Corporate Officer vs Employee: Who Hears Illegal Dismissal Cases?

The line between a corporate officer and a regular employee can determine which forum hears an illegal dismissal case. In Matling Industrial and Commercial Corporation v. Coros (G.R. No. 157802, October 13, 2010), the Supreme Court settled this question: a position not listed in the corporation's by-laws is not a corporate office, even if the title sounds executive. The case clarifies the jurisdiction of the Labor Arbiter (LA) versus the Regional Trial Court (RTC) in termination disputes.

The Dispute

Ricardo Coros worked for Matling Industrial and Commercial Corporation for 33 years, rising from bookkeeper to Vice President for Finance and Administration. After his dismissal in 2000, he filed a complaint for illegal dismissal with the NLRC.

The company moved to dismiss, arguing that Coros was a corporate officer and board member, making the case an intra-corporate dispute. At the time, such disputes fell under the Securities and Exchange Commission (SEC), and later the RTC under Republic Act No. 8799. The Labor Arbiter initially agreed and dismissed the case, but the NLRC reversed, and the Court of Appeals affirmed the NLRC.

The Legal Framework

Under Article 217 of the Labor Code, the Labor Arbiter has original and exclusive jurisdiction over termination disputes involving all workers. However, when the dismissed person is a corporate officer, the controversy becomes intra-corporate and falls outside the LA's jurisdiction.

The key provision is Section 25 of the Corporation Code, which identifies corporate officers as the president, secretary, treasurer, and such other officers as may be provided for in the by-laws. The Supreme Court interpreted this strictly: a position must be expressly mentioned in the by-laws to be considered a corporate office.

Why Coros Was an Employee

Matling's by-laws listed only four corporate officers: President, Executive Vice President, Secretary, and Treasurer. Coros's position was not among them. Although a by-law allowed the President to create new offices, the Court held this did not make those positions corporate offices.

The Court reasoned that allowing a by-law enabling clause to create corporate offices would let a board circumvent the employee's constitutional right to security of tenure. The power to elect corporate officers is vested exclusively in the board of directors and cannot be delegated.

The Court also rejected the argument that Coros's status as a director and stockholder automatically made his dismissal an intra-corporate dispute. The proper test considers two elements: the status or relationship of the parties, and the nature of the question. Coros's appointment and dismissal related to his employment, not his directorship. He had been promoted based on long service, and his removal did not affect his board membership.

Practical Takeaways

• Check the by-laws first. A position expressly listed in the corporation's by-laws is likely a corporate office. A title alone, such as "Vice President," does not make someone a corporate officer.
• Who appointed the person matters. Corporate officers are elected by the board of directors or stockholders. If a general manager or president appointed the person, the position is likely an ordinary employment.
• Stockholder status is not decisive. Being a shareholder or director does not automatically convert an employment dispute into an intra-corporate case. The nature of the controversy controls.
• The Labor Arbiter is the default forum. Unless the dismissed person is a genuine corporate officer, illegal dismissal cases belong to the Labor Arbiter, not the RTC.

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