Labor 1 1.

Sime Darby vs NLRC Is the act of management in revising the work schedule of its employees and discarding their paid lunch break constitutive of unfair labor practice? Sime Darby Pilipinas, Inc., petitioner, is engaged in the manufacture of automotive tires, tubes and other rubber products. Sime Darby Salaried Employees Association (ALU-TUCP), private respondent, is an association of monthly salaried employees of petitioner at its Marikina factory. Prior to the present controversy, all company factory workers in Marikina including members of private respondent union worked from 7:45 a.m. to 3:45 p.m. with a 30-minute paid "on call" lunch break. On 14 August 1992 petitioner issued a memorandum to all factory-based employees advising all its monthly salaried employees in its Marikina Tire Plant, except those in the Warehouse and Quality Assurance Department working on shifts, a change in work schedule effective 14 September 1992 thus TO: ALL FACTORY-BASED EMPLOYEES RE: NEW WORK SCHEDULE Effective Monday, September 14, 1992, the new work schedule of the factory office will be as follows: 7:45 A.M. 4:45 P.M. (Monday to Friday) 7:45 A.M. 11:45 A.M. (Saturday). Coffee break time will be ten minutes only anytime between: 9:30 A.M. 10:30 A.M. and 2:30 P.M. 3:30 P.M. Lunch break will be between: 12:00 NN 1:00 P.M. (Monday to Friday). Excluded from the above schedule are the Warehouse and QA employees who are on shifting. Their work and break time schedules will be maintained as it is now. 1 Since private respondent felt affected adversely by the change in the work schedule and discontinuance of the 30-minute paid "on call" lunch break, it filed on behalf of its members a complaint with the Labor Arbiter for unfair labor practice, discrimination and evasion of liability pursuant to the resolution of this Court in Sime Darby International Tire Co., Inc. v. NLRC. 2 However, the Labor Arbiter dismissed the complaint on the ground that the change in the work schedule and the elimination of the 30-minute paid lunch break of the factory workers constituted a valid exercise of management prerogative and that the new work schedule, break time and one-hour lunch break did not have the effect of diminishing the benefits granted to factory workers as the working time did not exceed eight (8) hours.

The Labor Arbiter further held that the factory workers would be unjustly enriched if they continued to be paid during their lunch break even if they were no longer "on call" or required to work during the break. He also ruled that the decision in the earlier Sime Darby case 3 was not applicable to the instant case because the former involved discrimination of certain employees who were not paid for their 30-minute lunch break while the rest of the factory workers were paid; hence, this Court ordered that the discriminated employees be similarly paid the additional compensation for their lunch break. Private respondent appealed to respondent National Labor Relations Commission (NLRC) which sustained the Labor Arbiter and dismissed the appeal. 4 However, upon motion for reconsideration by private respondent, the NLRC, this time with two (2) new commissioners replacing those who earlier retired, reversed its earlier decision of 20 April 1994 as well as the decision of the Labor Arbiter. 5 The NLRC considered the decision of this Court in the Sime Darby case of 1990 as the law of the case wherein petitioner was ordered to pay "the money value of these covered employees deprived of lunch and/or working time breaks." The public respondent declared that the new work schedule deprived the employees of the benefits of a time-honored company practice of providing its employees a 30-minute paid lunch break resulting in an unjust diminution of company privileges prohibited by Art. 100 of the Labor Code, as amended. Hence, this petition alleging that public respondent committed grave abuse of discretion amounting to lack or excess of jurisdiction: (a) in ruling that petitioner committed unfair labor practice in the implementation of the change in the work schedule of its employees from 7:45 a.m. 3:45 p.m. to 7:45 a.m. 4:45 p.m. with one-hour lunch break from 12:00 nn to 1:00 p.m.; (b) in holding that there was diminution of benefits when the 30-minute paid lunch break was eliminated; (c) in failing to consider that in the earlier Sime Darby case affirming the decision of the NLRC, petitioner was authorized to discontinue the practice of having a 30-minute paid lunch break should it decide to do so; and, (d) in ignoring petitioner's inherent management prerogative of determining and fixing the work schedule of its employees which is expressly recognized in the collective bargaining agreement between petitioner and private respondent. The Office of the Solicitor General filed in a lieu of comment a manifestation and motion recommending that the petitioner be granted, alleging that the 14 August 1992 memorandum which contained the new work schedule was not discriminatory of the union members nor did it constitute unfair labor practice on the part of petitioner. We agree, hence, we sustain petitioner. The right to fix the work schedules of the employees rests principally on their employer. In the instant case petitioner, as the employer, cites as reason for the adjustment the efficient conduct of its business operations and its improved production. 6 It rationalizes that while the old work schedule included a 30-minute paid lunch break, the employees could be called upon to do jobs during that period as they were "on call." Even if denominated as lunch break, this period could very well be considered as working time because the factory employees were required to work if necessary and were paid accordingly for working. With the new work schedule, the employees are now given a one-hour lunch break without any interruption from their employer. For a full one-hour undisturbed lunch break, the employees can freely and effectively use this hour not only for eating but also for their rest and comfort which are conducive to more efficiency and better performance in their work. Since the employees are no longer required to work during this one-hour lunch break, there is no more need for them to be compensated for this period. We agree with the Labor Arbiter that the new work schedule fully complies with the daily work period of eight (8) hours without violating the Labor Code. 7 Besides, the new schedule applies to all employees in the factory similarly situated whether they are union members or not. 8 Consequently, it was grave abuse of discretion for public respondent to equate the earlier Sime Darby case 9 with the facts obtaining in this case. That ruling in the former case is not applicable here. The issue in that case involved the matter of granting lunch breaks to certain employees while depriving the other employees of such breaks. This Court affirmed in that case the NLRC's finding that such act of management was discriminatory and constituted unfair labor practice.

The case before us does not pertain to any controversy involving discrimination of employees but only the issue of whether the change of work schedule, which management deems necessary to increase production, constitutes unfair labor practice. As shown by the records, the change effected by management with regard to working time is made to apply to all factory employees engaged in the same line of work whether or not they are members of private respondent union. Hence, it cannot be said that the new scheme adopted by management prejudices the right of private respondent to self-organization. Every business enterprise endeavors to increase its profits. In the process, it may devise means to attain that goal. Even as the law is solicitous of the welfare of the employees, it must also protect the right of an employer to exercise what are clearly management prerogatives. 10 Thus, management is free to regulate, according to its own discretion and judgment, all aspects of employment, including hiring, work assignments, working methods, time, place and manner of work, processes to be followed, supervision of workers, working regulations, transfer of employees, work supervision, lay off of workers and discipline, dismissal and recall of workers. 11 Further, management retains the prerogative, whenever exigencies of the service so require, to change the working hours of its employees. So long as such prerogative is exercised in good faith for the advancement of the employer's interest and not for the purpose of defeating or circumventing the rights of the employees under special laws or under valid agreements, this Court will uphold such exercise. 12 While the Constitution is committed to the policy of social justice and the protection of the working class, it should not be supposed that every dispute will be automatically decided in favor of labor. Management also has rights which, as such, are entitled to respect and enforcement in the interest of simple fair play. Although this Court has inclined more often than not toward the worker and has upheld his cause in his conflicts with the employer, such favoritism has not blinded the Court to the rule that justice is in every case for the deserving, to be dispensed in the light of the established facts and the applicable law and doctrine. 2. Globe-Mackay vs NLRC For private respondent Imelda L. Salazar, it would seem that her close association with Delfin Saldivar would mean the loss of her job. In May 1982, private respondent was employed by Globe-Mackay Cable and Radio Corporation (GMCR) as general systems analyst. Also employed by petitioner as manager for technical operations' support was Delfin Saldivar with whom private respondent was allegedly very close. Sometime in 1984, petitioner GMCR, prompted by reports that company equipment and spare parts worth thousands of dollars under the custody of Saldivar were missing, caused the investigation of the latter's activities. The report dated September 25, 1984 prepared by the company's internal auditor, Mr. Agustin Maramara, indicated that Saldivar had entered into a partnership styled Concave Commercial and Industrial Company with Richard A. Yambao, owner and manager of Elecon Engineering Services (Elecon), a supplier of petitioner often recommended by Saldivar. The report also disclosed that Saldivar had taken petitioner's missing Fedders airconditioning unit for his own personal use without authorization and also connived with Yambao to defraud petitioner of its property. The airconditioner was recovered only after petitioner GMCR filed an action for replevin against Saldivar. 1 It likewise appeared in the course of Maramara's investigation that Imelda Salazar violated company reglations by involving herself in transactions conflicting with the company's interests. Evidence showed that she signed as a witness to the articles of partnership between Yambao and Saldivar. It also appeared that she had full knowledge of the loss and whereabouts of the Fedders airconditioner but failed to inform her employer. Consequently, in a letter dated October 8, 1984, petitioner company placed private respondent Salazar under preventive suspension for one (1) month, effective October 9, 1984, thus giving her thirty (30) days within which to, explain her side. But instead of submitting an explanations three (3) days later or on October 12, 1984 private respondent filed a complaint against petitioner for illegal suspension, which she

subsequently amended to include illegal dismissal, vacation and sick leave benefits, 13th month pay and damages, after petitioner notified her in writing that effective November 8, 1984, she was considered dismissed "in view of (her) inability to refute and disprove these findings. 2 After due hearing, the Labor Arbiter in a decision dated July 16, 1985, ordered petitioner company to reinstate private respondent to her former or equivalent position and to pay her full backwages and other benefits she would have received were it not for the illegal dismissal. Petitioner was also ordered to pay private respondent moral damages of P50,000.00. 3 On appeal, public respondent National Labor Relations, Commission in the questioned resolution dated December 29, 1987 affirmed the aforesaid decision with respect to the reinstatement of private respondent but limited the backwages to a period of two (2) years and deleted the award for moral damages. 4 Hence, this petition assailing the Labor Tribunal for having committed grave abuse of discretion in holding that the suspension and subsequent dismissal of private respondent were illegal and in ordering her reinstatement with two (2) years' backwages. On the matter of preventive suspension, we find for petitioner GMCR. The inestigative findings of Mr. Maramara, which pointed to Delfin Saldivar's acts in conflict with his position as technical operations manager, necessitated immediate and decisive action on any employee closely, associated with Saldivar. The suspension of Salazar was further impelled by th.e discovery of the missing Fedders airconditioning unit inside the apartment private respondent shared with Saldivar. Under such circumstances, preventive suspension was the proper remedial recourse available to the company pending Salazar's investigation. By itself, preventive suspension does, not signify that the company has adjudged the employee guilty of the charges she was asked to answer and explain. Such disciplinary measure is resorted to for the protection of the company's property pending investigation any alleged malfeasance or misfeasance committed by the employee. 5 Thus, it is not correct to conclude that petitioner GMCR had violated Salazar's right to due process when she was promptly suspended. If at all, the fault, lay with private respondent when she ignored petitioner's memorandum of October 8, 1984 "giving her ample opportunity to present (her) side to the Management." Instead, she went directly to the Labor Department and filed her complaint for illegal suspension without giving her employer a chance to evaluate her side of the controversy. But while we agree with the propriety of Salazar's preventive suspension, we hold that her eventual separation from employment was not for cause. What is the remedy in law to rectify an unlawful dismissal so as to "make whole" the victim who has not merely lost her job which, under settled Jurisprudence, is a property right of which a person is not to be deprived without due process, but also the compensation that should have accrued to her during the period when she was unemployed? Art. 279 of the Labor Code, as amended, provides: Security of Tenure. In cases of regular employment, the employer shall not terminate the services of an employee except for a just cause or when authorized by this Title. An employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their monetary equivalent computed from the time his compensation was withheld from him up to the time of his actual reinstatement. 6 (Emphasis supplied)

Corollary thereto are the following provisions of the Implementing Rules and Regulations of the Labor Code: Sec. 2. Security of Tenure. In cases of regular employments, the employer shall not terminate the services of an employee except for a just cause as provided in the Labor Code or when authorized by existing laws. Sec. 3. Reinstatement. An employee who is unjustly dismissed from work shall by entitled to reinstatement without loss of seniority rights and to backwages." 7 (Emphasis supplied) Before proceeding any furthers, it needs must be recalled that the present Constitution has gone further than the 1973 Charter in guaranteeing vital social and economic rights to marginalized groups of society, including labor. Given the pro-poor orientation of several articulate Commissioners of the Constitutional Commission of 1986, it was not surprising that a whole new Article emerged on Social Justice and Human Rights designed, among other things, to "protect and enhance the right of all the people to human dignity, reduce social, economic and political inequalities, and remove cultural inequities by equitably diffusing wealth and political power for the common good." 8 Proof of the priority accorded to labor is that it leads the other areas of concern in the Article on Social Justice, viz., Labor ranks ahead of such topics as Agrarian and Natural Resources Reform, Urban Land Roform and Housing, Health, Women, Role and Rights of Poople's Organizations and Human Rights. 9 The opening paragraphs on Labor states The State shall afford full protection to labor, local and overseas, organized and unorganized, and promote full employment and equality of employment opportunities for all. It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations, and peaceful concerted activities, including the right to strike in accordance with law. They shall be entitled to security of tenure, humane conditions of work, and a living wage. They shall also participate in policy and decision-making processes affecting their rights and benefits is may be provided by law. 10 (Emphasis supplied) Compare this with the sole.provision on Labor in the 1973 Constitution under the Article an Declaration of Principles and State Policies that provides: Sec. 9. The state shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race, or creed, and regulate the relations between workers and employers. The State shall ensure the rights of workers to self-organization, collective baegaining, security of tenure, and just and humane conditions of work. The State may provide for compulsory arbitration. 11 To be sure, both Charters recognize "security of tenure" as one of the rights of labor which the State is mandated to protect. But there is no gainsaying the fact that the intent of the framers of the present Constitution was to give primacy to the rights of labor and afford the sector "full protection," at least greater protection than heretofore accorded them, regardless of the geographical location of the workers and whether they are organized or not. It was then CONCOM Commissioner, now Justice Hilario G. Davide, Jr., who substantially contributed to the present formulation of the protection to labor provision and proposed that the same be incorporated in the Article on Social Justice and not just in the Article on Declaration of Principles and State Policies "in the light of the special importance that we are giving now to social justice and the necessity of emphasizing the scope and role of social justice in national development." 12

If we have taken pains to delve into the background of the labor provisions in our Constitution and the Labor Code, it is but to stress that the right of an employee not to be dismissed from his job except for a just or authorized cause provided by law has assumed greater importance under the 1987 Constitution with the singular prominence labor enjoys under the article on Social Justice. And this transcendent policy has been translated into law in the Labor Code. Under its terms, where a case of unlawful or unauthorized dismissal has been proved by the aggrieved employee, or on the other hand, the employer whose duty it is to prove the lawfulness or justness of his act of dismissal has failed to do so, then the remedies provided in Article 279 should find, application. Consonant with this liberalized stance vis-a-vis labor, the legislature even went further by enacting Republic Act No. 6715 which took effect on March 2, 1989 that amended said Article to remove any possible ambiguity that jurisprudence may have generated which watered down the constitutional intent to grant to labor "full protection." 13 To go back to the instant case, there being no evidence to show an authorized, much less a legal, cause for the dismissal of private respondent, she had every right, not only to be entitled to reinstatement, but ay well, to full backwages." 14 The intendment of the law in prescribing the twin remedies of reinstatement and payment of backwages is, in the former, to restore the dismissed employee to her status before she lost her job, for the dictionary meaning of the word "reinstate" is "to restore to a state, conditione positions etc. from which one had been removed" 15 and in the latter, to give her back the income lost during the period of unemployment. Both remedies, looking to the past, would perforce make her "whole." Sadly, the avowed intent of the law has at times been thwarted when reinstatement has not been forthcoming and the hapless dismissed employee finds himself on the outside looking in. Over time, the following reasons have been advanced by the Court for denying reinstatement under the facts of the case and the law applicable thereto; that reinstatement can no longer be effected in view of the long passage of time (22 years of litigation) or because of the realities of the situation; 16 or that it would be "inimical to the employer's interest; " 17 or that reinstatement may no longer be feasible; 18 or, that it will not serve the best interests of the parties involved; 19 or that the company would be prejudiced by the workers' continued employment; 20 or that it will not serve any prudent purpose as when supervening facts have transpired which make execution on that score unjust or inequitable 21 or, to an increasing extent, due to the resultant atmosphere of "antipathy and antagonism" or "strained relations" or "irretrievable estrangement" between the employer and the employee. 22 In lieu of reinstatement, the Court has variously ordered the payment of backwages and separation pay or solely separation pay. 24
23

In the case at bar, the law is on the side of private respondent. In the first place the wording of the Labor Code is clear and unambiguous: "An employee who is unjustly dismissed from work shall be entitled to reinstatement. . . . and to his full backwages. . . ." 25 Under the principlesof statutory construction, if a statute is clears plain and free from ambiguity, it must be given its literal meaning and applied without attempted interpretation. This plain-meaning rule or verba legis derived from the maxim index animi sermo est (speech is the index of intention) rests on the valid presumption that the words employed by, the legislature in a statute correctly express its intent or will and preclude the court from construing it differently. 26 The legislature is presumed to know the meaning of the words, to:have used words advisedly, and to have expressed its intent by the use of such words as are found in the statute. 27 Verba legis non est recedendum, or from the words of a statute there should be no departure. Neither does the provision admit of any qualification. If in the wisdom of the Court, there may be a ground or grounds for non-application of the above-cited provision, this should be by way of exception, such as when the reinstatement may be inadmissible due to ensuing strained relations between the employer and the employee.

In such cases, it should be proved that the employee concerned occupies a position where he enjoys the trust and confidence of his employer; and that it is likely that if reinstated, an atmosphere of antipathy and antagonism may be generated as to adversely affect the efficiency and productivity of the employee concerned. A few examples, will suffice to illustrate the Court's application of the above principles: where the employee is a Vice-President for Marketing and as such, enjoys the full trust and confidence of top management; 28 or is the Officer-In-Charge of the extension office of the bank where he works; 29 or is an organizer of a union who was in a position to sabotage the union's efforts to organize the workers in commercial and industrial establishments; 30 or is a warehouseman of a non-profit organization whose primary purpose is to facilitate and maximize voluntary gifts. by foreign individuals and organizations to the Philippines; 31 or is a manager of its Energy Equipment Sales. 32 Obviously, the principle of "strained relations" cannot be applied indiscriminately. Otherwisey reinstatement can never be possible simply because some hostility is invariably engendered between the parties as a result of litigation. That is human nature. 33 Besides, no strained relations should arise from a valid and legal act of asserting one's right; otherwise an employee who shall assert his right could be easily separated from the service, by merely paying his separation pay on the pretext that his relationship with his employer had already become strained. 34 Here, it has not been proved that the position of private respondent as systems analyst is one that may be characterized as a position of trust and confidence such that if reinstated, it may well lead to strained relations between employer and employee. Hence, this does not constitute an exception to the general rule mandating reinstatement for an employee who has been unlawfully dismissed. On the other hand, has she betrayed any confidence reposed in her by engaging in transactions that may have created conflict of interest situations? Petitioner GMCR points out that as a matter of company policy, it prohibits its employees from involving themselves with any company that has business dealings with GMCR. Consequently, when private respondent Salazar signed as a witness to the partnership papers of Concave (a supplier of Ultra which in turn is also a supplier of GMCR), she was deemed to have placed. herself in an untenable position as far as petitioner was concerned. However, on close scrutiny, we agree with public respondent that such a circumstance did not create a conflict of interests situation. As a systems analyst, Salazar was very far removed from operations involving the procurement of supplies. Salazar's duties revolved around the development of systems and analysis of designs on a continuing basis. In other words, Salazar did not occupy a position of trust relative to the approval and purchase of supplies and company assets. In the instant case, petitioner has predicated its dismissal of Salazar on loss of confidence. As we have held countless times, while loss of confidence or breach of trust is a valid ground for terminations it must rest an some basis which must be convincingly established. 35 An employee who not be dismissed on mere presumptions and suppositions. Petitioner's allegation that since Salazar and Saldivar lived together in the same apartment, it "presumed reasonably that complainant's sympathy would be with Saldivar" and its averment that Saldivar's investigation although unverified, was probably true, do not pass this Court's test. 36 While we should not condone the acts of disloyalty of an employee, neither should we dismiss him on the basis of suspicion derived from speculative inferences. To rely on the Maramara report as a basis for Salazar's dismissal would be most inequitous because the bulk of the findings centered principally oh her friend's alleged thievery and anomalous transactions as technical operations' support manager. Said report merely insinuated that in view of Salazar's special relationship with Saldivar, Salazar might have had direct knowledge of Saldivar's questionable activities. Direct evidence implicating private respondent is wanting from the records.

It is also worth emphasizing that the Maramara report came out after Saldivar had already resigned from GMCR on May 31, 1984. Since Saldivar did not have the opportunity to refute management's findings, the report remained obviously one-sided. Since the main evidence obtained by petitioner dealt principally on the alleged culpability of Saldivar, without his having had a chance to voice his side in view of his prior resignation, stringent examination should have been carried out to ascertain whether or not there existed independent legal grounds to hold Salatar answerable as well and, thereby, justify her dismissal. Finding none, from the records, we find her to have been unlawfully dismissed. 3. Calalang vs Williams Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila, brought before this court this petition for a writ of prohibition against the respondents, A. D. Williams, as Chairman of the National Traffic Commission; Vicente Fragante, as Director of Public Works; Sergio Bayan, as Acting Secretary of Public Works and Communications; Eulogio Rodriguez, as Mayor of the City of Manila; and Juan Dominguez, as Acting Chief of Police of Manila. chanroblespublishingcompany It is alleged in the petition that the National Traffic Commission, in its resolution of July 17, 1940, resolved to recommend to the Director of Public Works and to the Secretary of Public Works and Communications that animal-drawn vehicles be prohibited from passing along Rosario Street extending from Plaza Calderon de la Barca to Dasmarias Street, from 7:30 a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal Avenue extending from the railroad crossing at Antipolo Street to Echague Street, from 7 a.m. to 11 p.m., from a period of one year from the date of the opening of the Colgante Bridge to traffic; that the Chairman of the National Traffic Commission, on July 18, 1940 recommended to the Director of Public Works the adoption of the measure proposed in the resolution aforementioned, in pursuance of the provisions of Commonwealth Act No. 548 which authorizes said Director of Public Works, with the approval of the Secretary of Public Works and Communications, to promulgate rules and regulations to regulate and control the use of and traffic on national roads; that on August 2, 1940, the Director of Public Works, in his first indorsement to the Secretary of Public Works and Communications, recommended to the latter the approval of the recommendation made by the Chairman of the National Traffic Commission as aforesaid, with the modification that the closing of Rizal Avenue to traffic to animal-drawn vehicles be limited to the portion thereof extending from the railroad crossing at Antipolo Street to Azcarraga Street; that on August 10, 1940, the Secretary of Public Works and Communications, in his second indorsement addressed to the Director of Public Works, approved the recommendation of the latter that Rosario Street and Rizal Avenue be closed to traffic of animal-drawn vehicles, between the points and during the hours as above indicated, for a period of one year from the date of the opening of the Colgante Bridge to traffic; that the Mayor of Manila and the Acting Chief of Police of Manila have enforced and caused to be enforced the rules and regulations thus adopted; that as a consequence of such enforcement, all animal-drawn vehicles are not allowed to pass and pick up passengers in the places above- mentioned to the detriment not only of their owners but of the riding public as well. It is contended by the petitioner that Commonwealth Act No. 548 by which the Director of Public Works, with the approval of the Secretary of Public Works and Communications, is authorized to promulgate rules and regulations for the regulation and control of the use of and traffic on national roads and streets is unconstitutional because it constitutes an undue delegation of legislative power. This contention is untenable. As was observed by this court in Rubi vs. Provincial Board of Mindoro (39 Phil, 660, 700), The rule has

nowhere been better stated than in the early Ohio case decided by Judge Ranney, and since followed in a multitude of cases, namely: The true distinction therefore is between the delegation of power to make the law, which necessarily involves a discretion as to what it shall be, and conferring an authority or discretion as to its execution, to be exercised under and in pursuance of the law. The first cannot be done; to the latter no valid objection can be made. (Cincinnati, W. & Z. R. Co. vs. Commrs. Clinton County, 1 Ohio St., 88.) Discretion, as held by Chief Justice Marshall in Wayman vs. Southard (10 Wheat., 1) may be committed by the Legislature to an executive department or official. The Legislature may make decisions of executive departments or subordinate officials thereof, to whom it has committed the execution of

certain acts, final on questions of fact. (U.S. vs. Kinkead, 248 Fed., 141.) The growing tendency in the decisions is to give prominence to the necessity of the case. Section 1 of Commonwealth Act No. 548 reads as follows: SECTION1. To promote safe transit upon, and avoid obstructions on, roads and streets designated as national roads by acts of the National Assembly or by executive orders of the President of the Philippines, the Director of Public Works, with the approval of the Secretary of Public Works and Communications, shall promulgate the necessary rules and regulations to regulate and control the use of and traffic on such roads and streets. Such rules and regulations, with the approval of the President, may contain provisions controlling or regulating the construction of buildings or other structures within a reasonable distance from along the national roads. Such roads may be temporarily closed to any or all classes of traffic by the Director of Public Works and his duly authorized representatives whenever the condition of the road or the traffic thereon makes such action necessary or advisable in the public convenience and interest, or for a specified period, with the approval of the Secretary of Public Work s and Communications. chanroblespublishingcompany The above provisions of law do not confer legislative power upon the Director of Public Works and the Secretary of Public Works and Communications. The authority therein conferred upon them and under which they promulgated the rules and regulations now complained of is not to determine what public policy demands but merely to carry out the legislative policy laid down by the National Assembly in said Act, to wit, to promote safe transit upon and avoid obstructions on, roads and streets designated as national roads by acts of the National Assembly or by executive orders of the President of the Philippines and to close them temporarily to any or all classes of traffic whenever the condition of the road or t he traffic makes such action necessary or advisable in the public convenience and interest. The delegated power, if at all, therefore, is not the determination of what the law shall be, but merely the ascertainment of the facts and circumstances upon which the application of said law is to be predicated. To promulgate rules and regulations on the use of national roads and to determine when and how long a national road should be closed to traffic, in view of the condition of the road or the traffic thereon and the requirements of public convenience and interest, is an administrative function which cannot be directly discharged by the National Assembly. It must depend on the discretion of some other government official to whom is confided the duty of determining whether the proper occasion exists for executing the law. But it cannot be said that the exercise of such discretion is the making of the law. As was said in Lockes Appeal (72 Pa. 491): To assert that a law is less than a law, because it is made to d epend on a future event or act, is to rob the Legislature of the power to act wisely for the public welfare whenever a law is passed relating to a state of affairs not yet developed, or to things future and impossible to fully know. The proper distinction the court said was this: The Legislature cannot delegate its power to make the law; but it can make a law to delegate a power to determine some fact or state of things upon which the law makes, or intends to make, its own action depend. To deny this would be to stop the wheels of government. There are many things upon which wise and useful legislation must depend which cannot be known to the law-making power, and, must, therefore, be a subject of inquiry and determination outside of the halls of legislati on. (Field vs. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.) In the case of People vs. Rosenthal and Osmea, G.R. Nos. 46076 and 46077, promulgated June 12, 1939, and in Pangasinan Transportation vs. The Public Service Commission, G.R. No. 47065, promulgated June 26, 1940, this Court had occasion to observe that the principle of separation of powers has been made to adapt itself to the complexities of modern governments, giving rise to the adoption, within certain limits, of the principle of subordinate legislation, not only in the United States and England but in practically all modern governments. Accordingly, with the growing complexity of modern life, the multiplication of the subjects of governmental regulations, and the increased difficulty of administering the laws, the rigidity of the theory of separation of governmental powers has, to a large extent, been relaxed by permitting the delegation of greater powers by the legislative and vesting a larger amount of discretion in administrative and executive officials, not only in the execution of the laws, but also in the promulgation of certain rules and regulations calculated to promote public interest.

The petitioner further contends that the rules and regulations promulgated by the respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an unlawful interference with legitimate business or trade and abridge the right to personal liberty and freedom of locomotion. Commonwealth Act No. 548 was passed by the National Assembly in the exercise of the paramount police power of the state. Said Act, by virtue of which the rules and regulations complained of were promulgated, aims to promote safe transit upon and avoid obstructions on national roads, in the interest and convenience of the public. In enacting said law, therefore, the National Assembly was prompted by considerations of public convenience and welfare. It was inspired by a desire to relieve congestion of traffic. which is, to say the least, a menace to public safety. Public welfare, then, lies at the bottom of the enactment of said law, and the state in order to promote the general welfare may interfere with personal liberty, with property, and with business and occupations. Persons and property may be subjected to all kinds of restraints and burdens, in order to secure the general comfort, health, and prosperity of the state (U.S. vs. Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights of the individual are subordinated. Liberty is a blessing without which life is a misery, but liberty should not be made to prevail over authority because then society will fall into anarchy. Neither should authority be made to prevail over liberty because then the individual will fall into slavery. The citizen should achieve the required balance of liberty and authority in his mind through education and personal discipline, so that there may be established the resultant equilibrium, which means peace and order and happiness for all. The moment greater authority is conferred upon the government, logically so much is withdrawn from the residuum of liberty which resides in the people. The paradox lies in the fact that the apparent curtailment of liberty is precisely the very means of insuring its preservation. The scope of police power keeps expanding as civilization advances. As was said in the case of Dobbins vs. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169), the right to exercise the police power is a continuing one, and a business lawful today may in the future, because of the changed situation, the growth of population or other causes, become a menace to the public health and welfare, and be required to yield to the public good. And in People vs. Pomar (46 Phil., 440), it was observed that advancing civilization is bringing within the police power of the state today things which were not thought of as being within such power yesterday. The development of civilization, the rapidly increasing population, the growth of public opinion, with an increasing desire on the part of the masses and of the government to look after and care for the interests of the individuals of the state, have brought within the police power many questions for regulation which formerly were not so considered. The petitioner finally avers that the rules and regulations complained of infringe upon the constitutional precept regarding the promotion of social justice to insure the well-being and economic security of all the people. The promotion of social justice, however, is to be achieved not through a mistaken sympathy towards any given group. Social justice is neither communism, nor despotism, nor atomism, nor anarchy, but the humanization of laws and the equalization of social and economic forces by the State so that justice in its rational and objectively secular conception may at least be approximated. Social justice means the promotion of the welfare of all the people, the adoption by the Government of measures calculated to insure economic stability of all the competent elements of society, through the maintenance of a proper economic and social equilibrium in the interrelations of the members of the community, constitutionally,

through the adoption of measures legally justifiable, or extra- constitutionally, through the exercise of powers underlying the existence of all governments on the time-honored principle of salus populi est suprema lex. Social justice, therefore, must be founded on the recognition of the necessity of interdependence among divers and diverse units of a society and of the protection that should be equally and evenly extended to all groups as a combined force in our social and economic life, consistent with the fundamental and paramount objective of the state of promoting the health, comfort, and quiet of all persons, and of bringing about the greatest good to the greatest number.

4. PLDT vs Balbastro Amparo Balbastro (private respondent) was employed by petitioner in 1978 as its telephone operator until her questioned dismissal from employment on October 5, 1989. She was dismissed by petitioner for her absences without authorized leave due to unconfirmed sick leave on June 28 to July 14, 1989, which constituted her third offense[3] punishable by dismissal under petitioners rules and regulations.[4] On October 28, 1991, private respondent filed a Complaint[5] with the Labor Arbiter against petitioner and its President, Antonio Cojuangco, for illegal dismissal, non-payment of salary wage, premium pay for rest day, 13th month pay, and damages. In her position paper, she alleged that she was dismissed on the ground of unconfirmed sick leave despite her presentation of medical certificates from her attending physicians which were not considered by petitioners medical doctors; and that she has four minor children and it was not her intention to habitually absent herself without reason considering that her loss of job which was based only on opinions of petitioners doctors had caused her great deprivation and moral suffering. She prayed for reinstatement, backwages, and damages. Petitioner filed its position paper with Motion to Dismiss[6] alleging that private respondents habitual and unjustified absences was a just and valid cause for her termination under its rules and regulations; and that her record of unauthorized absences for 1989 showed the following: First unauthorized absences, from March 19 to 29, 1989. Private respondent absented herself from work for nine days excluding rest days on March 23 to 24, 1989 without notice to petitioner. She gave marital problem as the reason for her absence. She was penalized with 18 days suspension for violating petitioners rules and regulations regarding absences. Second unauthorized absences, from June 11 to 13, 1989. Private respondent called in sick from Tanauan, Batangas on June 5 that she was suffering from gastroenteritis. She absented herself from June 5 to 13, 1989. On June 14, 1989, she presented herself to petitioners doctor, Dr. Melissa Musngi and submitted a medical certificate where it was stated that she was under treatment from June 5 to 8, 1989 of gastroenteritis. Dr. Musngi confirmed private respondents sick leave from June 5 to 10, 1989 but did not confirm her absences from June 11 to 13, 1989 because her medical certificate covered only the period from June 5 to 8, 1989. Furthermore, petitioner reasons out that if she really had such illness, certain normal logical medical procedures should have been taken, such as stool examinations and hospitalization; and she bore no post-illness manifestations of gastroenteritis. Private respondents unconfirmed leave of absence was considered by petitioner unauthorized due to her patent abuse of sick leave privileges and treated it as her second offense and was penalized with 15 days suspension. Third unauthorized absences, from June 28 to July 14, 1989. On June 25, 1989, private respondent made a sick call that she had sore eyes and absented herself from June 25 to July 14, 1989. On July 3, 1989, she was outvisited at her given address in Makati but was not found home. On July 15, 1989, she reported for work and presented herself to the clinic for confirmation. She had her medical certificate issued by her attending physician showing that she had been under his professional treatment from June 25 to July 12, 1989 for systemic viral infection. Petitioners doctor, Dr. Benito Dungo, confirmed her sick leave from June 25 to 27, 1989 but did not confirm as to the rest of the dates when she was absent from work. When asked to explain, private respondent said that she had a viral infection during the said period; and that she was in Tanauan, Batangas during the said dates so she was not found in Makati when outvisited. Petitioners doctor did not confirm her leave of absence from June 28 to July 14, 1989 on the ground that such illness did not warrant a very long time of rest; certain laboratory examinations should have been conducted by her attending physician; and there was patent abuse of her sick leave privileges. While private respondents third leave of absence was being deliberated upon, she absented herself from August 6 to 12, 1989. She called in sick on August 6, 1989 informing her supervisor that she had a fever. The medical certificate issued by her attending physician showed that she was under treatment from August 7 to 10, 1989 for influenza. Petitioners doctor, Dr. Eduardo Co, confirmed private respondents leave of absence from August 6 to 8, 1989 but did not confirm the rest because her absences from August 9 to 12, 1989 were not covered by a medical certificate; her illness did not warrant prolonged absence; and it was medically impossible for her to contract the same illness which she contracted the

previous month since it is a medical fact that there is no such thing as an immediately recurrent viral infection. In view of her repeated absences without authorized leave for the third time, petitioner terminated private respondents service effective October 5, 1989. The Labor Arbiter conducted a hearing where private respondent testified on her behalf, while petitioner presented the three medical doctors who did not confirm portions of private respondents leave of absence, and its Employee Relations and Service Department Manager. On May 30, 1994, the Labor Arbiter issued its Decision,[7] the dispositive portion of which reads: WHEREFORE, all the foregoing premises being considered, judgment is hereby rendered ordering the respondent Philippine Long Distance [and] Telephone Co. to reinstate the complainant to her former position as telephone operator with all the rights, privileges and benefits appertaining thereto, including seniority, plus backwages equivalent to one (1) year salary in the sum of P78,000.00 (P6,500.00/mo. x 12 mos.). SO ORDRED.[8] The Labor Arbiter held that private respondents first incident of absence from March 19 to 29, 1989 were unauthorized but not as to the other succeeding absences. It found that private respondent, on her first day of absence, called in sick and when she reported for work, she went to petitioners clinic for check-up and submitted her medical certificates, thus she complied with the standard requirements on matters of sick leave; that petitioners doctors did not confirm some portions of private respondents leave of absence based merely on their medical opinions; that such justification was not warranted under Department Order No. ADM-79-02 wherein absences due to illness were considered unauthorized and without pay when the attending doctors signature is forged, there is alteration as to the date and contents of the medical certificate, the certificate is false as to the facts alleged therein, the doctor issuing the medical certificate is not qualified to attend to the illness, there are falsities and misrepresentations, and when there is patent abuse of sick leave privileges; and that these circumstances were not proven in this case. The Labor Arbiter gave more credence to the doctor who actually attended to private respondent rather than to the medical opinion of petitioners doctors. It concluded that petitioners doctors should have coordinated with private respondents attending physicians to settle any doubts as to the medical certificates. Petitioner filed its appeal with the National Commission (NLRC).[9] On January 19, 1996, the NLRC issued a Resolution[10] affirming the decision of the Labor Arbiter. Labor Relations

The NLRC found that company practice allows leave of absence due to sickness if supported by a medical certificate issued by the attending physician; that a difference in opinion by the Medical Director from that of the attending physician should not prejudice private respondent since the Medical Director can consider absences unauthorized only in cases of forgery and patent abuse of sick leave privileges which were not proven in this case; that if the Medical Director entertained doubts as to the medical certificate, he should have asked the attending physician to submit himself for crossexamination and then present an independent physician for an expert opinion on the matter. Petitioners Motion for Reconsideration was denied in a Resolution[11] dated March 14, 1996. Undaunted, petitioner filed with us a Petition for Certiorari with prayer for the issuance of a Temporary Restraining Order (TRO). A TRO was issued to enjoin the enforcement of the NLRC

Resolution until further orders.[12] In a Resolution dated December 7, 1998,[13] we referred the petition to the CA in accordance with the St. Martin Funeral Home v. National Labor Relations Commission[14] ruling. On July 31, 2002, the CA issued its assailed Decision which dismissed the petition and affirmed the NLRC Decision. The CA held that as long as the medical certificate presented did not fall under any of the infirmities set forth in petitioners rules and regulations, the unconfirmed leave should be treated merely as absence without leave and was not subject to disciplinary action; that petitioner may not rely on the previous absences of respondents in 1978 and 1982 to show abuse of sick leave privileges because petitioner had acknowledged that respondent had already been penalized with suspension, and those absences were committed beyond the three-year period mentioned in their rules and regulations; that in its desire to clothe private respondents dismissal with a semblance of legality, petitioner points to private respondents fourth unauthorized leave of absence committed in August 1989 while the third unauthorized leave of absence was being deliberated upon; and that the notice of dismissal referred only to her third unauthorized leave, thus she could not be faulted for an infraction for which she was not charged. Petitioners Motion for Reconsideration was denied in a Resolution dated February 7, 2003. Hence, petitioner filed the instant Petition for Review on Certiorari alleging the following grounds: Petitioner argues that the NLRCs conclusions that private respondent had not committed a patent abuse of sick leave privileges and that her dismissal was illegal are utterly without any factual or legal basis; that the NLRCs conclusion that the dismissal was illegal was merely based: (1) on the evidence of private respondent; (2) on medical certificates which are clearly hearsay and of no probative value whatsoever; and (3) on medical certificates which, even supposing could be considered, simply failed to cover the period of the leave requested and set forth implausible diagnoses. Petitioner claims that the CA as well as the NLRC failed to resolve the issue of whether or not the medical certificate should be given any credence at all; that it had presented four witnesses which included their three medical doctors who were subjected to cross-examinations, and yet credence was given to private respondents hearsay evidence consisting merely of a medical certificate by the latters attending physician who was not even presented to testify; that since the content of the medical certificate had been rebutted and refuted by petitioners witnesses, the burden of evidence is shifted to private respondent to show that the medical certificate she submitted was competent, proper, and sound which she failed to do. Petitioner further claims that the CA erred in not finding that private respondent committed a patent abuse of sick leave privileges which does not arise solely from forgery or alteration of the medical certificate, but on the fact that an employee had frequently and incorrigibly absented herself and then applied for sick leave with absolute impunity armed with medical certificates which not only failed to cover the entire length of the leave but also with implausible diagnoses; that excluding private respondents unauthorized absences in 1989, she had accumulated 93 days of sick leave from January to July 1989 and 115 days of sick leave in 1988, thus, how can the conclusion be drawn that there was no patent abuse of sick leave privileges; and that her unauthorized absence for which she was terminated all occurred in 1989, thus, the CA erred in saying that petitioner may not rely on the previous absences of respondent in 1978 and 1982 to justify private respondents dismissal. We find the petition meritorious. Private respondent was validly dismissed by petitioner. It must be borne in mind that the basic principle in termination cases is that the burden of proof rests upon the employer to show that the dismissal is for just and valid cause and failure to do so would necessarily mean that the dismissal was not justified and, therefore, was illegal.[16] For dismissal to be valid, the evidence must be substantial and not arbitrary and must be founded on clearly established facts.[17] We find that petitioner had discharged this burden.

Under petitioners Department Order No. ADM-79-02, for the absence due to an alleged illness to be considered unauthorized, without pay, and subject to disciplinary action, it must be shown that the medical certificate is forged, altered as to the date and contents, false as to the facts stated therein, issued by a doctor not qualified to attend to the patients illness, and there is patent abuse of sick leave privileges. The penalty for three offenses of unauthorized absences committed within the three-year period is dismissal. Private respondents unconfirmed absences from June 28 to July 14, 1989 is the crucial period in this particular case. The Labor Arbiter and the NLRC found that private respondent was illegally dismissed by petitioner. Such finding was affirmed by the CA. They all concluded that the medical certificate which private respondent presented did not fall under the circumstances enumerated in Department Order No. ADM-79-02, and there was no patent abuse of sick leave privileges, thus, there was no basis for petitioners doctors not to confirm her sick leave and consider the same unauthorized. The jurisdiction of this Court in a petition for review on certiorari is limited to reviewing only errors of law, not of fact, unless the factual findings being assailed are not supported by evidence on record or the impugned judgment is based on a misapprehension of facts.[18] We find that those exceptions are present in the instant case. We find that petitioner had sufficiently established that private respondent committed a patent abuse of her sick leave privileges which is one of the grounds listed in Department Order No. ADM-79-02 for disciplinary action. Private respondent was absent on June 25, 1989 and the reason given was sore eyes. She was then absent from June 25 to July 14, 1989. When she reported for work on July 15, 1989, she went to petitioners doctor, Dr. Benito Dungo, for confirmation of her leave of absence and presented a medical certificate[19] from her attending physician, Dr. Manuel C. Damian of Tanauan Batangas, who certified that she had been under his professional care from June 25 to July 12, 1989 for systemic viral disease. Dr. Dungo confirmed private respondents leave of absence from June 25 to 27, 1989 only and did not confirm her leave from June 28 to July 14, 1989 for the following reasons: (a) systemic viral disease indicated in the medical certificate does not warrant such a very long time of rest and recuperation; (b) if she really had an infection, the logical recourse is for the attending physician to conduct a chest xray and blood examination to determine the cause of the prolonged fever, but such was not made; (c) if she was really ill for such a long time, she would have already been confined in a hospital for treatment as petitioner has standing agreements with various hospitals to provide immediate medical assistance free of charge; (d) she displayed no residue of symptoms of flu, thus casting doubt on the veracity of her claim; (e) she called in sick on June 25, 1989 that she was suffering from sore eyes but her medical certificate made no mention of such condition; and (f) her medical records reveal a pattern of abuse of sick leave privileges.[20] Private respondents reason for her absence on June 25, 1989 was sore eyes, however the medical certificate that she presented for her prolonged absence from June 25 to July 14, 1989 was systemic viral disease and as correctly observed by Dr. Dungo, sore eyes was never mentioned therein. Moreover, in the medical progress note[21] of Dr. Damian dated October 10, 1989 attached to private respondents position paper submitted before the Labor Arbiter, it was shown that private respondent was seen by Dr. Damian on June 25, 1989 at 9:00 a.m. and her temperature was 40 degrees and she was complaining of severe headache and body pain. It would appear that there was a discrepancy between the reason given when she called in sick on June 25, 1989 and her complaints when she consulted Dr. Damian on the same day. In fact, when private respondent was asked on cross-examination why sore eyes was never mentioned in her medical certificate, all that she could say was the diagnosis was systemic viral disease, sama-sama na lahat.[22] The medical certificate issued by Dr. Damian showed that private respondent was under his

professional care from June 25 to July 12, 1989. However, the medical progress note dated October 10, 1989 of the same doctor showed that private respondent consulted him only on June 25, 27, and 29, 1989. It was never mentioned that Dr. Damian had seen private respondent after June 29, 1989. Thus, there was even a discrepancy between the medical certificate dated July 13, 1989 and the medical progress note as to the time frame that private respondent was seen by Dr. Damian. The medical certificate did not cover private respondents absences from July 13 to 14, 1989 and she only reported for work on July 15, 1989. It bears stressing that from the time private respondent called in sick on June 25, 1989 due to sore eyes, she never called up petitioner again until she reported for work on July 15, 1989. She never went to petitioners doctors for them to verify her sickness. Private respondent had committed the first two offenses of unauthorized absences in the same year. First, she did not report for work from March 19 to 29, 1989 without notice to petitioner, thus her absence was treated as unauthorized and considered her first offense for which she was penalized with suspension. Second, she again did not report for work from June 5 to 13, 1989 and when she reported for work and presented her medical certificate, it covered the period from June 5 to 8, 1989 only but she did not report for work until June 14, 1989. Petitioners doctor did not confirm her absences from June 11 to 13, 1989, thus, the same was considered unauthorized and her second offense for which she was penalized again with suspension. These two unauthorized absences together with her third unauthorized absences committed from June 28 to July 14, 1989 are sufficient bases for petitioners finding that private respondent patently abused her sick leave privileges. Previous infractions may be used as justification for an employees dismissal from work in connection with a subsequent similar offense.[23] Moreover, it is in petitioners rules and regulations that the same offense committed within the three-year period merits the penalty of dismissal. The CAs finding that petitioner may not rely on the previous absences of private respondent in 1978 and 1982 to show abuse of sick leave privileges has no basis since private respondent was dismissed for committing her three unauthorized absences all in 1989. It had also been established by Dr. Dungos testimony that private respondents medical record showed that she did not go to the clinic for consultation as she would only present a medical certificate and get a clearance for her sick leave;[24] that the same medical record showed her absences in 1989 as follows: (1) From April 27 to May 4 due to urinary tract infection and she submitted a medical certificate;[25] (2) From May 5 to 14 due to back pain;[26] (3) From May 20 to 21 due to migraine;[27] (4) June 5 to 13 due to gastroenteritis (penalized as her second offense); (5) June 15 to 24 due to conjunctivitis and submitted a medical certificate;[28] and (6) June 25 to July 14, 1989 due to systemic viral disease with medical certificate (her third offense penalized with dismissal). Private respondent had incurred a total absence of 85 days from January to October 1989;[29] and 115 days in 1988.[30] It had also been established that petitioners doctors confirmed most of her sick leave out of compassion[31] and that her medical records showed that there were several warnings given her regarding her unconfirmed sick leave.[32] As petitioner stated in its pleadings, it is a telecommunication service company which provides the country with various telecommunication services and facilities. Its operations are a vital part to many transactions all over the country and abroad, and private respondent was one of its telephone operators who used to connect all these calls. Thus, her patent abuse of her sick leave privileges is detrimental to petitioners business. While it is true that compassion and human consideration should guide the disposition of cases involving termination of employment since it affects one's source or means of livelihood, it should not be overlooked that the benefits accorded to labor do not include compelling an employer to retain the services of an employee who has been shown to be a gross liability to the employer. The law in protecting the rights of the employees authorizes neither oppression nor self-destruction of the employer.[33] It should be made clear that when the law tilts the scale of justice in favor of labor, it is but a recognition of the inherent economic inequality between labor and management. The intent is to balance the scale of justice;

to put the two parties on relatively equal positions. There may be cases where the circumstances warrant favoring labor over the interests of management but never should the scale be so tilted if the result is an injustice to the employer. Justitia nemini neganda est (Justice is to be denied to none). 5. Phil. Movie Workers Assoc. vs Premiere Prod. This is a petition for review of two orders of the Court of Industrial Relations, one dated November 8, 1951, and the other November 24, 1951, which give authority to respondent to lay-off forty-four (44) of its employees in accordance with its urgent petition on condition that, in the event work is available in the future where their ability may be required, the same workers should be reemployed and that, if after the termination of the case, the court would find that at the time of their lay off work was available, the respondent shall pay to them the back wages to which they are entitled. These two holders were upheld by the court en banc in a resolution dated March 10, 1952, which is also involved in the present petition for review. On October 2, 1951, respondent filed with the Court of Industrial Relations an urgent petition seeking authority to lay-off 44 men working in three of its departments, the first batch to be laid off thirty (30) days after the filing of the petition and the rest 45 days thereafter, in order that in the intervening period it may finish the filming of its pending picture. The ground for the lay-off is the financial losses which respondent was allegedly suffering during the current year. Petitioner opposed the request alleging that the claim of financial losses has no basis in fact it being only an act of retaliation on the part of respondent for the strike staged by the workers days before in an attempt to harass and intimidate them and weaken and destroy the union to which they belong. On November 5, 1951, date when the urgent petition was set for hearing, at the request of counsel for respondent, Hon. Arsenio C. Roldan, presiding judge of the Court of Industrial Relations, held an ocular inspection of the studios and filming premises of respondent in the course of which he interrogated about fifteen laborers who were then present in the place. On the strength of the evidence adduced during the ocular inspection Judge Roldan issued an order on November 8, 1951, allowing respondent to lay-off the workers mentioned in its petition with respect to Unit No. 2 and those assigned to the Ground Maintenance Department subject to the condition that, in the event that work is available in the future, they should be re-employed. With respect to the workers assigned to Unit No. 1, the hearing was postponed. A subsequent hearing was held in connection with the workers assigned to Unit. 1 and on the strength of the evidence submitted by respondent, Judge Roldan again found the petition justifiable and authorized their lay-off in an order dated November 24, 1951, under the same condition as those contained in his previous order. Petitioner moved for the reconsideration of both orders dated November 8 and November 24, 1951, which motion the court en banc denied in a resolution issued on March 10, 1952. Hence this petition for review. The only issue submitted to this court for reconsideration is: May the Court of Industrial Relations authorize the lay off of workers on the basis of an ocular inspection without receiving full evidence to determine the cause or motive of such lay-off? It appears that when the case was called for hearing to look in the merits of the urgent petition of respondent seeking to lay-off 44 men who were working in three of its departments on the ground of lack of work and because its business was suffering financial losses during the current year the court, which was then represented by its presiding Judge, decided to make an ocular inspection of the studios and filming premises of respondent following a request made to that effect by its counsel, and in the course of said inspection Judge Roldan proceeded to interrogate the workers he found in the place in the presence of

the counsel of both parties. The testimony of those interrogated was taken down and the counsel of both parties were allowed to cross-examine them. Judge Roldan also proceeded to examine some of the records of respondent company among them the time cards of some workers which showed that while the workers reported for work, when their presence was checked they were found to be no longer in the premises. And on the strength of the findings made by judge Roldan in this ocular inspection he reached the conclusion that the petition for lay-off was justified because there was no more work for the laborers to do in connection with the different jobs given to them. It is now contended that such a procedure is unfair to the labor union in that it deprived the workers affected of the opportunity to disprove what apparently was represented to the court during the ocular inspection which at best may only be the result of prearrangement devised by the company to justify its claim of lack of work and that what the court should have done was to make a full-dress investigation if not a formal hearing giving both parties all the time and opportunity to present their evidence before deciding such an important matter which affects the position and the only means of livelihood of the workers affected by the petition. In other words, the petitioning labor union workers were deprived of their employment without due process of law. The claim of petitioner that the laborers were not given an opportunity to present their evidence to disprove the claim of lack of work is disputed by counsel for respondent company who claims that the labor union had its day in court because its counsel was present in the investigation or ocular inspection and even presented some witnesses to protect its interest. The record before the court on this matter is not clear and for such reason it has no way of determining the truth of both claims. The stenographic notes taken during the ocular inspection have not been elevated for the reason undoubtedly that this is a petition for review and the only issue before the court is one of law. In the face of this confusing situations on an issue which is determinative of the controversy, the only guide that the court finds is the order of the court of origin which happily contains a reference to the evidence that it has considered and which has served as basis for its conclusion resulting in lay-off of the workers in whose behalf the present petition was brought before this court. We refer to the order of November 8, 1951, subject of the petition for review, wherein Judge Roldan makes express mention of the evidence can only refer to testimony given by the workers interrogated by him and to whatever documents he found or examined in the course of such inspection. It is true, as counsel for respondent avers, that hearing were conducted by the court a quo on October 8, and 15, 1951, and on November 5, 6, 15, and 21, 1951, but it is likewise true that those hearings do not necessarily refer to the petition under consideration but to other matters and incidents which were then before the court for determination such as the petition of the labor union containing fourteen (14) demands and the petition of the same union to declare respondent in contempt for having violated certain directives of the court. At any rate, this matter does not appear clear and we are inclined to resolve the doubt in favor of labor considering the spirit of our Constitution. The right to labor is a constitutional as well as statutory right. Every man has a natural right to the fruits of his own industry. A man who has been employed to undertake certain labor and has put into it his time and effort is entitled to be protected. The right of a person to his labor is deemed to be property within the meaning of constitutional guarantees. That is his means of livelihood. He cannot be deprived of his labor or work without due process of law (11 Am. Jur., 333, pp. 1151-1153; 11 Am. Jur., section 344. pp. 11681171). Although the Court of Industrial Relations, in the determination of any question or controversy, may adopt its own rules of procedure and may act according to justice and equity without regard to technicalities, and for that matter is not bound by any technical rules of evidence (section 20, Commonwealth Act No. 103), this broad grant of power should not be interpreted to mean that it can ignore or disregard the fundamental requirements of due process in the trials and investigation of cases brought before it for determination. As aptly pointed out by this court, there are certain cardinal primary rights which the Court of Industrial Relations must respect in the trial of every labor case. One of them is the right to a hearing which includes the right of the party interested to present his own case and submit evidence in support thereof (Manila Trading and Supply Co. vs. Philippine Labor Union, 71 Phil., 124, 129). An ocular inspection of the establishment or premise involved is proper if the court finds it necessary, but such is authorized only to help the court in clearing a doubt, reaching a conclusion, or finding the truth. But it is not the main trial nor should it exclude the presentation of other evidence which the parties may deem necessary to establish

their case. It is merely an auxiliary remedy the law affords the parties or the court to reach an enlightened determination of the case. Considering the merits of the controversy before us, we are of the opinion that the required due process has not been followed. The court a quo merely acted on the strength of the ocular inspection it conducted in the premises of the respondent company. The petition for lay-off was predicated on the lack of work and of the further fact that the company was incurring financial losses. These allegations cannot be established by a mere inspection of the place of labor specially when such inspection was conducted at the request of the interested party. As counsel for petitioner says, such inspection could at best witness "the superficial fact of cessation of work but it could not be determinative of the larger and more fundamental issue of lack of work due to lack of funds". This fundamental issue cannot be determined without looking into the financial situation of the respondent company. In fact, this matter is now being looked into by the court a quo in connection with the fourteen demands of the labor union, but before finishing its inquiry it decided to grant the lay-off pending final determination of the main case. This action is in our opinion premature and has worked injustice to the laborers. 6. MAQUILING, petitioner, vs. PHILIPPINE TUBERCULOSIS On 16 April 1968, petitioner Dr. Maquiling was employed by respondent Philippine Tuberculosis Society, Inc. (PTS). On 8 June 1991, Dr. Maquiling, then earning a monthly salary of thirteen thousand nine hundred pesos (P13,900.00) was dismissed from service as Deputy Executive Director after serving PTS for twenty-three (23) years. Dr. Maquiling filed a complaint against PTS for reinstatement or, in the alternative, for payment of full backwages and separation pay in accordance with Article 279 of the Labor Code, as well as moral damages in the amount of five hundred thousand pesos (P500,000.00) and exemplary damages in the amount of one hundred thousand pesos (P100,000.00).[4] The complaint was assigned to Labor Arbiter Salimathar V. Nambi. After PTS failed to appear despite having requested for several postponements, Dr. Maquiling was allowed to present his evidence ex parte consisting of his testimony on direct examination and documentary proof. On 31 August 1992, Dr. Maquiling moved for submission of the case for resolution, which motion was granted.[5] The records disclose that Dr. Maquiling received a memo dated 2 April 1991 from the PTS OICExecutive Director Andres B. Soriano (Soriano) directing him to submit within five (5) days from notice a written explanation on the following matters: 1. 2. The delayed GSIS remittances; The reported deficit of P7.3 million appearing in our financial statement for 1990; The expenses you approved and incurred in connection with the Dale Carnegie and Silva Mind Control Seminar; The P3.7 million miscellaneous expenses appearing in our financial statement; and Your reasons for renewing our service contract with Ultra.[6]

3.

4.

5.

Dr. Maquiling submitted his explanatory letter dated 11 April 1991 inviting attention to PTS Finance Managers Report. On 15 April 1991, Dr. Maquiling had a thirty (30) minute conversation with Soriano at the latters instance. No further related proceedings were undertaken before Dr. Maquiling received a letter-notice dated 8 June 1991 informing him that the PTS Executive Committee approved Sorianos findings and recommendations calling for his dismissal effective immediately, without any retirement benefits.[7] Despite Sorianos instruction for him not to report for work, Dr. Maquiling manifested, through a

letter to the OIC-Executive Director, his intention to continue performing his duties as Deputy Executive Director. Dr. Maquiling continued to report for work at the PTS daily. In the meantime, he elevated his case to the PTS Board of Directors through a memorandum dated 28 June 1991 which sought to point out the illegality of his dismissal from office and prayed for a resolution upholding his position.[8] On 17 July 1991, Dr. Maquiling, protesting non-payment of his salary for the period of 15 July 1991, wrote the OIC Finance Department and formally demanded the release of his earned wages. PTS reacted through Soriano by informing Dr. Maquiling that there are no wages forthcoming inasmuch as the latters service had been terminated for cause since 7 June 1991.[9] In an effort to exhaust the remedies within PTS, Dr. Maquiling wrote the President of PTS a letter dated 5 August 1991 saying, among others: my counsels agree with me that if your Board does not act on my 28 June 1991 Memorandum within fifteen (15) days from receipt of this letter, such omission will mean a confirmation of Sorianos notice of my alleged termination from the service a dismissal which is referable to the proper outside forum.[10] Receiving no response from the PTS, Dr. Maquiling stopped reporting for work at the PTS in the last week of September 1991. Then, on 10 October 1991, Dr. Maquiling filed his complaint with the Labor Arbiter. After considering the evidence adduced by the parties, the Labor Arbiter rendered a decision ordering PTS to immediately reinstate Dr. Maquiling to the position of Deputy Executive Director or its equivalent in rank and pay, without loss of seniority rights inclusive of all benefits attached to said position at the time of his dismissal, and to pay Dr. Maquiling backwages computed from the time of his dismissal on 7 June 1991 until his actual reinstatement but not to exceed three (3) years at the rate of thirteen thousand nine hundred pesos (P13,900.00) per month or three hundred seventy-eight thousand seven hundred seventy-five pesos (P378,775.00).[11] He likewise ordered PTS to pay Dr. Maquiling five hundred thousand pesos (P500,000.00) as moral damages and one hundred thousand pesos (P100,000.00) as exemplary damages and to pay attorneys fees equivalent to ten (10%) percent of the total amount due the complainant. Upon appeal by PTS to the NLRC, the Commission upheld the decision of the labor arbiter and dismissed the appeal.[12] However, PTS appealed the decision to the Court of Appeals which reversed the decisions of the NLRC and Labor Arbiter by ordering the dismissal of the complaint and declaring that his dismissal from employment as legal and valid. It, however, ordered PTS to pay Dr. Maquiling the amount of ten thousand pesos (P10,000.00) as damages or indemnity for violation of his right to procedural due process and separation pay in the amount of one hundred fifty-nine thousand eight hundred fifty pesos (P159,850.00) in the interest of social justice.[13] Hence, this petition for review on certiorari. Dr. Maquiling argues that the appellate court should have applied the case of Serrano v. NLRC[14] which was decided on 27 January 2000 since the assailed decision of the appellate court was promulgated subsequently on 28 March 2000. He avers that PTS must pay him full backwages from the time his employment was terminated on 7 June 1991 up to the time the decision becomes final.[15] In addition to backwages, he also prays that he be awarded separation pay for every year of service, at the rate of one month pay for every year of service,[16] as well as thirteenth month pay, sick leave and vacation leave and all monetary benefits including moral damages and attorneys fees.[17] Further, Dr. Maquiling points out that the appellate court gravely abused its discretion by changing the rules on pleadings before the administrative body since it considered the position paper of PTS though unverified.[18] PTS should have considered the twenty-three (23) years of service of petitioner[19] and should not have ruled that the dismissal from service of Dr. Maquiling was for just cause.[20] He further contends that the appellate court did not show any degree of clarity of causal connection between Dr. Maquilings acts and the supposed damage to PTS.[21] Moreover, Dr. Maquiling raised in his petition that the appellate court, which agreed with the findings of the labor arbiter and the NLRC that the twin requirements of notice and hearing are wanting, erred in adopting an abandoned doctrine by merely imposing a fine of ten thousand pesos (P10,000.00) against PTS and in disregarding the present doctrine on termination of employment and monetary benefits

accorded by law to Dr. Maquiling, and in concluding with grave abuse of discretion that the dismissal of Dr. Maquiling, who had served PTS for twenty-three (23) years, was for just cause.[22] In its Comment[23] dated 9 October 2000, PTS contends that the dismissal of Dr. Maquiling was based on a just cause, supported as it was by the evidence, law and jurisprudence. The termination of Dr. Maquilings employment was allegedly due to loss of trust and confidence.[24] It avers that for gross mismanagement, for acts inimical to the interest of PTS, and also for reason that PTS has lost its trust and confidence in him, PTS terminated his services without any retirement benefit.[25] PTS, however, alleges that it complied with the two-notice rule required for termination of employment. According to PTS, the first notice was sent by Soriano to Dr. Maquiling by means of confidential memorandum[26] dated 2 April 1991 requiring him to explain in writing, within five days from notice, the matters stated therein. Dr. Maquiling honored the first notice by submitting on 11 April 1991 a written reply to Soriano. The second notice which allegedly informed Dr. Maquiling of the decision to terminate his employment, stating reasons therefor, was sent to him by Soriano on 8 June 1991.[27] A review of the factual milieu of the instant labor controversy and the jurisprudence on the subject leads us to modify the assailed decision of the appellate court. We agree with the appellate court that Dr. Maquiling was dismissed from employment for just cause consisting of loss of trust and confidence. The records reveal that he was Deputy Executive Director of PTS, a responsible position, at the time of his dismissal. The following defines the extent of the power and responsibility attached to the position he occupied: 1. Directs, supervises, coordinates, and controls the general administrative, finance and regional operations of PTS. 2. Formulates and executes plans and policies for operations activities under his charge. 3. Signs corresponden[ce] and other documents relative to operational activities under his charge, within specified limits. 4. Authorizes the hiring, promotion, transfer and termination of all PTS personnel below the supervisory level in accordance with the policies prescribed by the Board of Directors. 5. Reports regularly to the Executive Director on the individual operations and activities of departments and branches under his charge. 6. Executes and administers directives issued by the Executive Director. 7. Assists the Executive Director in the preparation of the [annual] budget and operational plan of the Society. 8. Prepares and submits reports required by the Board of Directors, government entities and other interested parties. 9. Performs related functions as may be assigned by the Executive Director.[28] PTS imputes the delayed GSIS remittances to Dr. Maquilings failure to follow his duties as prescribed by law. The records disclose that Dr. Maquiling was aware of the problem but he failed to give priority thereto. This non-remittance was partially brought about by a Guideline on the Releasing of Checks he issued, which placed the GSIS account as a last priority.[29] The security of workers compensation was undermined by his act which patently transgressed the constitutional injunction that workers should be afforded full protection in their employment. Subsumed in said mandate is the protection of the right to workmens compensation to which a lowly worker may be entitled. To rule

10

otherwise would frustrate the policy that the State shall promote and develop a tax-exempt employees compensation program whereby employees and their dependents, in the event of work-connected disability or death, may promptly secure adequate income benefit, and medical or related benefits.[30] On the other hand, we are inclined to attribute the P7.3 million deficit in PTS 1990 financial statements to Dr. Maquilings failure to consider the realities of the financial condition of the institution. Dr. Maquiling even aggravated such omission by insisting on the salary increase of both managerial and non-managerial personnel despite the financial conundrum that puzzles the future fiscal stability of PTS. The records show that he made representations during the Board meeting that sufficient funds existed to meet the salary upgrading despite the presence of financial strains.[31] Such a course of action falls short of his responsibility to safeguard the financial stability of the institution he leads. Said responsibility cannot be outweighed by any magnanimous motive for the institutional existence will be rendered illusory if the very foundation of its financial stability will be ignored. We are solicitous of the primordial goal sought to be achieved by Dr. Maquiling but the wisdom of the timing is questionable. The renewal of the Ultra Clean contract with the PTS for janitorial services also evinces a bad managerial move on the part of Dr. Maquiling. By reason of the contract, PTS was dragged into a labor controversy for illegal dismissal which eventually made it liable for backwages and differentials to employees of Ultra Clean.[32] Worse is the renewal of the said contract despite the unsatisfactory performance of Ultra Clean without the approval of the Board or the Executive Committee or any subsequent request for its ratification. The unnecessary expending of funds in the administration and operation of PTS is evidently an act of mismanagement which could bring PTS to severe financial distress. These acts if committed by a responsible officer wither the trust and confidence lodged in him by his superior and may serve as a valid and sufficient basis to impose disciplinary sanctions to an erring employee which may even result to dismissal from employment if the gravity of the offense warrants as in the instant case. Recent decisions of this Court distinguish the treatment of managerial from that of rank-and-file personnel insofar as the application of the doctrine of loss of trust and confidence is concerned. Thus, with respect to rank-and-file personnel, loss of trust and confidence as ground for valid dismissal requires proof of involvement in the alleged events in question and that mere uncorroborated assertions and accusations by the employer will not suffice.[33] But as regards a managerial employee, mere existence of a basis for believing that such employee has breached the trust of his employer would suffice for his dismissal.[34] After careful perusal of the factual backdrop of the case, we rule that Dr. Maquiling was indeed validly dismissed for just cause. However, PTS was remiss in its duty to observe procedural due process in effecting the dismissal of Dr. Maquiling. Under this second requirement, two notices must be sent to the employee who is the subject of an investigation for acts which may warrant his eventual dismissal from employment. The notices required before an employee may be validly dismissed are: (a) a written notice served on the employee specifying the grounds for termination and giving the employee reasonable opportunity to explain his/her side; (b) a hearing or conference wherein the employee, with the assistance of counsel if so desired, is given opportunity to respond to the charge, present his evidence or rebut evidence presented against him/her; and (c) written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify termination.[35] The twin requirements of notice and hearing constitute elements of due process in cases of employees dismissal; the requirement of notice is intended to inform the employee concerned of the employers intent to dismiss and the reason for the proposed dismissal; upon the other hand the requirement of hearing affords the employee an opportunity to answer his employers charges against him and accord ingly to defend himself therefrom before dismissal is effected.[36] Clearly, the first notice must inform outright the employee that an investigation will be conducted on the charges particularized therein which, if proven, will result to his dismissal. Such notice must not only contain a plain statement of the charges of malfeasance or misfeasance but must categorically state the effect on his employment if the charges are proven to be true.

This notice will afford the employee an opportunity to avail all defenses and exhaust all remedies to refute the allegations hurled against him for what is at stake is his very life and limb his employment. Otherwise, the employee may just disregard the notice as a warning without any disastrous consequence to be anticipated. Absent such statement, the first notice falls short of the requirement of due process. Ones work is everything, thus, it is not too exacting to impose this strict requirement on the part of the employer before the dismissal process be validly effected. This is in consonance with the rule that all doubts in the implementation and interpretation of the provisions of the Labor Code, including its implementing rules and regulations, shall be resolved in favor of labor.[37] It is worthy to note that the Labor Arbiter, the NLRC and the Court of Appeals all agree in concluding that procedural due process in the instant case was not observed. As revealed by the evidence on record, a confidential memorandum FN dated 2 April 1991 was sent to Dr. Maquiling by Soriano requiring him to explain in writing the matters contained therein. On 11 April 1991, Dr. Maquiling submitted his written reply. The second notice which informs Dr. Maquiling of the decision to terminate his employment was sent to him on 8 June 1991. It must be noted that the first notice dated 2 April 1991 is a mere instruction to explain the matters enumerated therein. It did not apprise Dr. Maquiling of any investigation to be conducted or being conducted that will warrant his dismissal from service if found guilty of charges specified therein. Thus, such notice fell short of the requirement of law that an employee must be afforded the benefit of the two-notice rule in dismissal cases that will allow the employee to substantiate the charges specified in the notice with full knowledge at the outset that the investigation to be conducted may result in his dismissal or suspension from employment. Dr. Maquiling invokes our ruling in Serrano as basis for appropriate relief. The Serrano ruling awarded full backwages and separation pay to the employee who was dismissed for just cause but without the observance of the procedural due process requirement. However, in Agabon v. NLRC,[38] this Court modified the Serrano ruling and awarded nominal damages in the amount of thirty thousand pesos (P30,000.00) including holiday pay, service incentive leave and thirteenth month pay to the petitioners in the said case. This case clarified the criticisms and answered the questions created by the Serrano ruling. The Agabon doctrine enunciates the rule that if the dismissal is for just cause but statutory due process was not observed, the dismissal should be upheld. While the procedural infirmity cannot be cured, it should not invalidate the dismissal. However, the employer should be held liable for non-compliance with the procedural requirements of due process.[39] Where the dismissal is for just cause, as in the instant case, the lack of statutory due process should not nullify the dismissal, or render it illegal, or ineffectual. However, the employer should indemnify the employee for the violation of his statutory rights. The indemnity to be imposed should be stiffer to discourage the abhorrent practice of dismiss now, pay later, which we sought to deter in the Serrano ruling. The sanction should be in the nature of indemnification or penalty and should depend on the facts of each case, taking into special consideration the gravity of the due process violation of the employer.[40] The violation of the petitioners right to statutory due process by the private respondent warrants the payment of indemnity in the form of nominal damages. The amount of such damages is addressed to the sound discretion of the court, taking into account the relevant circumstances.[41] Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at thirty thousand pesos (P30,000.00). We believe this form of damages would serve to deter employers from future violations of the statutory due process rights of employees. At the very least, it provides a vindication or recognition of this right granted to employees under the Labor Code and its Implementing Rules.[42] It may be also argued that actual or compensatory damages may be recovered in employment termination cases. Actual or compensatory damages are not available as a matter of right to an employee dismissed for just cause but denied statutory due process. The award must be based on clear factual and legal bases and correspond to such pecuniary loss suffered by the employee as duly proven. Evidently, there is less degree of discretion to award actual or compensatory damages.

11

In the instant case, the records fail to show that Dr. Maquiling suffered pecuniary loss by reason of his dismissal from service. It must be noted that he was dismissed for just cause but the procedural aspect of dismissal was not complied with. Such non-compliance did not automatically result to any pecuniary loss. Any such loss must be proved by Dr. Maquiling to be entitled to an award for actual damages. Besides, the two-notice rule was not at all disregarded although it was observed defectively by PTS. Thus, actual damages may not be awarded. Neither will an award for moral damages nor exemplary damages prosper. The instant controversy fails to show that the dismissal of the employee was attended by bad faith, fraud, or was done in a manner contrary to morals, good customs or public policy, or that the employer committed an act oppressive to labor to warrant an award for moral damages. Exemplary damages may avail if the dismissal was effected in a wanton, oppressive or malevolent manner to warrant an award for exemplary damages. Hence, Dr. Maquiling shall only be entitled to an award for nominal damages. On the other hand, Dr. Maquiling argues that PTS should have considered his twenty-three (23) years of service in the institution before he was dismissed from service. Such ratiocination is not quite convincing. The jurisprudential law[43] is not bereft of cases which disregarded length of service of an employee for breach of trust and confidence. Although length of service may be considered in reaching a decision in employment termination cases, the same alone is not controlling for other considerations must be taken into account such as the nature of the position he was holding, performance of an employee, quality of work, character and work attitude. Worth stressing is the fact that Dr. Maquiling is holding a managerial position being a Deputy Executive Director. Hence, trust and confidence is an essential factor in determining his eligibility to continue holding his position. The crucial nature of his position in PTS is exacting as to such qualification which cannot be outweighed by any length of service he earned. 7. Victoriano vs Elizalde Benjamin Victoriano (hereinafter referred to as Appellee), a member of the religious sect known as the "Iglesia ni Cristo", had been in the employ of the Elizalde Rope Factory, Inc. (hereinafter referred to as Company) since 1958. As such employee, he was a member of the Elizalde Rope Workers' Union (hereinafter referred to as Union) which had with the Company a collective bargaining agreement containing a closed shop provision which reads as follows: Membership in the Union shall be required as a condition of employment for all permanent employees workers covered by this Agreement. The collective bargaining agreement expired on March 3, 1964 but was renewed the following day, March 4, 1964. Under Section 4(a), paragraph 4, of Republic Act No. 875, prior to its amendment by Republic Act No. 3350, the employer was not precluded "from making an agreement with a labor organization to require as a condition of employment membership therein, if such labor organization is the representative of the employees." On June 18, 1961, however, Republic Act No. 3350 was enacted, introducing an amendment to paragraph (4) subsection (a) of section 4 of Republic Act No. 875, as follows: ... "but such agreement shall not cover members of any religious sects which prohibit affiliation of their members in any such labor organization". Being a member of a religious sect that prohibits the affiliation of its members with any labor organization, Appellee presented his resignation to appellant Union in 1962, and when no action was taken thereon, he reiterated his resignation on September 3, 1974. Thereupon, the Union wrote a formal letter to the Company asking the latter to separate Appellee from the service in view of the fact that he was resigning from the Union as a member. The management of the Company in turn notified Appellee and his counsel that unless the Appellee could achieve a satisfactory arrangement with the Union, the Company would be constrained to dismiss him from the service. This prompted Appellee to file an action for

injunction, docketed as Civil Case No. 58894 in the Court of First Instance of Manila to enjoin the Company and the Union from dismissing Appellee. 1 In its answer, the Union invoked the "union security clause" of the collective bargaining agreement; assailed the constitutionality of Republic Act No. 3350; and contended that the Court had no jurisdiction over the case, pursuant to Republic Act No. 875, Sections 24 and 9 (d) and (e). 2 Upon the facts agreed upon by the parties during the pre-trial conference, the Court a quo rendered its decision on August 26, 1965, the dispositive portion of which reads: IN VIEW OF THE FOREGOING, judgment is rendered enjoining the defendant Elizalde Rope Factory, Inc. from dismissing the plaintiff from his present employment and sentencing the defendant Elizalde Rope Workers' Union to pay the plaintiff P500 for attorney's fees and the costs of this action. 3 From this decision, the Union appealed directly to this Court on purely questions of law, assigning the following errors: I. That the lower court erred when it did not rule that Republic Act No. 3350 is unconstitutional. II. That the lower court erred when it sentenced appellant herein to pay plaintiff the sum of P500 as attorney's fees and the cost thereof. In support of the alleged unconstitutionality of Republic Act No. 3350, the Union contented, firstly, that the Act infringes on the fundamental right to form lawful associations; that "the very phraseology of said Republic Act 3350, that membership in a labor organization is banned to all those belonging to such religious sect prohibiting affiliation with any labor organization" 4 , "prohibits all the members of a given religious sect from joining any labor union if such sect prohibits affiliations of their members thereto" 5 ; and, consequently, deprives said members of their constitutional right to form or join lawful associations or organizations guaranteed by the Bill of Rights, and thus becomes obnoxious to Article III, Section 1 (6) of the 1935 Constitution. 6 Secondly, the Union contended that Republic Act No. 3350 is unconstitutional for impairing the obligation of contracts in that, while the Union is obliged to comply with its collective bargaining agreement containing a "closed shop provision," the Act relieves the employer from its reciprocal obligation of cooperating in the maintenance of union membership as a condition of employment; and that said Act, furthermore, impairs the Union's rights as it deprives the union of dues from members who, under the Act, are relieved from the obligation to continue as such members. 7 Thirdly, the Union contended that Republic Act No. 3350 discriminatorily favors those religious sects which ban their members from joining labor unions, in violation of Article Ill, Section 1 (7) of the 1935 Constitution; and while said Act unduly protects certain religious sects, it leaves no rights or protection to labor organizations. 8 Fourthly, Republic Act No. 3350, asserted the Union, violates the constitutional provision that "no religious test shall be required for the exercise of a civil right," in that the laborer's exercise of his civil right to join associations for purposes not contrary to law has to be determined under the Act by his affiliation with a religious sect; that conversely, if a worker has to sever his religious connection with a sect that prohibits membership in a labor organization in order to be able to join a labor organization, said Act would violate religious freedom. 9 Fifthly, the Union contended that Republic Act No. 3350, violates the "equal protection of laws" clause of the Constitution, it being a discriminately legislation, inasmuch as by exempting from the operation of closed shop agreement the members of the "Iglesia ni Cristo", it has granted said members undue advantages over their fellow workers, for while the Act exempts them from union obligation and liability, it nevertheless entitles them at the same time to the enjoyment of all concessions, benefits and other

12

emoluments that the union might secure from the employer. 10 Sixthly, the Union contended that Republic Act No. 3350 violates the constitutional provision regarding the promotion of social justice. 11 Appellant Union, furthermore, asserted that a "closed shop provision" in a collective bargaining agreement cannot be considered violative of religious freedom, as to call for the amendment introduced by Republic Act No. 3350; 12 and that unless Republic Act No. 3350 is declared unconstitutional, trade unionism in this country would be wiped out as employers would prefer to hire or employ members of the Iglesia ni Cristo in order to do away with labor organizations. 13 Appellee, assailing appellant's arguments, contended that Republic Act No. 3350 does not violate the right to form lawful associations, for the right to join associations includes the right not to join or to resign from a labor organization, if one's conscience does not allow his membership therein, and the Act has given substance to such right by prohibiting the compulsion of workers to join labor organizations; 14 that said Act does not impair the obligation of contracts for said law formed part of, and was incorporated into, the terms of the closed shop agreement; 15 that the Act does not violate the establishment of religion clause or separation of Church and State, for Congress, in enacting said law, merely accommodated the religious needs of those workers whose religion prohibits its members from joining labor unions, and balanced the collective rights of organized labor with the constitutional right of an individual to freely exercise his chosen religion; that the constitutional right to the free exercise of one's religion has primacy and preference over union security measures which are merely contractual 16 ; that said Act does not violate the constitutional provision of equal protection, for the classification of workers under the Act depending on their religious tenets is based on substantial distinction, is germane to the purpose of the law, and applies to all the members of a given class; 17 that said Act, finally, does not violate the social justice policy of the Constitution, for said Act was enacted precisely to equalize employment opportunities for all citizens in the midst of the diversities of their religious beliefs." 18 I. Before We proceed to the discussion of the first assigned error, it is necessary to premise that there are some thoroughly established principles which must be followed in all cases where questions of constitutionality as obtains in the instant case are involved. All presumptions are indulged in favor of constitutionality; one who attacks a statute, alleging unconstitutionality must prove its invalidity beyond a reasonable doubt, that a law may work hardship does not render it unconstitutional; that if any reasonable basis may be conceived which supports the statute, it will be upheld, and the challenger must negate all possible bases; that the courts are not concerned with the wisdom, justice, policy, or expediency of a statute; and that a liberal interpretation of the constitution in favor of the constitutionality of legislation should be adopted. 19 1. Appellant Union's contention that Republic Act No. 3350 prohibits and bans the members of such religious sects that forbid affiliation of their members with labor unions from joining labor unions appears nowhere in the wording of Republic Act No. 3350; neither can the same be deduced by necessary implication therefrom. It is not surprising, therefore, that appellant, having thus misread the Act, committed the error of contending that said Act is obnoxious to the constitutional provision on freedom of association. Both the Constitution and Republic Act No. 875 recognize freedom of association. Section 1 (6) of Article III of the Constitution of 1935, as well as Section 7 of Article IV of the Constitution of 1973, provide that the right to form associations or societies for purposes not contrary to law shall not be abridged. Section 3 of Republic Act No. 875 provides that employees shall have the right to self-organization and to form, join of assist labor organizations of their own choosing for the purpose of collective bargaining and to engage in concerted activities for the purpose of collective bargaining and other mutual aid or protection. What the Constitution and the Industrial Peace Act recognize and guarantee is the "right" to form or join associations. Notwithstanding the different theories propounded by the different schools of jurisprudence regarding the nature and contents of a "right", it can be safely said that whatever theory one subscribes to,

a right comprehends at least two broad notions, namely: first, liberty or freedom, i.e., the absence of legal restraint, whereby an employee may act for himself without being prevented by law; and second, power, whereby an employee may, as he pleases, join or refrain from Joining an association. It is, therefore, the employee who should decide for himself whether he should join or not an association; and should he choose to join, he himself makes up his mind as to which association he would join; and even after he has joined, he still retains the liberty and the power to leave and cancel his membership with said organization at any time. 20 It is clear, therefore, that the right to join a union includes the right to abstain from joining any union. 21 Inasmuch as what both the Constitution and the Industrial Peace Act have recognized, and guaranteed to the employee, is the "right" to join associations of his choice, it would be absurd to say that the law also imposes, in the same breath, upon the employee the duty to join associations. The law does not enjoin an employee to sign up with any association. The right to refrain from joining labor organizations recognized by Section 3 of the Industrial Peace Act is, however, limited. The legal protection granted to such right to refrain from joining is withdrawn by operation of law, where a labor union and an employer have agreed on a closed shop, by virtue of which the employer may employ only member of the collective bargaining union, and the employees must continue to be members of the union for the duration of the contract in order to keep their jobs. Thus Section 4 (a) (4) of the Industrial Peace Act, before its amendment by Republic Act No. 3350, provides that although it would be an unfair labor practice for an employer "to discriminate in regard to hire or tenure of employment or any term or condition of employment to encourage or discourage membership in any labor organization" the employer is, however, not precluded "from making an agreement with a labor organization to require as a condition of employment membership therein, if such labor organization is the representative of the employees". By virtue, therefore, of a closed shop agreement, before the enactment of Republic Act No. 3350, if any person, regardless of his religious beliefs, wishes to be employed or to keep his employment, he must become a member of the collective bargaining union. Hence, the right of said employee not to join the labor union is curtailed and withdrawn. To that all-embracing coverage of the closed shop arrangement, Republic Act No. 3350 introduced an exception, when it added to Section 4 (a) (4) of the Industrial Peace Act the following proviso: "but such agreement shall not cover members of any religious sects which prohibit affiliation of their members in any such labor organization". Republic Act No. 3350 merely excludes ipso jure from the application and coverage of the closed shop agreement the employees belonging to any religious sects which prohibit affiliation of their members with any labor organization. What the exception provides, therefore, is that members of said religious sects cannot be compelled or coerced to join labor unions even when said unions have closed shop agreements with the employers; that in spite of any closed shop agreement, members of said religious sects cannot be refused employment or dismissed from their jobs on the sole ground that they are not members of the collective bargaining union. It is clear, therefore, that the assailed Act, far from infringing the constitutional provision on freedom of association, upholds and reinforces it. It does not prohibit the members of said religious sects from affiliating with labor unions. It still leaves to said members the liberty and the power to affiliate, or not to affiliate, with labor unions. If, notwithstanding their religious beliefs, the members of said religious sects prefer to sign up with the labor union, they can do so. If in deference and fealty to their religious faith, they refuse to sign up, they can do so; the law does not coerce them to join; neither does the law prohibit them from joining; and neither may the employer or labor union compel them to join. Republic Act No. 3350, therefore, does not violate the constitutional provision on freedom of association. 2. Appellant Union also contends that the Act is unconstitutional for impairing the obligation of its contract, specifically, the "union security clause" embodied in its Collective Bargaining Agreement with the Company, by virtue of which "membership in the union was required as a condition for employment for all permanent employees workers". This agreement was already in existence at the time Republic Act No. 3350 was enacted on June 18, 1961, and it cannot, therefore, be deemed to have been incorporated into the agreement. But by reason of this amendment, Appellee, as well as others similarly situated, could no longer be dismissed from his job even if he should cease to be a member, or disaffiliate from the Union, and the Company could continue employing him notwithstanding his disaffiliation from the Union. The Act, therefore, introduced a change into the express terms of the union security clause; the Company

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was partly absolved by law from the contractual obligation it had with the Union of employing only Union members in permanent positions, It cannot be denied, therefore, that there was indeed an impairment of said union security clause. According to Black, any statute which introduces a change into the express terms of the contract, or its legal construction, or its validity, or its discharge, or the remedy for its enforcement, impairs the contract. The extent of the change is not material. It is not a question of degree or manner or cause, but of encroaching in any respect on its obligation or dispensing with any part of its force. There is an impairment of the contract if either party is absolved by law from its performance. 22 Impairment has also been predicated on laws which, without destroying contracts, derogate from substantial contractual rights.
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that said purpose is legitimate. The questioned Act also provides protection to members of said religious sects against two aggregates of group strength from which the individual needs protection. The individual employee, at various times in his working life, is confronted by two aggregates of power collective labor, directed by a union, and collective capital, directed by management. The union, an institution developed to organize labor into a collective force and thus protect the individual employee from the power of collective capital, is, paradoxically, both the champion of employee rights, and a new source of their frustration. Moreover, when the Union interacts with management, it produces yet a third aggregate of group strength from which the individual also needs protection the collective bargaining relationship. 31 The aforementioned purpose of the amendatory law is clearly seen in the Explanatory Note to House Bill No. 5859, which later became Republic Act No. 3350, as follows: It would be unthinkable indeed to refuse employing a person who, on account of his religious beliefs and convictions, cannot accept membership in a labor organization although he possesses all the qualifications for the job. This is tantamount to punishing such person for believing in a doctrine he has a right under the law to believe in. The law would not allow discrimination to flourish to the detriment of those whose religion discards membership in any labor organization. Likewise, the law would not commend the deprivation of their right to work and pursue a modest means of livelihood, without in any manner violating their religious faith and/or belief. 32 It cannot be denied, furthermore, that the means adopted by the Act to achieve that purpose exempting the members of said religious sects from coverage of union security agreements is reasonable. It may not be amiss to point out here that the free exercise of religious profession or belief is superior to contract rights. In case of conflict, the latter must, therefore, yield to the former. The Supreme Court of the United States has also declared on several occasions that the rights in the First Amendment, which include freedom of religion, enjoy a preferred position in the constitutional system. 33 Religious freedom, although not unlimited, is a fundamental personal right and liberty, 34 and has a preferred position in the hierarchy of values. Contractual rights, therefore, must yield to freedom of religion. It is only where unavoidably necessary to prevent an immediate and grave danger to the security and welfare of the community that infringement of religious freedom may be justified, and only to the smallest extent necessary to avoid the danger. 3. In further support of its contention that Republic Act No. 3350 is unconstitutional, appellant Union averred that said Act discriminates in favor of members of said religious sects in violation of Section 1 (7) of Article Ill of the 1935 Constitution, and which is now Section 8 of Article IV of the 1973 Constitution, which provides: No law shall be made respecting an establishment of religion, or prohibiting the free exercise thereof, and the free exercise and enjoyment of religious profession and worship, without discrimination and preference, shall forever be allowed. No religious test shall be required for the exercise of civil or political rights. The constitutional provision into only prohibits legislation for the support of any religious tenets or the modes of worship of any sect, thus forestalling compulsion by law of the acceptance of any creed or the practice of any form of worship, 35 but also assures the free exercise of one's chosen form of religion within limits of utmost amplitude. It has been said that the religion clauses of the Constitution are all designed to protect the broadest possible liberty of conscience, to allow each man to believe as his conscience directs, to profess his beliefs, and to live as he believes he ought to live, consistent with the liberty of others and with the common good. 36 Any legislation whose effect or purpose is to impede the observance of one or all religions, or to discriminate invidiously between the religions, is invalid, even

It should not be overlooked, however, that the prohibition to impair the obligation of contracts is not absolute and unqualified. The prohibition is general, affording a broad outline and requiring construction to fill in the details. The prohibition is not to be read with literal exactness like a mathematical formula, for it prohibits unreasonable impairment only. 24 In spite of the constitutional prohibition, the State continues to possess authority to safeguard the vital interests of its people. Legislation appropriate to safeguarding said interests may modify or abrogate contracts already in effect. 25 For not only are existing laws read into contracts in order to fix the obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. All contracts made with reference to any matter that is subject to regulation under the police power must be understood as made in reference to the possible exercise of that power. 26 Otherwise, important and valuable reforms may be precluded by the simple device of entering into contracts for the purpose of doing that which otherwise may be prohibited. The policy of protecting contracts against impairment presupposes the maintenance of a government by virtue of which contractual relations are worthwhile a government which retains adequate authority to secure the peace and good order of society. The contract clause of the Constitution must, therefore, be not only in harmony with, but also in subordination to, in appropriate instances, the reserved power of the state to safeguard the vital interests of the people. It follows that not all legislations, which have the effect of impairing a contract, are obnoxious to the constitutional prohibition as to impairment, and a statute passed in the legitimate exercise of police power, although it incidentally destroys existing contract rights, must be upheld by the courts. This has special application to contracts regulating relations between capital and labor which are not merely contractual, and said labor contracts, for being impressed with public interest, must yield to the common good. 27 In several occasions this Court declared that the prohibition against impairing the obligations of contracts has no application to statutes relating to public subjects within the domain of the general legislative powers of the state involving public welfare. 28 Thus, this Court also held that the Blue Sunday Law was not an infringement of the obligation of a contract that required the employer to furnish work on Sundays to his employees, the law having been enacted to secure the well-being and happiness of the laboring class, and being, furthermore, a legitimate exercise of the police power. 29 In order to determine whether legislation unconstitutionally impairs contract obligations, no unchanging yardstick, applicable at all times and under all circumstances, by which the validity of each statute may be measured or determined, has been fashioned, but every case must be determined upon its own circumstances. Legislation impairing the obligation of contracts can be sustained when it is enacted for the promotion of the general good of the people, and when the means adopted to secure that end are reasonable. Both the end sought and the means adopted must be legitimate, i.e., within the scope of the reserved power of the state construed in harmony with the constitutional limitation of that power. 30 What then was the purpose sought to be achieved by Republic Act No. 3350? Its purpose was to insure freedom of belief and religion, and to promote the general welfare by preventing discrimination against those members of religious sects which prohibit their members from joining labor unions, confirming thereby their natural, statutory and constitutional right to work, the fruits of which work are usually the only means whereby they can maintain their own life and the life of their dependents. It cannot be gainsaid

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though the burden may be characterized as being only indirect. 37 But if the stage regulates conduct by enacting, within its power, a general law which has for its purpose and effect to advance the state's secular goals, the statute is valid despite its indirect burden on religious observance, unless the state can accomplish its purpose without imposing such burden. 38 In Aglipay v. Ruiz 39 , this Court had occasion to state that the government should not be precluded from pursuing valid objectives secular in character even if the incidental result would be favorable to a religion or sect. It has likewise been held that the statute, in order to withstand the strictures of constitutional prohibition, must have a secular legislative purpose and a primary effect that neither advances nor inhibits religion. 40 Assessed by these criteria, Republic Act No. 3350 cannot be said to violate the constitutional inhibition of the "no-establishment" (of religion) clause of the Constitution. The purpose of Republic Act No. 3350 is secular, worldly, and temporal, not spiritual or religious or holy and eternal. It was intended to serve the secular purpose of advancing the constitutional right to the free exercise of religion, by averting that certain persons be refused work, or be dismissed from work, or be dispossessed of their right to work and of being impeded to pursue a modest means of livelihood, by reason of union security agreements. To help its citizens to find gainful employment whereby they can make a living to support themselves and their families is a valid objective of the state. In fact, the state is enjoined, in the 1935 Constitution, to afford protection to labor, and regulate the relations between labor and capital and industry. 41 More so now in the 1973 Constitution where it is mandated that "the State shall afford protection to labor, promote full employment and equality in employment, ensure equal work opportunities regardless of sex, race or creed and regulate the relation between workers and employers. 42 The primary effects of the exemption from closed shop agreements in favor of members of religious sects that prohibit their members from affiliating with a labor organization, is the protection of said employees against the aggregate force of the collective bargaining agreement, and relieving certain citizens of a burden on their religious beliefs; and by eliminating to a certain extent economic insecurity due to unemployment, which is a serious menace to the health, morals, and welfare of the people of the State, the Act also promotes the well-being of society. It is our view that the exemption from the effects of closed shop agreement does not directly advance, or diminish, the interests of any particular religion. Although the exemption may benefit those who are members of religious sects that prohibit their members from joining labor unions, the benefit upon the religious sects is merely incidental and indirect. The "establishment clause" (of religion) does not ban regulation on conduct whose reason or effect merely happens to coincide or harmonize with the tenets of some or all religions. 43 The free exercise clause of the Constitution has been interpreted to require that religious exercise be preferentially aided. 44 We believe that in enacting Republic Act No. 3350, Congress acted consistently with the spirit of the constitutional provision. It acted merely to relieve the exercise of religion, by certain persons, of a burden that is imposed by union security agreements. It was Congress itself that imposed that burden when it enacted the Industrial Peace Act (Republic Act 875), and, certainly, Congress, if it so deems advisable, could take away the same burden. It is certain that not every conscience can be accommodated by all the laws of the land; but when general laws conflict with scrupples of conscience, exemptions ought to be granted unless some "compelling state interest" intervenes. 45 In the instant case, We see no such compelling state interest to withhold exemption. Appellant bewails that while Republic Act No. 3350 protects members of certain religious sects, it leaves no right to, and is silent as to the protection of, labor organizations. The purpose of Republic Act No. 3350 was not to grant rights to labor unions. The rights of labor unions are amply provided for in Republic Act No. 875 and the new Labor Code. As to the lamented silence of the Act regarding the rights and protection of labor unions, suffice it to say, first, that the validity of a statute is determined by its provisions, not by its silence 46 ; and, second, the fact that the law may work hardship does not render it unconstitutional. 47 It would not be amiss to state, regarding this matter, that to compel persons to join and remain members of a union to keep their jobs in violation of their religious scrupples, would hurt, rather than help, labor

unions, Congress has seen it fit to exempt religious objectors lest their resistance spread to other workers, for religious objections have contagious potentialities more than political and philosophic objections. Furthermore, let it be noted that coerced unity and loyalty even to the country, and a fortiori to a labor union assuming that such unity and loyalty can be attained through coercion is not a goal that is constitutionally obtainable at the expense of religious liberty. 48 A desirable end cannot be promoted by prohibited means. 4. Appellants' fourth contention, that Republic Act No. 3350 violates the constitutional prohibition against requiring a religious test for the exercise of a civil right or a political right, is not well taken. The Act does not require as a qualification, or condition, for joining any lawful association membership in any particular religion or in any religious sect; neither does the Act require affiliation with a religious sect that prohibits its members from joining a labor union as a condition or qualification for withdrawing from a labor union. Joining or withdrawing from a labor union requires a positive act. Republic Act No. 3350 only exempts members with such religious affiliation from the coverage of closed shop agreements. So, under this Act, a religious objector is not required to do a positive act to exercise the right to join or to resign from the union. He is exempted ipso jure without need of any positive act on his part. A conscientious religious objector need not perform a positive act or exercise the right of resigning from the labor union he is exempted from the coverage of any closed shop agreement that a labor union may have entered into. How then can there be a religious test required for the exercise of a right when no right need be exercised? We have said that it was within the police power of the State to enact Republic Act No. 3350, and that its purpose was legal and in consonance with the Constitution. It is never an illegal evasion of a constitutional provision or prohibition to accomplish a desired result, which is lawful in itself, by discovering or following a legal way to do it. 49 5. Appellant avers as its fifth ground that Republic Act No. 3350 is a discriminatory legislation, inasmuch as it grants to the members of certain religious sects undue advantages over other workers, thus violating Section 1 of Article III of the 1935 Constitution which forbids the denial to any person of the equal protection of the laws. 50 The guaranty of equal protection of the laws is not a guaranty of equality in the application of the laws upon all citizens of the state. It is not, therefore, a requirement, in order to avoid the constitutional prohibition against inequality, that every man, woman and child should be affected alike by a statute. Equality of operation of statutes does not mean indiscriminate operation on persons merely as such, but on persons according to the circumstances surrounding them. It guarantees equality, not identity of rights. The Constitution does not require that things which are different in fact be treated in law as though they were the same. The equal protection clause does not forbid discrimination as to things that are different. 51 It does not prohibit legislation which is limited either in the object to which it is directed or by the territory within which it is to operate. The equal protection of the laws clause of the Constitution allows classification. Classification in law, as in the other departments of knowledge or practice, is the grouping of things in speculation or practice because they agree with one another in certain particulars. A law is not invalid because of simple inequality. 52 The very idea of classification is that of inequality, so that it goes without saying that the mere fact of inequality in no manner determines the matter of constitutionality. 53 All that is required of a valid classification is that it be reasonable, which means that the classification should be based on substantial distinctions which make for real differences; that it must be germane to the purpose of the law; that it must not be limited to existing conditions only; and that it must apply equally to each member of the class. 54 This Court has held that the standard is satisfied if the classification or distinction is based on a reasonable foundation or rational basis and is not palpably arbitrary. 55 In the exercise of its power to make classifications for the purpose of enacting laws over matters within its

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jurisdiction, the state is recognized as enjoying a wide range of discretion. 56 It is not necessary that the classification be based on scientific or marked differences of things or in their relation. 57 Neither is it necessary that the classification be made with mathematical nicety. 58 Hence legislative classification may in many cases properly rest on narrow distinctions, 59 for the equal protection guaranty does not preclude the legislature from recognizing degrees of evil or harm, and legislation is addressed to evils as they may appear. We believe that Republic Act No. 3350 satisfies the aforementioned requirements. The Act classifies employees and workers, as to the effect and coverage of union shop security agreements, into those who by reason of their religious beliefs and convictions cannot sign up with a labor union, and those whose religion does not prohibit membership in labor unions. Tile classification rests on real or substantial, not merely imaginary or whimsical, distinctions. There is such real distinction in the beliefs, feelings and sentiments of employees. Employees do not believe in the same religious faith and different religions differ in their dogmas and cannons. Religious beliefs, manifestations and practices, though they are found in all places, and in all times, take so many varied forms as to be almost beyond imagination. There are many views that comprise the broad spectrum of religious beliefs among the people. There are diverse manners in which beliefs, equally paramount in the lives of their possessors, may be articulated. Today the country is far more heterogenous in religion than before, differences in religion do exist, and these differences are important and should not be ignored. Even from the phychological point of view, the classification is based on real and important differences. Religious beliefs are not mere beliefs, mere ideas existing only in the mind, for they carry with them practical consequences and are the motives of certain rules. of human conduct and the justification of certain acts. 60 Religious sentiment makes a man view things and events in their relation to his God. It gives to human life its distinctive character, its tone, its happiness or unhappiness its enjoyment or irksomeness. Usually, a strong and passionate desire is involved in a religious belief. To certain persons, no single factor of their experience is more important to them than their religion, or their not having any religion. Because of differences in religious belief and sentiments, a very poor person may consider himself better than the rich, and the man who even lacks the necessities of life may be more cheerful than the one who has all possible luxuries. Due to their religious beliefs people, like the martyrs, became resigned to the inevitable and accepted cheerfully even the most painful and excruciating pains. Because of differences in religious beliefs, the world has witnessed turmoil, civil strife, persecution, hatred, bloodshed and war, generated to a large extent by members of sects who were intolerant of other religious beliefs. The classification, introduced by Republic Act No. 3350, therefore, rests on substantial distinctions. The classification introduced by said Act is also germane to its purpose. The purpose of the law is precisely to avoid those who cannot, because of their religious belief, join labor unions, from being deprived of their right to work and from being dismissed from their work because of union shop security agreements. Republic Act No. 3350, furthermore, is not limited in its application to conditions existing at the time of its enactment. The law does not provide that it is to be effective for a certain period of time only. It is intended to apply for all times as long as the conditions to which the law is applicable exist. As long as there are closed shop agreements between an employer and a labor union, and there are employees who are prohibited by their religion from affiliating with labor unions, their exemption from the coverage of said agreements continues. Finally, the Act applies equally to all members of said religious sects; this is evident from its provision. The fact that the law grants a privilege to members of said religious sects cannot by itself render the Act unconstitutional, for as We have adverted to, the Act only restores to them their freedom of association which closed shop agreements have taken away, and puts them in the same plane as the other workers who are not prohibited by their religion from joining labor unions. The circumstance, that the other employees, because they are differently situated, are not granted the same privilege, does not render the law

unconstitutional, for every classification allowed by the Constitution by its nature involves inequality. The mere fact that the legislative classification may result in actual inequality is not violative of the right to equal protection, for every classification of persons or things for regulation by law produces inequality in some degree, but the law is not thereby rendered invalid. A classification otherwise reasonable does not offend the constitution simply because in practice it results in some inequality. 61 Anent this matter, it has been said that whenever it is apparent from the scope of the law that its object is for the benefit of the public and the means by which the benefit is to be obtained are of public character, the law will be upheld even though incidental advantage may occur to individuals beyond those enjoyed by the general public. 62 6. Appellant's further contention that Republic Act No. 3350 violates the constitutional provision on social justice is also baseless. Social justice is intended to promote the welfare of all the people. 63 Republic Act No. 3350 promotes that welfare insofar as it looks after the welfare of those who, because of their religious belief, cannot join labor unions; the Act prevents their being deprived of work and of the means of livelihood. In determining whether any particular measure is for public advantage, it is not necessary that the entire state be directly benefited it is sufficient that a portion of the state be benefited thereby. Social justice also means the adoption by the Government of measures calculated to insure economic stability of all component elements of society, through the maintenance of a proper economic and social equilibrium in the inter-relations of the members of the community. 64 Republic Act No. 3350 insures economic stability to the members of a religious sect, like the Iglesia ni Cristo, who are also component elements of society, for it insures security in their employment, notwithstanding their failure to join a labor union having a closed shop agreement with the employer. The Act also advances the proper economic and social equilibrium between labor unions and employees who cannot join labor unions, for it exempts the latter from the compelling necessity of joining labor unions that have closed shop agreements and equalizes, in so far as opportunity to work is concerned, those whose religion prohibits membership in labor unions with those whose religion does not prohibit said membership. Social justice does not imply social equality, because social inequality will always exist as long as social relations depend on personal or subjective proclivities. Social justice does not require legal equality because legal equality, being a relative term, is necessarily premised on differentiations based on personal or natural conditions. 65 Social justice guarantees equality of opportunity 66 , and this is precisely what Republic Act No. 3350 proposes to accomplish it gives laborers, irrespective of their religious scrupples, equal opportunity for work. 7. As its last ground, appellant contends that the amendment introduced by Republic Act No. 3350 is not called for in other words, the Act is not proper, necessary or desirable. Anent this matter, it has been held that a statute which is not necessary is not, for that reason, unconstitutional; that in determining the constitutional validity of legislation, the courts are unconcerned with issues as to the necessity for the enactment of the legislation in question. 67 Courts do inquire into the wisdom of laws. 68 Moreover, legislatures, being chosen by the people, are presumed to understand and correctly appreciate the needs of the people, and it may change the laws accordingly. 69 The fear is entertained by appellant that unless the Act is declared unconstitutional, employers will prefer employing members of religious sects that prohibit their members from joining labor unions, and thus be a fatal blow to unionism. We do not agree. The threat to unionism will depend on the number of employees who are members of the religious sects that control the demands of the labor market. But there is really no occasion now to go further and anticipate problems We cannot judge with the material now before Us. At any rate, the validity of a statute is to be determined from its general purpose and its efficacy to accomplish the end desired, not from its effects on a particular case. 70 The essential basis for the exercise of power, and not a mere incidental result arising from its exertion, is the criterion by which the validity of a statute is to be measured. 71 II. We now pass on the second assignment of error, in support of which the Union argued that the decision of the trial court ordering the Union to pay P500 for attorney's fees directly contravenes Section 24 of Republic Act No. 875, for the instant action involves an industrial dispute wherein the Union was a party, and said Union merely acted in the exercise of its rights under the union shop provision of its existing collective bargaining contract with the Company; that said order also contravenes Article 2208 of the Civil

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Code; that, furthermore, Appellee was never actually dismissed by the defendant Company and did not therefore suffer any damage at all . 72 In refuting appellant Union's arguments, Appellee claimed that in the instant case there was really no industrial dispute involved in the attempt to compel Appellee to maintain its membership in the union under pain of dismissal, and that the Union, by its act, inflicted intentional harm on Appellee; that since Appellee was compelled to institute an action to protect his right to work, appellant could legally be ordered to pay attorney's fees under Articles 1704 and 2208 of the Civil Code. 73 The second paragraph of Section 24 of Republic Act No. 875 which is relied upon by appellant provides that: No suit, action or other proceedings shall be maintainable in any court against a labor organization or any officer or member thereof for any act done by or on behalf of such organization in furtherance of an industrial dispute to which it is a party, on the ground only that such act induces some other person to break a contract of employment or that it is in restraint of trade or interferes with the trade, business or employment of some other person or with the right of some other person to dispose of his capital or labor. (Emphasis supplied) That there was a labor dispute in the instant case cannot be disputed for appellant sought the discharge of respondent by virtue of the closed shop agreement and under Section 2 (j) of Republic Act No. 875 a question involving tenure of employment is included in the term "labor dispute". 74 The discharge or the act of seeking it is the labor dispute itself. It being the labor dispute itself, that very same act of the Union in asking the employer to dismiss Appellee cannot be "an act done ... in furtherance of an industrial dispute". The mere fact that appellant is a labor union does not necessarily mean that all its acts are in furtherance of an industrial dispute. 75 Appellant Union, therefore, cannot invoke in its favor Section 24 of Republic Act No. 875. This case is not intertwined with any unfair labor practice case existing at the time when Appellee filed his complaint before the lower court. Neither does Article 2208 of the Civil Code, invoked by the Union, serve as its shield. The article provides that attorney's fees and expenses of litigation may be awarded "when the defendant's act or omission has compelled the plaintiff ... to incur expenses to protect his interest"; and "in any other case where the court deems it just and equitable that attorney's fees and expenses of litigation should be recovered". In the instant case, it cannot be gainsaid that appellant Union's act in demanding Appellee's dismissal caused Appellee to incur expenses to prevent his being dismissed from his job. Costs according to Section 1, Rule 142, of the Rules of Court, shall be allowed as a matter of course to the prevailing party. 8. Intl School Alliance of Educators vs Quisumbing Receiving salaries less than their counterparts hired abroad, the local-hires of private respondent School, mostly Filipinos, cry discrimination. We agree. That the local-hires are paid more than their colleagues in other schools is, of course, beside the point. The point is that employees should be given equal pay for work of equal value. That is a principle long honored in this jurisdiction. That is a principle that rests on fundamental notions of justice. That is the principle we uphold today. 1wphi1.nt Private respondent International School, Inc. (the School, for short), pursuant to Presidential Decree 732, is a domestic educational institution established primarily for dependents of foreign diplomatic personnel and other temporary residents.1 To enable the School to continue carrying out its educational program and improve its standard of instruction, Section 2(c) of the same decree authorizes the School to employ its own teaching and management personnel selected by it either locally or abroad, from Philippine or other nationalities, such personnel being exempt from otherwise applicable laws and regulations attending their employment, except laws that have been or will be enacted for the protection of employees.

Accordingly, the School hires both foreign and local teachers as members of its faculty, classifying the same into two: (1) foreign-hires and (2) local-hires. The School employs four tests to determine whether a faculty member should be classified as a foreign-hire or a local hire: a. What is one's domicile? b. Where is one's home economy? c. To which country does one owe economic allegiance? d. Was the individual hired abroad specifically to work in the School and was the School responsible for bringing that individual to the Philippines?2 Should the answer to any of these queries point to the Philippines, the faculty member is classified as a local hire; otherwise, he or she is deemed a foreign-hire. The School grants foreign-hires certain benefits not accorded local-hires.1avvphi1 These include housing, transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires are also paid a salary rate twenty-five percent (25%) more than local-hires. The School justifies the difference on two "significant economic disadvantages" foreign-hires have to endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains: A foreign-hire would necessarily have to uproot himself from his home country, leave his family and friends, and take the risk of deviating from a promising career path all for the purpose of pursuing his profession as an educator, but this time in a foreign land. The new foreign hire is faced with economic realities: decent abode for oneself and/or for one's family, effective means of transportation, allowance for the education of one's children, adequate insurance against illness and death, and of course the primary benefit of a basic salary/retirement compensation. Because of a limited tenure, the foreign hire is confronted again with the same economic reality after his term: that he will eventually and inevitably return to his home country where he will have to confront the uncertainty of obtaining suitable employment after along period in a foreign land. The compensation scheme is simply the School's adaptive measure to remain competitive on an international level in terms of attracting competent professionals in the field of international education. 3 When negotiations for a new collective bargaining agreement were held on June 1995, petitioner International School Alliance of Educators, "a legitimate labor union and the collective bargaining representative of all faculty members"4 of the School, contested the difference in salary rates between foreign and local-hires. This issue, as well as the question of whether foreign-hires should be included in the appropriate bargaining unit, eventually caused a deadlock between the parties. On September 7, 1995, petitioner filed a notice of strike. The failure of the National Conciliation and Mediation Board to bring the parties to a compromise prompted the Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. On June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order resolving the parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A. Quisumbing subsequently denied petitioner's motion for reconsideration in an Order dated March 19, 1997. Petitioner now seeks relief in this Court. Petitioner claims that the point-of-hire classification employed by the School is discriminatory to Filipinos

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and that the grant of higher salaries to foreign-hires constitutes racial discrimination. The School disputes these claims and gives a breakdown of its faculty members, numbering 38 in all, with nationalities other than Filipino, who have been hired locally and classified as local hires. 5 The Acting Secretary of Labor found that these non-Filipino local-hires received the same benefits as the Filipino local-hires. The compensation package given to local-hires has been shown to apply to all, regardless of race. Truth to tell, there are foreigners who have been hired locally and who are paid equally as Filipino local hires. 6 The Acting secretary upheld the point-of-hire classification for the distinction in salary rates: The Principle "equal pay for equal work" does not find applications in the present case. The international character of the School requires the hiring of foreign personnel to deal with different nationalities and different cultures, among the student population. We also take cognizance of the existence of a system of salaries and benefits accorded to foreign hired personnel which system is universally recognized. We agree that certain amenities have to be provided to these people in order to entice them to render their services in the Philippines and in the process remain competitive in the international market. Furthermore, we took note of the fact that foreign hires have limited contract of employment unlike the local hires who enjoy security of tenure. To apply parity therefore, in wages and other benefits would also require parity in other terms and conditions of employment which include the employment which include the employment contract. A perusal of the parties' 1992-1995 CBA points us to the conditions and provisions for salary and professional compensation wherein the parties agree as follows: All members of the bargaining unit shall be compensated only in accordance with Appendix C hereof provided that the Superintendent of the School has the discretion to recruit and hire expatriate teachers from abroad, under terms and conditions that are consistent with accepted international practice. Appendix C of said CBA further provides: The new salary schedule is deemed at equity with the Overseas Recruited Staff (OSRS) salary schedule. The 25% differential is reflective of the agreed value of system displacement and contracted status of the OSRS as differentiated from the tenured status of Locally Recruited Staff (LRS). To our mind, these provisions demonstrate the parties' recognition of the difference in the status of two types of employees, hence, the difference in their salaries. The Union cannot also invoke the equal protection clause to justify its claim of parity. It is an established principle of constitutional law that the guarantee of equal protection of the laws is not violated by legislation or private covenants based on reasonable classification. A classification is reasonable if it is based on substantial distinctions and apply to all members of the same class. Verily, there is a substantial distinction between foreign hires and local hires, the former enjoying only a limited tenure, having no amenities of their own in the Philippines and have to be given a good compensation package in order to attract them to join the teaching faculty of the School.7

We cannot agree. That public policy abhors inequality and discrimination is beyond contention. Our Constitution and laws reflect the policy against these evils. The Constitution8 in the Article on Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment of measures that protect and enhance the right of all people to human dignity, reduce social, economic, and political inequalities." The very broad Article 19 of the Civil Code requires every person, "in the exercise of his rights and in the performance of his duties, [to] act with justice, give everyone his due, and observe honesty and good faith. International law, which springs from general principles of law, 9 likewise proscribes discrimination. General principles of law include principles of equity, 10 i.e., the general principles of fairness and justice, based on the test of what is reasonable. 11 The Universal Declaration of Human Rights, 12 the International Covenant on Economic, Social, and Cultural Rights, 13 the International Convention on the Elimination of All Forms of Racial Discrimination, 14 the Convention against Discrimination in Education, 15 the Convention (No. 111) Concerning Discrimination in Respect of Employment and Occupation 16 all embody the general principle against discrimination, the very antithesis of fairness and justice. The Philippines, through its Constitution, has incorporated this principle as part of its national laws. In the workplace, where the relations between capital and labor are often skewed in favor of capital, inequality and discrimination by the employer are all the more reprehensible. The Constitution 17 specifically provides that labor is entitled to "humane conditions of work." These conditions are not restricted to the physical workplace the factory, the office or the field but include as well the manner by which employers treat their employees. The Constitution 18 also directs the State to promote "equality of employment opportunities for all." Similarly, the Labor Code 19 provides that the State shall "ensure equal work opportunities regardless of sex, race or creed." It would be an affront to both the spirit and letter of these provisions if the State, in spite of its primordial obligation to promote and ensure equal employment opportunities, closes its eyes to unequal and discriminatory terms and conditions of employment. 20 Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article 135, for example, prohibits and penalizes 21 the payment of lesser compensation to a female employee as against a male employee for work of equal value. Article 248 declares it an unfair labor practice for an employer to discriminate in regard to wages in order to encourage or discourage membership in any labor organization. Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article 7 thereof, provides: The States Parties to the present Covenant recognize the right of everyone to the enjoyment of just and favourable conditions of work, which ensure, in particular: a. Remuneration which provides all workers, as a minimum, with: (i) Fair wages and equal remuneration for work of equal value without distinction of any kind, in particular women being guaranteed conditions of work not inferior to those enjoyed by men, with equal pay for equal work; xxx xxx xxx

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The foregoing provisions impregnably institutionalize in this jurisdiction the long honored legal truism of "equal pay for equal work." Persons who work with substantially equal qualifications, skill, effort and responsibility, under similar conditions, should be paid similar salaries. 22 This rule applies to the School, its "international character" notwithstanding. The School contends that petitioner has not adduced evidence that local-hires perform work equal to that of foreign-hires. 23 The Court finds this argument a little cavalier. If an employer accords employees the same position and rank, the presumption is that these employees perform equal work. This presumption is borne by logic and human experience. If the employer pays one employee less than the rest, it is not for that employee to explain why he receives less or why the others receive more. That would be adding insult to injury. The employer has discriminated against that employee; it is for the employer to explain why the employee is treated unfairly. The employer in this case has failed to discharge this burden. There is no evidence here that foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups have similar functions and responsibilities, which they perform under similar working conditions. The School cannot invoke the need to entice foreign-hires to leave their domicile to rationalize the distinction in salary rates without violating the principle of equal work for equal pay. "Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the "[c]onsideration paid at regular intervals for the rendering of services." In Songco v. National Labor Relations Commission, 24 we said that: "salary" means a recompense or consideration made to a person for his pains or industry in another man's business. Whether it be derived from "salarium," or more fancifully from "sal," the pay of the Roman soldier, it carries with it the fundamental idea of compensation for services rendered. (Emphasis supplied.) While we recognize the need of the School to attract foreign-hires, salaries should not be used as an enticement to the prejudice of local-hires. The local-hires perform the same services as foreign-hires and they ought to be paid the same salaries as the latter. For the same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot serve as valid bases for the distinction in salary rates. The dislocation factor and limited tenure affecting foreign-hires are adequately compensated by certain benefits accorded them which are not enjoyed by local-hires, such as housing, transportation, shipping costs, taxes and home leave travel allowances. The Constitution enjoins the State to "protect the rights of workers and promote their welfare," 25 "to afford labor full protection." 26 The State, therefore, has the right and duty to regulate the relations between labor and capital. 27 These relations are not merely contractual but are so impressed with public interest that labor contracts, collective bargaining agreements included, must yield to the common good. 28 Should such contracts contain stipulations that are contrary to public policy, courts will not hesitate to strike down these stipulations. In this case, we find the point-of-hire classification employed by respondent School to justify the distinction in the salary rates of foreign-hires and local hires to be an invalid classification. There is no reasonable distinction between the services rendered by foreign-hires and local-hires. The practice of the School of according higher salaries to foreign-hires contravenes public policy and, certainly, does not deserve the sympathy of this Court.1avvphi1 We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-hires.

A bargaining unit is "a group of employees of a given employer, comprised of all or less than all of the entire body of employees, consistent with equity to the employer, indicate to be the best suited to serve the reciprocal rights and duties of the parties under the collective bargaining provisions of the law." 29 The factors in determining the appropriate collective bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the employees' interest, such as substantial similarity of work and duties, or similarity of compensation and working conditions (Substantial Mutual Interests Rule); (3) prior collective bargaining history; and (4) similarity of employment status. 30 The basic test of an asserted bargaining unit's acceptability is whether or not it is fundamentally the combination which will best assure to all employees the exercise of their collective bargaining rights. 31 It does not appear that foreign-hires have indicated their intention to be grouped together with local-hires for purposes of collective bargaining. The collective bargaining history in the School also shows that these groups were always treated separately. Foreign-hires have limited tenure; local-hires enjoy security of tenure. Although foreign-hires perform similar functions under the same working conditions as the localhires, foreign-hires are accorded certain benefits not granted to local-hires. These benefits, such as housing, transportation, shipping costs, taxes, and home leave travel allowance, are reasonably related to their status as foreign-hires, and justify the exclusion of the former from the latter. To include foreignhires in a bargaining unit with local-hires would not assure either group the exercise of their respective collective bargaining rights. 9. Standard Chartered Bank Employees Union vs Confessor Standard Chartered Bank (the Bank, for brevity) is a foreign banking corporation doing business in the Philippines. The exclusive bargaining agent of the rank and file employees of the Bank is the Standard Chartered Bank Employees Union (the Union, for brevity). In August of 1990, the Bank and the Union signed a five-year collective bargaining agreement (CBA) with a provision to renegotiate the terms thereof on the third year. Prior to the expiration of the three-year period2 but within the sixty-day freedom period, the Union initiated the negotiations. On February 18, 1993, the Union, through its President, Eddie L. Divinagracia, sent a letter3 containing its proposals4 covering political provisions5 and thirty-four (34) economic provisions.6 Included therein was a list of the names of the members of the Unions negotiating panel.7 In a Letter dated February 24, 1993, the Bank, through its Country Manager Peter H. Harris, took note of the Unions proposals. The Bank attached its counter-proposal to the non-economic provisions proposed by the Union.8 The Bank posited that it would be in a better position to present its counter-proposals on the economic items after the Union had presented its justifications for the economic proposals. 9 The Bank, likewise, listed the members of its negotiating panel.10 The parties agreed to set meetings to settle their differences on the proposed CBA. Before the commencement of the negotiation, the Union, through Divinagracia, suggested to the Banks Human Resource Manager and head of the negotiating panel, Cielito Diokno, that the bank lawyers should be excluded from the negotiating team. The Bank acceded.11 Meanwhile, Diokno suggested to Divinagracia that Jose P. Umali, Jr., the President of the National Union of Bank Employees (NUBE), the federation to which the Union was affiliated, be excluded from the Unions negotiating panel.12 However, Umali was retained as a member thereof. On March 12, 1993, the parties met and set the ground rules for the negotiation. Diokno suggested that the negotiation be kept a "family affair." The proposed non-economic provisions of the CBA were discussed first.13 Even during the final reading of the non-economic provisions on May 4, 1993, there were still provisions on which the Union and the Bank could not agree. Temporarily, the notation "DEFERRED" was placed therein. Towards the end of the meeting, the Union manifested that the same should be changed to "DEADLOCKED" to indicate that such items remained unresolved. Both parties agreed to place the notation "DEFERRED/DEADLOCKED."14

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On May 18, 1993, the negotiation for economic provisions commenced. A presentation of the basis of the Unions economic proposals was made. The next meeting, the Bank made a similar presentation. Towards the end of the Banks presentation, Umali requested the Bank to validate the Unions " guestimates," especially the figures for the rank and file staff.15 In the succeeding meetings, Umali chided the Bank for the insufficiency of its counter-proposal on the provisions on salary increase, group hospitalization, death assistance and dental benefits. He reminded the Bank, how the Union got what it wanted in 1987, and stated that if need be, the Union would go through the same route to get what it wanted. 16 Upon the Banks insistence, the parties agreed to tackle the economic package item by item. Upon the Unions suggestion, the Bank indicated which provisions it would accept, reject, retain and agree to discuss.17 The Bank suggested that the Union prioritize its economic proposals, considering that many of such economic provisions remained unresolved. The Union, however, demanded that the Bank make a revised itemized proposal. In the succeeding meetings, the Union made the following proposals: Wage Increase: 1st Year Reduced from 45% to 40% 2nd Year - Retain at 20% Total = 60% Group Hospitalization Insurance: Maximum disability benefit reduced from P75,000.00 to P60,000.00 per illness annually Death Assistance: For the employee Reduced from P50,000.00 to P45,000.00 For Immediate Family Member Reduced from P30,000.00 to P25,000.00 Dental and all others No change from the original demand.18 In the morning of the June 15, 1993 meeting, the Union suggested that if the Bank would not make the necessary revisions on its counter-proposal, it would be best to seek a third party assistance. 19 After the break, the Bank presented its revised counter-proposal20 as follows: Wage Increase : 1st Year from P1,000 to P1,050.00 2nd Year P800.00 no change Group Hospitalization Insurance From: P35,000.00 per illness

To : P35,000.00 per illness per year Death Assistance For employee From: P20,000.00 To : P25,000.00 Dental Retainer Original offer remains the same21 The Union, for its part, made the following counter-proposal: Wage Increase: 1st Year - 40% 2nd Year - 19.5% Group Hospitalization Insurance From: P60,000.00 per year To : P50,000.00 per year Dental: Temporary Filling/ P150.00 Tooth Extraction Permanent Filling 200.00 Prophylaxis 250.00 Root Canal From P2,000 per tooth To: 1,800.00 per tooth Death Assistance: For Employees: From P45,000.00 to P40,000.00 For Immediate Family Member: From P25,000.00 to P20,000.00.22 The Unions original proposals, aside from the above-quoted, remained the same. Another set of counter-offer followed:

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Management Union Wage Increase 1st Year P1,050.00 40% 2nd Year - 850.00 19.0%23 Diokno stated that, in order for the Bank to make a better offer, the Union should clearly identify what it wanted to be included in the total economic package. Umali replied that it was impossible to do so because the Banks counter-proposal was unacceptable. He furthered asserted that it would have been easier to bargain if the atmosphere was the same as before, where both panels trusted each other . Diokno requested the Union panel to refrain from involving personalities and to instead focus on the negotiations.24 He suggested that in order to break the impasse, the Union should prioritize the items it wanted to iron out. Divinagracia stated that the Bank should make the first move and make a list of items it wanted to be included in the economic package. Except for the provisions on signing bonus and uniforms, the Union and the Bank failed to agree on the remaining economic provisions of the CBA. The Union declared a deadlock25 and filed a Notice of Strike before the National Conciliation and Mediation Board (NCMB) on June 21, 1993, docketed as NCMB-NCR-NS-06-380-93.26 On the other hand, the Bank filed a complaint for Unfair Labor Practice (ULP) and Damages before the Arbitration Branch of the National Labor Relations Commission (NLRC) in Manila, docketed as NLRC Case No. 00-06-04191-93 against the Union on June 28, 1993. The Bank alleged that the Union violated its duty to bargain, as it did not bargain in good faith. It contended that the Union demanded "sky high economic demands," indicative of blue-sky bargaining.27 Further, the Union violated its no strike- no lockout clause by filing a notice of strike before the NCMB. Considering that the filing of notice of strike was an illegal act, the Union officers should be dismissed. Finally, the Bank alleged that as a consequence of the illegal act, the Bank suffered nominal and actual damages and was forced to litigate and hire the services of the lawyer.28 On July 21, 1993, then Secretary of Labor and Employment (SOLE) Nieves R. Confesor, pursuant to Article 263(g) of the Labor Code, issued an Order assuming jurisdiction over the labor dispute at the Bank. The complaint for ULP filed by the Bank before the NLRC was consolidated with the complaint over which the SOLE assumed jurisdiction. After the parties submitted their respective position papers, the SOLE issued an Order on October 29, 1993, the dispositive portion of which is herein quoted: WHEREFORE, the Standard Chartered Bank and the Standard Chartered Bank Employees Union NUBE are hereby ordered to execute a collective bargaining agreement incorporating the dispositions contained herein. The CBA shall be retroactive to 01 April 1993 and shall remain effective for two years thereafter, or until such time as a new CBA has superseded it. All provisions in the expired CBA not expressly modified or not passed upon herein are deemed retained while all new provisions which are being demanded by either party are deemed denied, but without prejudice to such agreements as the parties may have arrived at in the meantime. The Banks charge for unfair labor practice which it originally filed with the NLRC as NLRC -NCR Case No. 00-06-04191-93 but which is deemed consolidated herein, is dismissed for lack of merit. On the other hand, the Unions charge for unfair labor practice is similarly dismissed. Let a copy of this order be furnished the Labor Arbiter in whose sala NLRC-NCR Case No. 00-06-0419193 is pending for his guidance and appropriate action.29 The SOLE gave the following economic awards: 1. Wage Increase: a) To be incorporated to present salary rates:

Fourth year : 7% of basic monthly salary Fifth year : 5% of basic monthly salary based on the 4th year adjusted salary b) Additional fixed amount: Fourth year : P600.00 per month Fifth year : P400.00 per month 2. Group Insurance a) Hospitalization : P45,000.00 b) Life : P130,000.00 c) Accident : P130,000.00 3. Medicine Allowance Fourth year : P5,500.00 Fifth year : P6,000.00 4. Dental Benefits Provision of dental retainer as proposed by the Bank, but without diminishing existing benefits 5. Optical Allowance Fourth year: P2,000.00 Fifth year : P2,500.00 6. Death Assistance a) Employee : P30,000.00 b) Immediate Family Member : P5,000.00 7. Emergency Leave Five (5) days for each contingency 8. Loans a) Car Loan : P200,000.00

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b) Housing Loan : It cannot be denied that the costs attendant to having ones own home have tremendously gone up. The need, therefore, to improve on this benefit cannot be overemphasized. Thus, the management is urged to increase the existing and allowable housing loan that the Bank extends to its employees to an amount that will give meaning and substance to this CBA benefit. 30 The SOLE dismissed the charges of ULP of both the Union and the Bank, explaining that both parties failed to substantiate their claims. Citing National Labor Union v. Insular-Yebana Tobacco Corporation,31 the SOLE stated that ULP charges would prosper only if shown to have directly prejudiced the public interest. Dissatisfied, the Union filed a motion for reconsideration with clarification, while the Bank filed a motion for reconsideration. On December 16, 1993, the SOLE issued a Resolution denying the motions. The Union filed a second motion for reconsideration, which was, likewise, denied on February 10, 1994. On March 22, 1994, the Bank and the Union signed the CBA.32 Immediately thereafter, the wage increase was effected and the signing bonuses based on the increased wage were distributed to the employees covered by the CBA. The Present Petition On April 28, 1994, the Union filed this petition for certiorari under Rule 65 The Union alleges that the SOLE acted with grave abuse of discretion amounting to lack or excess of jurisdiction when it found that the Bank did not commit unfair labor practice when it interfered with the Unions choice of negotiator. It argued that, Dioknos suggestion that the negotiation be limited as a "family affair" was tantamount to suggesting that Federation President Jose Umali, Jr. be excluded from the Unions negotiating panel. It further argued that contrary to the ruling of the public respondent, damage or injury to the public interest need not be present in order for unfair labor practice to prosper. The Union, likewise, pointed out that the public respondent failed to rule on the ULP charges arising from the Banks surface bargaining. The Union contended that the Bank merely went through the motions of collective bargaining without the intent to reach an agreement, and made bad faith proposals when it announced that the parties should begin from a clean slate. It argued that the Bank opened the political provisions "up for grabs," which had the effect of diminishing or obliterating the gains that the Union had made. The Union also accused the Bank of refusing to disclose material and necessary data, even after a request was made by the Union to validate its "guestimates." In its Comment, the Bank prayed that the petition be dismissed as the Union was estopped, considering that it signed the Collective Bargaining Agreement (CBA) on April 22, 1994. It asserted that contrary to the Unions allegations, it was the Union that committed ULP when negotiator Jose Umali, Jr. hurled invectives at the Banks head negotiator, Cielito Diokno, and demanded that she be excluded from the Banks negotiating team. Moreover, the Union engaged in blue-sky bargaining and isolated the no strikeno lockout clause of the existing CBA. The Office of the Solicitor General, in representation of the public respondent, prayed that the petition be dismissed. It asserted that the Union failed to prove its ULP charges and that the public respondent did not commit any grave abuse of discretion in issuing the assailed order and resolutions. The Issues

The issues presented for resolution are the following: (a) whether or not the Union was able to substantiate its claim of unfair labor practice against the Bank arising from the latters alleged "interference" with its choice of negotiator; surface bargaining; making bad faith non-economic proposals; and refusal to furnish the Union with copies of the relevant data; (b) whether or not the public respondent acted with grave abuse of discretion amounting to lack or excess of jurisdiction when she issued the assailed order and resolutions; and, (c) whether or not the petitioner is estopped from filing the instant action. The Courts Ruling The petition is bereft of merit. "Interference" under Article 248 (a) of the Labor Code The petitioner asserts that the private respondent committed ULP, i.e., interference in the selection of the Unions negotiating panel, when Cielito Diokno, the Banks Human Resource Manager, suggested to the Unions President Eddie L. Divinagracia that Jose P. Umali, Jr., President of the NUBE, be excluded from the Unions negotiating panel. In support of its claim, Divinagracia executed an affidavit, stating that prior to the commencement of the negotiation, Diokno approached him and suggested the exclusion of Umali from the Unions negotiating panel, and that during the first meeting, Diokn o stated that the negotiation be kept a "family affair." Citing the cases of U.S. Postal Service36 and Harley Davidson Motor Co., Inc., AMF,37 the Union claims that interference in the choice of the Unions bargaining panel is tantamount to ULP. In the aforecited cases, the alleged ULP was based on the employers violation of Section 8(a)(1) and (5) of the National Labor Relations Act (NLRA),38 which pertain to the interference, restraint or coercion of the employer in the employees exercise of their rights to self-organization and to bargain collectively through representatives of their own choosing; and the refusal of the employer to bargain collectively with the employees representatives. In both cases, the National Labor Relations Board held that up on the employers refusal to engage in negotiations with the Union for collective -bargaining contract when the Union includes a person who is not an employee, or one who is a member or an official of other labororganizations, such employer is engaged in unfair labor practice under Section 8(a)(1) and (5) of the NLRA. The Union further cited the case of Insular Life Assurance Co., Ltd. Employees Association NATU vs. Insular Life Assurance Co. Ltd.,39 wherein this Court said that the test of whether an employer has interfered with and coerced employees in the exercise of their right to self-organization within the meaning of subsection (a)(1) is whether the employer has engaged in conduct which it may reasonably be said, tends to interfere with the free exercise of employees rights under Section 3 of the Act.40 Further, it is not necessary that there be direct evidence that any employee was in fact intimidated or coerced by statements of threats of the employer if there is a reasonable inference that anti-union conduct of the employer does have an adverse effect on self-organization and collective bargaining.41 Under the International Labor Organization Convention (ILO) No. 87 FREEDOM OF ASSOCIATION AND PROTECTION OF THE RIGHT TO ORGANIZE to which the Philippines is a signatory, "workers and employers, without distinction whatsoever, shall have the right to establish and, subject only to the rules of the organization concerned, to job organizations of their own choosing without previous authorization."42 Workers and employers organizations shall have the right to draw up their constitutions and rules, to

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elect their representatives in full freedom to organize their administration and activities and to formulate their programs.43 Article 2 of ILO Convention No. 98 pertaining to the Right to Organize and Collective Bargaining, provides: Article 2 1. Workers and employers organizations shall enjoy adequate protection against any acts or interference by each other or each others agents or members in their estab lishment, functioning or administration. 2. In particular, acts which are designed to promote the establishment of workers organizations under the domination of employers or employers organizations or to support workers organizations by financial or other means, with the object of placing such organizations under the control of employers or employers organizations within the meaning of this Article. The aforcited ILO Conventions are incorporated in our Labor Code, particularly in Article 243 thereof, which provides: ART. 243. COVERAGE AND EMPLOYEES RIGHT TO SELF-ORGANIZATION. All persons employed in commercial, industrial and agricultural enterprises and in religious, charitable, medical or educational institutions whether operating for profit or not, shall have the right to self-organization and to form, join, or assist labor organizations of their own choosing for purposes of collective bargaining. Ambulant, intermittent and itinerant workers, self-employed people, rural workers and those without any definite employers may form labor organizations for their mutual aid and protection. and Articles 248 and 249 respecting ULP of employers and labor organizations. The said ILO Conventions were ratified on December 29, 1953. However, even as early as the 1935 Constitution,44 the State had already expressly bestowed protection to labor as part of the general provisions. The 1973 Constitution,45 on the other hand, declared it as a policy of the state to afford protection to labor, specifying that the workers rights to self-organization, collective bargaining, security of tenure, and just and humane conditions of work would be assured. For its part, the 1987 Constitution, aside from making it a policy to "protect the rights of workers and promote their welfare,"46 devotes an entire section, emphasizing its mandate to afford protection to labor, and highlights "the principle of shared responsibility" between workers and employers to promote industrial peace. 47 Article 248(a) of the Labor Code, considers it an unfair labor practice when an employer interferes, restrains or coerces employees in the exercise of their right to self-organization or the right to form association. The right to self-organization necessarily includes the right to collective bargaining. Parenthetically, if an employer interferes in the selection of its negotiators or coerces the Union to exclude from its panel of negotiators a representative of the Union, and if it can be inferred that the employer adopted the said act to yield adverse effects on the free exercise to right to self-organization or on the right to collective bargaining of the employees, ULP under Article 248(a) in connection with Article 243 of the Labor Code is committed. In order to show that the employer committed ULP under the Labor Code, substantial evidence is required to support the claim. Substantial evidence has been defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.48 In the case at bar, the Union bases its claim of interference on the alleged suggestions of Diokno to exclude Umali from the Unions negotiating panel. The circumstances that occurred during the negotiation do not show that the suggestion made by Diokno

to Divinagracia is an anti-union conduct from which it can be inferred that the Bank consciously adopted such act to yield adverse effects on the free exercise of the right to self-organization and collective bargaining of the employees, especially considering that such was undertaken previous to the commencement of the negotiation and simultaneously with Divinagracias suggestion that the bank lawyers be excluded from its negotiating panel. The records show that after the initiation of the collective bargaining process, with the inclusion of Umali in the Unions negotiating panel, the negotiations pushed through. The complaint was made only on August 16, 1993 after a deadlock was declared by the Union on June 15, 1993. It is clear that such ULP charge was merely an afterthought. The accusation occurred after the arguments and differences over the economic provisions became heated and the parties had become frustrated. It happened after the parties started to involve personalities. As the public respondent noted, passions may rise, and as a result, suggestions given under less adversarial situations may be colored with unintended meanings.49 Such is what appears to have happened in this case. The Duty to Bargain Collectively If at all, the suggestion made by Diokno to Divinagracia should be construed as part of the normal relations and innocent communications, which are all part of the friendly relations between the Union and Bank. The Union alleges that the Bank violated its duty to bargain; hence, committed ULP under Article 248(g) when it engaged in surface bargaining. It alleged that the Bank just went through the motions of bargaining without any intent of reaching an agreement, as evident in the Banks counter -proposals. It explained that of the 34 economic provisions it made, the Bank only made 6 economic counterproposals. Further, as borne by the minutes of the meetings, the Bank, after indicating the economic provisions it had rejected, accepted, retained or were open for discussion, refused to make a list of items it agreed to include in the economic package. Surface bargaining is defined as "going through the motions of negotiating" without any legal intent to reach an agreement.50 The resolution of surface bargaining allegations never presents an easy issue. The determination of whether a party has engaged in unlawful surface bargaining is usually a difficult one because it involves, at bottom, a question of the intent of the party in question, and usually such intent can only be inferred from the totality of the challenged partys conduct both at and away from the bargaining table.51 It involves the question of whether an employers conduct demonstrates an unwillingness to bargain in good faith or is merely hard bargaining.52 The minutes of meetings from March 12, 1993 to June 15, 1993 do not show that the Bank had any intention of violating its duty to bargain with the Union. Records show that after the Union sent its proposal to the Bank on February 17, 1993, the latter replied with a list of its counter-proposals on February 24, 1993. Thereafter, meetings were set for the settlement of their differences. The minutes of the meetings show that both the Bank and the Union exchanged economic and non-economic proposals and counter-proposals. The Union has not been able to show that the Bank had done acts, both at and away from the bargaining table, which tend to show that it did not want to reach an agreement with the Union or to settle the differences between it and the Union. Admittedly, the parties were not able to agree and reached a deadlock. However, it is herein emphasized that the duty to bargain "does not compel either party to agree to a proposal or require the making of a concession."53 Hence, the parties failure to agree did not amount

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to ULP under Article 248(g) for violation of the duty to bargain. We can hardly dispute this finding, for it finds support in the evidence. The inference that respondents did not refuse to bargain collectively with the complaining union because they accepted some of the demands while they refused the others even leaving open other demands for future discussion is correct, especially so when those demands were discussed at a meeting called by respondents themselves precisely in view of the letter sent by the union on April 29, 196054 In view of the finding of lack of ULP based on Article 248(g), the accusation that the Bank made bad-faith provisions has no leg to stand on. The records show that the Banks counterproposals on the non economic provisions or political provisions did not put "up for grabs" the entire work of the Union and its predecessors. As can be gleaned from the Banks counterproposal, there were many provisions which it proposed to be retained. The revisions on the other provisions were made after the parties had come to an agreement. Far from buttressing the Unions claim that the Bank made bad -faith proposals on the noneconomic provisions, all these, on the contrary, disprove such allegations. We, likewise, find that the Union failed to substantiate its claim that the Bank refused to furnish the information it needed. While the refusal to furnish requested information is in itself an unfair labor practice, and also supports the inference of surface bargaining,55 in the case at bar, Umali, in a meeting dated May 18, 1993, requested the Bank to validate its guestimates on the data of the rank and file. However, Umali failed to put his request in writing as provided for in Article 242(c) of the Labor Code: Article 242. Rights of Legitimate Labor Organization (c) To be furnished by the employer, upon written request, with the annual audited financial statements, including the balance sheet and the profit and loss statement, within thirty (30) calendar days from the date of receipt of the request, after the union has been duly recognized by the employer or certified as the sole and exclusive bargaining representatives of the employees in the bargaining unit, or within sixty (60) calendar days before the expiration of the existing collective bargaining agreement, or during the collective negotiation; The Union, did not, as the Labor Code requires, send a written request for the issuance of a copy of the data about the Banks rank and file employees. Moreover, as alleged by the Union, the fact that the Bank made use of the aforesaid guestimates, amounts to a validation of the data it had used in its presentation. No Grave Abuse of Discretion On the Part of the Public Respondent The special civil action for certiorari may be availed of when the tribunal, board, or officer exercising judicial or quasi-judicial functions has acted without or in excess of jurisdiction and there is no appeal or any plain, speedy, and adequate remedy in the ordinary course of law for the purpose of annulling the proceeding.56 Grave abuse of discretion implies such capricious and whimsical exercise of judgment as is equivalent to lack of jurisdiction, or where the power is exercised in an arbitrary or despotic manner by reason of passion or personal hostility which must be so patent and gross as to amount to an invasion of positive duty or to a virtual refusal to perform the duty enjoined or to act at all in contemplation of law. Mere abuse of discretion is not enough.57 While it is true that a showing of prejudice to public interest is not a requisite for ULP charges to prosper,

it cannot be said that the public respondent acted in capricious and whimsical exercise of judgment, equivalent to lack of jurisdiction or excess thereof. Neither was it shown that the public respondent exercised its power in an arbitrary and despotic manner by reason of passion or personal hostility. Estoppel not Applicable In the Case at Bar The respondent Bank argues that the petitioner is estopped from raising the issue of ULP when it signed the new CBA. Article 1431 of the Civil Code provides: Through estoppel an admission or representation is rendered conclusive upon the person making it, and cannot be denied or disproved as against the person relying thereon. A person, who by his deed or conduct has induced another to act in a particular manner, is barred from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to another.58 In the case, however, the approval of the CBA and the release of signing bonus do not necessarily mean that the Union waived its ULP claim against the Bank during the past negotiations. After all, the conclusion of the CBA was included in the order of the SOLE, while the signing bonus was included in the CBA itself. Moreover, the Union twice filed a motion for reconsideration respecting its ULP charges against the Bank before the SOLE. The Union Did Not Engage In Blue-Sky Bargaining We, likewise, do not agree that the Union is guilty of ULP for engaging in blue-sky bargaining or making exaggerated or unreasonable proposals.59 The Bank failed to show that the economic demands made by the Union were exaggerated or unreasonable. The minutes of the meeting show that the Union based its economic proposals on data of rank and file employees and the prevailing economic benefits received by bank employees from other foreign banks doing business in the Philippines and other branches of the Bank in the Asian region. In sum, we find that the public respondent did not act with grave abuse of discretion amounting to lack or excess of jurisdiction when it issued the questioned order and resolutions. While the approval of the CBA and the release of the signing bonus did not estop the Union from pursuing its claims of ULP against the Bank, we find the latter did not engage in ULP. We, likewise, hold that the Union is not guilty of ULP.

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