Corporate Officer vs Employee: Who Hears Illegal Dismissal Cases?

When a high-ranking company executive is dismissed, the first question is not whether the dismissal was legal—it is which forum has the power to hear the case. The answer depends on a single, often misunderstood distinction: whether the dismissed person is a corporate officer or a regular employee.

In Matling Industrial and Commercial Corporation v. Coros (G.R. No. 157802, October 13, 2010), the Supreme Court clarified this distinction and settled a recurring jurisdictional puzzle. The ruling is essential reading for employers, executives, and HR practitioners because it determines whether an illegal dismissal complaint goes to the Labor Arbiter (LA) or the Regional Trial Court (RTC).

The Case: A 33-Year Employee Dismissed

Ricardo Coros began working for Matling Industrial and Commercial Corporation in 1966 as a bookkeeper. Over 33 years, he rose steadily through the ranks—accountant, office supervisor, comptroller, manager—until he became Vice President for Finance and Administration in 1987.

In 2000, Matling dismissed him. Coros filed a complaint for illegal dismissal before the Labor Arbiter. The company moved to dismiss, arguing that Coros was a corporate officer and a member of the Board of Directors, making the dispute an intra-corporate controversy that belonged not to the LA but to the SEC (and later, after Republic Act No. 8799, to the RTC).

The Issue: Corporate Officer or Employee?

The decisive question was whether Coros's position as Vice President for Finance and Administration was a corporate office. If it was, his dismissal was an intra-corporate dispute for the RTC. If it was not, he was a regular employee whose illegal dismissal case belonged to the Labor Arbiter.

The Ruling: The Position Was Not a Corporate Office

The Supreme Court sided with Coros and affirmed that the Labor Arbiter had jurisdiction. The Court laid down a clear test based on the Corporation Code.

Only positions expressly listed in the by-laws are corporate offices. The Corporation Code requires the board of directors to elect a president, treasurer, secretary, and such other officers as may be provided for in the by-laws. The Court held that a position must be expressly mentioned in the by-laws to qualify as a corporate office. Creating an office under a general enabling provision is not enough.

In this case, Matling's by-laws listed only four corporate officers: President, Executive Vice President, Secretary, and Treasurer. The position of Vice President for Finance and Administration was not among them. It was created by the President under a by-law provision authorizing him to "create new offices"—but this did not make it a corporate office.

The board cannot delegate its power to create corporate offices. The Court stressed that the power to elect corporate officers is vested exclusively in the board of directors and cannot be delegated to subordinate officers. The President's power to create offices under the by-laws merely allowed him to create non-corporate positions for ordinary employees.

Status as director or stockholder does not automatically make a dispute intra-corporate. The Court rejected the argument that Coros's status as a director and stockholder converted his dismissal into an intra-corporate controversy. The proper test considers two elements: (1) the status or relationship of the parties, and (2) the nature of the question at issue. Not every conflict between a corporation and its stockholder is intra-corporate.

The Court noted that Coros had been promoted based on his long service, not because of his status as a stockholder or director. His directorship was unaffected by his dismissal from employment. Following Prudential Bank and Trust Company v. Reyes, the Court held that an employee who rises from the ranks and performs tasks integral to the business is a regular employee entitled to security of tenure.

How to Tell a Corporate Officer from a Regular Employee

The Court's test is straightforward:

• A corporate officer occupies a position expressly named in the corporation's by-laws and is elected by the board of directors or the stockholders.
• A regular employee occupies a position created by management—even a high-ranking one—and is appointed by a managing officer who also sets the compensation.

The title does not matter. A "Vice President" can be a regular employee if the position is not in the by-laws and was not created by the board. Conversely, an "Assistant Secretary" can be a corporate officer if the by-laws say so.

Practical Takeaways

• Check the by-laws first. Before assuming a dismissal is an intra-corporate dispute, verify whether the position is expressly listed in the corporation's by-laws. If it is not, the Labor Arbiter likely has jurisdiction.
• Titles are not decisive. A vice president or other high-ranking executive may still be a regular employee protected by security of tenure under the Labor Code.
• The board cannot delegate its power. A by-law provision allowing the President to create offices does not create corporate offices—only the board, or the by-laws themselves, can do that.
• Director status is not enough. Being a stockholder or director does not automatically make a dismissal dispute intra-corporate. The nature of the question and the circumstances of the appointment matter.
• For employees who rose from the ranks. Long service and promotion through the ranks strongly support a finding of regular employment, entitling the worker to the protections of labor law.

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