dismissal, which “clearly demonstrates his desire to preserve—not sever—the employer-employee relationship.”

The Court further faulted the company for violating procedural due process. It said the Notice to Explain was couched in general terms, and that instead of completing the disciplinary process, Tri-J “repeatedly attempted to secure petitioner’s resignation through threats of criminal prosecution while withholding a definitive resolution of the administrative proceedings.”

The SC also reminded the CA that in a certiorari petition under Rule 65, it cannot reweigh the evidence or substitute its own findings for those of the labor tribunals when these are supported by substantial evidence.

Bad faith

Finding reinstatement no longer feasible because the relationship had been irreparably strained, the SC awarded separation pay of one month’s salary for every year of service, plus full backwages from Feb. 11, 2019, the date Gabrillo was barred from the workplace.

It also found that Tri-J acted in bad faith, noting that the company kept pressuring Gabrillo through text messages about releasing his financial assistance upon signing a resignation letter, “even while insisting during the proceedings that no dismissal had occurred.”

“Such conduct falls short of the standards of fair dealing and good faith required of employers,” the Court said, adding that the company’s “oppressive manner” caused Gabrillo “confusion and feeling of uncertainty after more than 20 years of faithful service.”

All monetary awards will earn six percent legal interest a year from the finality of the decision until fully paid. The case was remanded to the Labor Arbitration Branch for computation of the amounts due.

Chief Justice Gesmundo, who chairs the First Division, and Associate Justices Zalameda, Rosario and Marquez completed the division.