Corporate Officers vs Employees: Who Hears Dismissal Cases in the Philippines

When a corporate officer is removed from their position, a threshold question arises: should the case be heard by a labor arbiter or by the Regional Trial Court? The Supreme Court's ruling in Locsin v. Nissan Lease Phils., Inc. (G.R. No. 185567, October 20, 2010) provides clear guidance on this issue, distinguishing corporate officers from regular employees and clarifying the proper forum for their disputes.

The Case: A Corporate Officer's Removal

Arsenio Locsin served as Executive Vice President and Treasurer of Nissan Lease Phils., Inc. (NCLPI) for 13 years, having been re-elected annually by the Board of Directors. In January 2005, he was elected Chairman of the Board. Seven months later, during a special board meeting, he was neither re-elected as Chairman nor reinstated as EVP/Treasurer.

Locsin filed a complaint for illegal dismissal before the Labor Arbiter, claiming he was a regular employee entitled to security of tenure. NCLPI moved to dismiss, arguing that the Labor Arbiter lacked jurisdiction because the dispute was intra-corporate in nature.

The Issue: Who Has Jurisdiction?

The central question was whether Locsin, as EVP/Treasurer, was a corporate officer or a regular employee. This determination would decide whether the Labor Arbiter or the Regional Trial Court had jurisdiction over his removal.

The Ruling: Corporate Officers Belong to the RTC

The Supreme Court ruled that Locsin was a corporate officer, not a regular employee. Under Section 25 of Batas Pambansa Blg. 68 (the Corporation Code), corporate officers include the president, secretary, treasurer, and such other officers as may be provided in the by-laws. Since NCLPI's by-laws specifically enumerated the position of EVP/Treasurer, and Locsin was elected to that position by the Board, he was a corporate officer.

The Court distinguished officers from employees: an "office" is created by the corporation's charter, and the officer is elected by directors or stockholders. An "employee" usually occupies no office and is hired by the managing officer, not by board election.

Because Locsin's removal involved a corporate officer's tenure, the dispute was intra-corporate. Under Section 5 of Presidential Decree No. 902-A, as transferred to the courts by Republic Act No. 8799, the Regional Trial Court—not the Labor Arbiter—has jurisdiction over such controversies.

The Procedural Lesson: Interlocutory Orders and Proper Remedies

The Court also addressed a procedural misstep. NCLPI had elevated the Labor Arbiter's denial of its motion to dismiss directly to the Court of Appeals via certiorari under Rule 65. The Court held this was improper: the denial of a motion to dismiss is an interlocutory order that cannot be appealed immediately. The proper remedy was to file a position paper, raise the jurisdictional defense, and appeal to the NLRC under Article 223 of the Labor Code after a final decision.

However, the Court applied an exception to strict procedural rules because the Labor Arbiter clearly lacked jurisdiction. Requiring the parties to undergo full proceedings before the Labor Arbiter would cause substantial injustice and unnecessary delay.

Practical Takeaways

• Check the by-laws first. If a position is specifically enumerated in a corporation's by-laws and filled by board election, the holder is likely a corporate officer, not a regular employee.
• Know the right forum. Disputes involving the removal of corporate officers are intra-corporate controversies within the Regional Trial Court's jurisdiction, not the Labor Arbiter's.
• Don't appeal interlocutory orders. A denial of a motion to dismiss by a Labor Arbiter is not immediately appealable; raise the defense in the position paper and await the final decision.
• Corporate officers lack security of tenure. Unlike regular employees, corporate officers serve at the pleasure of the board and are not covered by the Labor Code's security of tenure provisions.
• Election versus hiring matters. The manner of engagement—election by the board versus hiring by a managing officer—is a key factor in determining status.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.