GR 163512; (February, 2007) (Digest)
G.R. No. 163512 ; February 28, 2007
DAISY B. TIU, Petitioner vs. PLATINUM PLANS PHIL., INC., Respondent.
FACTS
Respondent Platinum Plans Philippines, Inc., a pre-need company, re-hired petitioner Daisy B. Tiu as Senior Assistant Vice-President under a five-year contract containing a “Non-Involvement Provision.” This clause prohibited Tiu, for two years after any separation from the company, from being involved with any entity engaged in the same pre-need business. In September 1995, Tiu stopped reporting for work and, by November 1995, became the Vice-President for Sales of Professional Pension Plans, Inc., a direct competitor.
Consequently, Platinum Plans sued Tiu for damages, alleging a breach of the non-involvement clause and seeking liquidated damages of ₱100,000, among other claims. Tiu defended herself by arguing the clause was unenforceable as an unreasonable restraint of trade, contending it was greater than necessary for the company’s protection, that the company invested nothing in her pre-existing skills, and that it would deprive her of practicing her only profession.
ISSUE
Whether the non-involvement clause in the employment contract is valid and enforceable.
RULING
The Supreme Court upheld the validity of the non-involvement clause and affirmed the award of liquidated damages. The legal logic rests on the principle that contracts, as the law between the parties, are binding if not contrary to law, morals, good customs, public order, or public policy. The Court distinguished this case from early precedents that struck down restraints for being overly broad and unlimited in scope. Here, the restraint was reasonable and partial, limited to a specific industry (the pre-need business) and a finite period of two years.
The Court found the restriction justified to protect the employer’s legitimate business interests, as Tiu’s high-ranking position gave her access to confidential marketing strategies and trade secrets. The clause did not constitute an absolute prohibition on engaging in any livelihood but was a narrowly tailored covenant to prevent unfair competition. Since the stipulation was freely agreed upon and reasonable, the liquidated damages of ₱100,000 for its breach were enforceable. The Court declined to reduce the amount, noting Tiu’s lack of good faith in complying with her contractual obligation.