Cooperative Officer Dismissal Jurisdiction Lies With Regional Trial Courts NOT Labor Tribunals

The Supreme Court has settled a recurring question in Philippine labor law: when a cooperative officer such as a general manager is dismissed, does the case belong before labor tribunals or the regular courts? In Ellao v. Batangas I Electric Cooperative, Inc. (G.R. No. 209166, July 9, 2018), the Court ruled that complaints for illegal dismissal filed by cooperative officers constitute intra-cooperative controversies, jurisdiction over which belongs to the regional trial courts (RTCs), not the National Labor Relations Commission (NLRC) or Labor Arbiter.

The case clarifies an important distinction that affects how dismissed officers of cooperatives should pursue their remedies.

The Facts of the Case

Demetrio Ellao was employed by Batangas I Electric Cooperative, Inc. (BATELEC I), an electric cooperative organized under Presidential Decree No. 269. He started as an Office Supplies and Equipment Control Officer in 1982 and was appointed General Manager on June 1, 2006.

In February 2009, complaints were filed against Ellao alleging irregularities in his discharge of functions as General Manager. A fact-finding body was created, and Ellao was placed under preventive suspension. After Ellao submitted his explanation, the matter was set for hearing, but the hearing was postponed at his instance. The fact-finding body eventually issued a report recommending his termination.

On March 13, 2009, the Board of Directors adopted Board Resolution No. 24-09 terminating Ellao as General Manager on grounds of gross and habitual neglect of duties, willful disobedience, and insubordination resulting in loss of trust and confidence. The National Electrification Administration (NEA) later confirmed the termination.

Ellao filed a complaint for illegal dismissal and money claims before the Labor Arbiter on February 23, 2011.

The Issue

The central question was whether jurisdiction over Ellao's complaint for illegal dismissal belonged to the labor tribunals or to the regional trial courts.

The Ruling of the Court

The Supreme Court denied Ellao's petition and affirmed the Court of Appeals' ruling that the RTC, not the labor tribunals, has jurisdiction over the case.

The Court explained that registration with the Securities and Exchange Commission (SEC) is not the operative factor in determining jurisdiction. Electric cooperatives organized under P.D. 269 already enjoy corporate powers and juridical personality akin to corporations. Registration with the SEC becomes relevant only when a cooperative decides to convert into and register as a stock corporation.

The Court then applied the distinction between "officers" and "employees" as established in Tabang v. NLRC. An office is created by the charter of the corporation, and the officer is elected by the directors or stockholders. An employee usually occupies no office and is generally employed not by action of the directors or stockholders but by the managing officer of the corporation.

Under the Labor Code, illegal dismissal cases of ordinary employees are cognizable by the Labor Arbiter. However, by way of exception, where the complaint involves a corporate officer, the controversy falls under the jurisdiction of the SEC, which was transferred to the RTCs by Republic Act No. 8799 (The Securities Regulation Code).

Why the General Manager Was a Corporate Officer

The Court applied the ruling in Matling Industrial and Commercial Corporation v. Coros, which held that under the Corporation Code, a position must be expressly mentioned in the By-Laws to be considered a corporate office. Creating an office pursuant to a By-Laws enabling provision is not enough.

In this case, the position of General Manager was expressly provided for under the By-laws of BATELEC I. The functions of the office—management of the Cooperative and keeping the Board fully informed of all operations—were specifically laid down in the By-laws themselves.

The Court cited Pascual v. Caniogan Credit and Development Cooperative, which held that an officer's dismissal is a matter that comes with the conduct and management of the affairs of a cooperative and is an intra-cooperative controversy. That nature is not altered by the reason or wisdom the Board may have in taking such action.

Since Ellao filed his complaint after the passage of R.A. 8799, his complaint fell under the jurisdiction of the RTC as an intra-cooperative dispute. The rulings of the Labor Arbiter and NLRC were declared void for lack of jurisdiction.

Practical Takeaways

• Officers of cooperatives cannot file illegal dismissal cases before the Labor Arbiter. Their dismissal cases are intra-cooperative controversies that belong to the RTC.
• A position is a corporate office only if expressly provided in the By-laws. Mere creation of a position pursuant to an enabling provision in the By-laws is not enough.
• Electric cooperatives enjoy corporate powers even without SEC registration. Organization under P.D. 269 sufficiently vests juridical personality and corporate powers.
• Filing in the wrong forum is costly. The Labor Arbiter's decision in this case was declared void, and the case had to be refiled in the proper court.
• Check the By-laws first. Before filing a dismissal case, determine whether the position is expressly mentioned in the cooperative's By-laws, as this determines the proper forum.

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