G.R. No. 120969 January 22, 1998 ALEJANDRO MARAGUINOT, JR. and PAULINO ENERO, petitioners, vs.

NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION) omposed of Presiding Commissioner RAUL T. AQUINO, Commissioner ROGELIO I. RAYALA and Commissioner VICTORIANO R. CALAYCAY (Ponente), VIC DEL ROSARIO and VIVA FIMS, respondents. DAVIDE, JR., J.: By way of this special civil action for certiorari under Rule 65 of the Rules of Court, petitioners 1 seek to annul the 10 February 1995 Decision of the National Labor Relations Commission 2 (hereafter NLRC), and its 6 April 1995 Resolution denying the motion to reconsider the former in NLRC-NCR-CA No. 006195-94. The decision reversed that of the Labor Arbiter in NLRC-NCR-Case No. 00-07-03994-92. The parties present conflicting sets of facts. Petitioner Alejandro Maraguinot, Jr. maintains that he was employed by private respondents on 18 July 1989 as part of the filming crew with a salary of P375.00 per week. About four months later, he was designated Assistant Electrician with a weekly salary of P400.00, which was increased to P450.00 in May 1990. In June 1991, he was promoted to the rank of Electrician with a weekly salary of P475.00, which was increased to P539.00 in September 1991. Petitioner Paulino Enero, on his part, claims that private respondents employed him in June 1990 as a member of the shooting crew with a weekly salary of P375.00, which was 3 increased to P425.00 in May 1991, then to P475.00 on 21 December 1991. Petitioners' tasks consisted of loading, unloading and arranging movie equipment in the shooting area as instructed by the cameraman, returning the equipment to Viva Films' warehouse, assisting in the "fixing" of the lighting system, and performing other tasks that the 4 cameraman and/or director may assign. Sometime in May 1992, petitioners sought the assistance of their supervisors, Mrs. Alejandria Cesario, to facilitate their request that private respondents adjust their salary in accordance with the minimum wage law. In June 1992, Mrs. Cesario informed petitioners that Mr. Vic del Rosario would agree to increase their salary only if they signed a blank employment contract. As petitioners refused to sign, private respondents forced Enero to go on leave in June 1992, then refused to take him back when he reported for work on 20 July 1992. Meanwhile, Maraguinot was dropped from the company payroll from 8 to 21 June 1992, but was returned

on 22 June 1992. He was again asked to sign a blank employment contract, and when he still 5 refused, private respondents terminated his services on 20 July 1992. Petitioners thus sued 6 for illegal dismissal before the Labor Arbiter. On the other hand, private respondents claim that Viva Films (hereafter VIVA) is the trade name of Viva Productions, Inc., and that it is primarily engaged in the distribution and exhibition of movies but not in the business of making movies; in the same vein, private respondent Vic del Rosario is merely an executive producer, i.e., the financier who invests a 7 certain sum of money for the production of movies distributed and exhibited by VIVA. Private respondents assert that they contract persons called "producers" also referred to 8 as "associate producers" to "produce" or make movies for private respondents; and contend that petitioners are project employees of the association producers who, in turn, act as independent contractors. As such, there is no employer-employee relationship between petitioners and private respondents. Private respondents further contend that it was the associate producer of the film "Mahirap Maging Pogi," who hired petitioner Maraguinot. The movie shot from 2 July up to 22 July 1992, and it was only then that Maraguinot was released upon payment of his last salary, as his services were no longer needed. Anent petitioner Enero, he was hired for the movie entitled "Sigaw ng Puso," later re-tired "Narito and Puso." He went on vacation on 8 June 1992, and by the time he reported for work on 20 July 1992, shooting for the movie had 9 already been completed. After considering both versions of the facts, the Labor Arbiter found as follows: On the first issue, this Office rules that complainants are the employees of the respondents. The producer cannot be considered as an independent contractor but should be considered only as a labor-only contractor and as such, acts as a mere agent of the real employer, the herein respondent. Respondents even failed to name and specify who are the producers. Also, it is an admitted fact that the complainants received their salaries from the respondents. The case cited by the respondents,Rosario Brothers, Inc. vs. Ople, 131 SCRA 72 does not apply in this case. It is very clear also that complainants are doing activities which are necessary and essential to the business of the respondents, that of movie-making. Complainant Maraguinot worked as an electrician while complainant Enero worked as a crew 10 [member]. Hence, the Labor Arbiter, in his decision of 20 December 1993, decreed as follows:

WHEREFORE, judgment is hereby rendered declaring that complainants were illegally dismissed. Respondents are hereby ordered to reinstate complainant to their former positions without loss [of] seniority rights and pay their backwages starting July 21, 1992 to December 31, 1993 temporarily computed in the amount of P38,000.00 for complainant Paulino Enero and P46,000.00 for complainant Alejandro Maraguinot, Jr. and thereafter until actually reinstated. Respondents are ordered to pay also attorney's fees equivalent to ten (10%) and/or 11 P8,400.00 on top of the award. Private respondents appealed to the NLRC (docketed as NLRC NCR-CA No. 006195-94). In 12 its decision of 10 February 1995, the NLRC found the following circumstances of petitioners' work "clearly established:" 1. Complainants [petitioners herein] were hired for specific movie projects and their employment wasco-terminus with each movie project the completion/termination of which are pre-determined, such fact being made known to complainants at the time of their engagement. xxx xxx xxx 2 Each shooting unit works on one movie project at a time. And the work of the shooting units, which work independently from each other, are not continuous in nature but depends on the availability of movie projects. 3. As a consequence of the non-continuous work of the shooting units, the total working hours logged by complainants in a month show extreme variations. . . For instance, complainant Maraguinot worked for only 1.45 hours in June 1991 but logged a total of 183.25 hours in January 1992. Complainant Enero logged a total of only 31.57 hours in September 1991 but worked for 183.35 hours the next month, October 1991. 4. Further shown by respondents is the irregular work schedule of complainants on a daily basis. Complainant Maraguinot was supposed to report on 05 August 1991 but reported only on 30 August 1991, or a gap of 25 days. Complainant Enero worked on 10 September 1991 and his next scheduled working day was 28 September 1991, a gap of 18 days.

5. The extremely irregular working days and hours of complainants' work explain the lump sum payment for complainants' services for each movie project. Hence, complainants were paid a standard weekly salary regardless of the number of working days and hours they logged in. Otherwise, if the principle of "no work no pay" was strictly applied, complainants' earnings for certain weeks would be very negligible. 6. Respondents also alleged that complainants were not prohibited from working with such movie companies like Regal, Seiko and FPJ Productions whenever they are not working for the independent movie producers engaged by respondents . . . This allegation was never rebutted by complainants and should be deemed admitted. The NLRC, in reversing the Labor Arbiter, then concluded that these circumstances, taken together, indicated that complainants (herein petitioners) were "project employees." After their motion for reconsideration was denied by the NLRC in its Resolution of 6 April 1995, petitioners filed the instant petition, claiming that the NLRC committed grave abuse of discretion amounting to lack or excess of jurisdiction in: (1) finding that petitioners were project employees; (2) ruling that petitioners were not illegally dismissed; and (3) reversing the decision of the Labor Arbiter. To support their claim that they were regular (and not project) employees of private respondents, petitioners cited their performance of activities that were necessary or desirable in the usual trade or business of private respondents and added that their work was continuous, i.e., after one project was completed they were assigned to another project. Petitioners thus considered themselves part of a work pool from which private respondents drew workers for assignment to different projects. Petitioners lamented that there was no basis for the NLRC's conclusion that they were project employees, while the associate producers were independent contractors; and thus reasoned that as regular employees, their dismissal was illegal since the same was premised on a "false cause," namely, the completion of a project, which was not among the causes for dismissal allowed by the Labor Code. Private respondents reiterate their version of the facts and stress that their evidence supports the view that petitioners are project employees; point to petitioners' irregular work load and work schedule; emphasize the NLRC's finding that petitioners never controverted the allegation that they were not prohibited from working with other movie companies; and ask that the facts be viewed in the context of the peculiar characteristics of the movie industry. The Office of the Solicitor General (OSG) is convinced that this petition is improper since petitioners raise questions of fact, particularly, the NLRC's finding that petitioners were
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project employees, a finding supported by substantial evidence; and submits that petitioners' reliance on Article 280 of the Labor Code to support their contention that they should be deemed regular employees is misplaced, as said section "merely distinguishes between two types of employees, i.e., regular employees and casual employees, for purposes of determining the right of an employee to certain benefits." The OSG likewise rejects petitioners' contention that since they were hired not for one project, but for a series of projects, they should be deemed regular employees. 14 Citing Mamansag v. NLRC, the OSG asserts that what matters is that there was a timeframe for each movie project made known to petitioners at the time of their hiring. In closing, the OSG disagrees with petitioners' claim that the NLRC's classification of the movie producers as independent contractors had no basis in fact and in law, since, on the contrary, the NLRC "took pains in explaining its basis" for its decision. As regards the propriety of this action, which the Office of the Solicitor General takes issue with, we rule that a special civil action for certiorari under Rule 65 of the Rules of Court is the proper remedy for one who complains that the NLRC acted in total disregard of evidence 15 material to or decisive of the controversy. In the instant case, petitioners allege that the NLRC's conclusions have no basis in fact and in law, hence the petition may not be dismissed on procedural or jurisdictional grounds. The judicious resolution of this case hinges upon, first, the determination of whether an employer-employee relationship existed between petitioners and private respondents or any one of private respondents. If there was none, then this petition has no merit; conversely, if the relationship existed, then petitioners could have been unjustly dismissed. A related question is whether private respondents are engaged in the business of making motion pictures. Del Rosario is necessarily engaged in such business as he finances the production of movies. VIVA, on the other hand, alleges that it does not "make" movies, but merely distributes and exhibits motion pictures. There being no further proof to this effect, we cannot rely on this self-serving denial. At any rate, and as will be discussed below, private respondents' evidence even supports the view that VIVA is engaged in the business of making movies. We now turn to the critical issues. Private respondents insist that petitioners are project employees of associate producers who, in turn, act as independent contractors. It is settled that the contracting out of labor is allowed only in case of job contracting. Section 8, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code describes permissible job contracting in this wise:

Sec. 8. Job contracting. There is job contracting permissible under the Code if the following conditions are met: (1) The contractor carries on an independent business and undertakes the contract work on his own account under his own responsibility according to his own manner and method, free from the control and direction of his employer or principal in all matters connected with the performance of the work except as to the results thereof; and (2) The contractor has substantial capital or investment in the form of tools, equipment, machineries, work premises, and other materials which are necessary in the conduct of his business. Assuming that the associate producers are job contractors, they must then be engaged in the business of making motion pictures. As such, and to be a job contractor under the preceding description, associate producers must have tools, equipment, machinery, work premises, and other materials necessary to make motion pictures. However, the associate producers here have none of these. Private respondents' evidence reveals that the movie-making equipment 16 are supplied to the producers and owned by VIVA. These include generators, cables and 17 18 wooden platforms, cameras and "shooting equipment;" in fact, VIVA likewise owns the 19 trucks used to transport the equipment. It is thus clear that the associate producer merely 20 leases the equipment from VIVA. Indeed, private respondents' Formal Offer of Documentary Evidence stated one of the purposes of Exhibit "148" as: To prove further that the independent Producers rented Shooting Unit No. 2 from Viva 21 to finish their films. While the purpose of Exhibits "149," "149-A" and "149-B" was: [T]o prove that the movies of Viva Films were contracted out to the different independent Producers who rented Shooting Unit No. 3 with a fixed budget and time22 frame of at least 30 shooting days or 45 days whichever comes first. Private respondent further narrated that VIVA's generators broke down during petitioners' last movie project, which forced the associate producer concerned to rent generators, equipment 23 and crew from another company. This only shows that the associate producer did not have substantial capital nor investment in the form of tools, equipment and other materials necessary for making a movie. Private respondents in effect admit that their producers, especially petitioners' last producer, are not engaged in permissible job contracting.

If private respondents insist that the associate producers are labor contractors, then these producers can only be "labor-only" contractors, defined by the Labor Code as follows: Art. 106. Contractor or subcontractor. . . . There is "labor-only" contracting where the person supplying workers to an employer does not have substantial capital or investment in the form of tools, equipment, machineries, work premises, among others, and the workers recruited and placed by such persons are performing activities which are directly related to the principal business of such employer. In such cases, the person or intermediary shall be considered merely as an agent of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. A more detailed description is provided by Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the Labor Code: Sec. 9. Labor-only contracting. (a) Any person who undertakes to supply workers to an employer shall be deemed to be engaged in labor-only contracting where such person: (1) Does not have substantial capital or investment in the form of tools, equipment, machineries, work premises and other materials; and (2) The workers recruited and placed by such person are performing activities which are directly related to the principal business or operations of the employer in which workers are habitually employed. (b) Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor shall be considered merely as an agent or intermediary of the employer who shall be responsible to the workers in the same manner and extent as if the latter were directly employed by him. (c) For cases not falling under this Article, the Secretary of Labor shall determine through appropriate orders whether or not the contracting out of labor is permissible in the light of the circumstances of each case and after considering the operating needs of the employer and the rights of the workers involved. In such case, he may prescribe conditions and restrictions to insure the protection and welfare of the workers.

As labor-only contracting is prohibited, the law considers the person or entity engaged in the same a mere agent or intermediary of the direct employer. But even by the preceding standards, the associate producers of VIVA cannot be considered labor-only contractors as they did not supply, recruit nor hire the workers. In the instant case, it was Juanita Cesario, Shooting Unit Supervisor and an employee of VIVA, who recruited crew members from an "available group of free-lance workers which includes the complainants Maraguinot and 24 Enero." And in their Memorandum, private respondents declared that the associate producer "hires the services of . . . 6) camera crew which includes (a) cameraman; (b) the utility crew; (c) the technical staff; (d) generator man and electrician; (e) clapper; etc. . . . 25 ." This clearly showed that the associate producers did not supply the workers required by the movie project. The relationship between VIVA and its producers or associate producers seems to be that of 26 agency, as the latter make movies on behalf of VIVA, whose business is to "make" movies. As such, the employment relationship between petitioners and producers is actually one between petitioners and VIVA, with the latter being the direct employer. The employer-employee relationship between petitioners and VIVA can further be established by the "control test." While four elements are usually considered in determining the existence of an employment relationship, namely: (a) the selection and engagement of the employee; (b) the payment of wages; (c) the power of dismissal; and (d) the employer's power to control of the employee's conduct, the most important element is the employer's control of the employee's conduct, not only as to the result of the work to be done but also as 27 to the means and methods to accomplish the same. These four elements are present here. In their position paper submitted to the Labor Arbiter, private respondents narrated the following circumstances: [T]he PRODUCER has to work within the limits of the budget he is given by the company, for as long as the ultimate finish[ed] product is acceptable to the company . . . The ensure that qualify films are produced by the PRODUCER who is an independent contractor, the company likewise employs a Supervising PRODUCER, a Project accountant and a Shooting unit supervisor. The Company's Supervising PRODUCER is Mr. Eric Cuatico, the Project accountant varies from time to time, and the Shooting Unit Supervisor is Ms. Alejandria Cesario. The Supervising PRODUCER acts as the eyes and ears of the company and of the Executive Producer to monitor the progress of the PRODUCER's work accomplishment. He is there usually in the field doing the rounds of inspection to see if there is any problem that the PRODUCER is encountering and to assist in threshing out the same so that the film project will be finished on schedule. He supervises about 3 to 7 movie

projects simultaneously [at] any given time by coordinating with each film "PRODUCER". The Project Accountant on the other hand assists the PRODUCER in monitoring the actual expenses incurred because the company wants to insure that any additional budget requested by the PRODUCER is really justified and warranted especially when there is a change of original plans to suit the tast[e] of the company on how a certain scene must be presented to make the film more interesting and more commercially viable. (emphasis supplied). VIVA's control is evident in its mandate that the end result must be a "quality film acceptable to the company." The means and methods to accomplish the result are likewise controlled by VIVA, viz., the movie project must be finished within schedule without exceeding the budget, and additional expenses must be justified; certain scenes are subject to change to suit the taste of the company; and the Supervising Producer, the "eyes and ears" of VIVA and del Rosario, intervenes in the movie-making process by assisting the associate producer in solving problems encountered in making the film. It may not be validly argued then that petitioners are actually subject to the movie director's control, and not VIVA's direction. The director merely instructs petitioners on how to better comply with VIVA's requirements to ensure that a quality film is completed within schedule and without exceeding the budget. At bottom, the director is akin to a supervisor who merely oversees the activities of rank-and-file employees with control ultimately resting on the employer. Moreover, appointment slips
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PEDRO NICOLAS Date: June 15, 1992 APPOINTMENT SLIP You are hereby appointed as SOUNDMAN for the film project entitled "MANAMBIT". This appointment shall be effective upon the commencement of the said project and shall continue to be effective until the completion of the same. For your services you shall receive the daily/weekly/monthly compensation of P812.50. During the term of this appointment you shall comply with the duties and responsibilities of your position as well as observe the rules and regulations promulgated by your superiors and by Top Management.Very truly yours,(an illegible signature) CONFORME:_________________Name of appointeeSigned in the presence of:___________________

Notably, nowhere in the appointment slip does it appear that it was the producer or associate producer who hired the crew members; moreover, it is VIVA's corporate name which appears on the heading of the appointment slip. What likewise tells against VIVA is that it paid petitioners' salaries as evidenced by vouchers, containing VIVA's letterhead, for that 30 purpose. All the circumstances indicate an employment relationship between petitioners and VIVA alone, thus the inevitable conclusion is that petitioners are employees only of VIVA. The next issue is whether petitioners were illegally dismissed. Private respondents contend that petitioners were project employees whose employment was automatically terminated with the completion of their respective projects. Petitioners assert that they were regular employees who were illegally dismissed. It may not be ignored, however, that private respondents expressly admitted that petitioners 31 were part of a work pool; and, while petitioners were initially hired possibly as project employees, they had attained the status of regular employees in view if VIVA's conduct. A project employee or a member of a work pool may acquire the status of a regular employee when the following concur: 1) There is a continuous rehiring of project employees even after cessation of a 32 project; and 2) The tasks performed by the alleged "project employee" are vital, necessary and 33 indispensable to the usual business or trade of the employer.

issued to all crew members state:

During the term of this appointment you shall comply with the duties and responsibilities of your position as well as observe the rules and regulations promulgated by your superiors and by Top Management. The words "supervisors" and "Top Management" can only refer to the "supervisors" and "Top Management" of VIVA. By commanding crew members to observe the rules and regulations promulgated by VIVA, the appointment slips only emphasize VIVA's control over petitioners. Aside from control, the element of selection and engagement is likewise present in the instant case and exercised by VIVA. A sample appointment slip offered by private respondents "to prove that members of the shooting crew except the driver are project employees of the 29 Independent Producers" reads as follows:
VIVA 16 Diliman, Quezon City PRODUCTIONS, Sct. Albano INC. St.

However, the length of time during which the employee was continuously re-hired is 34 not controlling, but merely serves as a badge of regular employment. In the instant case, the evidence on record shows that petitioner Enero was employed for a total of two (2) years and engaged in at least eighteen (18) projects, while petitioner Maraguinot was employed for some three (3) years and worked on at least twenty-three (23) 35 projects. Moreover, as petitioners' tasks involved, among other chores, the loading, unloading and
FILM DATE STARTED DATE COMPLETED ASSOCIATE PRODUCER

DARNA (addl. 1/2) MAGNONG REHAS M. REHAS (2nd contract) HIRAM NA MUKHA HIRAM (2nd contract) KAHIT AKO'Y BUSABOS SIGAW NG PUSO

11/20/91 12/13/91 1/28/92 3/15/92 5/1/92 5/28/92 7/1/92 8/15/92 9/6/92

12/12/91 1/27/92 3/12/92 4/29/92 6/14/92 7/7/92 8/4/92 9/5/92 10/20/92

E. MANUEL BOBBY GRIMALT B. GRIMALT M. ONG M. ONG JERRY OHARA M. ONG M. ONG SANDY STA. MARIA

LOVE AT FIRST SIGHT PAIKOT-IKOT ROCKY & ROLLY PAIKOT-IKOT (addl. 1/2) ROCKY & ROLLY (2nd contract) NARDONG TOOTHPICK BAKIT KAY TAGAL NG SANDALI BAKIT KAY TAGAL (2nd contract) HINUKAY KO NA ANG LIBINGAN MO MAGING SINO KA MAN M. SINO KA MAN (2nd contract) NOEL JUICO NOEL JUICO (2nd contract) ROBIN GOOD UTOL KONG HOODLUM # 1 KAPUTOL NG ISANG AWIT DARNA

1/3/90 1/26/90 2/13/90 3/12/90 4/6/90 4/4/90 6/26/90 8/10/90 9/6/90 10/25/90 12/9/90 1/29/91 3/15/91 5/7/91 6/23/91 8/18/91 10/4/91

2/16/90 3/11/90 3/29/90 4/3/90 5/20/90 5/18/90 10/20/90 9/23/90 10/20/90 12/8/90 1/22/91 3/14/90 4/6/91 6/20/91 8/6/91 10/2/91 11/18/91

MARIVIC ONG EDITH MANUEL M. ONG E. MANUEL M. ONG JUN CHING E. MANUEL E. MANUEL JUN CHING SANDY STA. MARIA SANDY S JUN CHING JUN CHING M. ONG JUN CHING SANDY S. E. MANUEL

SIGAW (addl. 1/2) NGAYON AT KAILANMAN

While Maraguinot was a member of Shooting Unit III, which made the following movies (Annex "4-A" of Respondents' Position Paper; OR, 29):
FILM GUMAPANG KA SA LUSAK PETRANG KABAYO LUSAK (2nd contract) P. KABAYO (Addl 1/2 contract) BADBOY BADBOY (2nd contract) ANAK NI BABY AMA A.B. AMA (addl 1/2) A.B. AMA (addl 2nd 1/2) BOYONG MANALAC HUMANAP KA NG PANGET H. PANGET(2nd contract) B. MANALAC (2nd contract) ROBIN GOOD (2nd contract) PITONG GAMOL P. GAMOL (2nd contract) GREASE GUN GANG DATE STARTED 1/27/90 2/19/90 3/14/90 4/21/90 6/15/90 7/30/90 9/2/90 10/17/90 11/9/90 11/30/90 1/20/91 3/10/91 5/22/91 7/7/91 8/30/91 10/14/91 12/28/91 DATE COMPLETED 3/12/90 4/4/90 4/27/90 5/13/90 7/29/90 8/21/90 10/16/90 11/8/90 12/1/90 1/14/91 3/5/91 4/23/91 7/5/91 8/20/91 10/13/91 11/27/91 2/10/92 ASSOCIATE PRODUCER JUN CHING RUTH GRUTA JUN CHING RUTH GRUTA EDITH MANUEL E. MANUEL RUTH GRUTA RUTH GRUTA R. GRUTA MARIVIC ONG EDITH MANUEL E. MANUEL M. ONG M. ONG M. ONG M. ONG E. MANUEL

ALABANG GIRLS (1/2 contract) BATANG RILES UTOL KONG HOODLUM (part 2) UTOL (addl. 1/2 contract) MANDURUGAS (2nd contract) MAHIRAP MAGING POGI

3/4/92 3/9/92 3/22/92 5/7/92 5/25/92 7/2/92

3/26/92 3/30/92 5/6/92 5/29/92 7/8/92 8/15/92

M. ONG BOBBY GRIMALT B. GRIMALT B. GRIMALT JERRY OHARA M. ONG

Workers Organization v. CIR [16 SCRA 526, 567-568 (1966)] which deals with regular seasonal employees. There we held: . . . Truly, the cessation of construction activities at the end of every project is a foreseeable suspension of work.Of course, no compensation can be demanded from the employer because the stoppage of operations at the end of a project and before the start of a new one is regular and expected by both parties to the labor relations. Similar to the case of regular seasonal employees, the employment relation is not severed by merely being suspended. [citing Manila Hotel Co. v. CIR, 9 SCRA 186 (1963)] The employees are, strictly speaking, not separated from services but merely on leave of absence without pay until they are reemployed . Thus we cannot affirm the argument that non-payment of salary or non-inclusion in the payroll and the 37 opportunity to seek other employment denote project employment. (emphasis supplied) While Lao admittedly involved the construction industry, to which Policy Instruction No. 38 20/Department Order No. 19 regarding work pools specifically applies, there seems to be no impediment to applying the underlying principles to industries other than the construction 39 industry. Neither may it be argued that a substantial distinction exists between the projects undertaken in the construction industry and the motion picture industry. On the contrary, the raison d' etre of both industries concern projects with a foreseeable suspension of work. At this time, we wish to allay any fears that this decision unduly burdens an employer by imposing a duty to re-hire a project employee even after completion of the project for which he was hired. The import of this decision is not to impose a positive and sweeping obligation upon the employer to re-hire project employees. What this decision merely accomplishes is a judicial recognition of the employment status of a project or work pool employee in accordance with what is fait accompli, i.e., the continuous re-hiring by the employer of project or work pool employees who perform tasks necessary or desirable to the employer's usual business or trade. Let it not be said that this decision "coddles" labor, for as Lao has ruled, project or work pool employees who have gained the status of regular employees are subject to the "no work-no pay" principle, to repeat: A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during temporary breaks in the business, provided that the worker shall be available when called to report for a project. Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers insofar as the effect of temporary cessation of work is concerned. This is beneficial to both the employer and employee for it prevents the unjust situation of "coddling labor at the expense of capital" and at the same time enables the workers to attain the status of regular employees.

arranging of movie equipment in the shooting area as instructed by the cameramen, returning the equipment to the Viva Films' warehouse, and assisting in the "fixing" of the lighting system, it may not be gainsaid that these tasks were vital, necessary and indispensable to the usual business or trade of the employer . As regards the underscored phrase, it has been held that this is ascertained by considering the nature of the work performed and its relation to the scheme of the particular business 36 or trade in its entirety. A recent pronouncement of this Court anent project or work pool employees who had attained the status of regular employees proves most instructive: The denial by petitioners of the existence of a work pool in the company because their projects were not continuous is amply belied by petitioners themselves who admit that: ... A work pool may exist although the workers in the pool do not receive salaries and are free to seek other employment during temporary breaks in the business, provided that the worker shall be available when called to report of a project . Although primarily applicable to regular seasonal workers, this set-up can likewise be applied to project workers insofar as the effect of temporary cessation of work is concerned . This is beneficial to both the employer and employee for it prevents the unjust situation of "coddling labor at the expense of capital" and at the same time enables the workers to attain the status of regular employees. Clearly, the continuous rehiring of the same set of employees within the framework of the Lao Group of Companies is strongly indicative that private respondents were an integral part of a work pool from which petitioners drew its workers for its various projects. In a final attempt to convince the Court that private respondents were indeed project employees, petitioners point out that the workers were not regularly maintained in the payroll and were free to offer their services to other companies when there were no on-going projects. This argument however cannot defeat the workers' status of regularity. We apply by analogy the vase of Industrial-Commercial-Agricultural

The Court's ruling here is meant precisely to give life to the constitutional policy of 40 strengthening the labor sector, but, we stress, not at the expense of management. Lest it be misunderstood, this ruling does not mean that simply because an employee is a project or work pool employee even outside the construction industry, he is deemed, ipso jure, a regular employee. All that we hold today is that once a project or work pool employee has been: (1) continuously, as opposed to intermittently, re-hired by the same employer for the same tasks or nature of tasks; and (2) these tasks are vital, necessary and indispensable to the usual business or trade of the employer, then the employee must be deemed a regular employee, pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise would allow circumvention of labor laws in industries not falling within the ambit of Policy Instruction No. 20/Department Order No. 19, hence allowing the prevention of acquisition of tenurial security by project or work pool employees who have already gained the status of regular employees by the employer's conduct. In closing then, as petitioners had already gained the status of regular employees, their dismissal was unwarranted, for the cause invoked by private respondents for petitioners' dismissal, viz.: completion of project, was not, as to them, a valid cause for dismissal under Article 282 of the Labor Code. As such, petitioners are now entitled to back wages and reinstatement, without loss of seniority rights and other benefits that may have 41 accrued. Nevertheless, following the principles of "suspension of work" and "no pay" between the end of one project and the start of a new one, in computing petitioners' back wages, the amounts corresponding to what could have been earned during the periods from the date petitioners were dismissed until their reinstatement when petitioners' respective Shooting Units were not undertaking any movie projects, should be deducted. Petitioners were dismissed on 20 July 1992, at a time when Republic Act No. 6715 was already in effect. Pursuant to Section 34 thereof which amended Section 279 of the Labor 42 Code of the Philippines and Bustamante v. NLRC, petitioners are entitled to receive full back wages from the date of their dismissal up to the time of their reinstatement, without deducting whatever earnings derived elsewhere during the period of illegal dismissal, subject however, to the above observations. WHEREFORE, the instant petition is GRANTED. The assailed decision of the National Labor Relations Commission in NLRC NCR CA No. 006195-94 dated 01 February 1995, as well as its Resolution dated 6 April 1995, are hereby ANNULLED and SET ASIDE for having been rendered with grave abuse of discretion, and the decision of the Labor Arbiter in NLRC NCR Case No. 00-07-03994-92 is REINSTATED, subject, however, to the modification above mentioned in the computation of back wages. No pronouncement as to costs.

G.R. No. L-48494 February 5, 1990 BRENT SCHOOL, INC., and REV. GABRIEL DIMACHE, petitioners, vs.RONALDO ZAMORA, the Presidential Assistant for Legal Affairs, Office of the President, and DOROTEO R. ALEGRE, respondents. NARVASA, J.: The question presented by the proceedings at bar is whether or not the provisions of the 2 3 Labor Code, as amended, have anathematized "fixed period employment" or employment for a term. The root of the controversy at bar is an employment contract in virtue of which Doroteo R. Alegre was engaged as athletic director by Brent School, Inc. at a yearly compensation of 4 P20,000.00. The contract fixed a specific term for its existence, five (5) years, i.e., from July 18, 1971, the date of execution of the agreement, to July 17, 1976. Subsequent subsidiary agreements dated March 15, 1973, August 28, 1973, and September 14, 1974 reiterated the same terms and conditions, including the expiry date, as those contained in the original 5 contract of July 18, 1971. Some three months before the expiration of the stipulated period, or more precisely on April 20,1976, Alegre was given a copy of the report filed by Brent School with the Department of Labor advising of the termination of his services effective on July 16, 1976. The stated ground for the termination was "completion of contract, expiration of the definite period of employment." And a month or so later, on May 26, 1976, Alegre accepted the amount of P3,177.71, and signed a receipt therefor containing the phrase, "in full payment of services for the period May 16, to July 17, 1976 as full payment of contract." However, at the investigation conducted by a Labor Conciliator of said report of termination of his services, Alegre protested the announced termination of his employment. He argued that although his contract did stipulate that the same would terminate on July 17, 1976, since his services were necessary and desirable in the usual business of his employer , and his employment had lasted for five years, he had acquired the status of a regular employee and 6 could not be removed except for valid cause. The Regional Director considered Brent School's report as anapplication for clearance to terminate employment (not a report of termination), and accepting the recommendation of the Labor Conciliator, refused to give such clearance and instead required the reinstatement of Alegre, as a "permanent employee," to his former position without loss of seniority rights and with full back wages. The Director pronounced "the ground relied upon by the respondent (Brent) in terminating the services of the complainant (Alegre) . . . (as) not sanctioned by P.D. 442," and, quite oddly, 7 as prohibited by Circular No. 8, series of 1969, of the Bureau of Private Schools.
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Brent School filed a motion for reconsideration. The Regional Director denied the motion and 8 forwarded the case to the Secretary of Labor for review. The latter sustained the Regional 9 Director. Brent appealed to the Office of the President. Again it was rebuffed. That Office dismissed its appeal for lack of merit and affirmed the Labor Secretary's decision, ruling that Alegre was a permanent employee who could not be dismissed except for just cause, and expiration of the employment contract was not one of the just causes provided in the Labor 10 Code for termination of services. The School is now before this Court in a last attempt at vindication. That it will get here. The employment contract between Brent School and Alegre was executed on July 18, 1971, at a time when the Labor Code of the Philippines (P.D. 442) had not yet been promulgated. Indeed, the Code did not come into effect until November 1, 1974, some three years after the perfection of the employment contract, and rights and obligations thereunder had arisen and been mutually observed and enforced. At that time, i.e., before the advent of the Labor Code, there was no doubt whatever about the validity of term employment. It was impliedly but nonetheless clearly recognized by the 11 12 Termination Pay Law, R.A. 1052, as amended by R.A. 1787. Basically, this statute provided that In cases of employment, without a definite period, in a commercial, industrial, or agricultural establishment or enterprise, the employer or the employee may terminate at any time the employment with just cause; or without just cause in the case of an employee by serving written notice on the employer at least one month in advance, or in the case of an employer, by serving such notice to the employee at least one month in advance or one-half month for every year of service of the employee, whichever is longer, a fraction of at least six months being considered as one whole year. The employer, upon whom no such notice was served in case of termination of employment without just cause, may hold the employee liable for damages. The employee, upon whom no such notice was served in case of termination of employment without just cause, shall be entitled to compensation from the date of termination of his employment in an amount equivalent to his salaries or wages corresponding to the required period of notice. There was, to repeat, clear albeit implied recognition of the licitness of term employment. RA 1787 also enumerated what it considered to be just causes for terminating an employment without a definite period, either by the employer or by the employee without incurring any liability therefor.

Prior, thereto, it was the Code of Commerce which governed employment without a fixed period, and also implicitly acknowledged the propriety of employment with a fixed period. Its Article 302 provided that In cases in which the contract of employment does not have a fixed period, any of the parties may terminate it, notifying the other thereof one month in advance. The factor or shop clerk shall have a right, in this case, to the salary corresponding to said month. The salary for the month directed to be given by the said Article 302 of the Code of Commerce to the factor or shop clerk, was known as the mesada (from mes, Spanish for "month"). When Article 302 (together with many other provisions of the Code of Commerce) was repealed by the Civil Code of the Philippines, Republic Act No. 1052 was enacted avowedly for the precise purpose of reinstating the mesada. Now, the Civil Code of the Philippines, which was approved on June 18, 1949 and became effective on August 30,1950, itself deals with obligations with a period in section 2, Chapter 3, Title I, Book IV; and with contracts of labor and for a piece of work, in Sections 2 and 3, Chapter 3, Title VIII, respectively, of Book IV. No prohibition against term-or fixed-period employment is contained in any of its articles or is otherwise deducible therefrom. It is plain then that when the employment contract was signed between Brent School and Alegre on July 18, 1971, it was perfectly legitimate for them to include in it a stipulation fixing the duration thereof Stipulations for a term were explicitly recognized as valid by this Court, for instance, in Biboso v. Victorias Milling Co., Inc., promulgated on March 31, 13 1977, and J. Walter Thompson Co. (Phil.) v. NLRC, promulgated on December 29, 14 1983. TheThompson case involved an executive who had been engaged for a fixed period of three (3) years. Bibosoinvolved teachers in a private school as regards whom, the following pronouncement was made: What is decisive is that petitioners (teachers) were well aware an the time that their tenure was for a limited duration. Upon its termination, both parties to the employment relationship were free to renew it or to let it lapse. (p. 254) Under American law the principle is the same. "Where a contract specifies the period of its 16 duration, it terminates on the expiration of such period." "A contract of employment for a 17 definite period terminates by its own terms at the end of such period." The status of legitimacy continued to be enjoyed by fixed-period employment contracts under the Labor Code (Presidential Decree No. 442), which went into effect on November 1, 1974.
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The Code contained explicit references to fixed period employment, or employment with a fixed or definite period. Nevertheless, obscuration of the principle of licitness of term employment began to take place at about this time Article 320, entitled "Probationary and fixed period employment," originally stated that the "termination of employment of probationary employees and those employed WITH A FIXED PERIOD shall be subject to such regulations as the Secretary of Labor may prescribe." The asserted objective to was "prevent the circumvention of the right of the employee to be secured in their employment as provided . . . (in the Code)." Article 321 prescribed the just causes for which an employer could terminate " an employment without a definite period." And Article 319 undertook to define "employment without a fixed period" in the following 18 manner: An employment shall be deemed to be without a definite period for purposes of this Chapter where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be performed is seasonal in nature and the employment is for the duration of the season. The question immediately provoked by a reading of Article 319 is whether or not a voluntary agreement on a fixed term or period would be valid where the employee "has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer." The definition seems a non sequitur. From the premise that the duties of an employee entail "activities which are usually necessary or desirable in the usual business or trade of the employer the" conclusion does not necessarily follow that the employer and employee should be forbidden to stipulate any period of time for the performance of those activities. There is nothing essentially contradictory between a definite period of an employment contract and the nature of the employee's duties set down in that contract as being "usually necessary or desirable in the usual business or trade of the employer." The concept of the employee's duties as being "usually necessary or desirable in the usual business or trade of the employer" is not synonymous with or identical to employment with a fixed term. Logically, the decisive determinant in term employment should not be the activities that the employee is called upon to perform, but the day certain agreed upon by the parties for the commencement and termination of their employment relationship, a day certain being understood to be "that which must necessarily come, although it may not be known 19 when." Seasonal employment, and employment for a particular project are merely instances employment in which a period, where not expressly set down, necessarily implied.

Of course, the term period has a definite and settled signification. It means, "Length of existence; duration. A point of time marking a termination as of a cause or an activity; an end, a limit, a bound; conclusion; termination. A series of years, months or days in which something is completed. A time of definite length. . . . the period from one fixed date to 20 another fixed date . . ." It connotes a "space of time which has an influence on an obligation as a result of a juridical act, and either suspends its demandableness or produces its 21 extinguishment." It should be apparent that this settled and familiar notion of a period, in the context of a contract of employment, takes no account at all of the nature of the duties of the employee; it has absolutely no relevance to the character of his duties as being "usually necessary or desirable to the usual business of the employer," or not. Subsequently, the foregoing articles regarding employment with "a definite period" and "regular" employment were amended by Presidential Decree No. 850, effective December 16, 1975. Article 320, dealing with "Probationary and fixed period employment," was altered by eliminating the reference to persons "employed with a fixed period," and was renumbered 22 (becoming Article 271). The article now reads: . . . Probationary employment.Probationary employment shall not exceed six months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged in a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. Also amended by PD 850 was Article 319 (entitled "Employment with a fixed period," supra) by (a) deleting mention of employment with a fixed or definite period, (b) adding a general exclusion clause declaring irrelevant written or oral agreements "to the contrary," and (c) making the provision treat exclusively of "regular" and "casual" employment. As revised, said 23 article, renumbered 270, now reads: . . . Regular and Casual Employment.The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties , an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be employed is seasonal in nature and the employment is for the duration of the season.

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An employment shall be deemed to he casual if it is not covered by the preceding paragraph:provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. The first paragraph is identical to Article 319 except that, as just mentioned, a clause has been added, to wit: "The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties . . ." The clause would appear to be addressed inter alia to agreements fixing a definite period for employment. There is withal no clear indication of the intent to deny validity to employment for a definite period. Indeed, not only is the concept of regular employment not essentially inconsistent with employment for a fixed term, as above pointed out, Article 272 of the Labor Code, as amended by said PD 850, still impliedly acknowledged the propriety of term employment: it listed the "just causes" for which "an employer may terminate employment without a definite period," thus giving rise to the inference that if the employment be with a definite period, there need be no just cause for termination thereof if the ground be precisely the expiration of the term agreed upon by the parties for the duration of such employment. Still later, however, said Article 272 (formerly Article 321) was further amended by Batas 24 Pambansa Bilang 130, to eliminate altogether reference to employment without a definite period. As lastly amended, the opening lines of the article (renumbered 283), now pertinently read: "An employer may terminate an employment for any of the following just causes: . . . " BP 130 thus completed the elimination of every reference in the Labor Code, express or implied, to employment with a fixed or definite period or term. It is in the light of the foregoing description of the development of the provisions of the Labor Code bearing on term or fixed-period employment that the question posed in the opening paragraph of this opinion should now be addressed. Is it then the legislative intention to outlaw stipulations in employment contracts laying down a definite period therefor? Are such stipulations in essence contrary to public policy and should not on this account be accorded legitimacy? On the one hand, there is the gradual and progressive elimination of references to term or 25 fixed-period employment in the Labor Code, and the specific statement of the rule that . . . Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or

termination of which has been determined at the time of the engagement of the employee or where the work or service to be employed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph:provided, that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the validity and propriety of contracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the parties to fix the duration of a contract, whatever its object, be it specie, goods or services, except the general admonition against stipulations contrary to law, morals, good customs, public order or public 26 policy. Under the Civil Code, therefore, and as a general proposition, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by nature seasonal or for specific projects with pre-determined dates of completion; they also include those to which the parties by free choice have assigned a specific date of termination. Some familiar examples may be cited of employment contracts which may be neither for seasonal work nor for specific projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts, for one, to which, whatever the nature of the engagement, the concept of regular employment will all that it implies does not appear ever to have been applied, Article 280 of the Labor Code not withstanding; also appointments to the positions of dean, assistant dean, college secretary, principal, and other administrative offices in educational institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a necessity, without which no reasonable rotation would be possible. Similarly, despite the provisions of Article 280, Policy, Instructions No. 8 of the 27 Minister of Labor implicitly recognize that certain company officials may be elected for what would amount to fixed periods, at the expiration of which they would have to stand down, in providing that these officials," . . . may lose their jobs as president, executive vice-president or vice-president, etc. because the stockholders or the board of directors for one reason or another did not re-elect them." There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exist, e.g., where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or

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for a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in . . . (his) employment?" As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate with his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employer's using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping off the head. It is a salutary principle in statutory construction that there exists a valid presumption that undesirable consequences were never intended by a legislative measure, and that a construction of which the statute is fairly susceptible is favored, which will avoid all 28 objecionable mischievous, undefensible, wrongful, evil and injurious consequences. Nothing is better settled than that courts are not to give words a meaning which would lead to absurd or unreasonable consequences. That s a principle that does back to In re Allen decided oil October 27, 1903, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to absurd results. That is a strong argument against its adoption. The words of Justice Laurel are particularly apt. Thus: "The fact that the construction placed upon the statute by the appellants would lead to an absurdity is another argument for 29 rejecting it. . . ." . . . We have, here, then a case where the true intent of the law is clear that calls for the application of the cardinal rule of statutory construction that such intent of spirit must prevail over the letter thereof, for whatever is within the spirit of a statute is within the statute, since adherence to the letter would result in absurdity, injustice and contradictions and would 30 defeat the plain and vital purpose of the statute. Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor Code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to

refer to the substantive evil that the Code itself has singled out: agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. Such interpretation puts the seal on Bibiso upon the effect of the expiry of an agreed period of employment as still good rulea rule reaffirmed in the recent case of Escudero vs. Office of the President (G.R. No. 57822, April 26, 1989) where, in the fairly analogous case of a teacher being served by her school a notice of termination following the expiration of the last of three successive fixed-term employment contracts, the Court held: Reyes (the teacher's) argument is not persuasive. It loses sight of the fact that her employment was probationary, contractual in nature, and one with a definitive period. At the expiration of the period stipulated in the contract, her appointment was deemed terminated and the letter informing her of the non-renewal of her contract is not a condition sine qua non before Reyes may be deemed to have ceased in the employ of petitioner UST. The notice is a mere reminder that Reyes' contract of employment was due to expire and that the contract would no longer be renewed. It is not a letter of termination. The interpretation that 32 the notice is only a reminder is consistent with the court's finding in Labajo supra. ... Paraphrasing Escudero, respondent Alegre's employment was terminated upon the expiration of his last contract with Brent School on July 16, 1976 without the necessity of any notice. The advance written advice given the Department of Labor with copy to said petitioner was a mere reminder of the impending expiration of his contract, not a letter of termination, nor an application for clearance to terminate which needed the approval of the Department of Labor to make the termination of his services effective. In any case, such clearance should properly have been given, not denied. WHEREFORE, the public respondent's Decision complained of is REVERSED and SET ASIDE. Respondent Alegre's contract of employment with Brent School having lawfully terminated with and by reason of the expiration of the agreed term of period thereof, he is declared not entitled to reinstatement and the other relief awarded and confirmed on appeal in the proceedings below. No pronouncement as to costs. SO ORDERED.
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G.R. No. 70705 August 21, 1989 MOISES DE vs.NATIONAL LABOR RELATIONS INC., respondents.FERNAN, C.J.: LEON, petitioner, LA TONDE;A

COMMISSION

and

petitioner was not a mere casual employee as asserted by private respondent but a regular employee. He concluded that the dismissal of petitioner from the service was prompted by his request to be included in the list of regular employees and to be paid through the payroll and is, therefore, an attempt to circumvent the legal obligations of an employer towards a regular employee. Labor Arbiter Hernandez found as follows: After a thorough examination of the records of the case and evaluation of the evidence and versions of the parties, this Office finds and so holds that the dismissal of complainant is illegal. Despite the impressive attempt of respondents to show that the complainant was hired as casual and for the work on particular project, that is the repainting of Mama Rosa Building, which particular work of painting and repainting is not pursuant to the regular business of the company, according to its theory, we find differently. Complainant's being hired on casual basis did not dissuade from the cold fact that such painting of the building and the painting and repainting of the equipment and tools and other things belonging to the company and the odd jobs assigned to him to be performed when he had no painting and repainting works related to maintenance as a maintenance man are necessary and desirable to the better operation of the business company. Respondent did not even attempt to deny and refute the corroborating statements of Emiliano Tanque Jr., who was regularly employed by it as a maintenance man doing same jobs not only of painting and repainting of building, equipment and tools and machineries or machines if the company but also other odd jobs in the Engineering and Maintenance Department that complainant Moises de Leon did perform the same odd jobs and assignments as were assigned to him during the period de Leon was employed for more than one year continuously by Id respondent company. We find no reason not to give credit and weight to the affidavit and statement made therein by Emiliano Tanque Jr. This strongly confirms that complainant did the work pertaining to the regular business in which the company had been organized. Respondent cannot be permitted to circumvent the law on security of tenure by considering complainant as a casual worker on daily rate basis and after working for a period that has entitled him to be regularized that he would be 4 automatically terminated. ... . On appeal, however, the above decision of the Labor Arbiter was reversed by the First Division of the National Labor Relations Commission by virtue of the votes of two 5 members which constituted a majority. Commissioner Geronimo Q. Quadra dissented, 6 voting "for the affirmation of the well-reasoned decision of the Labor Arbiter below." The motion for reconsideration was denied. Hence, this recourse. Petitioner asserts that the respondent Commission erred and gravely abuse its discretion in reversing the Order of the Labor Arbiter in view of the uncontroverted fact that the tasks he performed included not only painting but also other maintenance work which are usually

This petition for certiorari seeks to annul and set aside: (1) the majority decision dated January 28, 1985 of the National Labor Relations Commission First Division in Case No. NCR- 83566-83, which reversed the Order dated April 6,1984 of Labor Arbiter Bienvenido S. Hernandez directing the reinstatement of petitioner Moises de Leon by private respondent La Tonde;a Inc. with payment of backwages and other benefits due a regular employee; and, (2) the Resolution dated March 21, 1985 denying petitioner's motion for reconsideration. It appears that petitioner was employed by private respondent La Tonde;a Inc. on December 11, 1981, at the Maintenance Section of its Engineering Department in Tondo, 1 Manila. His work consisted mainly of painting company building and equipment, and other odd jobs relating to maintenance. He was paid on a daily basis through petty cash vouchers. In the early part of January, 1983, after a service of more than one (1) year, petitioner requested from respondent company that lie be included in the payroll of regular workers, instead of being paid through petty cash vouchers. Private respondent's response to this request was to dismiss petitioner from his employment on January 16, 1983. Having been refused reinstatement despite repeated demands, petitioner filed a complaint for illegal dismissal, reinstatement and payment of backwages before the Office of the Labor Arbiter of the then Ministry now Department of Labor and Employment. Petitioner alleged that he was dismissed following his request to be treated as a regular employee; that his work consisted of painting company buildings and maintenance chores like cleaning and operating company equipment, assisting Emiliano Tanque Jr., a regular maintenance man; and that weeks after his dismissal, he was re-hired by the respondent company indirectly through the Vitas-Magsaysay Village Livelihood Council, a labor agency of respondent company, and was made to perform the tasks which he used to do. Emiliano 2 Tanque Jr. corroborated these averments of petitioner in his affidavit. On the other hand, private respondent claimed that petitioner was not a regular employee but only a casual worker hired allegedly only to paint a certain building in the company premises, and that his work as a painter terminated upon the completion of the painting job. On April 6, 1984, Labor Arbiter Bienvenido S. Hernandez rendered a decision finding the complaint meritorious and the dismissal illegal; and ordering the respondent company to reinstate petitioner with full backwages and other benefits. Labor Arbiter Hernandez ruled that
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necessary or desirable in the usual business of private respondent: hence, the reversal violates the Constitutional and statutory provisions for the protection of labor. The private respondent, as expected, maintains the opposite view and argues that petitioner was hired only as a painter to repaint specifically the Mama Rosa building at its Tondo compound, which painting work is not part of their main business; that at the time of his engagement, it was made clear to him that he would be so engaged on a casual basis, so much so that he was not required to accomplish an application form or to comply with the usual requisites for employment; and that, in fact, petitioner was never paid his salary through 7 the regular payroll but always through petty cash vouchers. The Solicitor General, in his Comment, recommends that the petition be given due course in view of the evidence on record supporting petitioner's contention that his work was regular in nature. In his view, the dismissal of petitioner after he demanded to be regularized was a subterfuge to circumvent the law on regular employment. He further recommends that the questioned decision and resolution of respondent Commission be annulled and the Order of the Labor Arbiter directing the reinstatement of petitioner with payment of backwages and 8 other benefits be upheld. After a careful review of the records of this case, the Court finds merit in the petition as We sustain the position of the Solicitor General that the reversal of the decision of the Labor Arbiter by the respondent Commission was erroneous. The law on the matter is Article 281 of the Labor Code which defines regular and casual employment as follows: Art. 281. Regular and casual employment. The provisions of a written agreement to the contrary notwithstanding and regardless of the oral agreements of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists.

This provision reinforces the Constitutional mandate to protect the interest of labor. Its language evidently manifests the intent to safeguard the tenurial interest of the worker who may be denied the rights and benefits due a regular employee by virtue of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual status for as long as convenient. Thus, contrary agreements notwithstanding, an employment is deemed regular when the activities performed by the employee are usually necessary or desirable in the usual business or trade of the employer. Not considered regular are the so-called "project employment" the completion or termination of which is more or less determinable at the time of employment, such as those employed in 9 connection with a particular construction project and seasonal employment which by its nature is only desirable for a limited period of time. However, any employee who has rendered at least one year of service, whether continuous or intermittent, is deemed regular with respect to the activity he performed and while such activity actually exists. The primary standard, therefore, of determining a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual business or trade of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is also considered regular, but only with respect to such activity and while such activity exists. In the case at bar, the respondent company, which is engaged in the business of manufacture and distillery of wines and liquors, claims that petitioner was contracted on a casual basis specifically to paint a certain company building and that its completion rendered petitioner's employment terminated. This may have been true at the beginning, and had it been shown that petitioner's activity was exclusively limited to painting that certain building, respondent company's theory of casual employment would have been worthy of consideration. However, during petitioner's period of employment, the records reveal that the tasks assigned to him included not only painting of company buildings, equipment and tools but also cleaning and oiling machines, even operating a drilling machine, and other odd jobs assigned to him when he had no painting job. A regular employee of respondent company, Emiliano Tanque Jr., attested in his affidavit that petitioner worked with him as a maintenance man when there was no painting job.

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It is noteworthy that, as wisely observed by the Labor Arbiter, the respondent company did not even attempt to negate the above averments of petitioner and his co- employee. Indeed, the respondent company did not only fail to dispute this vital point, it even went further and confirmed its veracity when it expressly admitted in its comment that, "The main bulk of work and/or activities assigned to petitioner was painting and other related activities. Occasionally, he was instructed to do other odd things in connection with maintenance while he was waiting 10 for materials he would need in his job or when he had finished early one assigned to him. The respondent Commission, in reversing the findings of the Labor Arbiter reasoned that petitioner's job cannot be considered as necessary or desirable in the usual business or trade of the employer because, "Painting the business or factory building is not a part of the 11 respondent's manufacturing or distilling process of wines and liquors. The fallacy of the reasoning is readily apparent in view of the admitted fact that petitioner's activities included not only painting but other maintenance work as well, a fact which even the respondent Commission, like the private respondent, also expressly recognized when it stated in its decision that, 'Although complainant's (petitioner) work was mainly painting, he 12 was occasionally asked to do other odd jobs in connection with maintenance work. It misleadingly assumed that all the petitioner did during his more than one year of employment was to paint a certain building of the respondent company, whereas it is admitted that he was given other assignments relating to maintenance work besides painting company building and equipment. It is self-serving, to say the least, to isolate petitioner's painting job to justify the proposition of casual employment and conveniently disregard the other maintenance activities of petitioner which were assigned by the respondent company when he was not painting. The law demands that the nature and entirety of the activities performed by the employee be considered. In the case of petitioner, the painting and maintenance work given him manifest a treatment consistent with a maintenance man and not just a painter, for if his job was truly only to paint a building there would have been no basis for giving him other work assignments In between painting activities. It is not tenable to argue that the painting and maintenance work of petitioner are not necessary in respondent's business of manufacturing liquors and wines, just as it cannot be said that only those who are directly involved in the process of producing wines and liquors may be considered as necessary employees. Otherwise, there would have been no need for the regular Maintenance Section of respondent company's Engineering Department, manned by regular employees like Emiliano Tanque Jr., whom petitioner often worked with. Furthermore, the petitioner performed his work of painting and maintenance activities during his employment in respondent's business which lasted for more than one year, until early

January, 1983 when he demanded to be regularized and was subsequently dismissed. Certainly, by this fact alone he is entitled by law to be considered a regular employee. And considering further that weeks after his dismissal, petitioner was rehired by the company through a labor agency and was returned to his post in the Maintenance Section and made to perform the same activities that he used to do, it cannot be denied that as activities as a regular painter and maintenance man still exist. It is of no moment that petitioner was told when he was hired that his employment would only be casual, that he was paid through cash vouchers, and that he did not comply with regular employment procedure. Precisely, the law overrides such conditions which are prejudicial to the interest of the worker whose weak bargaining position needs the support of the State. That determines whether a certain employment is regular or casual is not the will and word of the employer, to which the desperate worker often accedes, much less the procedure of hiring the employee or the manner of paying his salary. It is the nature of the activities performed in relation to the particular business or trade considering all circumstances, and in some cases the length of time of its performance and its continued existence. Finally, considering its task to give life and spirit to the Constitutional mandate for the protection of labor, to enforce and uphold our labor laws which must be interpreted liberally in favor of the worker in case of doubt, the Court cannot understand the failure of the respondent Commission to perceive the obvious attempt on the part of the respondent company to evade its obligations to petitioner by dismissing the latter days after he asked to be treated as a regular worker on the flimsy pretext that his painting work was suddenly finished only to rehire him indirectly weeks after his dismissal and assign him to perform the same tasks he used to perform. The devious dismissal is too obvious to escape notice. The inexplicable disregard of established and decisive facts which the Commission itself admitted to be so, in justifying a conclusion adverse to the aggrieved laborer clearly spells a grave abuse of discretion amounting to lack of jurisdiction. WHEREFORE, the petition is GRANTED. The assailed Decision and Resolution of the National Labor Relations Commission are hereby annulled and set aside. The Order of Labor arbiter Bienvenido S. Hernandez dated April 6, 1984 is reinstated. Private respondent is ordered to reinstate petitioner as a regular maintenance man and to pay petitioner 1) backwages equivalent to three years from January 16,1983, in accordance with the Aluminum Wage Orders in effect for the period covered, 2) ECOLA 3) 13th Month Pay, 4) and other benefits under pertinent Collective Bargaining Agreements, if any. SO ORDERED.

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G.R. No. 85519 February 15, 1990 UNIVERSITY OF STO. TOMAS, FR. MAXIMO MARINA O.P. AND GILBERTO L. GAMEZ, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, HONORABLE LABOR ARBITER BIENVENIDO S. HERNANDEZ AND BASILIO E. BORJA, respondents.GANCAYCO, J.: The herein private respondent Dr. Basilio E. Borja was first appointed as "affiliate faculty" in the Faculty of Medicine and Surgery at the University of Sto. Tomas (UST for short) on September 29, 1976. In the second semester of the school year 1976-77 he was appointed instructor with a load of twelve (12) hours a week. He was reappointed instructor for the school year 1977-78 with a load of nine (9) hours a week in the first semester and two (2) hours a week in the second. On June 10, 1978 he was appointed as Instructor III for the school year 1978-79. His load for the first semester was eight (8) hours a week, and for the second semester, seven (7) hours a week. On March 19, 1979 Dean Gilberto Gamez observed that Dr. Borja should not be reappointed based on the evaluation sheet that shows his sub-standard and inefficient 1 performance. Nevertheless in view of the critical shortage of staff members in the Department of Neurology and Psychiatry Dr. Gamez recommended the reappointment of Dr. Borja, after informing the latter of the negative feedbacks regarding his teaching and his promise to improve his performance. Thus on July 27, 1979 he was extended a reappointment as Instructor III in the school year 1979-80. He was given a load of six (6) hours a week. In all these appointments he was a part time instructor. At the end of the academic year, it appearing that Dr. Borja had not improved his performance in spite of his assurances of improvement, his reappointment was not recommended. In July, 1982 he filed a complaint in the National Labor Relations Commission (NLRC for short) for illegal dismissal against the UST. After the submission of the pleadings and due proceedings the labor arbiter rendered a decision on July 19, 1984, the dispositive part of which reads as follows: WHEREFORE this Office finds in favor of the complainant. The respondents (sic) university are hereby ordered to effect the immediate reinstatement of complainant to his former position with full backwages, rights and benefits appertaining thereto. Respondent university is likewise ordered to pay the complainant the sum of FIVE HUNDRED THOUSAND PESOS (P500,000.00) as and by way of moral damages and another 1 0% of the gross amount due him, and as and by way of attorney's fees.

Respondents are hereby ordered to effect this decision immediately.

The UST appealed therefrom to the NLRC which in due course rendered a decision on September 30, 1988, modifying the appealed decision as follows: WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED with a modification limiting the backwages to three (3) years without qualification or deduction, computed at P660.00 per month, ordering respondents to pay complainant P100,000.00 as and for actual or compensatory damages, ordering respondents to pay complainant P300,000.00 as and for moral damages, and further ordering them to pay complainant P100,000.00 as and for exemplary damages. Finally, respondents are ordered to pay to complainant the sum of ten (10%) percent of the 3 total sum due as and for attorney's fees. Hence the instant petition for certiorari and prohibition with a prayer for the issuance of a writ of preliminary injunction and restraining order that was filed by the UST and its officers wherein it is alleged that the public respondent NLRC committed the following errors: I THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION COMMITTED SERIOUS REVERSIBLE ERRORS OF SUBSTANCE AMOUNTING TO GRAVE ABUSE OF DISCRETION AND/OR LACK OR EXCESS OF JURISDICTION IN FINDING THAT BASILIO E. BORJA ACQUIRED TENURE, THE SAID FINDING BEING CLEARLY CONTRARY TO THE EVIDENCE AT HAND AND DEVOID OF BASIS IN LAW. II THE HONORABLE NLRC COMMITTED A SERIOUS AND REVERSIBLE ERROR AND GRAVELY ABUSED ITS DISCRETION IN HOLDING THAT THE SERVICES OF BASILIO E. BORJA HAD BEEN CONSTRUCTIVELY TERMINATED, HIS APPOINTMENT HAVING MERELY LAPSED IN ACCORDANCE WITH ITS TERMS AS ACCEPTED BY THE COMPLAINANT-APPELLEE BORJA. III THE HONORABLE NLRC COMMITTED A SERIOUS AND GRAVE ERROR IN AFFIRMING, ALBEIT REDUCING THE AWARD OF THE HONORABLE LABOR ARBITER A QUO OF CLEARLY EXCESSIVE, UNJUST, UNCONSCIONABLE AND SHOCKING MORAL

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DAMAGES OF P300,000.00 AND IN AWARDING MOTU PROPIO EXEMPLARY DAMAGES IN THE AMOUNT OF P100,000.00 IN GRAVE ABUSE OF ITS DISCRETION AMOUNTING 4 TO EXCESS OF JURISDICTION. The petition is impressed with merit. In the questioned decision of the public respondent NLRC it found that private respondent had earned to his credit eight (8) semesters or four (4) academic years of professional duties with the UST and that he has met the requirements to become a regular employee under the three (3) years requirement in the Manual of Regulations for Private Schools. The appealed decision is correct insofar as it declares that it is the Manual of Regulations for Private Schools, not the Labor Code, that determines the acquisition of regular or permanent status of faculty members in an educational institution, but the Court disagrees with the observation that it is only the completion of three (3) years of service that is required to acquire such status. According to Policy Instructions No. 11 issued by the Department of Labor and Employment, "the probationary employment of professors, instructors and teachers shall be subject to standards established by the Department of Education and Culture." Said standards are embodied in paragraph 75 of the Manual of Regulations for Private Schools, to wit: 75. Full time teachers who have rendered three consecutive years of satisfactory service shall be considered permanent." (Emphasis supplied) The legal requisites, therefore, for acquisition by a teacher of permanent employment, or security of tenure, are as follows: 1) the teacher is a full time teacher; 2) the teacher must have rendered three (3) consecutive years of service; and 3) such service must have been satisfactory. Now, the Manual of Regulations also states that "a full-time teacher" is "one whose total working day is devoted to the school, has no other regular remunerative employment and is paid on a regular monthly basis regardless of the number of teaching hours" (Par. 77); and that in college, "the nominal teaching load of a full-time instructor shall be eighteen hours a week" (par. 78).

It follows that a part-time member of the faculty cannot acquire permanence in employment under the Manual of Regulations in relation to the Labor Code. Hence, the crucial question is whether or not the private respondent was a full-time or parttime member of the faculty during the three (3) years that he served in the petitioneruniversity's College of Medicine. Stated otherwise, the question is (1) whether or not the said respondent's "total working day ..... (was) devoted to the school" and he had "no other regular remunerative employment" and was "paid on a regular monthly basis regardless of the number of teaching hours;" and/or (2) whether or not his normal teaching load was eighteen (18) hours a week. It cannot be said that respondent's total working day was devoted to the school alone. It is clear from the record that he was practising his profession as a doctor and maintaining a clinic in the hospital for this purpose during the time that he was given a teaching load. In other words, he had another regular remunerative work aside from teaching. His total working day was not, therefore, devoted to the school. Indeed, his salaries from teaching were computed by the respondent Commission itself at only an average of P660.00 per month; he, therefore, had to have other sources of income, and this of course was his self-employment as a practising psychiatrist. That the compensation for teaching had to be averaged also shows that he was not paid on a regular monthly basis. Moreover, there is absolutely no evidence that he performed other functions for the school when not teaching. All things considered, it would appear that teaching was only a secondary occupation or "sideline," his professional practice as a psychiatrist being his main vocation. The record also discloses that he never had a normal teaching load of eighteen (18) hours a week during the time that he was connected with the university. The only evidence on this equally vital issue was presented by the petitioner through the affidavit of Dr. Gilberts Gamez who was the dean of the medical school during the time material to the proceedings at bar. His sworn declaration is to the effect that as "affiliate faculty" member of the Department of Neurology and Psychiatry from September 29,1976, private respondent had no teaching functions: that in fact, when he was appointed in September, 1976, classes for the first semester were already nearing their end; that as "affiliate faculty" he was merely an observer acquainting himself with the functions of an instructor while awaiting issuance of a formal appointment as such; that in the school year 1977-78 he had a teaching load of nine (9) hours a week in the first semester and two (2) hours a week in the second semester; that in the school year 1978-1979 he had a load of eight (8) hours a week in the first semester and seven (7) hours a week in the second semester; that in the school year 1979-1980 he had a load of six (6) hours a week in each semester. This evidence does not appear to have been refuted at all by the private respondent, and has inexplicably been ignored by public respondent. No discussion of this particular point is found in the decisions of the Labor Arbiter or the NLRC.

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The private respondent, therefore, could not be regarded as a full- time teacher in any aspect. He could not be regarded as such because his total working day was not devoted to the school and he had other regular remunerative employment. Moreover, his average teaching load was only 6.33 hours a week. In view of the explicit provisions of the Manual of Regulations above-quoted, and the fact that private respondent was not a full- time teacher, he could not have and did not become a permanent employee even after the completion of three (3) years of service. Having found that private respondent did not become a permanent employee of petitioner UST, it correspondingly follows that there was no duty on the part of petitioner UST to reappoint private respondent as Instructor, the temporary appointment having lapsed. Such appointment is a matter addressed to the discretion of said petitioner. The findings, therefore, of the public respondent NLRC that private respondent was constructively terminated is without lawful basis. By the same token, the order for reinstatement of private respondent with backwages plus an award of actual or compensatory, moral and exemplary damages must be struck down. WHEREFORE, the petition is hereby GRANTED. The questioned orders of public respondent NLRC dated September 13, 1988 and public respondent labor arbiter Bienvenido S. Hernandez dated July 19,1988 are hereby SET ASIDE and another judgment is hereby rendered DISMISSING the complaint of private respondent, without pronouncement as to costs. SO ORDERED.

G.R. No. 87653 February 11, 1992 CONRADO M. AQUINO, NAPOLEON B. AROMIN, ROBERTO A. GASPAN and NICARDO P. BLANQUISCO,petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION AND OTIS ELEVATOR COMPANY, respondents.CRUZ, J.: The petitioners' services were terminated on the ground of retrenchment, and they received separation pay double that required by the Labor Code. Thereafter, they demanded retirement benefits, invoking the Retirement Plan of the respondent company which they said was contractual rather than statutory. The question eventually submitted to the labor authorities was, having received the separation pay, were the petitioners still entitled to the retirement benefits? The Labor Arbiter said they were, but the NLRC reversed him. The issue is now before us for final resolution. The petitioners were employees of private respondent Otis Elevator Company when they were informed of the termination of their employment in line with the need of the company "to streamline its operations, consolidate certain functions, reduce its manpower and cut nonessential spending." The separate letters addressed to the petitioners advised them that In lieu of notice, you shall be paid one month's equivalent salary, plus your regular allowances, counted from such date, and you shall be covered with the normal benefits for that period. You shall also be paid your earned and/or unused sick leave and vacation leave, including your pro-rata 13th month pay. And for every year of service with the Company, you shall be paid one month's basic salary or your 1 retirement benefits, if applicable to you, whichever is higher. Accordingly, petitioners were paid their separation pay, computed as follows: Basic monthly Years in Separation salary service Pay Conrado M. Aquino P 4,300 22 P 94,600 Napoleon B. Aromin 10,350 22 227,700 Roberto A. Gaspan 3,800 19 72,200 Nicardo P. Blanquisco 8,800 13 110,500 The separation pay was based on Section 4, Article VII of the Collective Bargaining Agreement between the company and its employees providing thus: All employees in the bargaining unit separated without cause shall be granted separation pay of not less than one (1) month's latest basic rate for every year of service subject to the existing provisions of the Retirement Plan.

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In justifying their subsequent demand for retirement benefits before the Labor Arbiter, the petitioners invoked Section 1, Article XIV, of the CBA in relation to Section 5.2, Article V, of the company's Retirement Plan, which provides: The COMPANY shall maintain the present group retirement plan which is attached hereto as Annex "A" and made an integral part of this contract. (Sec. 1, Art. XIV). xxx xxx xxx 5.2. A Participant who is terminated from employment and who has rendered at least ten (10) years of service shall be entitled to receive in lump sum all or a portion of his accrued benefit credits as of his date of termination, in accordance with the following schedule: Years of Service Vested Percentage Upon Termination of Benefit Credits Less than 10 years NIL 10 to less than 15 50% 15 to less than 20 75% 20 years and over 100% They also cited the case of their co-employees Cleodeveo Soriano, Jr. and Patriciano Destajo, Jr., whose services were terminated on the ground of redundancy in 1983 and 1982, respectively, and were both given separation pay and retirement benefits. For its part, the respondent company argued that separation pay and retirement benefits were mutually exclusive; hence, the petitioners could no longer claim the latter after having received the former. The Labor Arbiter ruled in favor of the petitioners mainly on the ground that the company was estopped from withholding retirement benefits from them after having granted similar benefits to the employees earlier mentioned. He held that a different treatment of the petitioners would constitute discrimination because "benefits accorded to other employees must likewise be 2 extended to the rest who are similarly situated." In reversing the appealed decision, the NLRC declared that the case cited by the petitioners was exceptional and could not be considered a precedent. Moreover The CBA provision is very clear that while the employees separated without cause are entitled to a separation pay of not less than one (1) month's latest basic rate for every year of service, this is made merely subject toand not in addition to the existing provisions of Section 5.2 of the Article V of the Retirement Plan. In other words, no logical inference can be made that the benefits under Section 5.2 of Article V of the Retirement in addition to the one (1) month's latest basic rate for every year of

service. (sic) Therefore, the offer of appellant perfectly fits well within the contemplation of the parties as envisaged in the aforementioned provisions of the 3 CBA and the Retirement Plan. It is important at the outset to note the distinction between separation pay and retirement benefits. Separation pay is required in the cases enumerated in Articles 283 and 284 of the Labor Code, which include retrenchment, and is computed at at least one month salary or at the rate of one-half month salary for every year of service, whichever is higher. We have held that it is a statutory right designed to provide the employee with the wherewithal during the 4 period that he is looking for another employment. Retirement benefits, where not mandated by law, may be granted by agreement of the employees and their employer or as a voluntary act on the part of the employer. Retirement benefits are intended to help the employee enjoy the remaining years of his life, lessening the burden of worrying for his financial support, and are a form of reward for his loyalty and 5 service to the employer. It is on the basis of these distinctions that the petitioners claim to be entitled not only to the separation pay they have already received but also to the retirement benefits provided for in the Retirement Plan of the respondent company. In rejecting this contention, the private respondent insists that the retirement benefits are subject to the provisions of the Retirement Plan under Section 4 of the CBA. Moreover, under the Omnibus Implementing Rules of the Labor Code, retired employees whose services are terminated shall receive the corresponding retirement benefits or separation pay, whichever 6 is higher. This clearly indicates that one benefit should exclude the other. The petitioners are covered by the Retirement Plan because they have contributed to the retirement fund, have been separated by reason of the retrenchment, and have served the company for more than the prescribed minimum period of ten years. In Batangas Laguna Tayabas Bus Co. v. Court of Appeals, Justice Martin started his ponencia thus: "The issue in this petition is whether an employee who has already received his separation pay can still recover retirement benefits from his employer." Resolving the question affirmatively, the Court declared in part: But petitioner contends that private respondent can only avail himself of either separation pay or retirement benefits but not both, citing in support thereof, the ruling of this Court in the case ofCipriano vs. San Miguel Corporation, 24 SCRA 703. The
7

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foregoing ruling cannot be made to apply to the present suit because in said case it is so expressly provided in the Labor Agreement that: Regular employees who are separated from the service of the company for any reason other than misconduct or voluntary resignation shall be entitled to either 100% of the benefits provided in Section 2, Article VIII hereof regardless of their length of service in the company or to the severance pay provided by law, whichever is the greater amount. Thus, in said case the employee was entitled to either the amount prescribed in the plan or the severance pay provided by law whichever is the greater amount. In the present case, there is nothing in the labor agreement entered into by the petitioner with Batangas Transportation Employees Association of which private respondent is a member barring the latter from recovering whatever benefits he is entitled to under the law in addition to the gratuity benefits under the labor agreementbetween him and his employer. Neither is there any provision in the Termination Pay Law (Republic Act No. 1052, as amended by Republic Act No. 1787) that an employee who receives big termination pay upon separation from the service without cause is precluded from recovering any other benefits agreed upon by him and his employer. In the absence of any such prohibition, both in the aforesaid Labor Agreement and the Termination Pay Law the private respondent has the right to recover from the petitioner whatever benefits he is entitled to under the Termination Pay Law in addition to the other benefits conferred upon him by the aforesaid labor agreement . * The same issue was squarely raised in University of the East v. Minister of Labor, 8 where the award of both separation pay and retirement benefits to the employees was assailed by the employer on the ground that "there could only be one mode of termination of employment with respect to one and the same employee." Through Justice Gutierrez, the Court reaffirmed the above-quoted ruling in the BLTB case and held as follows: Therefore, if there is no provision contained in the collective bargaining agreement to the effect that benefits received under the Termination Pay Law shall preclude the employee from receiving other benefits from the agreement, then said employee is entitled to the benefits embodied in the agreement in addition to whatever benefits are mandated by statute. In the case at bar, there is no such provision. We cannot presume that it forms an implicit part of either the CBA or the law. Separation pay arising from a forced termination of employment and benefits given as a contractual right due to many years of faithful service are not necessarily antagonistic to each other, especially where there are strong equitable considerations as in this case. ** We have carefully examined the record, and particularly the Collective Bargaining Agreement and the Retirement Plan, and have found no specific prohibition against the payment of both benefits to the employee.

Maintaining that the above cases have no application to the case at bar, the company calls attention to Book VI, Section 14, Rule 1, of the Omnibus Rules Implementing the Labor Code, which provides as follows: (a) An employee who is retired pursuant to a bonafide retirement plan or in accordance with the applicable individual or collective agreement or established employer policy shall be entitled to all the retirement benefits provided therein or to termination pay equivalent to at least one-half month salary for every year of service, whichever is higher, a fraction of at least six (6) months being considered as one whole year. However, it overlooks sub-section (c) of the same Section 14, which clearly provides that: (c) This Section shall apply where the employee retires at the age of sixty (60) years or more. The private respondent has not shown that the petitioners were sixty years or older at the time of their separation and therefore covered by the said section. Having itself invoked that provision, the company had the obligation to prove that the petitioners came under its terms. The private respondent's argument that the petitioners did not retire but were terminated in employment is, in our view, plain nitpicking. It cannot be seriously contended that if an employee dies before he can retire (at a time when he is already eligible for retirement), his beneficiaries are entitled to the retirement pay he would have himself earned. The effective cause of separation is death, for which his heirs are entitled to death benefits, but they are also paid retirement benefits as a consequence of such death. This is not to say that one whose services are terminated not only because he has retired but for another cause resulting in retirement is always entitled to both separation pay and retirement benefits. It should be obvious that if, say, an employee is dismissed for dishonesty, he is not entitled to separation pay or, for that matter, even retirement benefits. But in the case before us, the petitioners have not been separated for cause, in the sense that they have committed an offense warranting their removal. They were separated for reasons not imputable to them, as the letter above quoted categorically declared: Finally, we want to assure you that your retrenchment is through no fault of your own but mainly due to prevention of further losses. In behalf of the Company, we express our sincere appreciation for your services and loyalty and wish you every success in 9 your future undertakings. In arriving at our conclusion, we are guided by the principle that any doubt concerning the rights of labor should be resolved in its favor, pursuant to the social justice policy. The Court feels that if the private respondent really intended to make the separation pay and the

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retirement benefits mutually exclusive, it should have sought inclusion of the corresponding provision in the Retirement Plan and the Collective Bargaining Agreement so as to remove all possible ambiguity regarding this matter. We may presume that the counsel of the respondent company was aware of the prevailing doctrine embodied in the cases earlier cited. Knowing this, he should have made it a point to categorically provide in the Retirement Plan and the CBA that an employee who had received separation pay would no longer be entitled to retirement benefits. Or to put it more plainly, collection of retirement benefits was prohibited if the employee had already received separation pay. The private respondent argues that it had paid the petitioners more than what the law requires by giving them separation pay at the rate of one month instead of one-half month for every year of service. The suggestion is that the company had been more than liberal and that to require it to pay the retirement benefits as well would be a strain on its benevolence. The petitioners are not pleading for generosity but demanding their rights. These rights are embodied in the Collective Bargaining Agreement, which was the result of negotiations between the company and the employees. Bargaining is a process where the parties discuss their demands and counter-demands and, after haggling, agree on what is essentially a compromise reflecting the concessions mutually given by the parties to arrive at a common understanding. The resultant contract provides for demandable rights, not withdrawable doles. When the employer signs a collective bargaining agreement, it recognizes the rights of the workers and does not merely concedecertain privileges to them out of the goodness of its heart. The private respondent asserts in its statement of facts that it gave the petitioners a choice between accepting the separation pay and the retirement benefits and they opted for the former. This is not borne by the record. In its letter advising the petitioners of the termination of their services, the company merely informed them that they would be given separation pay or retirement benefits, whichever was higher. The petitioners received the separation pay because they felt they were entitled thereto but they did not thereby waive their rights to the retirement benefits. We realize that the retirement benefits of the petitioners come up to a substantial figure, considering their respective lengths of service with the company. These benefits, added to the separation pay they have already received, make up a tidy sum indeed. The point, however, is that the petitioners are entitled to this amount under the provisions of the CBA and the Retirement Plan freely entered into by the parties. These instruments are binding

agreements, not being contrary to law, morals, good customs, public order or public policy, and must therefore be upheld. WHEREFORE, the petition is GRANTED. The decision of the respondent National Labor Relations Board is REVERSED and a new judgment is hereby rendered directing the payment of retirement benefits to the petitioners in accordance with the Retirement Plan of the respondent company and its Collective Bargaining Agreement with its employees. SO ORDERED.

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G.R. No. 110524

July 29, 2002

the context of Article 280 of the Labor Code." They claim that the decision may establish a precedent that will adversely affect the maritime industry. The Court resolved to set the case for oral arguments to enable the parties to present their sides. To recall, the facts of the case are, as follows:

DOUGLAS MILLARES and ROGELIO LAGDA, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, TRANS-GLOBAL MARITIME AGENCY, INC. and ESSO INTERNATIONAL SHIPPING CO., LTD. respondents.KAPUNAN, J.: On March 14, 2000, the Court promulgated its decision in the above-entitled case, ruling in favor of the petitioners. The dispositive portion reads, as follows: WHEREFORE, premises considered, the assailed Decision, dated June 1, 1993, of the National Labor Relations Commission is hereby REVERSED and SET ASIDE and a new judgment is hereby rendered ordering the private respondents to: (1) Reinstate petitioners Millares and Lagda to their former positions without loss of seniority rights, and to pay full backwages computed from the time of illegal dismissal to the time of actual reinstatement; (2) Alternatively, if reinstatement is not possible, pay petitioners Millares and Lagda separation pay equivalent to one month's salary for every year of service; and, (3) Jointly and severally pay petitioners One Hundred Percent (100%) of their total credited contributions as provided under the Consecutive Enlistment Incentive Plan. SO ORDERED.
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Petitioner Douglas Millares was employed by private respondent ESSO International Shipping Company LTD. (Esso International, for brevity) through its local manning agency, private respondent Trans-Global Maritime Agency, Inc. (Trans-Global, for brevity) on November 16, 1968 as a machinist. In 1975, he was promoted as Chief Engineer which position he occupied until he opted to retire in 1989. He was then receiving a monthly salary of US $1,939.00. On June 13, 1989, petitioner Millares applied for a leave of absence for the period July 9 to August 7, 1989. In a letter dated June 14, 1989, Michael J. Estaniel, President of private respondent Trans-Global, approved the request for leave of absence. On June 21, 1989, petitioner Millares wrote G.S. Hanly, Operations Manager of Exxon International Co., (now Esso International) through Michael J. Estaniel, informing him of his intention to avail of the optional retirement plan under the Consecutive Enlistment Incentive Plan (CEIP) considering that he had already rendered more than twenty (20) years of continuous service. On July 13, 1989 respondent Esso International, through W.J. Vrints, Employee Relations Manager, denied petitioner Millares' request for optional retirement on the following grounds, to wit: (1) he was employed on a contractual basis; (2) his contract of enlistment (COE) did not provide for retirement before the age of sixty (60) years; and (3) he did not comply with the requirement for claiming benefits under the CEIP, i.e., to submit a written advice to the company of his intention to terminate his employment within thirty (30) days from his last disembarkation date. On August 9, 1989, petitioner Millares requested for an extension of his leave of absence from August 9 to 24, 1989. On August 19, 1989, Roy C. Palomar, Crewing Manager, Ship Group A, Trans-global, wrote petitioner Millares advising him that respondent Esso International "has corrected the deficiency in its manpower requirement specifically in the Chief Engineer rank by promoting a First Assistant Engineer to this position as a result of (his) previous leave of absence which expired last August 8, 1989. The adjustment in said rank was required in order to meet manpower schedules as a result of (his) inability." On September 26, 1989, respondent Esso International, through H. Regenboog, Personnel Administrator, advised petitioner Millares that in view of his absence without leave, which is

A motion for reconsideration was consequently filed by the private respondents to which 3 petitioners filed an Opposition thereto. In a Minute Resolution dated June 28, 2000, the Court resolved to deny the motion for 4 reconsideration with finality. Subsequently, the Filipino Association for Mariners Employment, Inc. (FAME) filed a Motion for Leave to Intervene and to Admit a Motion for Reconsideration in Intervention. Private respondents, meanwhile, also filed a Motion for Leave to File a Second Motion for Reconsideration of our decision. In both motions, the private respondents and FAME respectively pray in the main that the Court reconsider its ruling that "Filipino seafarers are considered regular employees within

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equivalent to abandonment of his position, he had been dropped from the roster of crew members effective September 1, 1989. On the other hand, petitioner Lagda was employed by private respondent Esso International as wiper/oiler in June 1969. He was promoted as Chief Engineer in 1980, a position he continued to occupy until his last COE expired on April 10, 1989. He was then receiving a monthly salary of US$1,939.00. On May 16, 1989, petitioner Lagda applied for a leave of absence from June 19, 1989 up to the whole month of August 1989. On June 14, 1989, respondent Trans-Global's President, Michael J. Estaniel, approved petitioner Lagda's leave of absence from June 22, 1989 to July 20, 1989 and advised him to report for re-assignment on July 21, 1989. On June 26, 1989, petitioner Lagda wrote a letter to G.S. Stanley, Operations Manager of respondent Esso International, through respondent Trans-Global's President Michael J. Estaniel, informing him of his intention to avail of the optional early retirement plan in view of his twenty (20) years continuous service in the complaint. On July 13, 1989, respondent Trans-global denied petitioner Lagda's request for availment of the optional early retirement scheme on the same grounds upon which petitioner Millares request was denied. On August 3, 1989, he requested for an extension of his leave of absence up to August 26, 1989 and the same was approved. However, on September 27, 1989, respondent Esso International, through H. Regenboog, Personnel Administrator, advised petitioner Lagda that in view of his "unavailability for contractual sea service," he had been dropped from the roster of crew members effective September 1, 1989. On October 5, 1989, petitioners Millares and Lagda filed a complaint-affidavit, docketed as POEA (M) 89-10-9671, for illegal dismissal and non-payment of employee benefits against 5 private respondents Esso International and Trans-Global, before the POEA. On July 17, 1991, the POEA rendered a decision dismissing the complaint for lack of merit. On appeal to the NLRC, the decision of the POEA was affirmed on June 1, 1993 with the following disquisition: The first issue must be decided in the negative. Complainants-appellants, as seamen and overseas contract workers are not covered by the term "regular employment" as defined under Article 280 of the Labor Code. The POEA, which is tasked with protecting the rights of

the Filipino workers for overseas employment to fair and equitable recruitment and employment practices and to ensure their welfare, prescribes a standard employment contract for seamen on board ocean-going vessels for a fixed period but in no case to exceed twelve (12) months (Part 1, Sec. C). This POEA policy appears to be in consonance with the international maritime practice. Moreover, the Supreme Court in Brent School, Inc. vs. Zamora, 181 SCRA 702, had held that a fixed term is essential and natural appurtenance of overseas employment contracts to which the concept of regular employment with all that it implies is not applicable, Article 280 of the Labor Code notwithstanding. There is, therefore, no reason to disturb the POEA Administrator's finding that complainants-appellants were hired on a contractual basis and for a definite period. Their employment is thus governed by the contracts they sign each time they are re-hired and is terminated at the expiration of the 6 contract period. Undaunted, the petitioners elevated their case to this Court and successfully obtained the favorable action, which is now vehemently being assailed. At the hearing on November 15, 2000, the Court defined the issues for resolution in this case, namely: I. ARE PETITIONERS REGULAR OR CONTRACTUAL EMPLOYEES WHOSE EMPLOYMENTS ARE TERMINATED EVERYTIME THEIR CONTRACTS OF EMPLOYMENT EXPIRE? II. ASSUMING THAT PETITIONERS ARE REGULAR EMPLOYEES, WERE THEY DISMISSED WITHOUT JUST CAUSE SO AS TO BE ENTITLED TO REINSTATEMENT AND BACKWAGES, INCLUDING PAYMENT OF 100% OF THEIR TOTAL CREDITED CONTRIBUTIONS TO THE CONSECUTIVE ENLISTMENT INCENTIVE PLAN (CEIP)? III. DOES THE PROVISION OF THE POEA STANDARD CONTRACT FOR SEAFARERS ON BOARD FOREIGN VESSELS (SEC. C., DURATION OF CONTRACT) PRECLUDE THE ATTAINMENT BY SEAMEN OF THE STATUS OF REGULAR EMPLOYEES? IV. DOES THE DECISION OF THE COURT IN G.R. NO. 110524 CONTRAVENE INTERNATIONAL MARITIME LAW, ALLEGEDLY PART OF THE LAW OF THE LAND UNDER SECTION 2, ARTICLE II OF THE CONSTITUTION? V. DOES THE SAME DECISION OF THE COURT CONSTITUTE A DEPARTURE FROM 8 ITS RULING INCOYOCA VS. NLRC (G.R. NO. 113658, March 31, 1995)? In answer to the private respondents' Second Motion for Reconsideration and to FAME's Motion for Reconsideration in Intervention, petitioners maintain that they are regular
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employees as found by the Court in the March 14, 2000 Decision. Considering that petitioners performed activities which are usually necessary or desirable in the usual business or trade of private respondents, they should be considered as regular employees 9 pursuant to Article 280, Par. 1 of the Labor Code. Other justifications for this ruling include the fact that petitioners have rendered over twenty (20) years of service, as admitted by the 10 private respondents; that they were recipients of Merit Pay which is an express acknowledgment by the private respondents that petitioners are regular and not just 11 contractual employees; that petitioners were registered under the Social Security System (SSS). The petitioners further state that the case of Coyoca v. NLRC which the private respondents invoke is not applicable to the case at bar as the factual milieu in that case is not the same. Furthermore, private respondents' fear that our judicial pronouncement will spell the death of the manning industry is far from real. Instead, with the valuable contribution of the manning industry to our economy, these seafarers are supposed to be considered as "Heroes of the 13 Republic" whose rights must be protected. Finally, the first motion for reconsideration has already been denied with finality by this Court and it is about time that the Court should write finis to this case. The private respondents, on the other hand, contend that: (a) the ruling holding petitioners as regular employees was not in accord with the decision in Coyoca v. NLRC, 243 SCRA 190; (b) Art. 280 is not applicable as what applies is the POEA Rules and Regulations Governing Overseas Employment; (c) seafarers are not regular employees based on international maritime practice; (d) grave consequences would result on the future of seafarers and manning agencies if the ruling is not reconsidered; (e) there was no dismissal committed; (f) a dismissed seafarer is not entitled to back wages and reinstatement, that being not allowed under the POEA rules and the Migrant Workers Act; and, (g) petitioners are not entitled to 14 claim the total amount credited to their account under the CEIP. Meanwhile, Intervenor Filipino Association of Mariners Employment (FAME) avers that our decision, if not reconsidered, will have negative consequences in the employment of Filipino Seafarers overseas which, in turn, might lead to the demise of the manning industry in the Philippines. As intervenor FAME puts it: xxx 7.1 Foreign principals will start looking for alternative sources for seafarers to man their ships. AS reported by the BIMCO/ISF study, "there is an expectancy that there will be an increasing demand for (and supply of) Chinese seafarers, with some commentators suggesting that this may be a long-term alternative to the Philippines." Moreover, "the political changes within the former Eastern Bloc have made new sources of supply available to the international market."
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Intervenor's recent survey among its members shows that 50 Philippine manning companies had already lost some 6,300 slots to other Asian, East Europe and Chinese competition for the last two years; 7.2 The Philippine stands to lose an annual foreign income estimated at U.S. DOLLARS TWO HUNDRED SEVENTY FOUR MILLION FIVE HUNDRED FORTY NINE THOUSAND (US$ 274,549,000.00) from the manning industry and another US DOLLARS FOUR BILLION SIX HUNDRED FIFTY MILLION SEVEN HUNDRED SIX THOUSAND (US$ 4,650,760,000.00) from the land-based sector if seafarers and equally situated land-based contract workers will be declared regular employees; 7.3 Some 195,917 (as of 1998) deployed overseas Filipino seafarers will be rendered jobless should we lose the market; 7.4 Some 360 manning agencies (as of 30 June 2000) whose principals may no longer be doing business with them will close their shops; 7.5 The contribution to the Overseas Worker's Welfare Administration by the sector, which is USD 25.00 per contract and translates to US DOLLARS FOUR MILLION (US$ 4,000,000.00)annually, will be drastically reduced. This is not to mention the processing fees paid to POEA, Philippine Regulatory Commission (PRC), Department of Foreign Affairs (DFA) and Maritime Industry Authority (MARINA) for the documentation of these seafarers; 7.6 Worst, some 195,917 (as of 1998) families will suffer socially and economically, as their breadwinners will be rendered jobless; and 7.7 It will considerably slow down the government's program of employment generation, considering that, as expected foreign employers will now avoid hiring Filipino overseas 15 contract workers as they will become regular employees with all its concomitant effects. Significantly, the Office of the Solicitor General, in a departure from its original position in this case, has now taken the opposite view. It has expressed its apprehension in sustaining our 16 decision and has called for a re-examination of our ruling. Considering all the arguments presented by the private respondents, the Intervenor FAME and the OSG, we agree that there is a need to reconsider our position with respect to the status of seafarers which we considered as regular employees under Article 280 of the Labor Code. We, therefore, partially grant the second motion for reconsideration.

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In Brent School Inc. v. Zamora, the Supreme Court stated that Article 280 of the Labor Code does not apply to overseas employment. In the light of the foregoing description of the development of the provisions of the Labor Code bearing on term or fixed-period employment that the question posed in the opening paragraph of this opinion should now be addressed. Is it then the legislative intention to outlaw stipulations in employment contracts laying down a definite period therefor? Are such stipulations in essence contrary to public policy and should not on this account be accorded legitimacy? On the other hand, there is the gradual and progressive elimination of references to term or fixed-period employment in the Labor Code, and the specific statement of the rule that: Regular and Casual Employment The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or service to be employee is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph; provided that, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such actually exists. There is, on the other hand, the Civil Code, which has always recognized, and continues to recognize, the validity and propriety of contracts and obligations with a fixed or definite period, and imposes no restraints on the freedom of the parties to fix the duration of a contract, whatever its object, be it specific, goods or services, except the general admonition against stipulations contrary to law, morals, good customs, public order or public policy. Under the Civil code, therefore, and as a general proposition, fixed-term employment contracts are not limited, as they are under the present Labor Code, to those by natural seasonal or for specific projects with predetermined dates of completion; they also include those to which the parties by free choice have assigned a specific date of termination. Some familiar examples may be cited of employment contract which may be neither for seasonal work nor for specific projects, but to which a fixed term is an essential and natural appurtenance: overseas employment contracts, for one, to which, whatever the nature of the engagement, the concept of regular employment with all

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that it implies does not appear ever to have been applied. Article 280 of the Labor Code notwithstanding also appointments to the positions of dean, assistant dean, college secretary, principal, and other administrative offices in educational institutions, which are by practice or tradition rotated among the faculty members, and where fixed terms are a necessity without which no reasonable rotation would be possible. Similarly, despite the provisions of Article 280, Policy Instructions. No. 8 of the Minister of Labor implicitly recognize that certain company officials may be elected for what would amount to fix periods, at the expiration of which they would have to stand down, in providing that these officials, xxx may lose their jobs as president, executive vice-president or vice-president, etc. because the stockholders or the board of directors for one reason or another did not reelect them. There can of course be no quarrel with the proposition that where from the circumstances it is apparent that periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregard as contrary to public policy, morals, etc. But where no such intent to circumvent the law is shown, or stated otherwise, where the reason for the law does not exists, e.g., where it is indeed the employee himself who insists upon a period or where the nature of the engagement is such that, without being seasonal or for a specific project, a definite date of termination is a sine qua non, would an agreement fixing a period be essentially evil or illicit, therefore anathema? Would such an agreement come within the scope of Article 280 which admittedly was enacted "to prevent the circumvention of the right of the employee to be secured in xxx his employment As it is evident from even only the three examples already given that Article 280 of the Labor Code, under a narrow and literal interpretation, not only fails to exhaust the gamut of employment contracts to which the lack of a fixed period would be an anomaly, but would also appear to restrict, without reasonable distinctions, the right of an employee to freely stipulate within his employer the duration of his engagement, it logically follows that such a literal interpretation should be eschewed or avoided. The law must be given a reasonable interpretation, to preclude absurdity in its application. Outlawing the whole concept of term employment and subverting to boot the principle of freedom of contract to remedy the evil of employer's using it as a means to prevent their employees from obtaining security of tenure is like cutting off the nose to spite the face or, more relevantly, curing a headache by lopping of the head. It is a salutary principle in statutory construction that there exists a valid presumption that undesirable consequences were never intended by a legislative measure, and that a construction of which the statute is fairly susceptible is favored, which will avoid all objectionable, mischievous, indefensible, wrongful, evil, and injurious consequences." Nothing is better settled than that courts are not to give words a meaning which would lead to absurd or unreasonable consequences. That is a principle that goes back to In re Allen

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decided on October 27, 1902, where it was held that a literal interpretation is to be rejected if it would be unjust or lead to absurd results. That is a strong argument against its adoption. The words of Justice Laurel are particularly apt. Thus: "the appellants would lead to an absurdity is another argument for rejecting it." xxx We have, here, then a case where the true intent of the law is clear that calls for the application of the cardinal rule of statutory construction that such intent of spirit must prevail over the letter thereof, for whatever is within the spirit of a statute is within the statute, since adherence to the letter would result in absurdity, injustice and contradictions and would defeat the plain and vital purpose of the statute. Accordingly, and since the entire purpose behind the development of legislation culminating in the present Article 280 of the Labor code clearly appears to have been, as already observed, to prevent circumvention of the employee's right to be secure in his tenure, the clause in said article indiscriminately and completely ruling out all written or oral agreements conflicting with the concept of regular employment as defined therein should be construed to refer to the substantive evil that the Code itself has singled out; agreements entered into precisely to circumvent security of tenure. It should have no application to instances where a fixed period of employment was agreed upon knowingly and voluntarily by the parties, without any force, duress or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent, or where it satisfactorily appears that the employer and employee dealt with each other on more or less equal terms with no moral dominance whatever being exercised by the former over the latter. Unless thus limited in its purview, the law would be made to apply to purposes other than those explicitly stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects and apt to lead to absurd and unintended consequences. Again, in Pablo Coyoca v. NLRC, the Court also held that a seafarer is not a regular employee and is not entitled to separation pay. His employment is governed by the POEA Standard Employment Contract for Filipino Seamen. x x x. In this connection, it is important to note that neither does the POEA standard employment contract for Filipino seamen provide for such benefits. As a Filipino seaman, petitioner is governed by the Rules and Regulations Governing Overseas Employment and the said Rules do not provide for separation or termination pay. What is embodied in petitioner's contract is the payment of compensation arising from permanent partial disability during the period of employment. We find that private respondent complied with the terms of contract when it paid petitioner P42,315.00 which, in our opinion, is a reasonable amount, as compensation for his illness.
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Lastly, petitioner claims that he eventually became a regular employee of private respondent and thus falls within the purview of Articles 284 and 95 of the Labor Code. In support of this contention, petitioner cites the case of Worth Shipping Service, Inc., et al. v. NLRC, et al., wherein we held that the crew members of the shipping company had attained regular status and thus, were entitled to separation pay. However, the facts of said case differ from the present. In Worth, we held that the principal and agent had "operational control and management" over the MV Orient Carrier and thus, were the actual employers of their crew members. From the foregoing cases, it is clear that seafarers are considered contractual employees. They can not be considered as regular employees under Article 280 of the Labor Code. Their employment is governed by the contracts they sign everytime they are rehired and their employment is terminated when the contract expires. Their employment is contractually fixed for a certain period of time. They fall under the exception of Article 280 whose employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the 19 season. We need not depart from the rulings of the Court in the two aforementioned cases which indeed constitute stare decisis with respect to the employment status of seafarers. Petitioners insist that they should be considered regular employees, since they have rendered services which are usually necessary and desirable to the business of their employer, and that they have rendered more than twenty(20) years of service. While this may be true, the Brent case has, however, held that there are certain forms of employment which also require the performance of usual and desirable functions and which exceed one year but 20 do not necessarily attain regular employment status under Article 280. Overseas workers including seafarers fall under this type of employment which are governed by the mutual agreements of the parties. In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed by the Rules and Regulations of the POEA. The Standard Employment Contract governing the employment of All Filipino seamen on Board Ocean-Going Vessels of the POEA, particularly in Part I, Sec. C specifically provides that the contract of seamen shall be for a fixed period. And in no case should the contract of seamen be longer than 12 months. It reads: Section C. Duration of Contract The period of employment shall be for a fixed period but in no case to exceed 12 months and shall be stated in the Crew Contract. Any extension of the Contract period shall be subject to the mutual consent of the parties.

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Moreover, it is an accepted maritime industry practice that employment of seafarers are for a fixed period only. Constrained by the nature of their employment which is quite peculiar and unique in itself, it is for the mutual interest of both the seafarer and the employer why the employment status must be contractual only or for a certain period of time. Seafarers spend most of their time at sea and understandably, they can not stay for a long and an indefinite 21 period of time at sea. Limited access to shore society during the employment will have an adverse impact on the seafarer. The national, cultural and lingual diversity among the crew 22 during the COE is a reality that necessitates the limitation of its period. Petitioners make much of the fact that they have been continually re-hired or their contracts renewed before the contracts expired (which has admittedly been going on for twenty (20) years). By such circumstance they claim to have acquired regular status with all the rights and benefits appurtenant to it. Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was dictated by practical considerations that experienced crew members are more preferred. Petitioners were only given priority or preference because of their experience and qualifications but this does not detract the fact that herein petitioners are contractual employees. They can not be considered regular employees. We quote with favor the explanation of the NLRC in this wise: xxx The reference to "permanent" and "probationary" masters and employees in these papers is a misnomer and does not alter the fact that the contracts for enlistment between complainants-appellants and respondent-appellee Esso International were for a definite periods of time, ranging from 8 to 12 months. Although the use of the terms "permanent" and "probationary" is unfortunate, what is really meant is "eligible for-re-hire". This is the only logical conclusion possible because the parties cannot and should not violate POEA's requirement that a contract of enlistment shall be for a limited period only; not exceeding 23 twelve (12)months. From all the foregoing, we hereby state that petitioners are not considered regular or permanent employees under Article 280 of the Labor Code. Petitioners' employment have automatically ceased upon the expiration of their contracts of enlistment (COE). Since there was no dismissal to speak of, it follows that petitioners are not entitled to reinstatement or payment of separation pay or backwages, as provided by law. With respect to the benefits under the Consecutive Enlistment Incentive Plan (CEIP), we hold that the petitioners are still entitled to receive 100% of the total amount credited to him under the CEIP. Considering that we have declared that petitioners are contractual employees, their compensation and benefits are covered by the contracts they signed and the CEIP is part and parcel of the contract.

The CEIP was formulated to entice seamen to stay long in the company. As the name implies, the program serves as an incentive for the employees to renew their contracts with the same company for as long as their services were needed. For those who remained loyal to them, they were duly rewarded with this additional remuneration under the CEIP, if eligible. While this is an act of benevolence on the part of the employer, it can not, however, be denied that this is part of the benefits accorded to the employees for services rendered. Such right to the benefits is vested upon them upon their eligibility to the program. The CEIP provides that an employee becomes covered under the Plan when he completes thirty-six (36) months or an equivalent of three (3) years of credited service with respect to 24 employment after June 30, 1973. Upon eligibility, an amount shall be credited to his account as it provides, among others: III. Distribution of Benefits A. Retirement, Death and Disability When the employment of an employee terminates because of his retirement, death or permanent and total disability, a percentage of the total amount credited to his account will be distributed to him (or his eligible survivor(s) in accordance with the following:
Reason for Termination a) Attainment of mandatory retirement age of 60. Percentage 100%

b) Permanent and total disability, while under contract, that is not 100% due to accident or misconduct. c) Permanent and total disability, while under contract, that is due 100% to accident, and not due to misconduct.

xxx B. Voluntary Termination When an employee voluntary terminates his employment with at least 36 months of credited service without any misconduct on his part, 18 percent of the total amount credited to his account, plus an additional of one percent for each month (up to a maximum of 164 months of credited service in excess of 36, will be distributed to him provided (1) the employee has completed his last Contract of Enlistment and (2) employee advises the company in writing, within 30 days, from his last disembarkation date, of his intention to terminate his employment. (To advise the Company in writing means that the original letter must be sent to the Company's agent in the Philippines, a copy sent to the Company in New York).

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xxx C. Other Terminations When the employment of an employee is terminated by the Company for a reason other than one in A and B above, without any misconduct on his part, a percentage of the total amount credited to his account will be distributed to him in accordance with the following.
Credited Service 36 months 48 " 60 " Percentage 50% 75% 100%

Neither can we consider petitioners guilty of poor performance or misconduct since they were recipients of Merit Pay Awards for their exemplary performances in the company. Anent the letters dated June 21, 1989 (for Millares) and June 26, 1989 (for Lagda) which private respondent considered as belated written notices of termination, we find such assertion specious. Notwithstanding, we could conveniently consider the petitioners eligible under Section III-B of the CEIP (Voluntary Termination), but this would, however, award them only a measly amount of benefits which to our mind, the petitioners do not rightfully deserve under the facts and circumstances of the case. As the CEIP provides: III. Distribution of Benefits xxx E. Distribution of Accounts When an employee terminates under conditions that would qualify for a distribution of more than one specified in A, B or C above, the largest single amount, only, will be distributed. Since petitioners' termination of employment under the CEIP do not fall under Section III-A (Retirement, Death and Disability) or Section III-B (Voluntary Termination), nor could they be they be considered under the second paragraph of Section III-C, as earlier discussed; it follows that their termination falls under the first paragraph of Section III-C for which they are entitled to 100% of the total amount credited to their accounts. The private respondents can not now renege on their commitment under the CEIP to reward deserving and loyal employees as the petitioners in this case. In taking cognizance of private respondent's Second Motion for Reconsideration, the Court hereby suspends the rules to make them comformable to law and justice and to subserve an overriding public interest. IN VIEW OF THE FOREGOING, the Court Resolved to Partially GRANT Private Respondent's Second Motion for Reconsideration and Intervenor FAMES' Motion for Reconsideration in Intervention. The Decision of the National Labor Relations Commission dated June 1, 1993 is hereby REINSTATED with MODIFICATION. The Private Respondents, Trans-Global Maritime Agency, Inc. and Esso International Shipping Co., Ltd. are hereby jointly and severally ORDERED to pay petitioners One Hundred Percent (100%) of their total credited contributions as provided under the Consecutive Enlistment Incentive Plan(CEIP).SO ORDERED.

When the employment of an employee is terminated due to his poor-performance, misconduct, unavailability, etc., or if employee is not offered re-engagement for similar reasons, no distribution of any portion of employee's account will ever be made to him (or his eligible survivor[s]). It must be recalled that on June 21, 1989, Millares wrote a letter to his employer informing his intention to avail of the optional retirement plan under the CEIP considering that he has rendered more than twenty (20) years of continuous service. Lagda, likewise, manifested the same intention in a letter dated June 26, 1989. Private respondent, however, denied their requests for benefits under the CEIP since: (1) the contract of enlistment (COE) did not provide for retirement before 60 years of age; and that (2) petitioners failed to submit a written notice of their intention to terminate their employment within thirty (30) days from the last disembarkation date pursuant to the provision on Voluntary Termination of the CEIP. Petitioners were eventually dropped from the roster of crew members and on grounds of "abandonment" and "unavailability for contractual sea service", respectively, they were 25 disqualified from receiving any benefits under the CEIP. In our March 14, 2000 Decision, we, however, found that petitioners Millares and Lagda were not guilty of "abandonment" or "unavailability for contractual sea service," as we have stated: The absence of petitioners was justified by the fact that they secured the approval of private respondents to take a leave of absence after the termination of their last contracts of enlistment. Subsequently, petitioners sought for extensions of their respective leaves of absence. Granting arguendo that their subsequent requests for extensions were not approved, it cannot be said that petitioners were unavailable or had abandoned their work when they failed to report back for assignment as they were still questioning the denial of private respondents of their desire to avail of the optional early retirement policy, which they 26 believed in good faith to exist.

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G.R. No. 111651 November 28, 1996 OSMALIK S. BUSTAMANTE, PAULINO A. BANTAYAN, FERNANDO L. BUSTAMANTE, MARIO D. SUMONOD, and SABU J. LAMARAN, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION, FIFTH DIVISION, and EVERGREEN FARMS, INC. respondents.PADILLA, J.: On 15 March 1996, the Court (First Division) promulgated a decision in this case, the dispositive part of which states: WHEREFORE, the Resolution of the National Labor Relations Commission dated 3 May 1993 is modified in that its deletion of the award for backwages in favor of petitioners, is SET ASIDE. The decision of the Labor Arbiter dated 26 April 1991 is AFFIRMED with the modification that backwages shall be paid to petitioners from the time of their illegal dismissal on 25 June 1990 up to the date of their reinstatement. If reinstatement is no longer feasible, a one-month salary shall be paid the petitioners as ordered in the labor arbiter's decision, in addition to the adjudged backwages. Private respondent now moves to reconsider the decision on grounds that (a) petitioners are not entitled to recover backwages because they not actually dismissed but their probationary employment was not converted to permanent employment; and (b) assuming that petitioners are entitled to backwages, computation thereof should not start from cessation of work up to actual reinstatement, and that salary earned elsewhere (during the period of illegal dismissal) should be deducted from the award such backwages. There is no compelling reason to reconsider the decision of the Court (First Division) dated 15 March 1996. However, we here clarify the computation of backwages due an employee on account of his illegal dismissal from employment. This Court has, over the years, applied different methods in the computation of backwages. The first labor relations law governing the award of backwages was Republic Act No. 875, the Industrial Peace Act, approved on 17 June 1953. Sections 5 and 15 thereof provided thus: Sec. 5. Unfair Labor Practice Cases. (c) . . . If, after investigation, the Court shall be of the opinion that any person named in the complaint has engaged in or is engaging in any unfair labor practice, then the Court shall state its findings of fact and shall issue and cause to be served on such person an order requiring such person to cease and desist from such unfair labor practice and take such affirmative action as will effectuate the policies of this Act, including (but not limited to) reinstatement of employees with or without back-pay and including rights of the employees

prior to . . . (emphasis supplied)

dismissal

including

seniority.

Sec. 15. Violation of Duty to Bargain Collectively. . . . Any employee whose work has stopped as a consequence of such lockout shall be entitled to back-pay. (emphasis supplied) In accordance with these provisions, backpay (the same as backwages) could be awarded where, in the opinion of the Court of Industrial Relations (CIR), such was necessary to effectuate the policies of the Industrial Peace 1 Act. Only in one case was backpay a matter of right, that was, when an employer had declared a lockout without having first bargained collectively with his employees in accordance with the provisions of the Act. As the CIR was given wide discretion to grant or disallow payment of backpay (backwages) to an employee, it also had the implied power of mitigating (reducing) the backpay where 2 backpay was allowed. Thus, in the exercise of its jurisdiction, the CIR increased or diminished the award of backpay, depending on several circumstances, among them, the 3 good faith of the employer, the employee's employment in other establishments during, the period of illegal dismissal, or the probability that the employee could have realized net earnings from outside employment if he had exercised due diligence to search for outside 4 employment. In labor cases decided during the effectivity of R.A. No. 875, this Court acknowledged and upheld the CIR's authority to deduct any amount from the employee's 5 backwages, including the discretion to reduce such award of backwages whatever earnings 6 were obtained by the employee elsewhere during the period of his illegal dismissal. In the 7 case of Itogon-Suyoc Mines, Inc. v. Sagilo-Itogon Workers' Union, this Court restated the guidelines for determination of total backwages, thus: First. To be deducted from the backwages accruing to each of the laborers to be reinstated is the total amount of earnings obtained by him from other employment(s) from the date of dismissal to the date of reinstatement. Should the laborer decide that it is preferable not to return to work, the deduction should be made up to the time judgment becomes final. And these, for the reason that employees should not be permitted to enrich themselves at the expense of their employer. Besides, there is the "law's abhorrence for double compensation". Second. Likewise, in mitigation of the damages that the dismissed respondents are entitled to, account should be taken of whether in the exercise of due diligence respondents might have obtained income from suitable remunerative employment. We are prompted to give out this last reminder because it is really unjust that a discharged employee should, with folded arms, remain inactive in the expectation that a windfall would come to him. A contrary view would breed idleness; it is conducive to lack of initiative on the part of a laborer. Both bear the stamp of undesirability.

29

From this ruling came the burden of disposing of an illegal dismissal case on its merits and of determining whether or not the computation of the award of backwages is correct. In order not to unduly delay the disposition of illegal dismissal cases, this Court found occasion in the 8 case of Mercury Drug Co., Inc., et al. v. CIR, et al. to rule that a fixed amount of backwages without further qualifications should be awarded to an illegally dismissed employee (hereinafter the Mercury Drug rule). This ruling was grounded upon considerations of expediency in the execution of the decision. Former Justice Claudio Teehankee approved of this formula expressing that such method of computation is a "realistic, reasonable and mutually beneficial solution" and "thus obviates the twin evils of idleness on the part of the employees and attrition and undue delay in satisfying the award on the part of the 9 employer" However, Justice Teehankee dissented from the majority view that the employee in said case should be awarded backwages only for a period of 1 year, 11 months and 15 day which represented the remainder of the prescriptive period after deducting the period corresponding to the delay incurred by the employee in filing the complaint for unfair labor practice and reinstatement. Justice Teehankee opined that: . . . an award of back wages equivalent to three years (where the case is not terminated sooner) should serve as the base figure for such awards without deduction, subject to deduction where there are mitigating circumstances in favor of the employer but subject to increase by way of exemplary damages where there are aggravating circumstances (e.g. 10 oppression or dilatory appeals) on the employer's part. The proposal on the three-year backwages was subsequently adopted in later cases, among them, Feati University Faculty Club (PAFLU) v. Feati University (No. L-31503, 15 August 1974, 58 SCRA 395), Luzon Stevedoring Corporation v. CIR (No. L-34300, 22 November 1974, 61 SCRA 154), Danao Development Corporation v. NLRC (Nos. L-40706 and L-40707, 16 February 1978, 81 SCRA 487), Associated Anglo-American Tobacco Corporation v. Lazaro (No. 63779, 27 October 1983, 125 SCRA 463), Philippine National Oil Company Energy Development Corporation v. Leogardo (G.R. No. 58494, 5 July 1989, 175 SCRA 26). Then came Presidential Decree No. 442 (the Labor Code of Philippines) which was signed into law on 1 May 1974 and which took effect on 1 November 1974. Its posture on the award of backwages, as amended, was expressed as follows. Art. 279. 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 to his back wages computed from the time his compensation was withheld from him up to the time of his reinstatement . (emphasis supplied).

Under the abovequoted provision, it became mandatory to award backwages to illegally dismissed regular employees. The law specifically declared that the award of backwages was to be computed from the time compensation was withheld from the employee up to the time of his instatement. This notwithstanding, the rule generally applied by the Court under the 11 promulgation of the Mercury Drug case, and during the effectivity of P.D. No. 442 was still the Mercury Drug rule. A survey of causes from 1974 until 1989, when the amendatory law to P.D. No. 442, namely, R.A. No. 6715 took effect, supports this conclusion. In the case of New Manila Candy Workers Union (Naconwa-Paflu) v. CIR (1978), or after the Labor Code (P.D. No. 442) had taken effect, the court still followed the Mercury Drug rule to avoid the necessity of a hearing on earnings obtained elsewhere by the employee during 13 the period of illegal dismissal. In an even later case (1987) the Court declared that the general principle is that an employee is entitled to receive as backwages the amounts he may have received from the date of his dismissal up to the time of his reinstatement. However, in compliance with the jurisprudential policy of fixing the amount of backwages to a just and reasonable level, the award of backwages equivalent to three (3) years, without qualification or deduction, was nonetheless followed in said case. In a more direct approach to the rule on the award of backwages, this Court declared in the 14 1990 case of Medado v. Court of Appeals that "any decision or order granting backwages in excess of three (3) years is null nad void as to the excess." In sum, during the effectivity of P.D. 442, the Court enforced the Mercury Drug rule and, in effect, qualified the provision under P.D. No. 442 by limiting the award of backwages to three (3) years. On March 1989, Republic Act No. 6715 took effect, amending the Labor Code. Article 279 thereof states in part : Art. 279 Security of Tenure. . . . 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 is witheld from him up to the time of his actual reinstatement. (emphasis supplied) In accordance with the above provision, an illegally dismissed employee is entitled to his full backwages from the time his compensation was witheld from him (which, as a rule, is from the time of his illegal dismissal) up to the time of his actual reinstatement. It is true that this Court had ruled in the case of Pines City Educational Center vs. NLRC (G.R. No. 96779, 10 November 1993, 227 SCRA 655) that "in ascertaining the total amount of backwages payable to them (employees), we go back to the rule prior to the Mercury Drug rule that the total
12

30

amount derived from employment elsewhere by the employee from the date of dismissal up 15 to the date of reinstatement, if any, should be deducted therefrom." The rationale for such ruling was that, the earnings derived elsewhere by the dismissed employee while litigating the legality of his dismissal, should be deducted from the full amount of backwages which the law grants him upon reinstatement, so as not to unduly or unjustly enrich the employee at the sense of the employer. The Court deems it appropriate, however, to reconsider such earlier on the computation of backwages as enunciated in said Pines City Educational Center case, by now holding that comformably with the evident legislative intent as expressed in Rep. Act No. 6715, abovequoted, backwages to be awarded to an illegally dismissed employee, should not, as general rule, be diminished or reduced by the earnings derived by him elsewhere during the period of his illegal dismissal. The underlying reason of this ruling is that the employee, while litigating the legality (illegality) of his dismissal, must still earn a living to support himself and family, while his backwages have to be paid by the employer as part of the price or penalty he has to pay for illegally dismissing his employee. The clear legislative intent of the amendment in Rep. Act No. 6715 is to give more benefits to workers than was previously given them under the Mercury Drug rule or the "deduction of earnings elsewhere" rule. Thus, a closer adherence to the legislative policy behind Rep. Act No. 6715 points to "full backwages" as meaning exactly that, i.e., without deducting from backwages the earnings derived elsewhere 16 by the concerned employee during the period of his illegal dismissal. In other words, the provision handling for "full backwages" to illegally dismissed employees is clear, plain and free from ambiguity and, therefore, must be applied without attempted or strained 17 interpretation. Index animi sermo est. Therefore, in accordance with R.A. No. 6715, petitioners are entitled on their full backwages, inclusive of allowances and other benefits or their monetary equivalent, from the time their actual compensation was withheld on them up to the time of their actual reinstatement. As to reinstatement of petitioners, this Court has already ruled that reinstatement is no longer feasible, because the company would be adjustly prejudiced by the continued employment of petitioners who at present are overage, a separation pay equal to one-month salary granted to them in the Labor Arbiter's decision was in order and, therefore, affirmed on the Court's decision of 15 March 1996. Furthermore, since reinstatement on this case is no longer feasible, the amount of backwages shall be computed from the time of their illegal termination 18 on 25 June 1990 up to the time of finality of this decision. ACCORDINGLY, private respondent's Motion for Reconsideration, dated 10 April 1996, is DENIED. SO ORDERED.

G.R. No. 117040

January 27, 2000

RUBEN SERRANO, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION and ISETANN DEPARTMENT STORE, respondents. MENDOZA, J.: This is a Petition seeking review of the resolutions, dated March 30, 1994 and August 26, 1994, of the National Labor Relations Commission (NLRC) which reversed the decision of the Labor Arbiter and dismissed petitioner Ruben Serrano's complaint for illegal dismissal and denied his motion for reconsideration. The facts are as follows: Petitioner was hired by private respondent Isetann Department Store as a security checker to 1 apprehend shoplifters and prevent pilferage of merchandise. Initially hired on October 4, 1984 on contractual basis, petitioner eventually became a regular employee on April 4, 1985. 2 In 1988, he became head of the Security Checkers Section of private respondent. Sometime in 1991, as a cost-cutting measure, private respondent decided to phase out its entire security section and engage the services of an independent security agency. For this 3 reason, it wrote petitioner the following memorandum: October 11, 1991 MR. RUBEN SERRANO PRESENT Dear Mr. Seranno, In view of the retrenchment program of the company, we hereby reiterate our verbal notice to you of your termination as Security Section Head effective October 11, 1991. Please secure your clearance from this office. Very truly yours, [Sgd.] TERESITA A. VILLANUEVA Human Resources Division Manager The loss of his employment prompted petitioner to file a complaint on December 3, 1991 for illegal dismissal, illegal layoff, unfair labor practice, underpayment of wages, 4 and nonpayment of salary and overtime pay. The parties were required to submit their position papers, on the basis of which the 5 Labor Arbiter defined the issues as follows:

31

Whether or not there is a valid ground for the dismissal of the complainant. Whether or not complainant is entitled to his monetary claims for underpayment of wages, nonpayment of salaries, 13th month pay for 1991 and overtime pay. Whether or not Respondent is guilty of unfair labor practice. Thereafter, the case was heard. On April 30, 1993, the Labor Arbiter rendered a decision finding petitioner to have been illegally dismissed. He ruled that private respondent failed to establish that it had retrenched its security section to prevent or minimize losses to its business; that private respondent failed to accord due process to petitioner; that private respondent failed to use reasonable standards in selecting employees whose employment would be terminated; that private respondent had not shown that petitioner and other employees in the security section were so inefficient so as to justify their replacement by a security agency, or that "cost-saving devices [such as] secret video cameras (to monitor and prevent shoplifting) and secret code tags on the merchandise" could not have been employed; instead, the day after petitioner's dismissal, private respondent employed a safety and security supervisor with duties and functions similar to those of petitioner. 1wphi1.nt Accordingly, the Labor Arbiter ordered:
6

Private respondent appealed to the NLRC which, in its resolution of March 30, 1994; reversed the decision of the Labor Arbiter and ordered petitioner to be given separation pay equivalent to one month pay for every year of service, unpaid salary, and proportionate 13th month pay. Petitioner filed a motion for reconsideration, but his motion was denied. The NLRC held that the phase-out of private respondent's security section and the hiring of an independent security agency constituted an exercise by private respondent of "[a] legitimate business decision whose wisdom we do not intend to inquire into and for which we cannot substitute our judgment"; that the distinction made by the Labor Arbiter between "retrenchment" and the employment of cost-saving devices" under Art. 283 of the Labor Code was insignificant because the company official who wrote the dismissal letter apparently used the term "retrenchment" in its "plain and ordinary sense: to layoff or remove from one's job, regardless of the reason therefor"; that the rule of "reasonable criteria" in the selection of the employees to be retrenched did not apply because all positions in the security section had been abolished; and that the appointment of a safety and security supervisor referred to by petitioner to prove bad faith on private respondent's part was of no moment because the position had long been in existence and was separate from petitioner's position as head of the Security Checkers Section. Hence this petition. Petitioner raises the following issue:

WHEREFORE, above premises considered, judgment is hereby decreed: (a) Finding the dismissal of the complainant to be illegal and concomitantly, Respondent is ordered to pay complainant full backwages without qualification or deduction in the amount of P74,740.00 from the time of his dismissal until reinstatement. (computed till promulgation only) based on his monthly salary of P4,040.00/month at the time of his termination but limited to (3) three years; (b) Ordering the Respondent to immediately reinstate the complainant to his former position as security section head or to a reasonably equivalent supervisorial position in charges of security without loss of seniority rights, privileges and benefits. This order is immediately executory even pending appeal; (c) Ordering the Respondent to pay complainant unpaid wages in the amount of P2,020.73 and proportionate 13th month pay in the amount of P3,198.30; (d) Ordering the Respondent to pay complainant the amount of P7,995.91, representing 10% attorney's fees based on the total judgment award of P79,959.12. All other claims of the complainant whether monetary or otherwise is hereby dismissed for lack of merit. SO ORDERED.

IS THE HIRING OF AN INDEPENDENT SECURITY AGENCY BY THE PRIVATE RESPONDENT TO REPLACE ITS CURRENT SECURITY SECTION A VALID GROUND FOR THE DISMISSAL OF THE EMPLOYEES CLASSED UNDER THE 7 LATTER? Petitioner contends that abolition of private respondent's Security Checkers Section and the employment of an independent security agency do not fall under any of the authorized causes for dismissal under Art. 283 of the Labor Code. Petitioner Laid Off for Cause Petitioner's contention has no merit. Art. 283 provides: Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor-saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operations of the establishment or undertaking unless the closing is for the purpose of circumventing the provisions of this Title, by serving a written notice on the, workers and the Department of Labor and Employment at least one (1) month before the intended date thereof. In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least one (1) month pay or to at least one

32

(1) month pay for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closure or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to at least one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six (6) months shall be considered as one (1) whole year. In De Ocampo v. National Labor Relations Commission, this Court upheld the termination of employment of three mechanics in a transportation company and their replacement by a company rendering maintenance and repair services. It held: In contracting the services of Gemac Machineries, as part of the company's costsaving program, the services rendered by the mechanics became redundant and superfluous, and therefore properly terminable. The company merely exercised its business judgment or management prerogative. And in the absence of any proof that the management abused its discretion or acted in a malicious or arbitrary manner, 9 the court will not interfere with the exercise of such prerogative. In Asian Alcohol Corporation v. National Labor Relations Commission, the Court likewise upheld the termination of employment of water pump tenders and their replacement by independent contractors. It ruled that an employer's good faith in implementing a redundancy program is not necessarily put in doubt by the availment of the services of an independent contractor to replace the services of the terminated employees to promote economy and efficiency. Indeed, as we pointed out in another case, the "[management of a company] cannot be denied the faculty of promoting efficiency and attaining economy by a study of what units are essential for its operation. To it belongs the ultimate determination of whether services should be performed by its personnel or contracted to outside agencies . . . [While there] should be mutual consultation, eventually deference is to be paid to what management 11 decides." Consequently, absent proof that management acted in a malicious or arbitrary 12 manner, the Court will not interfere with the exercise of judgment by an employer. In the case at bar, we have only the bare assertion of petitioner that, in abolishing the security section, private respondent's real purpose was to avoid payment to the security checkers of the wage increases provided in the collective bargaining agreement approved in 13 1990. Such an assertion is not sufficient basis for concluding that the termination of petitioner's employment was not a bona fide decision of management to obtain reasonable return from its investment, which is a right guaranteed to employers under the 14 Constitution. Indeed, that the phase-out of the security section constituted a "legitimate business decision" is a factual finding of an administrative agency which must be accorded
10 8

respect and even finality by this Court since nothing can be found in the record which fairly 15 detracts from such finding. Accordingly, we hold that the termination of petitioner's services was for an authorized cause, i.e., redundancy. Hence, pursuant to Art. 283 of the Labor Code, petitioner should be given separation pay at the rate of one month pay for every year of service. Sanctions for Violations of the Notice Requirement Art. 283 also provides that to terminate the employment of an employee for any of the authorized causes the employer must serve "a written notice on the workers and the Department of Labor and Employment at least one (1) month before the intended date thereof." In the case at bar, petitioner was given a notice of termination on October 11, 1991. On the same day, his services were terminated. He was thus denied his right to be given written notice before the termination of his employment, and the question is the appropriate sanction for the violation of petitioner's right. To be sure, this is not the first time this question has arisen. In Subuguero v. 16 NLRC, workers in a garment factory were temporarily laid off due to the cancellation of orders and a garment embargo. The Labor Arbiter found that the workers had been illegally dismissed and ordered the company to pay separation pay and backwages. The NLRC, on the other hand, found that this was a case of retrenchment due to business losses and ordered the payment of separation pay without backwages. This Court sustained the NLRC's finding. However, as the company did not comply with the 30-day written notice in Art. 283 of the Labor Code, the Court ordered the employer to pay the workers P2,000.00 each as indemnity. The decision followed the ruling in several cases involving dismissals which, although based 17 on any of the just causes under Art. 282, were effected without notice and hearing to the 18 employee as required by the implementing rules. As this Court said: "It is now settled that where the dismissal of one employee is in fact for a just and valid cause and is so proven to be but he is not accorded his right to due process, i.e., he was not furnished the twin requirements of notice and opportunity to be heard, the dismissal shall be upheld but the employer must be sanctioned for non-compliance with the requirements of, or for failure to 19 observe, due process." The rule reversed a long standing policy theretofore followed that even though the dismissal is based on a just cause or the termination of employment is for an authorized cause, the dismissal or termination is illegal if effected without notice to the employee. The shift in 20 doctrine took place in 1989 in Wenphil Corp. v. NLRC. In announcing the change, this Court 21 said:

33

The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of seniority and the payment of his wages during the period of his separation until his actual reinstatement but not exceeding three (3) years without qualification or deduction, when it appears he was not afforded due process, although his dismissal was found to be for just and authorized cause in an appropriate proceeding in the Ministry of Labor and Employment, should be reexamined. It will be highly prejudicial to the interests of the employer to impose on him the services of an employee who has been shown to be guilty of the charges that warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not undesirable, remains in the service. xxx xxx xxx However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee must be for just or authorized cause and after due process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by law before dismissing petitioner from employment. Considering the circumstances of this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award depends on the facts of each case and the gravity of the omission committed by the employer. The fines imposed for violations of the notice requirement have varied from P1,000.00 23 24 25 P2,000.00 to P5,000.00 to P10,000.00. Need for Reexamining the Wenphil Doctrine Today, we once again consider the question of appropriate sanctions for violations of the notice experience during the last decade or so with the Wenphil doctrine. The number of cases involving dismissals without the requisite notice to the employee, although effected for just or authorized causes, suggest that the imposition of fine for violation of the notice requirement has not been effective in deterring violations of the notice requirement. Justice Panganiban finds the monetary sanctions "too insignificant, too niggardly, and sometimes even too late." On the other hand, Justice Puno says there has in effect been fostered a policy of "dismiss now; pay later" which moneyed employers find more convenient to comply with than the requirement to serve a 30-day written notice (in the case of termination of employment for an authorized cause under Arts. 283-284) or to give notice and hearing (in the case of dismissals for just causes under Art. 282). For this reason, they regard any dismissal or layoff without the requisite notice to be null and void even though there are just or authorized cause for such dismissal or layoff.
22

Consequently, in their view, the employee concerned should be reinstated and paid backwages. Validity of Petitioner's Layoff Not Affected by Lack of Notice We agree with our esteemed colleagues, Justices Puno and Panganiban, that we should rethink the sanction of fine for an employer's disregard of the notice requirement. We do not agree, however, that disregard of this requirement by an employer renders the dismissal or termination of employment null and void. Such a stance is actually a reversion to the discredited pre-Wenphil rule of ordering an employee to be reinstated and paid backwages when it is shown that he has not been given notice and hearing although his dismissal or layoff is later found to be for a just or authorized cause. Such rule was abandoned in Wenphil because it is really unjust to require an employer to keep in his service one who is guilty, for example, of an attempt on the life of the employer or the latter's family, or when the employer is precisely retrenching in order to prevent losses. The need is for a rule which, while recognizing the employee's right to notice before he is dismissed or laid off, at the same time acknowledges the right of the employer to dismiss for any of the just causes enumerated in Art. 282 or to terminate employment for any of the authorized causes mentioned in Arts. 283-284. If the Wenphil rule imposing a fine on an employer who is found to have dismissed an employee for cause without prior notice is deemed ineffective in deterring employer violations of the notice requirement, the remedy is not to declare the dismissal void if there are just or valid grounds for such dismissal or if the termination is for an authorized cause. That would be to uphold the right of the employee but deny the right of the employer to dismiss for cause. Rather, the remedy is to order the payment to the employee of full backwages from the time of his dismissal until the court finds that the dismissal was for a just cause. But, otherwise, his dismissal must be upheld and he should not be reinstated. This is because his dismissal is ineffectual. For the same reason, if an employee is laid off for any of the causes in Arts. 283-284, i.e., installation of a labor-saving device, but the employer did not give him and the DOLE a 30day written notice of termination in advance, then the termination of his employment should be considered ineffectual and he should be paid backwages. However, the termination of his employment should not be considered void but he should simply be paid separation pay as provided in Art. 283 in addition to backwages. Justice Puno argues that an employer's failure to comply with the notice requirement constitutes a denial of the employee's right to due process. Prescinding from this premise, he quotes the statement of Chief Justice Concepcion Vda. de Cuaycong v. Vda. de 26 Sengbengco that "acts of Congress, as well as of the Executive, can deny due process only under the pain of nullity, and judicial proceedings suffering from the same flaw are subject to

to

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the same sanction, any statutory provision to the contrary notwithstanding." Justice Puno concludes that the dismissal of an employee without notice and hearing, even if for a just cause, as provided in Art. 282, or for an authorized cause, as provided in Arts. 283-284, is a nullity. Hence, even if just or authorized cause exist, the employee should be reinstated with full back pay. On the other hand, Justice Panganiban quotes from the statement in People v. 27 Bocar that "[w]here the denial of the fundamental right of due process is apparent, a decision rendered in disregard of that right is void for lack of jurisdiction." Violation of Notice Requirement Not a Denial of Due Process The cases cited by both Justices Puno and Panganiban refer, however, to the denial of due process by the State, which is not the case here. There are three reasons why, on the other hand, violation by the employer of the notice requirement cannot be considered a denial of due process resulting in the nullity of the employee's dismissal or layoff. The first is that the Due Process Clause of the Constitution is a limitation on governmental powers. It does not apply to the exercise of private power, such as the termination of employment under the Labor Code. This is plain from the text of Art. III, 1 of the Constitution, viz.: "No person shall be deprived of life, liberty, or property without due process of law. . . ." The reason is simple: Only the State has authority to take the life, liberty, or property of the individual. The purpose of the Due Process Clause is to ensure that the exercise of this power is consistent with what are considered civilized methods. The second reason is that notice and hearing are required under the Due Process Clause before the power of organized society are brought to bear upon the individual. This is obviously not the case of termination of employment under Art. 283. Here the employee is not faced with an aspect of the adversary system. The purpose for requiring a 30-day written notice before an employee is laid off is not to afford him an opportunity to be heard on any charge against him, for there is none. The purpose rather is to give him time to prepare for the eventual loss of his job and the DOLE an opportunity to determine whether economic causes do exist justifying the termination of his employment. Even in cases of dismissal under Art. 282, the purpose for the requirement of notice and hearing is not to comply with Due Process Clause of the Constitution. The time for notice and hearing is at the trial stage. Then that is the time we speak of notice and hearing as the essence of procedural due process. Thus, compliance by the employer with the notice requirement before he dismisses an employee does not foreclose the right of the latter to question the legality of his dismissal. As Art. 277(b) provides, "Any decision taken by the employer shall be without prejudice to the right of the worker to contest the validity or legality of his dismissal by filing a complaint with the regional branch of the National Labor Relations Commission."

Indeed, to contend that the notice requirement in the Labor Code is an aspect of due process is to overlook the fact that Art. 283 had its origin in Art. 302 of the Spanish Code of Commerce of 1882 which gave either party to the employer-employee relationship the right to terminate their relationship by giving notice to the other one month in advance. In lieu of notice, an employee could be laid off by paying him a mesada equivalent to his salary for one 28 month. This provision was repealed by Art. 2270 of the Civil Code, which took effect on August 30, 1950. But on June 12, 1954, R.A. No. 1052, otherwise known as the Termination Pay Law, was enacted reviving the mesada. On June 21, 1957, the law was amended by R.A. No. 1787 providing for the giving of advance notice or the payment of compensation at 29 the rate of one-half month for every year of service. The Termination Pay Law was held not to be a substantive law but a regulatory measure, the purpose of which was to give the employer the opportunity to find a replacement or substitute, and the employee the equal opportunity to look for another job or source of employment. Where the termination of employment was for a just cause, no notice was 30 required to be given to the, employee. It was only on September 4, 1981 that notice was required to be given even where the dismissal or termination of an employee was for cause. This was made in the rules issued by the then Minister of Labor and Employment to implement B.P. Blg. 130 which amended the Labor Code. And it was still much later when the notice requirement was embodied in the law with the amendment of Art. 277(b) by R.A. No. 6715 on March 2, 1989. It cannot be that the former regime denied due process to the employee. Otherwise, there should now likewise be a rule that, in case an employee leaves his job without cause and without prior notice to his employer, his act should be void instead of simply making him liable for damages. The third reason why the notice requirement under Art. 283 can not be considered a requirement of the Due Process Clause is that the employer cannot really be expected to be entirely an impartial judge of his own cause. This is also the case in termination of employment for a just cause under Art. 282 (i.e., serious misconduct or willful disobedience by the employee of the lawful orders of the employer, gross and habitual neglect of duties, fraud or willful breach of trust of the employer, commission of crime against the employer or the latter's immediate family or duly authorized representatives, or other analogous cases). Justice Puno disputes this. He says that "statistics in the DOLE will prove that many cases have been won by employees before the grievance committees manned by impartial judges of the company." The grievance machinery is, however, different because it is established by agreement of the employer and the employees and composed of representatives from both 31 sides. That is why, in Batangas Laguna Tayabas Bus Co. v. Court of Appeals , which Justice Puno cites, it was held that "Since the right of [an employee] to his labor is in itself a property and that the labor agreement between him and [his employer] is the law between the parties, his summary and arbitrary dismissal amounted to deprivation of his property without due process of law." But here we are dealing with dismissals and layoffs by employers alone,

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without the intervention of any grievance machinery. Accordingly in Montemayor v. Araneta 32 University Foundation, although a professor was dismissed without a hearing by his university, his dismissal for having made homosexual advances on a student was sustained, it appearing that in the NLRC, the employee was fully heard in his defense. Lack of Notice Only Makes Termination Ineffectual Not all notice requirements are requirements of due process. Some are simply part of a procedure to be followed before a right granted to a party can be exercised. Others are 33 simply an application of the Justinian precept, embodied in the Civil Code, to act with justice, give everyone his due, and observe honesty and good faith toward one's fellowmen. Such is the notice requirement in Arts. 282-283. The consequence of the failure either of the employer or the employee to live up to this precept is to make him liable in damages, not to render his act (dismissal or resignation, as the case may be) void. The measure of damages is the amount of wages the employee should have received were it not for the termination of his employment without prior notice. If warranted, nominal and moral damages may also be awarded. We hold, therefore, that, with respect to Art. 283 of the Labor Code, the employer's failure to comply with the notice requirement does not constitute a denial of due process but a mere failure to observe a procedure for the termination of employment which makes the termination of employment merely ineffectual. It is similar to the failure to observe the 34 provisions of Art. 1592, in relation to Art. 1191, of the Civil Code in rescinding a contract for the sale of immovable property. Under these provisions, while the power of a party to rescind a contract is implied in reciprocal obligations, nonetheless, in cases involving the sale of immovable property, the vendor cannot exercise this power even though the vendee defaults in the payment of the price, except by bringing an action in court or giving notice of rescission 35 by means of a notarial demand. Consequently, a notice of rescission given in the letter of an attorney has no legal effect, and the vendee can make payment even after the due date 36 since no valid notice of rescission has been given. Indeed, under the Labor Code, only the absence of a just cause for the termination of employment can make the dismissal of an employee illegal. This is clear from Art. 279 which 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 dismissedfrom 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 37 time of his actual reinstatement.

Thus, only if the termination of employment is not for any of the causes provided by law is it illegal and, therefore, the employee should be reinstated and paid backwages. To contend, as Justices Puno and Panganiban do, that even if the termination is for a just or authorized cause the employee concerned should be reinstated and paid backwages would be to amend Art. 279 by adding another ground for considering a dismissal illegal. What is more, it would ignore the fact that under Art. 285, if it is the employee who fails to give a written notice to the employer that he is leaving the service of the latter, at least one month in advance, his failure to comply with the legal requirement does not result in making his resignation void but only in 38 making him liable for damages. This disparity in legal treatment, which would result from the adoption of the theory of the minority cannot simply be explained by invoking resident Ramon Magsaysay's motto that "he who has less in life should have more in law." That would be a misapplication of this noble phrase originally from Professor Thomas Reed Powell of the Harvard Law School. Justice Panganiban cites Pepsi-Cola Bottling Co. v. NLRC, in support of his view that an illegal dismissal results not only from want of legal cause but also from the failure to observe "due process." The Pepsi-Cola case actually involved a dismissal for an alleged loss of trust and confidence which, as found by the Court, was not proven. The dismissal was, therefore, illegal, not because there was a denial of due process, but because the dismissal was without cause. The statement that the failure of management to comply with the notice requirement "taints the dismissal with illegality" was merely a dictum thrown in as additional grounds for holding the dismissal to be illegal. Given the nature of the violation, therefore, the appropriate sanction for the failure to give notice is the payment of backwages for the period when the employee is considered not to have been effectively dismissed or his employment terminated. The sanction is not the payment alone of nominal damages as Justice Vitug contends. Unjust Results of Considering Dismissals/Layoffs Without Prior Notice As Illegal The refusal to look beyond the validity of the initial action taken by the employer to terminate employment either for an authorized or just cause can result in an injustice to the employer. For not giving notice and hearing before dismissing an employee, who is otherwise guilty of, say, theft, or even of an attempt against the life of the employer, an employer will be forced to keep in his employ such guilty employee. This is unjust. It is true the Constitution regards labor as "a primary social economic force." But so does it declare that it "recognizes the indispensable role of the private sector, encourages private 41 enterprise, and provides incentives to needed investment." The Constitution bids the State 42 to "afford full protection to labor." But it is equally true that "the law, in protecting the right's 43 of the laborer, authorizes neither oppression nor self-destruction of the employer." And it is
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oppression to compel the employer to continue in employment one who is guilty or to force the employer to remain in operation when it is not economically in his interest to do so. In sum, we hold that if in proceedings for reinstatement under Art. 283, it is shown that the termination of employment was due to an authorized cause, then the employee concerned should not be ordered reinstated even though there is failure to comply with the 30-day notice requirement. Instead, he must be granted separation pay in accordance with Art. 283, to wit: In case of termination due to the installation of labor-saving devices or redundancy, the worker affected thereby shall be entitled to a separation pay equivalent to at least his one (1) month pay or to at least one month for every year of service, whichever is higher. In case of retrenchment to prevent losses and in cases of closures or cessation of operations of establishment or undertaking not due to serious business losses or financial reverses, the separation pay shall be equivalent to one (1) month pay or at least one-half (1/2) month pay for every year of service, whichever is higher. A fraction of at least six months shall be considered one (1) whole year. If the employee's separation is without cause, instead of being given separation pay, he should be reinstated. In either case, whether he is reinstated or only granted separation pay, he should be paid full backwages if he has been laid off without written notice at least 30 days in advance. On the other hand, with respect to dismissals for cause under Art. 282, if it is shown that the employee was dismissed for any of the just causes mentioned in said Art. 282, then, in accordance with that article, he should not be reinstated. However, he must be paid backwages from the time his employment was terminated until it is determined that the termination of employment is for a just cause because the failure to hear him before he is dismissed renders the termination of his employment without legal effect. WHEREFORE, the petition is GRANTED and the resolution of the National Labor Relations Commission is MODIFIED by ordering private respondent Isetann Department Store, Inc. to pay petitioner separation pay equivalent to one (1) month pay for every year of service, his unpaid salary, and his proportionate 13th month pay and, in addition, full backwages from the time his employment was terminated on October 11, 1991 up to the time the decision herein becomes final. For this purpose, this case is REMANDED to the Labor Arbiter for computation of the separation pay, backwages, and other monetary awards to petitioner. SO ORDERED.

G.R. No. 117195

February 20, 1996

DANNY T. RASONABLE, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION, JOEY GUEVARRA AND VICTORY LINER, INC., respondents.PUNO, J.: On March 19, 1993, petitioner DANNY T. RASONABLE filed a complaint for illegal dismissal with the Regional Arbitration Branch No. III, San Fernando, Pampanga, against private respondents VICTORY LINER, INC. and JOEY GUEVARRA, praying for reinstatement, 1 payment of backwages and other benefits, damages and attorney's fees. In a Decision, dated November 8, 1993, Labor Arbiter Ariel C. Santos found private respondents guilty of illegal dismissal. They were ordered to pay petitioner the total sum of P84,957.47, representing the latter's backwages from March 1, 1993 (when petitioner was illegally dismissed) up to November 8, 1993 (the date of the Labor Arbiter's Decision), 13th month pay, separation pay equivalent to one-half month salary for every year of service and ten percent (10%) of the total award as attorney's fees. Dissatisfied, both parties appealed to the National Labor Relations Commission (NLRC). In 3 his appeal, petitioner prayed that the Labor Arbiter's Decision be modified by awarding him instead full backwages, separation pay equivalent to one (1) month pay for every year of service, and other benefits which he would have received had he not been illegally dismissed. Upon the other hand, private respondents claimed that the Labor Arbiter decided their case when it was not as yet submitted for decision as the parties were then in the verge of striking an amicable settlement. They prayed that the case be remanded to the Labor Arbiter for 4 settlement and/or reception of further evidence of both parties. In a Decision, dated March 30, 1994, the NLRC modified the Decision of the Labor Arbiter by increasing the award of separation pay from one-half (1/2) month pay to one (1) month pay for every year of service and by deleting the award of attorney's fees. Both parties moved for 6 reconsideration. Both motions were denied. They filed separate petitions for certiorari to this Court. Private respondents' petition, entitled "Victory Liner, Inc. v. NLRC, et al." (G.R. No. 116848) was filed on September 8, 1994 and they reiterated their position before the NLRC. The THIRD DIVISION of this Court, in a Minute Resolution, dated September 21, 1994, denied due course to private respondents' 7 petition. Their motion for reconsideration was denied with finality on November 16, 1994.
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Upon the other hand, petitioner filed the petition at bar against private respondents and the NLRC on October 6, 1994. His petition was given due course and the parties were directed to file their respective Memorandum. In his petition, petitioner charges that public respondent NLRC committed grave abuse of discretion: (a) in deleting the award of attorney's fees, and; (b) in failing to award other benefits, like holiday pay, service incentive leave pay, 13th month pay, backwages and separation pay accruing from November 8, 1993 (the date of the labor arbiter's Decision) up to the finality thereof. At the outset, it bears emphasis that when the Third Division of this Court denied due course to private respondents' petition (G.R. No. 116848), the Court in effect wrote finis to the issue of illegal dismissal. It is thus settled that petitioner was illegally dismissed from service. Similarly a non-issue is the labor arbiter's award of separation pay in lieu of reinstatement which was not challenged by petitioner in his appeal to the NLRC. What then remains is the determination of the monetary awards to be adjudged to petitioner and the period covered thereby. We hold that public respondent NLRC committed grave abuse of discretion when it ruled that there is no basis for the award of attorney's fees in favor of petitioner. It is settled that in actions for recovery of wages or where an employee was forced to litigate and incur 8 expenses to protect his rights and interests, he is entitled to an award of attorney's fees. We come now to the other monetary benefits being claimed by petitioner. Public respondent denied petitioner's claim for service incentive pay and holiday pay on the ground that petitioner failed to present substantial evidence to support his claim. In the absence of a clear showing by petitioner of grave abuse of discretion on the part of the public respondent, its factual finding binds this Court. Next, petitioner contends that as a result of his illegal dismissal, he is entitled to an award of separation pay, backwages and 13th month pay not only from the time the complaint was filed up to the November 8, 1993 Decision of the Labor Arbiter but also from the time the arbiter's decision was rendered up to the finality of said decision. He faults the ruling of the public respondent that under Art. 279 of the Labor Code, as amended by Section 34 of R.A. 6715, an illegally dismissed employee shall be entitled to reinstatement and to his full backwages and other benefits computed from the time his compensation was withheld from him up to the time of his actual reinstatement. In the case at bar, instead of ordering petitioner's reinstatement, the Labor Arbiter awarded to petitioner separation pay. It computed the separation pay on the basis of petitioner's length of service, i.e. from the time of his employment up to the time of dismissal. Petitioner is thus deemed separated from service as of the date of the arbiter's decision awarding him separation pay. Hence, public respondent

held that petitioner is no longer entitled to an award of 13th month pay and backwages after the date of the decision of the labor arbiter granting petitioner separation pay, the employeremployee relationship having ceased. We find merit in petitioner's contention. A look back on our law and jurisprudence on illegal dismissal is in order. Originally, an illegally dismissed employee is entitled to the payment of backwages from the date of dismissal to the date of reinstatement less the amount he may have earned elsewhere during said period. Should the laborer decide not to return to work, the deduction should be made up 9 to the time the judgment becomes final. Hence, under the old law, payment of backwages is computed from the time of dismissal up to finality of decision in case the laborer is not reinstated. To prevent double compensation, the earnings derived by a dismissed employee in other jobs during the period his case is pending is deducted from the grant of backwages to be awarded to him. Likewise, the award of backwages would carry with it payment of the benefits to which an employee would have been entitled if he were not dismissed. Thereafter, in the case of Mercury Drug Co. v. Court of Industrial Relations, the Court simplified the computation of backwages which was unduly delaying the speedy termination of illegal dismissal cases by limiting its payment to three (3) years without qualification or deduction. Under the Mercury Drug rule, the worker is to be paid his backwages fixed as of the time of his dismissal without deduction for their earnings elsewhere during their lay-off and without qualification of their wages as thus fixed, i.e., unqualified by any increases or other benefits that may have been received by their co-workers who were not 11 dismissed. Such award is understood to be inclusive of leave benefits: in making the award, the court necessarily takes into consideration holidays, vacation leaves; all working days are paid for regardless of whether or not the same fall on holidays or employee's leave days; the regular allowances that the employee had been receiving should however be 12 included in the salary base. The Mercury Drug rule was changed by Article 279 of the Labor Code, as amended by 13 Section 34 of R.A. 6715. It provides: Art. 279. 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. (emphasis supplied).
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As the law stands now, an employee who has been illegally dismissed after the effectivity of R.A. 6715 shall be entitled to reinstatement, full backwages and other benefits for the entire period that he was out of work and until actual reinstatement. However, in lieu of reinstatement, petitioner may instead be awarded separation pay. Separation pay is the amount that an employee receives at the time of his severance from the service and is designed to provide the employee with the wherewithal during the period that he is looking for 14 another employment. The grant of separation pay does not preclude an award for backwages for the latter represents the amount of earnings lost by reason of the unjustified 15 dismissal. Additionally, a dismissed employee is entitled to 13th month pay. Public respondent holds that award of separation pay implies termination of employment as of the date of the decision. Hence, from the date of the decision of the labor arbiter granting separation pay, an illegally dismissed employee is no longer entitled to an award of backwages and 13th month pay, the employer-employee relationship having been severed. We are not persuaded. In a number of cases, we ruled that there is no inconsistency in the grant of both backwages and separation pay to an illegally dismissed employee. In Lim v. NLRC, supra, the Court elucidated the propriety of awarding both separation pay and backwages in this wise: We have ordered the payment of both (separation pay and backwages) . . . as otherwise, the employee might be deprived of benefits justly due him. Thus, if an employee who has worked only one year is sustained by the labor court after three years from his unjust dismissal, granting him separation pay only would entitle him to only one month salary. There is no reason why he should not also be paid three years backwages corresponding to the period when he could not return to his work or could not find employment elsewhere. A mere order for reinstatement issued by the labor arbiter is totally different from actual restoration of an employee to his previous position. It is for this reason that Article 279, as amended by R.A. 6715, provides for payment of full backwages and other benefits from the time of dismissal up to the time of actual reinstatement. Thus, in case reinstatement is adjudged, the award of backwages and other benefits continues beyond the date of the labor arbiter's decision ordering reinstatement and extends up to the time said order of reinstatement is actually carried out. Correlatively, an award of separation pay, in lieu of reinstatement, and other benefits due to the employee, without actual payment thereof, does not have the effect of terminating the employment of an illegally dismissed employee. The award of the labor arbiter could still be overturned or modified and, in most cases, its 17 execution could be unreasonably delayed. Thus, until actual receipt of the award of separation pay, the employer-employee relationship subsists, entitling the illegally dismissed employee to an award of backwages, 13th month pay and other benefits from the time of his dismissal until finality of the decision of the labor arbiter.
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With the enactment of R.A. 6715, we now go back to the policy adopted by this Court prior to the Mercury Drug rule, i.e., payment of full backwages shall be made from the date of dismissal up to finality of the judgment should reinstatement be not decreed, less the amount which the dismissed employee may have earned during said period, taking into consideration the increases and other benefits, including the 13th month pay, received by his co-employees who were not dismissed. Payment of separation pay shall be computed from the date of the 18 dismissed employee's service until finality of our decision. IN VIEW WHEREOF, the petition is hereby GRANTED. The Decision of public respondent NLRC is MODIFIED. The labor arbiter's award of attorney's fees is reinstated. Payment of backwages, less earnings elsewhere, and qualified by increases and other benefits (including the 13th month pay) shall be computed from the date of his dismissal until the finality of our decision. Payment of the separation pay, on the other hand, shall be computed from the date of petitioner's employment until finality of our decision. No cost. SO ORDERED.

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G.R. No. 124617

April 28, 2000

PHILIPPINE AEOLUS AUTO-MOTIVE UNITED CORPORATION and/or FRANCIS CHUA, petitioners, vs.NATIONAL LABOR RELATIONS COMMISSION and ROSALINDA C. CORTEZ, respondents. BELLOSILLO, J.: This petition seeks to set aside the Decision of 15 February 1996 and the Resolution of 28 March 1996 of public respondent National Labor Relations Commission in NLRC NCR CA No. 009753-95 (NLRC NCR Case No. 00-12-08759-94) which modified the decision of the Labor Arbiter finding petitioners not guilty of illegal dismissal. Petitioner Philippine Aeolus Automotive United Corporation (PAAUC) is a corporation duly organized and existing under Philippine laws, petitioner Francis Chua is its President while 1 private respondent Rosalinda C. Cortez was a company nurse of petitioner corporation until her termination on 7 November 1994. On 5 October 1994 a memorandum was a issued by Ms. Myrna Palomares, Personnel Manager of petitioner corporation, addressed to private respondent Rosalinda C. Cortez requiring her to explain within forty-eight (48) hours why no disciplinary action should be taken against her (a) for throwing a stapler at Plant Manager William Chua, her superior, and uttering invectives against him on 2 August 1994; (b) for losing the amount of P1,488.00 entrusted to her by Plant Manager Chua to be given to Mr. Fang of the CLMC Department on 23 August 1994; and, (c) for asking a co-employee to punch-in her time card thus making it appear that she was in the office in the morning of 6 September 1944 when in fact she was not. The memorandum however was refused by private respondent although it was read to her and discussed with her by a co-employee. She did not also submit the required explanation, so that while her case pending investigation the company placed her under preventive suspension for thirty (30) days effective 9 October 1994 to 7 November 1994. On 20 October 1994, while Cortez was still under preventive suspension, another memorandum was issued by petitioner corporation giving her seventy-two (72) hours to explain why no disciplinary action should be taken against her for allegedly failing to process the ATM applications of her nine (9) co-employees with the Allied Banking Corporation. On 21 October 1994 private respondent also refused to receive the second memorandum although it was read to her by a co-employee. A copy of the memorandum was also sent by the Personnel Manager to private respondent at her last known address by registered mail. Meanwhile, private respondent submitted a written explanation with respect to the loss of the P1,488.00 and the punching-in of her time card by a co-employee.

On 3 November 1994 a third memorandum was issued to private respondent, this time informing her of her termination from the service effective 7 November 1994 on grounds of 2 gross and habitual neglect of duties, serious misconduct and fraud or willful breach of trust. On 6 December 1994 private respondent filed with the Labor Arbiter a complaint for illegal dismissal, non-payment of annual service incentive leave pay, 13th month pay and damages 3 against PAAUC and its president Francis Chua. On 10 July 1995 the Labor Arbiter rendered a decision holding the termination of Cortez as 4 valid and legal, at the same time dismissing her claim for damages for lack of merit. On appeal to the NLRC, public respondent reversed on 15 February 1996 the decision of the Labor Arbiter and found petitioner corporation guilty of illegal dismissal of private respondent Cortez. The NLRC ordered petitioner PAAUC to reinstate respondent Cortez to her former position with back wages computed from the time of dismissal up to her actual 5 reinstatement. On 11 March 1996 petitioners moved for reconsideration. On 28 March 1996 the motion was 6 denied; hence, this petition for certiorari challenging the NLRC Decision and Resolution. The crux of the controversy may be narrowed down to two (2) main issues: whether the NLRC gravely abused its discretion in holding as illegal the dismissal of private respondent, and whether she is entitled to damages in the event that the illegality of her dismissal is sustained. The Labor Code as amended provides specific grounds by which an employer may validly 7 terminate the services of an employee which grounds should be strictly construed since a person's employment constitutes "property" under the context of the constitutional protection that "no person shall be deprived of life, liberty or property without due process of law" and, as such, the burden of proving that there exists a valid ground for termination of the 8 employment rests upon the employer. Likewise, in light of the employee's right to security of tenure, where a penalty less punitive than dismissal will suffice, whatever missteps may have 9 been committed by labor ought not to be visited with a consequence so severe. A perusal of the termination letter indicates that private respondent was discharged from employment for "serious misconduct, gross and habitual neglect of duties and fraud or willful breach of trust." Specifically 1. On August 2, 1994, you committed acts constituting gross disrespect to your superior Mr. William Chua, the Plant Manager.

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2. On August 23, 1994, the Plant Manager entrusted you the amount of P1,488.00 to be sent to CLMC for Mr. Fang but the money was allegedly lost in your possession and was not recovered. 3. On September 6, 1994, you caused someone else to punch-in your time card to show that you were at work when in fact you were doing a personal errand for Richard Tan. As per time card you were in at 8:02 A.M. but you only arrived at 12:35 P.M. 4. On July 28, 1994, you received an amount of P900.00 from Miss Lucy Lao to open an ATM card of nine (9) employees. On September 24, 1994, one of the employees complained by the name of Tirso Aquino about the status of his ATM Card and upon query from the bank it was found out that no application and no deposit for said person has been made. Likewise, it was found out that you did not open the ATM Card and deposit the P800.00 for the 8 other employees. It turned out that said 10 deposit was made after a month later. As to the first charge, respondent Cortez claims that as early as her first year of employment her Plant Manager, William Chua, already manifested a special liking for her, so much so that she was receiving special treatment from him who would oftentimes invite her "for a date," which she would as often refuse. On many occasions, he would make sexual advances touching her hands, putting his arms around her shoulders, running his fingers on her arms and telling her she looked beautiful. The special treatment and sexual advances continued during her employment for four (4) years but she never reciprocated his flirtations, until finally, she noticed that his attitude towards her changed. He made her understand that if she would not give in to his sexual advances he would cause her termination from the service; and he made good his threat when he started harassing her. She just found out one day that her table which was equipped with telephone and intercom units and containing her personal belongings was transferred without her knowledge to a place with neither telephone nor intercom, for which reason, an argument ensued when she confronted William Chua resulting 11 in her being charged with gross disrespect. Respondent Cortez explains, as regards the second charge, that the money entrusted to her for transmittal was not lost; instead, she gave it to the company personnel in-charge for 12 proper transmittal as evidenced by a receipt duly signed by the latter. With respect to the third imputation, private respondent admits that she asked someone to punch-in her time card because at that time she was doing an errand for one of the company's officers, Richard Tan, and that was with the permission of William Chua. She maintains that she did it in good faith believing that she was anyway only accommodating the request of a company executive and done for the benefit of the company with the

acquiescence of her boss, William Chua. Besides, the practice was apparently tolerated as 13 the employees were not getting any reprimand for doing so. As to the fourth charge regarding her alleged failure to process the ATM cards of her coemployees, private respondent claims that she has no knowledge thereof and therefore denies it. After all, she was employed as a company nurse and not to process ATM cards for her co-employees. The Supreme Court, in a litany of decisions on serious misconduct warranting dismissal of an employee, has ruled that for misconduct or improper behavior to be a just cause for dismissal (a) it must be serious; (b) must relate to the performance of the employee's duties; and, (c) 14 must show that the employee has become unfit to continue working for the employer. The act of private respondent in throwing a stapler and uttering abusive language upon the person of the plant manager may be considered, from a lay man's perspective, as a serious misconduct. However, in order to consider it a serious misconduct that would justify dismissal under the law, it must have been done in relation to the performance of her duties as would show her to be unfit to continue working for her employer. The acts complained of, under the circumstances they were done, did not in any way pertain to her duties as a nurse. Her employment identification card discloses the nature of her employment as a nurse and no 15 other. Also, the memorandum informing her that she was being preventively suspended 16 pending investigation of her case was addressed to her as a nurse. As regards the third alleged infraction, i.e., the act of private respondent in asking a coemployee to punch-in her time card, although a violation of company rules, likewise does not constitute serious misconduct. Firstly, it was done by her in good faith considering that she was asked by an officer to perform a task outside the office, which was for the benefit of the company, with the consent of the plant manager. Secondly, it was her first time to commit such infraction during her five (5)-year service in the company. Finally, the company did not lose anything by reason thereof as the offense was immediately known and corrected. On alleged infraction No. 4, as may be gleaned from and admitted in the memorandum of 17 petitioners to private respondent dated 20 October 1994 and the notice of termination dated 3 November 1994, the money entrusted to her was in fact deposited in the respective accounts of the employees concerned, although belatedly. We agree with the submission of the Solicitor General that The mere delay/failure to open an ATM account for nine employees is not sufficient, by itself, to support a conclusion that Rosalinda is guilty of gross and habitual neglect of duties. First, petitioner did not show that opening an ATM is one of her primary duties as company nurse. Second, petitioner failed to show that Rosalinda intentionally, knowingly, and purposely delayed the opening of ATM accounts for

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petitioner's employees. It is of common knowledge that a bank imposes upon an applicant certain requirements before an ATM account can be opened, i.e. properly filled up application forms, identification cards, minimum deposit etc. In the instant case, petitioner did not prove that the delay was caused by Rosalinda's neglect or 18 willful act (emphasis supplied). Gross negligence implies a want or absence of or failure to exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of consequences without 19 exerting any effort to avoid them. The negligence, to warrant removal from service, should not merely be gross but also habitual. Likewise, the ground "willful breach by the employee of the trust reposed in him by his employer" must be founded on facts established by the employer who must clearly and convincingly prove by substantial evidence the facts and 20 incidents upon which loss of confidence in the employee may fairly be made to rest. All these requirements prescribed by law and jurisprudence are wanting in the case at bar. On the issue of moral and exemplary damages, the NLRC ruled that private respondent was not entitled to recover such damages for her failure to prove that petitioner corporation had been motivated by malice or bad faith or that it acted in a wanton, oppressive or malevolent manner in terminating her services. In disbelieving the explanation proffered by private respondent that the transfer of her table was the response of a spurned lothario, public respondent quoted the Labor Arbiter Complainant's assertion that the cause of the altercation between her and the Plant Manager where she threw a stapler to him and uttered invectives against him was her refusal to submit to his advances to her which started from her early days of employment and lasted for almost four years, is hardly believable. For indeed, if there was such harassment, why was there no complaints ( sic) from her during that period? Why did she stay there for so long? Besides, it could not have taken that period for the Plant Manager to react. This assertion of the complainant deserves no 21 credence at all. Public respondent in thus concluding appears baffled why it took private respondent more than four (4) years to expose William Chua's alleged sexual harassment. It reasons out that it would have been more prepared to support her position if her act of throwing the stapler and uttering invectives on William Chua were her immediate reaction to his amorous overtures. In that case, according to public respondent, she would have been justified for such outburst because she would have been merely protecting her womanhood, her person and her rights. We are not persuaded. The gravamen of the offense in sexual harassment is not the violation of the employee's sexuality but the abuse of power by the employer. Any employee, male or female, may rightfully cry "foul" provided the claim is well substantiated. Strictly speaking,

there is no time period within which he or she is expected to complain through the proper channels. The time to do so may vary depending upon the needs, circumstances, and more importantly, the emotional threshold of the employee. Private respondent admittedly allowed four (4) years to pass before finally coming out with her employer's sexual impositions. Not many women, especially in this country, are made of the stuff that can endure the agony and trauma of a public, even corporate, scandal. If petitioner corporation had not issued the third memorandum that terminated the services of private respondent, we could only speculate how much longer she would keep her silence. Moreover, few persons are privileged indeed to transfer from one employer to another. The dearth of quality employment has become a daily "monster" roaming the streets that one may not be expected to give up one's employment easily but to hang on to it, so to speak, by all tolerable means. Perhaps, to private respondent's mind, for as long as she could outwit her employer's ploys she would continue on her job and consider them as mere occupational hazards. This uneasiness in her place of work thrived in an atmosphere of tolerance for four (4) years, and one could only imagine the prevailing anxiety and resentment, if not bitterness, that beset her all that time. But William Chua faced reality soon enough. Since he had no place in private respondent's heart, so must she have no place in his office. So, he provoked her, harassed her, and finally dislodged her; and for finally venting her pent-up anger for years, he "found" the perfect reason to terminate her. In determining entitlement to moral and exemplary damages, we restate the bases therefor.1wphi1 In moral damages, it suffices to prove that the claimant has suffered anxiety, sleepless nights, besmirched reputation and social humiliation by reason of the act 22 complained of. Exemplary damages, on the other hand, are granted in addition to, inter 23 alia, moral damages "by way of example or correction for the public good" if the employer 24 ''acted in a wanton, fraudulent, reckless, oppressive or malevolent manner." Anxiety was gradual in private respondent's five (5)-year employment. It began when her plant manager showed an obvious partiality for her which went out of hand when he started to make it clear that he would terminate her services if she would not give in to his sexual advances. Sexual harassment is an imposition of misplaced "superiority" which is enough to dampen an employee's spirit in her capacity for advancement. It affects her sense of judgment; it changes her life. If for this alone private respondent should be adequately compensated. Thus, for the anxiety, the seen and unseen hurt that she suffered, petitioners should also be made to pay her moral damages, plus exemplary damages, for the oppressive manner with which petitioners effected her dismissal from the service, and to serve as a forewarning to lecherous officers and employers who take undue advantage of their ascendancy over their employees.

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All told, the penalty of dismissal is too excessive and not proportionate to the alleged infractions committed considering that it does not appear that private respondent was an incorrigible offender or that she inflicted serious damage to the company, nor would her 25 continuance in the service be patently inimical to her employer's interest. Even the suspension imposed upon her while her case was pending investigation appears to be unjustified and uncalled for. WHEREFORE, the Decision of public respondent National Labor Relations Commssion finding the dismissal of private respondent Rosalinda C. Cortez to be without just cause and ordering petitioners Philippine Aeolus Automotive United Corporation and/or Francis Chua to pay her back wages computed from the time of her dismissal, which should be full back wages, is AFFIRMED. However, in view of the strained relations between the adverse parties, instead of reinstatement ordered by public respondent, petitioners should pay private respondent separation pay equivalent to one (1) month salary for every year of service until finality of this judgment. In addition, petitioners are ordered to pay private respondent P25,000.00 for moral damages and P10,000.00 for exemplary damages. Costs against petitioners. SO ORDERED.

G.R. No. 140812

August 28, 2001

CANDIDO ALFARO, petitioner, vs.COURT OF APPEALS, NATIONAL LABOR RELATIONS COMMISSION and STAR PAPER CORPORATION,respondents.PANGANIBAN, J.: Generally, separation pay need not be paid to an employee who voluntarily resigns. However, an employer who agrees to expend such benefit as an incident of the resignation should not be allowed to renege in the performance of such commitment. The Case Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, seeking 2 to set aside the Decision of the Court of Appeals (CA), which affirmed the June 16, 1998 3 Decision of the National Labor Relations Commission (NLRC). The Facts The facts as related by petitioner in his Memorandum are hereunder reproduced as follows: "Petitioner was employed as a helper/operator of private respondent since November 8, 1990. From November 23, 1993 until December 5, 1993, he took a sick leave. When he reported back to work on December 6, 1993, he was surprised to find out that another worker was recruited to take his place, and instead, he was transferred to [the] wrapping section where he was required to work with overtime up to 9:30 PM, from his regular working hours of from 7:00 a.m., to 4:00 p.m., despite the fact that he had just recovered from illness. On December 7, 1993, he was given a new assignment where the work was even more difficult[;] when he complained o[f] what he felt was rude treatment or sort of punishment since he was being exposed to hard labor notwithstanding his predicament of just coming from sickness, petitioner was told to look for another job because he was dismissed effective on said date, December 7, 1993, when petitioner was seeking his 13th month pay and fifteen (15) days sick leave pay [o]n the afternoon of the same day, he was ignored when he refused to sign documents which indicated that he was renouncing claims against private respondent. Before Christmas of 1993, petitioner sought private respondent to pay his 13th month pay and [his] 15 days sick leave pay, but he was told to come next year. "On January 12, 1994, petitioner came to private respondent for his aforestated money claims. During that occasion, private respondent dangled to petitioner a check worth P3,000.00 which [would] be released to him, only if he [signed] the documents,
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being forced upon him to sign on December 7, 1993. Desperate for the money to support his subsistence, and against his will, petitioner was constrained to sign the said documents which contained no amount of money released to him. The actual sum of money received by petitioner from private respondent amounted to P3,000.00 in the form of check, while his claims for 15 days sick leave pay was secured by him from the Social Security System. "The documents forced upon the petitioner to sign were a 'resignation letter, and a Release and Quit Claim'. Said 'resignation letter' read, thus: 'To the Personal Manager Mr. Michael Philip Elizalde Star Paper Corporation 46 Joy St., Grace Village, Q.C. Dear Sir, Ako po si Candido Alfaro ay nagbibigay ng aking resignation letter dahilan po sa aking sakit. Umaasa po ako na mabigyan ng tulong. Lubos na gumagalang (sgd) Candido Alfaro' "As submitted by private respondent in its pleadings on record, petitioner allegedly tendered said resignation letter on January 12, 1994, on the basis of which, the former maintains that the latter was not illegally dismissed, was paid [his] separation pay of P8,455.50, and that he voluntarily resigned from his job effective January 12, 5 1994." Private respondent, in its Memorandum , adopts Labor Arbiter Donato Quinto's findings of fact as follows: "Complainant alleges that he was hired by respondent corporation in November 1990 [as] the latter's machine tape operator. Thereafter, or in the month[s] of September and October, 1993, he was suffered to do some painting work on pallets guide using [a] spray gun. As a result, in the third week of October, 1993 he felt general body weakness coupled with constant coughing and fever. "As a consequence of his illness, complainant alleges that he took a vacation leave from November 22, 1993 to December 5, 1993. However, upon reporting for work on
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December 6, 1993, complainant was surprised to find out that somebody was already recruited to take his place. Instead, he was transferred to the wrapping section. "On December 7, 1993, complainant complained of the work being given to him for being difficult which was interpreted as some sort of a punishment given to him by the respondent. As a result thereof, complainant alleges that he was dismissed without valid cause and without due process of law. He further alleges that he was not paid his 13th month pay and 15 days sick leave which he was claiming because he refused to sign a document renouncing all his claim[s] against respondent corporation. "On January 12, 1994, complainant went to the respondent corporation to claim his 13th month pay and his 15 days sick leave pay. He received the amount of P3,000.00 but he was allegedly pressured to sign a Quitclaim and Release with no amount or consideration written on said document. Further, complainant also alleges that he was also made to sign a prepared resignation letter in exchange for the P3,000.00 which he received which [was] contrary to the claim of the respondent corporation that he received P8,452.00. "On June 14, 1996, the complainant filed a case against the respondent corporation for non-payment of separation pay. Said complaint was later amended on August 1, 1996 by claiming illegal dismissal and damages in lieu of separation pay, with a prayer for reinstatement with backwages and attorney's fees. "On the other hand, respondent corporation maintains that complainant while still under its employ contracted PTB Minimal Active for which reason he applied for SSS benefits on November 25, 1993. Considering his illness, complainant asked the respondent corporation that he be allowed to resign with benefits. After getting a favorable reply, complainant submitted a resignation letter to the respondent corporation on January 12, 1994. "Because of his request for help, separation benefits were likewise given to complainant in the amount of P8,452.50. Complainant, upon receipt of said benefits, executed a Release and Quitclaim in favor of respondent corporation." The CA Ruling In denying petitioner's claims, the CA ruled as follows:

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"It is not easy to uphold petitioner's submission. For, the Labor Arbiter's report to the National Labor Relations Commission shows that petitioner 'resigned voluntarily'. Thus, as written in the letter of resignation: 'Ako po si candido Alfaro ay nagbibigay ng aking resignation dahilan po sa aking sakit.

"4) Whether or not the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of or . . . excess of jurisdiction, and/or serious reversible 8 error in dismissing the petition for certiorari" The Court's Ruling The Petition has no merit.

'Umaasa po ako na mabigyan ng tulong.' "The same report likewise mentioned the "Quitclaim and Release" (Annex 2, of private respondent's position paper) which further strengthened the fact that petitioner resigned due to his ailment. If petitioner's concatenation is true that he was forced to sign the resignation letter against his better judgment, then why should he also sign the quitclaim and release[?] "We find no reason to reverse and set aside the findings and recommendation of the Labor Arbiter, and affirmed by the NLRC. As a quasi-judicial body, the findings of the NLRC deserve respect, even finality (M. Ramirez Industries vs. Secretary of Labor, 266 SCRA 111; Bataan Shipyard and Engineering Corporation vs. NLRC, 269 SCRA 199; Naguiat vs. NLRC, 269 SCRA 564; Conti vs. NLRC, 271 SCRA 114.)" Hence, this recourse.
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Main Issue: Illegal Dismissal and Separation Pay At the outset, it bears stressing that in a petition for review on certiorari, the scope of the Supreme Court's judicial review of decisions of the Court of Appeals is generally confined 9 10 only to errors of law; questions of fact are not entertained. Thus, only questions of law may be brought by the parties and passed upon by this Court in the exercise of its power to 11 review. The Supreme Court is not a trier of facts, and this doctrine applies with greater force in labor 12 13 cases. Factual questions are for the labor tribunals to resolve. In this case, the factual issues have already been determined by the labor arbiter and the National Labor Relations Commission. Their findings were affirmed by the CA. Judicial review by this Court does not extend to a reevaluation of the sufficiency of the evidence upon which the proper labor 14 tribunal has based its determination. Indeed, factual findings of labor officials who are deemed to have acquired expertise in matters within their respective jurisdictions are generally accorded not only respect, but even 15 finality, and are binding on the Supreme Court. Verily, their conclusions are accorded great 16 weight upon appeal, especially when supported by substantial evidence. Consequently, the Supreme Court is not duty-bound to delve into the accuracy of their factual findings, in the 17 absence of a clear showing that the same were arbitrary and bereft of any rational basis. The factual findings of the labor arbiter and the NLRC, as affirmed by the CA, reveal that petitioner resigned from his work due to his illness, with the understanding that private respondent would give him separation pay. Unfortunately, it seems that private respondent did not keep its promise to grant the separation pay, prompting petitioner to institute the present action for illegal dismissal. It was only for this reason that the Court gave due course to this Petition. Generally, an employee who voluntarily resigns from employment is not entitled to separation 18 pay. In the present case, however, upon the request of petitioner, private respondent agreed to a scheme whereby the former would receive separation pay despite having

The Issues Petitioner submits the following issues for the consideration of this Court: "1.) Whether or not the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack or . . . excess of jurisdiction and/or serious reversible error in holding that petitioner was not illegally dismissed by private respondent; "2.) Whether or not the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of or . . . excess of jurisdiction, and/or serious reversible error in holding that petitioner voluntarily resigned from employment; "3.) Whether or not the Honorable Court of Appeals committed grave abuse of discretion tantamount to lack of or . . . excess of jurisdiction and/or reversible error in holding that the finding of the NLRC, deserve respect and even finality despite serious flaws in its appreciation of facts and evidence;

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resigned voluntarily. Thus, the terms and conditions they both agreed upon constituted a contract freely entered into, which should be performed in good faith, as it constituted the law between the parties. Not all waivers and quitclaims are invalid as against public policy. If the agreement was voluntarily entered into and represented a reasonable settlement, it is binding on the parties 19 and may not later be disowned, simply because of a change of mind. The position taken by petitioner on the alleged illegal dismissal was vacillating and indecisive, as correctly found by the labor arbiter who provided a ratiocination on the matter as follows: "Thus, after a careful perusal of the evidence on hand, we are of the opinion that the position taken by the respondent corporation is more credible than that of complainant. This is evident from the fact that the complaint filed by complainant on June 14,1996, or more than two (2) years from his alleged dismissal on December 7, 1993, was only payment of separation pay. It was only on August 1, 1996 when complainant abandoned his claim for separation pay and instead filed an amended complaint claiming that he was, illegally dismissed. "To our mind, therefore, the foregoing coupled with the fact that there is practically no evidence on record which shows that complainant was pressured and made to sign a resignation letter and Release and Quitclaim against his will [and] better judgment only shows that his claim of illegal dismissal is unsubstantiated and is a mere afterthought. "Moreover, if indeed complainant was illegally dismissed, he should have pursued his claim against the respondent corporation by immediately filing a complaint for illegal dismissal. As it is, however, complainant filed a complaint for separation pay against the respondent corporation only after two (2) years from his alleged dismissal which complaint was amended for the purpose of claiming illegal dismissal almost two (2) 20 months thereafter." Voluntary resignation is defined as the act of an employee, who finds himself in a situation in which he believes that personal reasons cannot be sacrificed in favor of the exigency of the 21 service; thus, he has no other choice but to disassociate himself from his employment. As discussed above, petitioner negotiated for a resignation with separation pay as the manner in which his employment relations with private respondent would end. He was already suffering from a lingering illness at the time he tendered his resignation. His continued employment would have been detrimental not only to his health, but also to his performance as an employee of private respondent. Hence, the termination of the employment relations of petitioner with private respondent was ultimately, if not outrightly inevitable. Resignation with separation pay was the best option for

him under the circumstances. Rightly so, this was the mode adopted and agreed upon by the parties, as evidenced by the Release and Quitclaim petitioner executed in connection with his resignation. Clearly then, the claim of petitioner that he was illegally dismissed cannot be sustained, considering that his voluntary resignation has been indubitably established as a fact by the three tribunals below. Indeed, illegal dismissal and voluntary resignation are adversely opposed modes of terminating employment relations, in that the presence of one precludes that of the other. Although the Supreme Court has, more often than not, been inclined towards the workers and has upheld their cause in their conflicts with the employers, such inclination has not blinded it to the rule that justice is in every case for the deserving, to be dispensed in the light 22 of the established facts and applicable law and doctrine. An employee who resigns and executes a quitclaim in favor of the employer is generally estopped from filing any further 23 money claims against the employer arising from the employment. However, private respondent has not complied with its obligation to give petitioner's separation pay in the amount of P8,542.50. It was this deliberate withholding of monetary benefits that necessitated the long, litigious and lethargic proceedings in this case. Had private respondent simply paid the measly amount of P8,452.50 as separation pay to petitioner, this legal controversy could have been avoided and the court dockets unclogged. WHEREFORE, the Petition is hereby DENIED and the assailed Decision of the Court of Appeals AFFIRMED, with the modification that private respondent is directed to pay petitioner P8,452.50 plus legal interest thereon, computed from December 7, 1993, until fully paid, representing the unpaid separation pay benefit agreed upon by the parties. SO ORDERED.

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G.R. No. 141717

April 14, 2004

The Complaint of the Respondent The respondent filed a complaint before the National Capital Region Arbitration Branch of the National Labor Relations Commission (NLRC) for illegal dismissal against the petitioner, docketed as NLRC Case No. NCR-07-04263-93. She alleged, inter alia, that she was illegally dismissed, as there was no valid cause for the termination of her employment. She was not notified of any infractions she allegedly committed; neither was she accorded a chance to be heard. According to the respondent, the petitioner did not conduct any formal investigation before her employment was terminated. Furthermore, considering that she had rendered more than six months of service to the petitioner, she was already a regular employee and could not be terminated without any justifiable cause. Moreover, her absences were covered 13 by the proper authorizations. On the other hand, the petitioner contended that the respondent had not been dismissed, but that her contract of employment for the period of April 4, 1993 to June 4, 1993 merely expired and was no longer renewed because of her low performance rating. Hence, there was no need for a notice or investigation. Furthermore, the respondent had already accumulated five unauthorized absences which led to the deterioration of her performance, and ultimately 14 caused the non-renewal of her contract. The Ruling of the Labor Arbiter and the NLRC On June 26, 1997, the Labor Arbiter rendered a decision dismissing the complaint for lack of merit, thus: IN THE LIGHT OF ALL THE FOREGOING, the complaint is hereby dismissed for lack of merit. The respondent is, however, ordered to extend to the complainant a send off award or financial assistance in the amount equivalent to one-month salary 15 on ground of equity. The Labor Arbiter declared that the respondent, who had rendered less than seventeen months of service to the petitioner, cannot be said to have acquired regular status. The petitioner and the Philips Semiconductor Phils., Inc., Workers Union had agreed in their Collective Bargaining Agreement (CBA) that a contractual employee would acquire a regular employment status only upon completion of seventeen months of service. This was also reflected in the minutes of the meeting of April 6, 1993 between the petitioner and the union. Further, a contractual employee was required to receive a performance rating of at least 3.0, based on output, quality of work, attendance and work attitude, to qualify for contract renewal. In the respondents case, she had worked for the petitioner for only twelve months. In the last extension of her employment contract, she garnered only 2.8 points, below the 3.0 required average, which disqualified her for contract renewal, and regularization of

PHILIPS SEMICONDUCTORS (PHILS.), INC., petitioner, vs.ELOISA FADRIQUELA, respondent.CALLEJO, SR., J.: Before us is a petition for review of the Decision of the Court of Appeals (CA) in CA-G.R. SP No. 52149 and its Resolution dated January 26, 2000 denying the motion for reconsideration therefrom. The Case for the Petitioner The petitioner Philips Semiconductors (Phils.), Inc. is a domestic corporation engaged in the production and assembly of semiconductors such as power devices, RF modules, CATV modules, RF and metal transistors and glass diods. It caters to domestic and foreign corporations that manufacture computers, telecommunications equipment and cars. Aside from contractual employees, the petitioner employed 1,029 regular workers. The employees were subjected to periodic performance appraisal based on output, quality, 2 attendance and work attitude. One was required to obtain a performance rating of at least 3.0 for the period covered by the performance appraisal to maintain good standing as an employee. On May 8, 1992, respondent Eloisa Fadriquela executed a Contract of Employment with the petitioner in which she was hired as a production operator with a daily salary of P118. Her 3 initial contract was for a period of three months up to August 8, 1992, but was extended for 4 two months when she garnered a performance rating of 3.15. Her contract was again 5 renewed for two months or up to December 16, 1992, when she received a performance 6 rating of 3.8. After the expiration of her third contract, it was extended anew, for three 7 months, that is, from January 4, 1993 to April 4, 1993. After garnering a performance rating of 3.4, the respondents contract was extended for 9 another three months, that is, from April 5, 1993 to June 4, 1993. She, however, incurred five absences in the month of April, three absences in the month of May and four absences in the 10 month of June. Line supervisor Shirley F. Velayo asked the respondent why she incurred the said absences, but the latter failed to explain her side. The respondent was warned that if she offered no valid justification for her absences, Velayo would have no other recourse but to recommend the non-renewal of her contract. The respondent still failed to respond, as a consequence of which her performance rating declined to 2.8. Velayo recommended to the 11 petitioner that the respondents employment be terminated due to habitual absenteeism, in 12 accordance with the Company Rules and Regulations. Thus, the respondents contract of employment was no longer renewed.
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employment. The Labor Arbiter also ruled that the respondent cannot justifiably complain that she was deprived of her right to notice and hearing because her line supervisor had asked her to explain her unauthorized absences. Accordingly, these dialogues between the respondent and her line supervisor can be deemed as substantial compliance of the required notice and investigation. The Labor Arbiter declared, however, that the respondent had rendered satisfactory service for a period of one year, and since her infraction did not involve moral turpitude, she was entitled to one months salary. Aggrieved, the respondent appealed to the NLRC, which, on September 16, 1998, issued a Resolution affirming the decision of the Labor Arbiter and dismissing the appeal. The NLRC explained that the respondent was a contractual employee whose period of employment was fixed in the successive contracts of employment she had executed with the petitioner. Thus, upon the expiration of her contract, the respondents employment automatically ceased. The respondents employment was not terminated; neither was she dismissed. The NLRC further ruled that as a contractual employee, the respondent was bound by the stipulations in her contract of employment which, among others, was to maintain a performance rating of at least 3.0 as a condition for her continued employment. Since she failed to meet the said requirement, the petitioner was justified in not renewing her contract. The respondent filed a motion for reconsideration of the resolution, but on January 12, 1999, the NLRC resolved to deny the same. The Case Before the Court of Appeals Dissatisfied, the respondent filed a petition for certiorari under Rule 65 before the Court of Appeals, docketed as CA-G.R. SP No. 52149, for the reversal of the resolutions of the NLRC. On October 11, 1999, the appellate court rendered a decision reversing the decisions of the NLRC and the Labor Arbiter and granting the respondents petition. The CA ratiocinated that the bases upon which the NLRC and the Labor Arbiter founded their decisions were inappropriate because the CBA and the Minutes of the Meeting between the union and the management showed that the CBA did not cover contractual employees like the respondent. Thus, the seventeenth-month probationary period under the CBA did not apply to her. The CA ruled that under Article 280 of the Labor Code, regardless of the written and oral agreements between an employee and her employer, an employee shall be deemed to have attained regular status when engaged to perform activities which are necessary and desirable in the usual trade or business of the employer. Even casual employees shall be deemed

regular employees if they had rendered at least one year of service to the employer, whether broken or continuous. The CA noted that the respondent had been performing activities that were usually necessary and desirable to the petitioners business, and that she had rendered thirteen months of service. It concluded that the respondent had attained regular status and cannot, thus, be dismissed except for just cause and only after due hearing. The appellate court further declared that the task of the respondent was hardly specific or seasonal. The periods fixed in the contracts of employment executed by the respondent were designed by the petitioner to preclude the respondent from acquiring regular employment status. The strict application of the contract of employment against the respondent placed her at the mercy of the petitioner, whose employees crafted the said contract. According to the appellate court, the petitioners contention that the respondents employment on "as the need arises" basis was illogical. If such stance were sustained, the court ruled, then no employee would attain regular status even if employed by the petitioner for seventeen months or more. The CA held that the respondents sporadic absences upon which her dismissal was premised did not constitute valid justifiable grounds for the termination of her employment. The tribunal also ruled that a less punitive penalty would suffice for missteps such as absenteeism, especially considering that the respondent had performed satisfactorily for the past twelve months. The CA further held that, contrary to the ruling of the Labor Arbiter, the dialogues between the respondent and the line supervisor cannot be considered substantial compliance with the requirement of notice and investigation. Thus, the respondent was not only dismissed without justifiable cause; she was also deprived of her right to due process. The petitioner filed a motion for reconsideration of the decision but on January 26, 2000, the CA issued a resolution denying the same. The Case Before the Court The petitioner filed the instant petition and raised the following issues for the courts resolution: (a) whether or not the respondent was still a contractual employee of the petitioner as of June 4, 1993; (b) whether or not the petitioner dismissed the respondent from her employment; (c) if so, whether or not she was accorded the requisite notice and investigation prior to her dismissal; and, (d) whether or not the respondent is entitled to reinstatement and full payment of backwages as well as attorneys fees. On the first issue, the petitioner contends that the policy of hiring workers for a specific and limited period on an "as needed basis," as adopted by the petitioner, is not new; neither is it

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prohibited. In fact, according to the petitioner, the hiring of workers for a specific and limited period is a valid exercise of management prerogative. It does not necessarily follow that where the duties of the employee consist of activities usually necessary or desirable in the usual course of business of the employer, the parties are forbidden from agreeing on a period of time for the performance of such activities. Hence, there is nothing essentially contradictory between a definite period of employment and the nature of the employees duties. According to the petitioner, it had to resort to hiring contractual employees for definite periods because it is a semiconductor company and its business is cyclical in nature. Its operation, production rate and manpower requirements are dictated by the volume of business from its clients and the availability of the basic materials. It produces the products upon order of its clients and does not allow such products to be stockpiled. Peak loads due to cyclical demands increase the need for additional manpower for short duration. Thus, the petitioner often experiences short-term surges in labor requirements. The hiring of workers for a definite period to supplement the regular work force during the unpredictable peak loads was the most efficient, just and practical solution to the petitioners operating needs. The petitioner contends that the CA misapplied the law when it insisted that the respondent should be deemed a regular employee for having been employed for more than one year. The CA ignored the exception to this rule, that the parties to an employment contract may agree otherwise, particularly when the same is established by company policy or required by the nature of work to be performed. The employer has the prerogative to set reasonable standards to qualify for regular employment, as well as to set a reasonable period within which to determine such fitness for the job. According to the petitioner, the conclusion of the CA that the policy adopted by it was intended to circumvent the respondents security of tenure is witho ut basis. The petitioner merely exercised a right granted to it by law and, in the absence of any evidence of a wrongful act or omission, no wrongful intent may be attributed to it. Neither may the petitioner be penalized for agreeing to consider workers who have rendered more than seventeen months of service as regular employees, notwithstanding the fact that by the nature of its business, the petitioner may enter into specific limited contracts only for the duration of its clients peak demands. After all, the petitioner asserts, the union recognized the need to establish such training and probationary period for at least six months for a worker to qualify as a regular employee. Thus, under their CBA, the petitioner and the union agreed that contractual workers be hired as of December 31, 1992. The petitioner stresses that the operation of its business as a semiconductor company requires the use of highly technical equipment which, in turn, calls for certain special skills for their use. Consequently, the petitioner, in the exercise of its best technical and business

judgment, has set a standard of performance for workers as well as the level of skill, efficiency, competence and production which the workers must pass to qualify as a regular employee. In rating the performance of the worker, the following appraisal factors are considered by the respondent company as essential: (1) output (40%), (2) quality (30%), (3) attendance (15%), and (4) work attitude (15%). The rate of 3.0 was set as the passing grade. As testified to by the petitioners Head of Personnel Services, Ms. Cecilia C. Mallari: A workers efficiency and productivity can be established only after he has rendered service using Philips equipment over a period of time. A worker has to undergo training, during which time the worker is taught the manufacturing process and quality control. After instructions, the worker is subjected to written and oral examinations to determine his fitness to continue with the training. The orientation and initial training lasts from three to four weeks before the worker is assigned to a specific work station. Thereafter, the workers efficiency and skill are monitored. Among the factors considered (before a contractual employee becomes a regular employee) are output, quality, attendance, and work attitude, which includes cooperation, discipline, housekeeping and inter-office employee relationship. These 16 factors determine the workers efficiency and productivity. The Courts Ruling In ruling for the respondent, the appellate court applied Article 280 of the Labor Code of the Philippines, as amended, which reads: Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral argument of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. An employment shall be deemed to be casual if it is not covered by the preceding paragraph; Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular

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employee with respect to the activity in which he is employed and his employment shall continue while such activity exists. The appellate court held that, in light of the factual milieu, the respondent was already a regular employee on June 4, 1993. Thus: It is apparent from the factual circumstances of this case that the period of employment has been imposed to preclude acquisition of tenurial security by petitioner. It bears stressing that petitioners original contract of employment, dated May 8, 1992 to August 8, 1992, had been extended through several contracts one from October 13, 1992 to December 16, 1992, another from January 7, 1993 to April 4, 1993, and, lastly, from April 5, 1993 to June 4, 1993. The fact that the petitioner had rendered more than one year of service at the time of his (sic) dismissal only shows that she is performing an activity which is usually necessary and desirable in private respondents business o r trade. The work of petitioner is hardly "specific" or "seasonal." The petitioner is, therefore, a regular employee of private respondent, the provisions of their contract of employment notwithstanding. The private respondents prepared employment contrac ts placed 17 petitioner at the mercy of those who crafted the said contract. We agree with the appellate court. Article 280 of the Labor Code of the Philippines was emplaced in our statute books to prevent the circumvention by unscrupulous employers of the employees right to be secure in his tenure by indiscriminately and completely ruling out all written and oral agreements inconsistent with the concept of regular employment defined therein. The language of the law manifests the intent to protect the tenurial interest of the worker who may be denied the rights and benefits due a regular employee because of lopsided agreements with the economically powerful employer who can maneuver to keep an employee on a casual or temporary status 18 for as long as it is convenient to it. In tandem with Article 281 of the Labor Code, Article 280 was designed to put an end to the pernicious practice of making permanent casuals of our lowly employees by the simple expedient of extending to them temporary or probationary 19 appointments, ad infinitum. The two kinds of regular employees under the law are (1) those engaged to perform activities which are necessary or desirable in the usual business or trade of the employer; and (2) those casual employees who have rendered at least one year of service, whether continuous 20 or broken, with respect to the activities in which they are employed. The primary standard to determine a regular employment is the reasonable connection between the particular activity performed by the employee in relation to the business or trade of the employer. The test is

whether the former is usually necessary or desirable in the usual business or trade of the 21 employer. If the employee has been performing the job for at least one year, even if the performance is not continuous or merely intermittent, the law deems the repeated and continuing need for its performance as sufficient evidence of the necessity, if not indispensability of that activity to the business of the employer. Hence, the employment is also considered regular, but only with respect to such activity and while such activity 22 exists. The law does not provide the qualification that the employee must first be issued a regular appointment or must be declared as such before he can acquire a regular employee 23 status. In this case, the respondent was employed by the petitioner on May 8, 1992 as production operator. She was assigned to wirebuilding at the transistor division. There is no dispute that the work of the respondent was necessary or desirable in the business or trade of the 24 petitioner. She remained under the employ of the petitioner without any interruption since May 8, 1992 to June 4, 1993 or for one (1) year and twenty-eight (28) days. The original contract of employment had been extended or renewed for four times, to the same position, with the same chores. Such a continuing need for the services of the respondent is sufficient evidence of the necessity and indispensability of her services to the petitioners 25 business. By operation of law, then, the respondent had attained the regular status of her employment with the petitioner, and is thus entitled to security of tenure as provided for in Article 279 of the Labor Code which reads: Art. 279. 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. The respondents re-employment under contracts ranging from two to three months over a period of one year and twenty-eight days, with an express statement that she may be reassigned at the discretion of the petitioner and that her employment may be terminated at any time upon notice, was but a catch-all excuse to prevent her regularization. Such statement is contrary to the letter and spirit of Articles 279 and 280 of the Labor Code. We 26 reiterate our ruling in Romares v. NLRC: Succinctly put, in rehiring petitioner, employment contracts ranging from two (2) to three (3) months with an express statement that his temporary job/service as mason shall be terminated at the end of the said period or upon completion of the project was obtrusively a convenient subterfuge utilized to prevent his regularization. It was a

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clear circumvention of the employees right to security of tenure and to other benefits. It, likewise, evidenced bad faith on the part of PILMICO. The limited period specified in petitioners employment contract having been imposed precisely to circumvent the constitutional guarantee on security of tenure should, therefore, be struck down or disregarded as contrary to public policy or morals. To uphold the contractual arrangement between PILMICO and petitioner would, in effect, permit the former to avoid hiring permanent or regular employees by simply hiring them on a temporary or casual basis, thereby violating the employees security 27 of tenure in their jobs. Under Section 3, Article XVI of the Constitution, it is the policy of the State to assure the workers of security of tenure and free them from the bondage of uncertainty of tenure woven by some employers into their contracts of employment. The guarantee is an act of social justice. When a person has no property, his job may possibly be his only possession or means of livelihood and those of his dependents. When a person loses his job, his dependents suffer as well. The worker should therefor be protected and insulated against any 28 arbitrary deprivation of his job. We reject the petitioners general and catch-all submission that its policy for a specific and limited period on an "as the need arises" basis is not prohibited by law or abhorred by the Constitution; and that there is nothing essentially contradictory between a definite period of employment and the nature of the employees duties. The petitioners reliance on our ruling in Brent School, Inc. v. Zamora and reaffirmed in subsequent rulings is misplaced, precisely in light of the factual milieu of this case. In the Brent School, Inc. case, we ruled that the Labor Code does not outlaw employment contracts on fixed terms or for specific period. We also ruled that the decisive determinant in "term employment" should not be the activity that the employee is called upon to perform but the day certain agreed upon by the parties for the commencement and termination of their employment relationship. However, we also emphasized in the same case that where from the circumstances it is apparent that the periods have been imposed to preclude acquisition of tenurial security by the employee, they should be struck down or disregarded as contrary to public policy and morals. In the Romares v. NLRC case, we cited the criteria under which "term employment" cannot be said to be in circumvention of the law on security of tenure, namely: 1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without any force, duress, or improper pressure being brought to bear upon the employee and absent any other circumstances vitiating his consent; or
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2) It satisfactorily appears that the employer and the employee dealt with each other on more or less equal terms with no moral dominance exercised by the former or the 30 latter. None of these criteria has been met in this case. Indeed, in Pure Foods Corporation v. 31 NLRC, we sustained the private respondents averments therein, thus: [I]t could not be supposed that private respondents and all other so-called "casual" workers of [the petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract. Cannery workers are never on equal terms with their employers. Almost always, they agree to any terms of an employment contract just to get employed considering that it is difficult to find work given their ordinary qualifications. Their freedom to contract is empty and hollow because theirs is the freedom to starve if they refuse to work as casual or contractual workers. Indeed, to the unemployed, security of tenure has no value. It could not then be said that petitioner and private respondents "dealt with each other on more or less equal terms 32 with no moral dominance whatever being exercised by the former over the latter. We reject the petitioners submission that it resorted to hiring employees for fixed terms to augment or supplement its regular employment "for the duration of peak loads" during shortterm surges to respond to cyclical demands; hence, it may hire and retire workers on fixed terms, ad infinitum, depending upon the needs of its customers, domestic and international. Under the petitioners submission, any worker hired by it for fixed terms of months or years can never attain regular employment status. However, the petitioner, through Ms. Cecilia C. Mallari, the Head of Personnel Services of the petitioner, deposed that as agreed upon by the Philips Semiconductor (Phils.), Inc. Workers Union and the petitioner in their CBA, contractual employees hired before December 12, 1993 shall acquire regular employment status after seventeen (17) months of satisfactory service, continuous or broken: 5. Q: What was the response of Philips regular employees to your hiring of contractual workers in the event of peak loads? A: Philips regular rank -and-file employees, through their exclusive bargaining agent, the Philips Semiconductors (Phils.), Inc. Workers Union ("Union"), duly recognized the right of Philips, in its best business judgment, to hire contractual workers, and excluded these workers from the bargaining unit of regular rank-and-file employees. Thus, it is provided under the Collective Bargaining Agreement, dated May 16, 1993, between Philips and the Union that:

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ARTICLE I UNION RECOGNITION "Section 1. Employees Covered: The Company hereby recognizes the Union as the exclusive bargaining representative of the following regular employees in the Factory at Las Pias, Metro Manila: Janitors, Material Handlers, Store helpers, Packers, Operators, QA Inspectors, Technicians, Storekeepers, Production Controllers, Inventory Controllers, Draftsmen, Machinists, Sr. Technician, Sr. QA Inspectors, Controllers, Sr. Draftsmen, and Servicemen, except probationary and Casual/Contractual Employees, all of whom do not belong to the bargaining unit." A copy of the CBA, dated May 16, 1993, was attached as Annex "1" to Philips Position Paper, dated August 30, 1993. 6. Q: May a contractual employee become a regular employee of the Philips? A: Yes. Under the agreement, dated April 6, 1993, between the Union and Philips, contractual workers hired before 12 December 1993, who have rendered seventeen months of satisfactory service, whether continuous or broken, shall be given regular status. The service rendered by a contractual employee may be broken depending on production needs of Philips as explained earlier. A copy of the Minutes of the Meeting ("Minutes," for brevity), dated April 6, 1993, evidencing the agreement between Philips and the Union has been submitted as 33 Annex "2" of Philips Position Paper. In fine, under the CBA, the regularization of a contractual or even a casual employee is based solely on a satisfactory service of the employee/worker for seventeen (17) months and not on an "as needed basis" on the fluctuation of the customers demands for its products. The illogic of the petitioners incongruent submissions was exposed by the appellate court in its assailed decision, thus: The contention of private respondent that petitioner was employed on "as needed basis" because its operations and manpower requirements are dictated by the volume of business from its client and the availability of the basic materials, such that when the need ceases, private respondent, at its option, may terminate the contract, is certainly untenable. If such is the case, then we see no reason for private respondent to allow the contractual employees to attain their regular status after they rendered service for seventeen months. Indubitably, even after the lapse of seventeen months, the operation of private respondent would still be dependent on

the volume of business from its client and the availability of basic materials. The point is, the operation of every business establishment naturally depends on the law of supply and demand. It cannot be invoked as a reason why a person performing an activity, which is usually desirable and necessary in the usual business, should be placed in a wobbly status. In reiteration, the relation between capital and labor is not merely contractual. It is so impressed with public interest that labor contracts must yield to the common good. While at the start, petitioner was just a mere contractual employee, she became a regular employee as soon as she had completed one year of service. It is not difficult to see that to uphold the contractual arrangement between private respondent and petitioner would, in effect, be to permit employers to avoid the necessity of hiring regular or permanent employees. By hiring employees indefinitely on a temporary or casual status, employers deny their right to security of tenure. This is not sanctioned 34 by law. Even then, the petitioners reliance on the CBA is misplaced. For, as ratiocinated by the appellate court in its assailed decision: Obviously, it is the express mandate of the CBA not to include contractual employees within its coverage. Such being the case, we see no reason why an agreement between the representative union and private respondent, delaying the regularization of contractual employees, should bind petitioner as well as other contractual employees. Indeed, nothing could be more unjust than to exclude contractual employees from the benefits of the CBA on the premise that the same contains an exclusionary clause while at the same time invoke a collateral agreement entered into between the parties to the CBA to prevent a contractual employee from attaining the status of a regular employee. This cannot be allowed. The CBA, during its lifetime, constitutes the law between the parties. Such being the rule, the aforementioned CBA should be binding only upon private respondent and its regular employees who were duly represented by the bargaining union. The agreement embodied in the "Minutes of Meeting" between the representative union and private respondent, providing that contractual employees shall become regular employees only after seventeen months of employment, cannot bind petitioner. Such a provision runs contrary to law not only because contractual employees do not form part of the collective bargaining unit which entered into the CBA with private respondent but also because of the Labor Code provision on regularization. The law explicitly states that an employee who had rendered at least one year of service,

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whether such service is continuous or broken, shall be considered a regular employee. The period set by law is one year. The seventeen months provided by the "Minutes of Meeting" is obviously much longer. The principle is well settled that the law forms part of and is read into every contract without the need for the parties 35 expressly making reference to it. On the second and third issues, we agree with the appellate court that the respondent was dismissed by the petitioner without the requisite notice and without any formal investigation. Given the factual milieu in this case, the respondents dismissal from employment for incurring five (5) absences in April 1993, three (3) absences in May 1993 and four (4) absences in June 1993, even if true, is too harsh a penalty. We do agree that an employee may be dismissed for violation of reasonable regulations/rules promulgated by the employer. 36 However, we emphasized in PLDT v. NLRC that: Dismissal is the ultimate penalty that can be meted to an employee. Where a penalty less punitive would suffice, whatever missteps may have been committed by the worker ought not to be visited with a consequence so severe such as dismissal from employment. For, the Constitution guarantees the right of workers to "security of tenure." The misery and pain attendant to the loss of jobs then could be avoided if there be acceptance of the view that under certain circumstances of the case the 37 workers should not be deprived of their means of livelihood. Neither can the conferences purportedly held between the respondent and the line supervisor be deemed substantial compliance with the requirements of notice and investigation. We are in full accord with the following ratiocinations of the appellate court in its assailed decision: As to the alleged absences, we are convinced that the same do not constitute sufficient ground for dismissal. Dismissal is just too stern a penalty. No less than the Supreme Court mandates that where a penalty less punitive would suffice, whatever missteps may be committed by labor ought not to be visited with a consequence so severe. (Meracap v. International Ceramics Manufacturing Co., Inc., 92 SCRA 412 [1979]). Besides, the fact that petitioner was repeatedly given a contract shows that she was an efficient worker and, therefore, should be retained despite occasional lapses in attendance. Perfection cannot, after all, be demanded. (Azucena, The Labor Code, Vol. II, 1996 ed., [p.] 680) Finally, we are convinced that it is erroneous for the Commission to uphold the following findings of the Labor Arbiter, thus: "Those dialogues of the complainant with the Line Supervisor, substantially, stand for the notice and investigation required to comply with due process.

The complainant did not avail of the opportunity to explain her side to justify her shortcomings, especially, on absences. She cannot now complain about deprivation of due process." Of course, the power to dismiss is a formal prerogative of the employer. However, this is not without limitations. The employer is bound to exercise caution in terminating the services of his employees. Dismissals must not be arbitrary and capricious. Due process must be observed in dismissing an employee because it affects not only his position but also his means of livelihood. Employers should respect and protect the rights of their employees which include the right to labor. (Liberty Cotton Mills Workers Union v. Liberty Cotton Mills, Inc., 90 SCRA 391 [1979]) To rule that the mere dialogue between private respondent and petitioner sufficiently complied with the demands of due process is to disregard the strict mandate of the law. A conference is not a substitute for the actual observance of notice and hearing. (Pepsi Cola Bottling Co., Inc. v. National Labor Relations Commission, 210 SCRA 277 [1992]) The failure of private respondent to give petitioner the benefit of a hearing before she was dismissed constitutes an infringement on her constitutional right to due process of law and not to be denied the equal protection of the laws. The right of a person to his labor is deemed to be his property within the meaning of the constitutional guarantee. This is his means of livelihood. He cannot be deprived of his labor or work without due process of law. (Batangas Laguna Tayabas Bus Co. v. Court of Appeals, 71 SCRA 470 [1976]) All told, the court concludes that pet itioners dismissal is illegal because, first, she was dismissed in the absence of a just cause, and second, she was not afforded procedural due process. In pursuance of Article 279 of the Labor Code, we deem it proper to order the reinstatement of petitioner to her former job and the payment of her full backwages. Also, having been compelled to come to court to protect her 38 rights, we grant petitioners prayer for attorneys fees. IN LIGHT OF ALL THE FOREGOING, the assailed decision of the appellate court in CAG.R. SP No. 52149 is AFFIRMED. The petition at bar is DENIED. Costs against the petitioner. SO ORDERED.

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G.R. No. 149371. April 13, 2005 ABERDEEN COURT, INC., and RICHARD NG, Petitioners, vs.MATEO C. AGUSTIN JR., Respondents. AZCUNA, J.: This is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, assailing the Decision of the Court of Appeals in CAG.R. SP No. 60223, entitled "Mateo Agustin Jr. v. National Labor Relations Commission (First Division), Aberdeen Court, Inc. and Ricardo Ng," dated January 31, 2001, and the Resolution of August 10, 2001 denying the motion for reconsideration therein. On September 16, 1996, Aberdeen Court, Inc. (Aberdeen), one of the petitioners, employed Mateo C. Agustin (Agustin), herein respondent, for the purpose of trouble shooting the electrical problems in said petitioners establishment. Agustin was engaged on a six -month probationary basis. The employment contract provided, inter alia, that: Should my performance be considered unsatisfactory at any time by management during my probationary period, I understand and agree that the management can terminate my services 1 at any time, even before the termination of the agreed six-month period. On January 12 and 13, 1997 the personnel of Centigrade Industries, Inc. performed a reading of the exhaust air balancing at the fifth and sixth floors of Aberdeens premises. Petitioners claim that Agustin was placed in charge of the undertaking. On the other hand, Agustin asserts that Engr. Abad merely requested him to accompany the aforesaid personnel to show the location of the exhaust air outlet at the fifth and sixth floors of the premises. He avers that: The request of Engr. Abad is actually the responsibility of the companys mechanical engineers. Despite the fact that the request of Engr. Abad is not a part of his job since he is not a mechanical engineer and there were three (3) other mechanical engineers on duty in the company premises, petitioner [herein respondent], being a subordinate of Engr. Abad, obliged and accompanied the aforementioned personnel to the location. There were no other specific instructions from Engr. Abad to petitioner with respect to the conduct or actual reading to be made by the Centigrade personnel. It must be noted that the reading of exhaust air balancing is under the category of heating, ventilating and air conditioning (HVAC) which are within the realm of field of work of mechanical engineers. Being an electrical engineer, petitioner obviously has no knowledge of the procedure and the equipment used by mechanical engineers in the conduct of the 2 reading of the exhaust air balancing.

After the Centigrade personnel finished their job, they submitted their report to Agustin. Petitioners allege that Agustin accepted and signed the report, without verifying its correctness. Engineer Abad later checked the work of the Centigrade employees only to find 3 out that four rooms in the fifth floor and five rooms in the sixth floor were incorrectly done. In contrast, Agustin states that after the report was handed to him, he took the same to Engr. Abad, who he claims was responsible for evaluating and confirming the said report. Allegedly, instead of signing it himself, Engr. Abad directed respondent to sign it, giving the reason that Agustin was present when the reading was conducted. Respondent Agustin complied, but he now points out that his signature was not accompanied by any qualification that he accepted the report on behalf of Aberdeen. He claims that he signed merely to evidence that he 4 received a copy of the report. The parties also differ on the occurrences two days after the signing of the report or on January 15, 1997. According to petitioners, Aberdeen management confronted Agustin with his failure to check the job and asked him to explain his side. Agustin allegedly ignored management and left the company, which made it impossible for Aberdeen to transmit any 5 further notice to him. However, Agustin claims that: On January 15, 1997 or two days after the report was submitted by Centigrade Industries, petitioner [herein respondent] was summarily dismissed. In the afternoon of that day, he received a telephone call from the personnel office of respondent company ordering him to report to that office after his tour of duty. At about seven p.m. at the personnel office, Ms. Lani Carlos of the Personnel Department, informed him that Aberdeen Court is terminating his services as electrical engineer. Petitioner was flabbergasted. Ms. Carlos then informed him that he could get his two (2) weeks salary in the amount of P4,000, more or less, on the condition that he will sign some documents which provides that the company has no more liability and that he is voluntarily resigning from Aberdeen Court. Aware of his rights, petitioner did not sign the offered documents. He was then hurriedly led to the door by Ms. Carlos. The following day or on January 16, 1997, petitioner requested assistance from the Department of Labor and Employment (DOLE). A DOLE personnel told him to report for work since private respondents did not serve him a notice of termination. As instructed, petitioner reported for work on the same day. Upon arriving at the company premises, petitioner asked Ms. Carlos if he could still report for work but private respondents personnel officer told him 6 that he cannot do so. Within the same month of that year, respondent Agustin filed a complaint for illegal dismissal which was docketed as NLRC NCR Case No. 00-01-00466-97.

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In an undated decision, the labor arbiter rendered judgment in favor of herein respondent, declaring that Agustin was illegally dismissed, thus: WHEREFORE, judgment is hereby rendered: 1. Ordering respondent ABERDEEN COURT, INC. to reinstate to his former position without loss of seniority rights complainant MATEO C. AGUSTIN, JR. 2. Ordering respondent to pay to complainant backwages in the sum of PHP P175,933.33.
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and failure to do so will result in a finding that the dismissal was unfounded (Reformist Union of R.B. Liner, Inc. vs. National Labor Relations Commissions, 266 SCRA 713, 726). Our perusal of the record yielded no showing of satisfactory attempt on the part of the private respondents to prove the validity of the petitioners dismissal. It bears emphasizing that, to be lawful, the employees dismissal must comply with the following requirements (a) the dismissal must be for any of the causes provided in Article 292 of the Labor Code; and, (b) the employee must be given an opportunity to be heard and defend himself (Molato vs. National Labor Relations Commission, 266 SCRA 42, 45). The employer must first affirmatively show rationally adequate evidence that the dismissal was for a justifiable cause (Brahm Industries, Inc. vs. National Labor Relations Commission, 280 SCRA 828,838). It is our considered view that the private respondents did not succeed in discharging the aforesaid onus. Against the petitioners contention that exhaust air balancing is neither covered by his duties nor competence, there is no showing that the private respondents even attempted to prove the extent of the petitioners technical responsibilities. Even assuming that the task properly pertained to the petitioner, an employee where, as in the case at bench, the offense appears to be the first committed by the employee, was devoid of malice and, more importantly, was not his sole responsibility (Tumbiga vs. National Labor Relations Commission, 274 SCRA 338, 348). The fact that the petitioner was still in his probationary period of employment did not lessen the burden of proof the law imposes on the private respondents. Probationary employees are protected by the security of tenure provision of the Constitution and cannot, likewise, be removed from their position unless for cause (Pines City Educational Center vs. National Labor Relations Commission, 227 SCRA 655, 663). Article 281 of the Labor Code of the Philippines, as amended provides: Art. 281. Probationary employment. Probationary employment shall not exceed six (6) months from the date the employee started working unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. Aside from failing to show a just cause for the termination of the petitioners services, the private respondents appear not to have even deigned to show such reasonable standards the petitioners failure to measure up alongside which would have justified his dismissal from employment.

Petitioners appealed the decision to the National Labor Relations Commission (NLRC). On February 29, 2000, the NLRC reversed the decision of the Labor Arbiter and held that Agustin had not been illegally dismissed, disposing thus: WHEREFORE, for and on account of the reasons above-discussed, the decision appealed from is hereby reversed and set aside and a new one entered dismissing the complaint for 8 lack of merit. From the NLRC decision, Agustin filed a petition for certiorari under Rule 65 of the Rules of Court with the Court of Appeals. The appellate court ruled in favor of Agustin and reasoned thus: Constructive dismissal is defined as a quitting because continued employment is rendered impossible, unreasonable or unlikely, as an offer involving demotion in rank and a diminution in pay (Jarcia Machine Shop and Auto Supply, Inc. vs. National Labor Relations Commission, 266 SCRA 97, 108). As there is no showing in the record of any circumstance to support the proposition that the petitioner was constructively dismissed, the private respondents correctly point out the flaw in the first ground proffered by the petitioner in support of his petition. Be that as it may, the petitioners erroneous choice of terminology does not, to our mind, preclude a finding of illegal dismissal. Alongside the private respondents contention that it was the petitioner who unceremoniously quit his employment after being confronted with his negligence, greater stock m[a]y be taken of the petitioners imm ediate recourse for assistance from the Department of Labor and his subsequent filing of his complaint. The rule is settled that the immediate filing of a complaint for illegal dismissal is inconsistent with abandonment (Pampanga Sugar Development Company, Inc. vs. National Labor Relations Commission, 272 SCRA 737, 747) and, in such cases, the burden of proof to establish the validity of the dismissal of an employee lies on the employer (Gonpu Services Corporation vs. National Labor Relations Commission, 266 SCRA 657, 662). Rather than the employee who must prove its invalidity, it is the employer who should prove the validity of a dismissal. (Sanyo Travel Corporation vs. National Labor Relations Commission, 280 SCRA 129, 138)

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Neither did the private respondents successfully show their compliance with the second requirement for the validity of the termination of petitioners employment. Their contention that it was the latter who abandoned his job cannot be taken at face value in view of the fact that an employee who forthwith takes steps to protest his layoff cannot, by any logic, be said to have abandoned his work (Nazal vs. National Labor Relations Commission, 274 SCRA 350, 355). Even without the petitioners affirmative allegation that he returned to his workplace after being so advised at the Department of Labor and Employment, we find the dearth of any notice of termination sent to the petitioner or, at the very least, his address in the respondent corporations record derogatory of elementary requirements of due process. A valid dismissal presupposes not only the validity of its cause, but also the validity of the manner by which dismissal is done (Dela Cruz vs. National Labor Relations Commission, 277, SCRA 563, 573) and failure to prove the observance of due process as in the case at bench taints the dismissal (Aquinas School vs. Magnaye, 278 SCRA 602, 612). Having been illegally dismissed from employment, the petitioner is as initially ruled by the Labor Arbiter entitled to reinstatement and backwages in accordance with the Labor Code of the Philippines (Magcalas vs. National Labor Relations Commission, 269 SCRA 453, 9 470). The dispositive portion of the aforesaid Decision of the Court of Appeals, dated January 31, 2001, states: WHEREFORE, the instant petition is GRANTED and the assailed decision dated February 29, 2000 of the First Division of the National Labor Relations Commission is REVERSED and SET ASIDE. In lieu thereof, the undated decision of Labor Arbiter Celenito N. Daing rendered in NLRC NCR Case No. 00-01-00466-97 is REINSTATED. No 10 costs. Petitioners filed a motion for reconsideration dated February 20, 2001, which the Court of Appeals denied in its Resolution of August 10, 2001. Unsatisfied, petitioners filed the instant petition on August 29, 2001 and raised the following assignments of error: 1. THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN REVERSING THE DECISION OF THE NATIONAL LABOR RELATIONS COMMISSION (ANNEX "E") WHOSE FINDING OF FACTS ARE BY LAW ACCORDED DUE RESPECT AND EVEN FINALITY, AFFIRMING THAT OF THE LABOR ARBITER. SUCH REVERSAL OF THE COMMISSIONS DECISION IS BASED ON SPECULATION.

2. THE HONORABLE COURT OF APPEALS COMMITTED AN ERROR OF LAW IN NOT ENTERTAINING OR EVEN RESOLVING THE ISSUE POSED BY PETITIONERS THAT IT IS NOT FOR THE COURT TO REGULARIZE THE EMPLOYMENT OF A PROBATIONARY EMPLOYEE AND ASSUMING HIS DISMISSAL IS ILLEGAL HIS BACKWAGES SHOULD NOT GO BEYOND HIS PROBATIONARY EMPLOYMENT. 3. AND ASSUMING THE REINSTATEMENT OF RESPONDENT IS LEGAL, HIS BACKWAGES SHOULD NOT GO BEYOND ONE (1) MONTH FROM SUBMISSION FOR 11 DECISION (APRIL 30, 1997). Petitioners argue, as follows: It has been ruled that findings of fact of the NLRC, except where there is grave abuse of discretion committed by it, are conclusive on the Supreme Court. National Union of Workers in Hotels, Restaurants and Allied Industries vs. National Labor Relations Commissions, 287 SCRA 192. Factual findings of the quasi-judicial agencies like the National Labor Relations Commission, which have acquired expertise because their jurisdiction is confined to specific matters, are generally accorded not only respect but even finality. Suarez vs. National Labor Relations Commission, 293 SCRA 496. Findings of fact of quasi-judicial bodies, like the National Labor Relations Commission, are accorded with respect, even finality, if supported by substantial evidence. Travelaire & Tours 12 Corporation vs. National Labor Relations Commission, 294 SCRA 505. Petitioners also contend that the Court of Appeals has no legal right to regularize the employment of a probationary employee without assessing the employees performance. Petitioners claim that the Court of Appeals committed an error of law when it ordered the reinstatement of respondent beyond March 15, 1997, which is six (6) months from the time respondent commenced working. Petitioners contend that the reinstatement of Agustin 13 beyond that date resulted in regularizing his employment. Going further, petitioners quote the stipulation in the contract of probationary employment that respondent signed, earlier 14 adverted to. Petitioners, finally, raise Article 281 of the Labor Code which reads, as follows: Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with

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reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after a probationary period shall be considered a regular employee. It can be gleaned from Article 281 of the Labor Code that there are two grounds to legally terminate a probationary employee. It may be done either: a) for a just cause or b) when employee fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the start of the employment. Petitioners say that Agustin was terminated because he failed to qualify as a regular employee. Petitioners, however, allegedly did not show that respondent was apprised of these reasonable standards at the start of the employment. In Servidad v. NLRC et al., Court stated:
15

(c) The services of an employee who has been engaged on probationary basis may be terminated only for a just cause, when he fails to qualify as a regular employee in accordance with the reasonable standards prescribed by the employer. (d) In all cases of probationary employment, the employer shall make known to the employee the standards under which he will qualify as a regular employee at the time of his engagement. Where no standards are made known to the employee at that time, he shall be 17 deemed a regular employee. The above rule, however, should not be used to exculpate a probationary employee who acts in a manner contrary to basic knowledge and common sense, in regard to which there is no need to spell out a policy or standard to be met. This is what the NLRC found to be the fact in this case. Said the NLRC: It bears stressing that even if technically the reading of air exhaust balancing is not within the realm of expertise of the complainant, still it ought not to be missed that prudence and due diligence imposed upon him not to readily accept the report handed to him by the workers of Centigrade Industries. Required of the complainant was that he himself proceed to the work area, inquire from the workers as to any difficulties encountered, problems fixed and otherwise observe for himself the progress and/or condition/quality of the work performed. As it is, We find it hard to believe that complainant would just have been made to sign the report to signify his presence. By saying so, complainant is inadvertently degrading himself from an electrical engineer to a mere watchdog. It is in this regard that We concur with the respondents that by his omission, lack of concern and grasp of basic knowledge and common sense, complainant has shown himself to be undeserving of continued employment 18 from probationary employee to regular employee. Nevertheless, it appears that petitioners violated due process in the dismissal of respondent, by not affording him the required notice. As this Court held in Agabon, et al. v. NLRC, et 19 al., an employer who dismisses an employee for just cause but does so without notice, is liable for nominal damages in the amount of P30,000. WHEREFORE, the petition is partly GRANTED and the assailed Decision and Resolution of the Court of Appeals are MODIFIED in that respondent is declared dismissed for just cause but petitioners are ordered to pay him nominal damages in the amount of P30,000. No costs. SO ORDERED.

where effectively the probationary period was for one year, the

If the nature of the job did actually necessitate at least one year for the employee to acquire the requisite training and experience, still, the same could not be a valid probationary employment as it falls short of the requirement of Article 281 of the Labor Code. It was not brought to light that the petitioner was duly informed at the start of his employment, of the reasonable standards under which he could qualify as a regular employee. The rudiments of due process demand that an employee should be apprised beforehand of the conditions of his employment and the basis for his advancement. Similarly, in Secon Philippines Ltd. v. NLRC, the dismissal of the employee was declared illegal by the Court because the employer did not prove that the employee was properly apprised of the standards of the job at the time of his engagement and, naturally, the employer could not show that the employee failed to meet such standards. The Implementing Rules of the Labor Code in Book VI, Rule I, Section 6, also provides: Probationary employment. -- There is probationary employment where the employee, upon his engagement, is made to undergo a trial period during which the employer determines his fitness to qualify for regular employment, based on reasonable standards made known to him at the time of engagement. Probationary employment shall be governed by the following rules: ...
16

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G.R. No. 149440

January 28, 2003

HACIENDA FATIMA and/or PATRICIO VILLEGAS, ALFONSO VILLEGAS and CRISTINE SEGURA, petitioners, vs.NATIONAL FEDERATION OF SUGARCANE WORKERS-FOOD AND GENERAL TRADE, respondents.PANGANIBAN, J.: Although the employers have shown that respondents performed work that was seasonal in nature, they failed to prove that the latter worked only for the duration of one particular season. In fact, petitioners do not deny that these workers have served them for several years already. Hence, they are regular not seasonal employees. The Case Before the Court is a Petition for Review under Rule 45 of the Rules of Court, seeking to set 1 aside the February 20, 2001 Decision of the Court of Appeals (CA) in CA-GR SP No. 51033. The dispositive part of the Decision reads: "WHEREFORE, premises considered, the instant special civil action for certiorari is 2 hereby DENIED." On the other hand, the National Labor Relations 3 Decision, upheld by the CA, disposed in this wise: Commission (NLRC)

"Indeed, it would appear that respondents did not look with favor workers' having organized themselves into a union. Thus, when complainant union was certified as the collective bargaining representative in the certification elections, respondents under the pretext that the result was on appeal, refused to sit down with the union for the purpose of entering into a collective bargaining agreement. Moreover, the workers including complainants herein were not given work for more than one month. In protest, complainants staged a strike which was however settled upon the signing of a Memorandum of Agreement which stipulated among others that: 'a) The parties will initially meet for CBA negotiations on the 11th day of January 1991 and will endeavor to conclude the same within thirty (30) days. 'b) The management will give priority to the women workers who are members of the union in case work relative . . . or amount[ing] to gahit and [dipol] arises. 'c) Ariston Eruela Jr. will be given back his normal work load which is six (6) days in a week. 'd) The management will provide fifteen (15) wagons for the workers and that existing workforce prior to the actual strike will be given priority. However, in case the said workforce would not be enough, the management can hire additional workers to supplement them. 'e) The management will not anymore allow the scabs, numbering about eighteen (18) workers[,] to work in the hacienda; and 'f) The union will immediately lift the picket upon signing of this agreement.' "However, alleging that complainants failed to load the fifteen wagons, respondents reneged on its commitment to sit down and bargain collectively. Instead, respondent employed all means including the use of private armed guards to prevent the organizers from entering the premises. "Moreover, starting September 1991, respondents did not any more give work assignments to the complainants forcing the union to stage a strike on January 2, 1992. But due to the conciliation efforts by the DOLE, another Memorandum of Agreement was signed by the complainants and respondents which provides:

"WHEREFORE, premises considered, the decision of the Labor Arbiter is hereby SET ASIDE and VACATED and a new one entered declaring complainants to have been illegally dismissed. Respondents are hereby ORDERED to reinstate complainants except Luisa Rombo, Ramona Rombo, Bobong Abriga and Boboy Silva to their previous position and to pay full backwages from September 1991 until reinstated. Respondents being guilty of unfair labor practice are further ordered to pay complainant union the sum of P10,000.00 as moral damages and P5,000.00 as 4 exemplary damages." The Facts The facts are summarized in the NLRC Decision as follows: "Contrary to the findings of the Labor Arbiter that complainants [herein respondents] refused to work and/or were choosy in the kind of jobs they wanted to perform, the records is replete with complainants' persistence and dogged determination in going back to work.

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'Whereas the union staged a strike against management on January 2, 1992 grounded on the dismissal of the union officials and members; 'Whereas parties to the present dispute agree to settle the case amicably once and for all; 'Now therefore, in the interest of both labor and management, parties herein agree as follows: '1. That the list of the names of affected union members hereto attached and made part of this agreement shall be referred to the Hacienda payroll of 1990 and determine whether or not this concerned Union members are hacienda workers; '2. That in addition to the payroll of 1990 as reference, herein parties will use as guide the subjects of a Memorandum of Agreement entered into by and between the parties last January 4, 1990; '3. That herein parties can use other employment references in support of their respective claims whether or not any or all of the listed 36 union members are employees or hacienda workers or not as the case may be; '4. That in case conflict or disagreement arises in the determination of the status of the particular hacienda workers subject of this agreement herein parties further agree to submit the same to voluntary arbitration; '5. To effect the above, a Committee to be chaired by Rose Mengaling is hereby created to be composed of three representatives each and is given five working days starting Jan. 23, 1992 to resolve the status of the subject 36 hacienda workers. (Union representatives: Bernardo Torres, Martin Alasas, Ariston Arulea Jr.)" "Pursuant thereto, the parties subsequently met and the Minutes of the Conciliation Meeting showed as follows: 'The meeting started at 10:00 A.M. A list of employees was submitted by Atty. Tayko based on who received their 13th month pay. The following are deemed not considered employees: 1. Luisa Rombo 2. Ramona Rombo

3. Bobong Abrega 4. Boboy Silva 'The name Orencio Rombo shall be verified in the 1990 payroll. 'The following employees shall be reinstated immediately upon availability of work: 1. Jose Dagle 7. Alejandro Tejares 2. Rico Dagle 3. Ricardo Dagle 4. Jesus Silva 5. Fernando Silva 6. Ernesto Tejares 8. Gaudioso Rombo 9. Martin Alas-as Jr. 10. Cresensio Abrega 11. Ariston Eruela Sr. 12. Ariston Eruela Jr.'

"When respondents again reneged on its commitment; complainants filed the present complaint. "But for all their persistence, the risk they had to undergo in conducting a strike in the face of overwhelming odds, complainants in an ironic twist of fate now find themselves being accused of 'refusing to work and being choosy in the kind of work 5 they have to perform'." (Citations omitted) Ruling of the Court of Appeals The CA affirmed that while the work of respondents was seasonal in nature, they were considered to be merely on leave during the off-season and were therefore still employed by petitioners. Moreover, the workers enjoyed security of tenure. Any infringement upon this right was deemed by the CA to be tantamount to illegal dismissal. The appellate court found neither "rhyme nor reason in petitioner's argument that it was the workers themselves who refused to or were choosy in their work." As found by the NLRC, the record of this case is "replete with complainants' persistence and dogged determination in 6 going back to work." The CA likewise concurred with the NLRC's finding that petitioners were guilty of unfair labor practice.

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Hence this Petition. Issues

Contrary to petitioners' contention, the CA did not err when it held that respondents were regular employees. Article 280 of the Labor Code, as amended, states:

Petitioners raise the following issues for the Court's consideration: "A. Whether or not the Court of Appeals erred in holding that respondents, admittedly seasonal workers, were regular employees, contrary to the clear provisions of Article 280 of the Labor Code, which categorically state that seasonal employees are not covered by the definition of regular employees under paragraph 1, nor covered under paragraph 2 which refers exclusively to casual employees who have served for at least one year. "B. Whether or not the Court of Appeals erred in rejecting the ruling in Mercado, . . . and relying instead on rulings which are not directly applicable to the case at bench, viz, Philippine Tobacco, Bacolod-Murcia, and Gaco, . . . "C Whether or not the Court of Appeals committed grave abuse of discretion in upholding the NLRC's conclusion that private respondents were illegally dismissed, that petitioner[s were] guilty of unfair labor practice, and that the union be awarded 8 moral and exemplary damages." Consistent with the discussion in petitioners' Memorandum, we shall take up Items A and B as the first issue and Item C as the second. The Court's Ruling The Petition has no merit. First Issue: Regular Employment At the outset, we must stress that only errors of law are generally reviewed by this Court in 9 petitions for review on certiorari of CA decisions. Questions of fact are not 10 entertained. The Court is not a trier of facts and, in labor cases, this doctrine applies with 11 12 greater force. Factual questions are for labor tribunals to resolve. In the present case, these have already been threshed out by the NLRC. Its findings were affirmed by the appellate court. "Art. 280. Regular and Casual Employment. The provisions of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. "An employment shall be deemed to be casual if it is not covered by the preceding paragraph: Provided, That, any employee who has rendered at least one year of service, whether such service is continuous or broken, shall be considered a regular employee with respect to the activity in which he is employed and his employment shall continue while such activity exist." (Italics supplied) For respondents to be excluded from those classified as regular employees, it is not enough that they perform work or services that are seasonal in nature. They must have also been employed only for the duration of one season. The evidence proves the existence of the first, but not of the second, condition. The fact that respondents with the exception of Luisa Rombo, Ramona Rombo, Bobong Abriga and Boboy Silva repeatedly worked as sugarcane workers for petitioners for several years is not denied by the latter. Evidently, petitioners employed respondents for more than one season. Therefore, the general rule of regular employment is applicable. In Abasolo v. National Labor Relations Commission,
13

the Court issued this clarification:

"[T]he test of whether or not an employee is a regular employee has been laid down in De Leon v. NLRC, in which this Court held: "The primary standard, therefore, of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the former is usually necessary or desirable in the usual trade or business of the employer. The connection can be determined by considering the nature of the work performed and its relation to the scheme of the particular business or trade in its entirety. Also if the

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employee has been performing the job for at least a year, even if the performance is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists. xxx xxx xxx

Unfair Labor Practice The NLRC also found herein petitioners guilty of unfair labor practice. It ruled as follows: "Indeed, from respondents' refusal to bargain, to their acts of economic inducements resulting in the promotion of those who withdrew from the union, the use of armed guards to prevent the organizers to come in, and the dismissal of union officials and members, one cannot but conclude that respondents did not want a union in their 17 haciendaa clear interference in the right of the workers to self-organization." We uphold the CA's affirmation of the above findings. Indeed, factual findings of labor officials, who are deemed to have acquired expertise in matters within their respective jurisdictions, are generally accorded not only respect but even finality. Their findings are 18 binding on the Supreme Court. Verily, their conclusions are accorded great weight upon 19 appeal, especially when supported by substantial evidence. Consequently, the Court is not duty-bound to delve into the accuracy of their factual findings, in the absence of a clear 20 showing that these were arbitrary and bereft of any rational basis." The finding of unfair labor practice done in bad faith carries with it the sanction of moral and 21 exemplary damages." WHEREFORE, the Petition is hereby DENIED and the assailed Decision AFFIRMED. Costs against petitioners.SO ORDERED.

". . . [T]he fact that [respondents] do not work continuously for one whole year but only for the duration of the . . . season does not detract from considering them in regular employment since in a litany of cases this Court has already settled that seasonal workers who are called to work from time to time and are temporarily laid off during off-season are not separated from service in said period, but merely 14 considered on leave until re-employed." The CA did not err when it ruled that Mercado v. NLRC was not applicable to the case at bar. In the earlier case, the workers were required to perform phases of agricultural work for a definite period of time, after which their services would be available to any other farm owner. They were not hired regularly and repeatedly for the same phase/s of agricultural work, but on and off for any single phase thereof. On the other hand, herein respondents, having performed the same tasks for petitioners every season for several years, are considered the latter's regular employees for their respective tasks. Petitioners' eventual refusal to use their services even if they were ready, able and willing to perform their usual duties whenever these were available and hiring of other workers to perform the tasks originally assigned to respondents amounted to illegal dismissal of the latter. The Court finds no reason to disturb the CA's dismissal of what petitioners claim was their valid exercise of a management prerogative. The sudden changes in work assignments reeked of bad faith. These changes were implemented immediately after respondents had organized themselves into a union and started demanding collective bargaining. Those who were union members were effectively deprived of their jobs. Petitioners' move actually amounted to unjustified dismissal of respondents, in violation of the Labor Code. "Where there is no showing of clear, valid and legal cause for the termination of employment, the law considers the matter a case of illegal dismissal and the burden is on the employer to 16 prove that the termination was for a valid and authorized cause." In the case at bar, petitioners failed to prove any such cause for the dismissal of respondents who, as discussed above, are regular employees. Second Issue:
15

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G.R. No. 151378. March 28, 2005 JAKA FOOD PROCESSING CORPORATION, Petitioners, vs.DARWIN PACOT, ROBERT PAROHINOG, DAVID BISNAR, MARLON DOMINGO, RHOEL LESCANO and JONATHAN CAGABCAB, Respondents. GARCIA, J.: Assailed and sought to be set aside in this appeal by way of a petition for review on certiorari under rule 45 of the Rules of Court are the following issuances of the Court of Appeals in CAG.R. SP. No. 59847, to wit: 1. Decision dated 16 November 2001, reversing and setting aside an earlier decision of the National Labor Relations Commission (NLRC); and 2. Resolution dated 8 January 2002, denying petitioners motion for reconsideration. The material facts may be briefly stated, as follows: Respondents Darwin Pacot, Robert Parohinog, David Bisnar, Marlon Domingo, Rhoel Lescano and Jonathan Cagabcab were earlier hired by petitioner JAKA Foods Processing Corporation (JAKA, for short) until the latter terminated their employment on August 29, 1997 because the corporation was "in dire financial straits". It is not disputed, however, that the termination was effected without JAKA complying with the requirement under Article 283 of the Labor Code regarding the service of a written notice upon the employees and the Department of Labor and Employment at least one (1) month before the intended date of termination. In time, respondents separately filed with the regional Arbitration Branch of the National Labor Relations Commission (NLRC) complaints for illegal dismissal, underpayment of wages and nonpayment of service incentive leave and 13th month pay against JAKA and its HRD Manager, Rosana Castelo. After due proceedings, the Labor Arbiter rendered a decision declaring the termination illegal and ordering JAKA and its HRD Manager to reinstate respondents with full backwages, and separation pay if reinstatement is not possible. More specifically the decision dispositively reads: WHEREFORE, judgment is hereby rendered declaring as illegal the termination of complainants and ordering respondents to reinstate them to their positions with full backwages which as of July 30, 1998 have already amounted to P339,768.00. Respondents are also ordered to pay complainants the amount of P2,775.00 representing the unpaid
3 2 1

service incentive leave pay of Parohinog, Lescano and Cagabcab an the amount of P19,239.96 as payment for 1997 13th month pay as alluded in the above computation. If complainants could not be reinstated, respondents are ordered to pay them separation pay equivalent to one month salary for very (sic) year of service. SO ORDERED. Therefrom, JAKA went on appeal to the NLRC, which, in a decision dated August 30, 4 1999, affirmed in toto that of the Labor Arbiter. JAKA filed a motion for reconsideration. Acting thereon, the NLRC came out with another 5 decision dated January 28, 2000, this time modifying its earlier decision, thus: WHEREFORE, premises considered, the instant motion for reconsideration is hereby GRANTED and the challenged decision of this Commission [dated] 30 August 1999 and the decision of the Labor Arbiter xxx are hereby modified by reversing an setting aside the awards of backwages, service incentive leave pay. Each of the complainants-appellees shall be entitled to a separation pay equivalent to one month. In addition, respondents-appellants is (sic) ordered to pay each of the complainants-appellees the sum of P2,000.00 as indemnification for its failure to observe due process in effecting the retrenchment. SO ORDERED. Their motion for reconsideration having been denied by the NLRC in its resolution of April 28, 6 2000, respondents went to the Court of Appeals via a petition for certiorari, thereat docketed as CA-G.R. SP No. 59847. As stated at the outset hereof, the Court of Appeals, in a decision dated November 16, 2000, 7 applying the doctrine laid down by this Court in Serrano vs. NLRC, reversed and set aside the NLRCs decision of January 28, 2000, thus: WHEREFORE, the decision dated January 28, 2000 of the National Labor Relations Commission is REVERSEDand SET ASIDE and another one entered ordering respondent JAKA Foods Processing Corporation to pay petitioners separation pay equivalent to one (1) month salary, the proportionate 13th month pay and, in addition, full backwages from the time their employment was terminated on August 29, 1997 up to the time the Decision herein becomes final. SO ORDERED.

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This time, JAKA moved for a reconsideration but its motion was denied by the appellate court in its resolution of January 8, 2002. Hence, JAKAs present recourse, submitting, for our consideration, the following issues: "I. WHETHER OR NOT THE COURT OF APPEALS CORRECTLY AWARDED FULL BACKWAGES TO RESPONDENTS. II. WHETHER OR NOT THE ASSAILED DECISION CORRECTLY AWARDED SEPARATION PAY TO RESPONDENTS". As we see it, there is only one question that requires resolution, i.e. what are the legal implications of a situation where an employee is dismissed for cause but such dismissal was effected without the employers compliance with the notice requirement under the Labor Code. This, certainly, is not a case of first impression. In the very recent case of Agabon vs. 8 NLRC, we had the opportunity to resolve a similar question. Therein, we found that the employees committed a grave offense, i.e.,abandonment, which is a form of a neglect of duty which, in turn, is one of the just causes enumerated under Article 282 of the Labor Code. In said case, we upheld the validity of the dismissal despite non-compliance with the notice requirement of the Labor Code. However, we required the employer to pay the dismissed employees the amount of P30,000.00, representing nominal damages for non-compliance with statutory due process, thus: "Where the dismissal is for a 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, as ruled in Reta vs. National Labor Relations Commission. 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. xxx xxx xxx The violation of 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. Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at 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 fundamental right granted to the latter under the Labor Code and its Implementing Rules," (Emphasis supplied). The difference between Agabon and the instant case is that in the former, the dismissal was based on a just cause under Article 282 of the Labor Code while in the present case, respondents were dismissed due to retrenchment, which is one of the authorized causes under Article 283 of the same Code. At this point, we note that there are divergent implications of a dismissal for just cause under Article 282, on one hand, and a dismissal for authorized cause under Article 283, on the other. A dismissal for just cause under Article 282 implies that the employee concerned has committed, or is guilty of, some violation against the employer, i.e. the employee has committed some serious misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his duties. Thus, it can be said that the employee himself initiated the dismissal process. On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by the employers exercise of his management prerogative, i.e. when the employer opts to install labor saving devices, when he decides to cease business operations or when, as in this case, he undertakes to implement a retrenchment program. The clear-cut distinction between a dismissal for just cause under Article 282 and a dismissal for authorized cause under Article 283 is further reinforced by the fact that in the first, payment of separation pay, as a rule, is not required, while in the second, the law requires 9 payment of separation pay. For these reasons, there ought to be a difference in treatment when the ground for dismissal is one of the just causes under Article 282, and when based on one of the authorized causes under Article 283. Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction

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should be stiffer because the dismissal process was initiated by the employers exercise of his management prerogative. The records before us reveal that, indeed, JAKA was suffering from serious business losses at the time it terminated respondents employment. As aptly found by the NLRC: "A careful study of the evidence presented by the respondent-appellant corporation shows that the audited Financial Statement of the corporation for the periods 1996, 1997 and 1998 were submitted by the respondent-appellant corporation, The Statement of Income and Deficit found in the Audited Financial Statement of the respondent-appellant corporation clearly shows the following in 1996, the deficit of the respondent-appellant corporation was P188,218,419.00 or 94.11% of the stockholders [sic] equity which amounts to P200,000,000.00. In 1997 when the retrenchment program of respondent-appellant corporation was undertaken, the deficit ballooned to P247,222,569.00 or 123.61% of the stockholders equity, thus a capital deficiency or impairment of equity ensued. In 1998, the deficit grew to P355,794,897.00 or 177% of the stockholders equity. From 1996 to 1997, the deficit grew by more that (sic) 31% while in 1998 the deficit grew by more than 47%. The Statement of Income and Deficit of the respondent-appellant corporation to prove its alleged losses was prepared by an independent auditor, SGV & Co. It convincingly showed that the respondent-appellant corporation was in dire financial straits, which the complainants-appellees failed to dispute. The losses incurred by the respondent-appellant corporation are clearly substantial and sufficiently proven with clear and satisfactory evidence. Losses incurred were adequately shown with respondent-appellants audited financial statement. Having established the loss incurred by the respondent-appellant corporation, it necessarily necessarily (sic) follows that the ground in support of retrenchment existed at the time the complainants-appellees were terminated. We cannot therefore sustain the findings of the Labor Arbiter that the alleged losses of the respondent-appellant was [sic] not well substantiated by substantial proofs. It is therefore logical for the corporation to 10 implement a retrenchment program to prevent further losses." Noteworthy it is, moreover, to state that herein respondents did not assail the foregoing finding of the NLRC which, incidentally, was also affirmed by the Court of Appeals. It is, therefore, established that there was ground for respondents dismissal, i.e., retrenchment, which is one of the authorized causes enumerated under Article 283 of the Labor Code. Likewise, it is established that JAKA failed to comply with the notice requirement under the same Article. Considering the factual circumstances in the instant case and the above ratiocination, we, therefore, deem it proper to fix the indemnity at P50,000.00.

We likewise find the Court of Appeals to have been in error when it ordered JAKA to pay respondents separation pay equivalent to one (1) month salary for every year of service. This 11 is because in Reahs Corporation vs. NLRC, we made the following declaration: "The rule, therefore, is that in all cases of business closure or cessation of operation or undertaking of the employer, the affected employee is entitled to separation pay. This is consistent with the state policy of treating labor as a primary social economic force, affording full protection to its rights as well as its welfare. The exception is when the closure of business or cessation of operations is due to serious business losses or financial reverses; duly proved, in which case, the right of affected employees to separation pay is lost for obvious reasons. xxx". (Emphasis supplied) WHEREFORE, the instant petition is GRANTED. Accordingly, the assailed decision and resolution of the Court of Appeals respectively dated November 16, 2001 and January 8, 2002 are hereby SET ASIDE and a new one entered upholding the legality of the dismissal but ordering petitioner to pay each of the respondents the amount of P50,000.00, representing nominal damages for non-compliance with statutory due process. SO ORDERED.

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G.R. No. 153832. March 18, 2005 FILIPINAS PRE-FABRICATED BUILDING SYSTEMS (FILSYSTEMS), INC., and FELIPE A. 1 CRUZ JR.,Petitioners, vs.ROGER D. PUENTE, Respondent.PANGANIBAN, J.: Without a valid cause, the employment of project employees cannot be terminated prior to expiration. Otherwise, they shall be entitled to reinstatement with full back wages. However, if the project or work is completed during the pendency of the ensuing suit for illegal dismissal, the employees shall be entitled only to full back wages from the date of the termination of their employment until the actual completion of the project or work. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court, seeking to annul and 3 4 reverse the April 16, 2002 Decision and the May 30, 2002 Resolution of the Court of Appeals (CA) in CA-GR SP No. 66756. The assailed Decision disposed as follows: "WHEREFORE, premises considered, the petition is GRANTED and the decision dated May 18, 2001 and resolution dated June 29, 2001 of the NLRC are hereby annulled and set aside. [Petitioner] Filsystems, Inc. is hereby ordered to reinstate [respondent] immediately to his former position without loss of seniority and privileges with full back wages from the date of his dismissal until his actual reinstatement, plus 10% of the total monetary award as 5 attorneys fees." The assailed Resolution denied petitioners Motion for Reconsideration. The Facts The factual antecedents are summarized by the CA as follows: "[Respondent] avers that he started working with [Petitioner] Filsystems, Inc., a corporation engaged in construction business, on June 12, 1989; that he was initially hired by [petitioner] company as an installer; that he was later promoted to mobile crane operator and was stationed at the company premises at No. 69 Industria Road, Bagumbayan, Quezon City; that his work was not dependent on the completion or termination of any project; that since his work was not dependent on any project, his employment with the [petitioner-]company was continuous and without interruption for the past ten (10) years; that on October 1, 1999, he was dismissed from his employment allegedly because he was a project employee. He filed a pro forma complaint for illegal dismissal against the [petitioner] company on November 18, 1999.
2

"The [petitioner-]company however claims that complainant was hired as a project employee in the companys various projects; that his employment contracts sho wed that he was a project worker with specific project assignments; that after completion of each project assignment, his employment was likewise terminated and the same was correspondingly reported to the DOLE. "Labor Arbiter Veneranda C. Guerrero dismissed the complaint for lack of merit, ruling thus: WHEREFORE, premises considered, judgment is hereby rendered dismissing the complaint for illegal dismissal for lack of merit. [Petitioner] Filsystems, Inc. is hereby ordered to pay complainant Roger D. [F]uente the amount of FOUR THOUSAND TWO HUNDRED TWELVE PHILIPPINE PESOS (P4,212.00) representing his pro-rata 13th month pay for 1999, plus ten percent (10%) thereof as and for attorneys fees. SO ORDERED. "[Respondent] appealed. However, [the] National Labor Relations Commission (NLRC) 6 dismissed the same and the subsequent motion for reconsideration." Ruling of the Court of Appeals The Court of Appeals reversed the NLRC and the labor arbiter thus: "The employment contracts signed by petitioner Puente do not have the specified duration for each project contrary to the provision of Article 280 of the Labor Code, nor did petitioner work in the project sites, but had always been assigned at the company plant attending to the maintenance of all mobile cranes of the company, performing tasks vital and desirable in the 7 employers usual business for ten (10) continuous years." The CA concluded that respondent was a regular employee of petitioners. Hence, this Petition. The Issues In its Memorandum, petitioners raise the following issues for our consideration:
8

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"1. Whether or not the Court of Appeals erred and committed grave abuse of discretion in finding that: The employment contracts signed by private respondent Puente do not have the specified duration for each project contrary to the provision of Art. 280 of the Labor Code, nor did petitioner work in the project sites, but had always been assigned at the company plant attending to the maintenance of all mobile cranes of the company, performing tasks vital and desirable in the companys usual business for ten (10) continuous years. "2. Whether or not the Court a quo erred and committed grave abuse of discretion in finding that the private respondent is a regular employee and not a project employee? "3. Whether or not the Court a quo erred and committed grave abuse of discretion in giving due course to the private respondents petition for certiorari under Rule 65 of the 1997 Rules on Civil Procedure; and in annulling and setting aside the Decision dated May 18, 2001 and the Resolution dated June 29, 2001 of the NLRC? "4. Whether or not the Court a quo erred and committed grave abuse of discretion in ruling that the evidence submitted by the petitioners proving that there was retrenchment program implemented by the petitioner company, as a defense that the private respondents services was terminated due to absence if not lack of construction project contract, where he may be redeployed or reinstated? "5. Whether or not the Court a quo erred and committed grave abuse of discretion in ordering the reinstatement of the private respondent, with full back wages plus payment of 10% 9 attorneys fees?" In the main, the issues boil down to (1) whether Roger Puente is a project employee, and (2) whether he is entitled to reinstatement with full back wages. This Courts Ruling The Petition is partly meritorious. First Issue: Project Employee In general, the factual findings of the Court of Appeals are binding on the Supreme Court. One exception to this rule, however, is when the factual findings of the former are contrary to 10 those of the trial court (or the lower administrative body, as the case may be). The question of whether respondent is a regular or a project employee is essentially factual in nature; nonetheless, the Court is constrained to resolve it due to the incongruent findings of the NLRC and the CA.

The Labor Code defines regular, project and casual employees as follows: ART. 280. Regular and Casual Employment. - The provision of written agreement to the contrary notwithstanding and regardless of the oral agreement of the parties, an employment shall be deemed to be regular where the employee has been engaged to perform activities which are usually necessary or desirable in the usual business or trade of the employer, except where the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for the duration of the season. With particular reference to the construction industry, to which Petitioner Filsystems belongs, 11 Department (of Labor and Employment) Order No. 19, Series of 1993, states: 2.1 Classification of employees. The employees in the construction industry are generally categorized as a) project employees and b) non-project employees. Project employees are those employed in connection with a particular construction project or phase thereof and whose employment is co-terminous with each project or phase of the project to which they are assigned. xxxxxxxxx 2.2 Indicators of project employment. Either one or more of the following circumstances, among other, may be considered as indicators that an employee is a project employee. (a) The duration of the specific/identified undertaking for which the worker is engaged is reasonably determinable. (b) Such duration, as well as the specific work/service to be performed, is defined in an employment agreement and is made clear to the employee at the time of hiring. (c) The work/service performed by the employee is in connection with the particular project/undertaking for which he is engaged. (d) The employee, while not employed and awaiting engagement, is free to offer his services to any other employer. (e) The termination of his employment in the particular project/undertaking is reported to the Department of Labor and Employment (DOLE) Regional Office having jurisdiction over the

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workplace within 30 days following the date of his separation from work, using the prescribed form on employees terminations/dismissals/suspensions. (f) An undertaking in the employment contract by the employer to pay completion bonus to the project employee as practiced by most construction companies. The above-quoted provisions make it clear that a project employee is one whose "employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee or where the work or services to be performed is seasonal in nature and the employment is for 12 the duration of the season." In D.M. Consunji, Inc. v. NLRC, this Court has ruled that "the length of service of a project employee is not the controlling test of employment tenure but whether or not the employment has been fixed for a specific project or undertaking the completion or termination of which has been determined at the time of the engagement of the employee." In the present case, the contracts of employment of Puente attest to the fact that he was hired for specific projects. His employment was coterminous with the completion of the projects for which he had been hired. Those contracts expressly provided that his tenure of employment depended on the duration of any phase of the project or on the completion of the construction projects. Furthermore, petitioners regularly submitted to the labor department reports of the termination of services of project workers. Such compliance with the reportorial 14 requirement confirms that respondent was a project employee. With regard specifically to the last employment contract executed by the parties, a contract that respondent accepted on August 26, 1996, we find that he worked at the site of the World Finance Plaza project. That he did is amply proven by the Affidavit of Eduardo 15 Briagas, another employee who was also stationed at the World Finance Plaza project, as 16 well as by respondents Travel Trip Reports. Furthermore, respondents Complaint specified the address of Filsystems, as "69 INDUSTRIA ROAD, B.BAYAN Q.C.," but specified his place of work as "PROJECT TO PROJECT." These statements, coupled with the other pieces of evidence presented by petitioners, convinces the Court that -- contrary to the subsequent claims of respondent -- he performed his work at the project site, not at the companys premises. That his employment contract does not mention particular dates that establish the specific duration of the project does not preclude his classification as a project employee. This fact is clear from the provisions of Clause 3.3(a) of Department Order No. 19, which states:
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a) Project employees whose aggregate period of continuous employment in a construction company is at least one year shall be considered regular employees, in the absence of a "day certain" agreed upon by the parties for the termination of their relationship . Project employees who have become regular shall be entitled to separation pay. A "day" as used herein, is understood to be that which must necessarily come, although is may not be known exactly when. This means that where the final completion of a project or phase thereof is in fact determinable and the expected completion is made known to the employee, such project employee may not be considered regular, notwithstanding the oneyear duration of employment in the project or phase thereof or the one-year duration of two or more employments in the same project or phase of the object. (Italicization and emphasis supplied) Respondents employment contract provides as follows: "x x x employment, under this contract is good only for the duration of the project unless employees services is terminated due to completion of the phase of work/section of the project or piece of work to which employee is assigned: "We agree clearly that employment is on a Project to Project Basis and that upon termination of services there is no separation pay:
POSITION : Mobil Crane Operator PROJECT NAME : World Finance Plaza LOCATION : Meralco Ave., Ortigas Center, Pasig City ASSIGNMENT : Lifting & Hauling of Materials (Phase of Work/Piece of Work)"18

Evidently, although the employment contract did not state a particular date, it did specify that the termination of the parties employment relationship was to be on a "day certain" -- the day when the phase of work termed "Lifting & Hauling of Materials" for the "World Finance Plaza" project would be completed. Thus, respondent cannot be considered to have been a regular employee. He was a project employee. That he was employed with Petitioner Filsystems for ten years in various projects did not ipso facto make him a regular employee, considering that the definition of regular employment in Article 280 of the Labor Code makes a specific exception with respect to project employment.

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The mere rehiring of respondent on a project-to-project basis did not confer upon him regular 19 employment status. "The practice was dictated by the practical consideration that 20 experienced construction workers are more preferred." It did not change his status as a project employee. Second Issue: Reinstatement In termination cases, the burden of proving that an employee has been lawfully dismissed lies 21 with the employer. Thus, employers who hire project employees are mandated to state and, 22 once its veracity is challenged, to prove the actual basis for the latters dismissal. In the present case, petitioners claim that respondents services were terminated due to the 23 completion of the project. There is no allegation or proof, however, that the World Finance Plaza project -- or the phase of work therein to which respondent had been assigned -- was already completed by October 1, 1999, the date when he was dismissed. The inescapable presumption is that his services were terminated for no valid cause prior to the expiration of the period of his employment; hence, the termination was illegal. Reinstatement with full back wages, inclusive of allowances and other benefits or their monetary equivalents -- computed 24 from the date of his dismissal until his reinstatement -- is thus in order. However, if indeed the World Finance Plaza project has already been completed during the pendency of this suit, then respondent -- being a project employee -- can no longer be 25 reinstated. Instead, he shall entitled to the payment of his salary and other benefits 26 corresponding to the unexpired portion of his employment, specifically from the time of the termination of his employment on October 1, 1999, until the date of the completion of the World Finance Plaza project. WHEREFORE, the Petition is PARTLY GRANTED. Respondent Roger D. Puente is DECLARED to be a project employee, whose employment was terminated without any valid cause prior to its expiration and is thus entitled to reinstatement with full back wages. However, if reinstatement is no longer possible due to the completion of the World Finance Plaza project during the pendency of this case, Petitioner Filipinas Pre-Fabricated Building Systems (Filsystems), Inc. is ORDERED to PAY respondent the equivalent of his salaries and other employment benefits, computed from October 1, 1999, until the date of the projects actual completion. No costs. SO ORDERED.

G.R. No. 155279 October 11, 2005 MICRO SALES OPERATION NETWORK and WILLY BENDOL, Petitioners, vs.THE NATIONAL LABOR RELATIONS COMMISSION (SECOND DIVISION), LARRY HERMOSA, LEONARDO G. DE CASTRO and RAMIL BASINILLO, Respondents.QUISUMBING, J.: For review on certiorari are the Resolutions dated November 28, 2001 and September 3, 2002, respectively, of the Court of Appeals, in CA-G.R. SP No. 67755. The said Resolutions dismissed petitioners special civil action for certiorari against the National Labor Relations 2 3 Commission (NLRC) Resolution, which affirmed the Labor Arbiters Decision finding petitioners herein liable for illegal dismissal. The antecedent facts are as follows: Petitioner Micro Sales Operation Network ("company" for brevity) is a domestic corporation 4 engaged in local transportation of goods by land. Petitioner Willy Bendol was the companys operations manager at the time of the controversy. Private respondents Larry Hermosa, Leonardo de Castro, and Ramil Basinillo were employed by the company as driver, warehouseman, and helper, respectively. Hermosa was hired on November 17, 1997, de Castro on February 1, 1996, and Basinillo on February 4, 1998. Hermosa failed to promptly surrender the ignition key of the companys vehicle after discharging his duties. Such failure was allegedly contrary to the companys standard operating procedure. Thus, he was asked to explain within 24 hours why disciplinary action should not be meted on him. He explained that he kept the ignition key because the vehicle 5 was stalled when its battery broke down. Unsatisfied with Hermosas explanation, the company dismissed him on January 9, 1999. De Castro was suspected of firing a gun during the blessing of the companys warehou se on December 10, 1998. The next day, he was placed under preventive suspension and temporarily banned from entering the companys premises. He was also asked to explain within 24 hours why he should not be terminated. He explained that he had no knowledge of 6 the said incident. As his suspension was indefinite and he received no recall order from petitioners, he no longer reported for work. Basinillo alleged that sometime in September 1998, the companys security guard scolded him for not wearing the employee ID. On October 17, 1998, he was dismissed.
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Thus, on February 10, 1999, Hermosa, de Castro, and Basinillo collectively filed a 7 Complaint for illegal dismissal before the Regional Arbitration Branch No. IV, docketed as NLRC Case No. RAB-IV-2-10765-99-C. In his Decision dated February 21, 2000, Labor Arbiter Antonio R. Macam found that private respondents were illegally dismissed. The fallo of the decision reads: WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of all complainants herein illegal and ordering respondents to reinstate them to their former or equivalent positions and to pay them full backwages, plus ten percent (10%) attorneys fees, computed as follows:
LARRY HERMOSA From January 9, 1999 to Feb. 21, 2000 = 1 yr. 1 mo. & 12 days or 13.36 mos. P220.00 x 26 x 13.36 = P76,419.20 P76,419.20/12 = 6,368.27 P220.00 x 5 = 1,100.00 P83,887.47 ---------------LEONARDO DE CASTRO From Dec. 12, 1998 to Feb. 21, 2000 = 1 yr. 2 mos. & 9 days or 14.30 mos. P7,280.00 x 14.30 = P104,104.00 P104,104.00/12 = 8,675.33 P7,280.00/26 x 5 = 1,400.00 P114,179.33 ---------------RAMIL BASINILLO
8

From Oct. 17, 1998 to Feb. 21, 2000 = 1 yr., 4 mos. & 4 days or 16.13 mos. P200.00 x 26 x 16.13 = P83,876.00 P83,876.00/12 = 6,989.67 P200.00 x 5 = 1,000.00 P 91,865.67 ---------------- --------------Total Full Backwages = P289,932.47 Plus 10% Attorneys Fees = 28,993.25 --------------GRAND TOTAL = P318,925.72 SO ORDERED.9

On appeal, the NLRC affirmed the Labor Arbiters decision. It also denied petitioners motion for reconsideration. Undaunted, petitioners filed with the Court of Appeals a special civil action for certiorari. However, the appellate court dismissed the petition for being defective in form. It found that only the company signed the verification and certification on non-forum shopping. Petitioner Willy Bendol did not sign the same. Petitioners motion for reconsideration was denied. The appellate court reasoned that even if petitioner Willy Bendol was not impleaded as a real party in interest, records showed that he was impleaded as a co-respondent before the Labor Arbiter. Thus, the appellate court ruled, his failure to sign the verification and certification on non-forum shopping is a ground for the dismissal of the petition. Hence, the instant petition anchored on the following grounds: A. THE HONORABLE COURT OF APPEALS PLAINLY ERRED AND ACTED CONTRARY TO EXISTING LAW AND JURISPRUDENCE IN DISMISSING THE PETITION

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FOR CERTIORARI ON A MERE TECHNICALITY CONSIDERING THAT WILLY BENDOL WAS JOINED MERELY AS A NOMINAL PARTY TO THE PETITION. B. MORE IMPORTANTLY, JUSTICE WOULD BE BEST SERVED IF THE PETITION WAS GIVEN DUE COURSE CONSIDERING THAT THE PUBLIC RESPONDENT COMMISSION ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION WHEN IT AFFIRMED THE DECISION OF LABOR ARBITER MACAM CONSIDERING THAT: 1. THERE IS NO FACTUAL OR EVIDENTIARY BASIS TO SUPPORT THE FINDING OF ILLEGAL DISMISSAL. DUE PROCESS AND FAIR PLAY DICTATE THAT THE PUBLIC RESPONDENT COMMISSION POINT OUT THE PARTICULAR FACTUAL FINDING OF THE LABOR ARBITER WHICH JUSTIFIED THE FINDING OF ILLEGAL DISMISSAL. 2. THE PUBLIC RESPONDENT COMMISSION IGNORED THE FACT THAT THE LABOR ARBITERS FINDING OF ILLEGAL DISMISSAL RESTS ON PURE SPECULATION, CONJECTURE AND SURMISES. 3. PRIVATE RESPONDENT BASINILLO HIMSELF DENIED THAT HE WAS DISMISSED BY PETITIONERS. 4. THE ACTS OF HERMOSA CONSTITUTE WILLFUL DISOBEDIENCE JUSTIFYING HIS DISMISSAL. 5. THE HONORABLE COMMISSION COMPLETELY IGNORED THE FACT THAT PRIVATE RESPONDENTS SINGULAR CAUSE OF ACTION IS THAT FOR ILLEGAL DISMISSAL. THUS, THE LABOR ARBITERS AWARD OF SEPARATION PAY AND ATTORNEYS FEES 10 WAS UTTERLY WITHOUT BASIS. Petitioners insist Willy Bendol was impleaded merely because he was the immediate supervisor of private respondents. They argue that the real party in interest in this case is the company. In any case, petitioners point out that Bendol was no longer connected with the company when the special civil action for certiorari was filed. Private respondents, however, maintain that formal requirements must be strictly complied with. Thus, they posit, the Court of Appeals correctly dismissed the petition for failure of one of the petitioners to sign the verification and certification on non-forum shopping. Further, petitioners contend that Hermosas omission constituted willful disobedience justifying his dismissal. With respect to de Castro, petitioners claim that he was merely

suspended. As for Basinillo, petitioners point to an unsworn statement, filing any complaint for illegal dismissal against the company.

11

where he denied

Private respondents, however, counter that petitioners failed to prove willful disobedience as a just cause for Hermosas termination. Moreover, they posit that de Castros preventive suspension constituted constructive dismissal because it was for an indefinite period and no recall order was issued by the company. Private respondents also argue that Basinillos purported unsworn statement has no probative value. Lastly, petitioners contend the Labor Arbiter erroneously awarded separation pay and attorneys fees not prayed for. On this point, private respondents quickly point out that, contrary to petitioners claim, separation pay was not awarded at all. They also claim that the award of attorneys fees was in accordance with law. We resolve to give due course to the petition. The requirement regarding verification of a pleading is not jurisdictional. Such requirement is simply a condition affecting the form of the pleading, non-compliance with which does not 12 necessarily render the pleading fatally defective. The Court of Appeals relied on Loquias v. Office of the Ombudsman, which held that a certification on non-forum shopping signed by only one of two or more petitioners is defective, unless he was duly authorized by his co-petitioner. However, the said ruling applies when the co-parties are being sued in their individual capacities. Note that the petitioners 14 in Loquias are the mayor, vice-mayor, and three members of the municipal board of San Miguel, Zamboanga del Sur. The said co-parties were charged with violation of Republic Act 15 No. 3019 in their various capacities. In the instant case, the petitioners are the company and its operations manager, Willy Bendol. The latter was impleaded simply because he was a co-respondent in the illegal dismissal complaint. He has no interest in this case separate and distinct from the company, which was the direct employer of private respondents. Any award of reinstatement, backwages, and attorneys fees in favor of private respondents will be enforced against the company as the real party in interest in an illegal dismissal case. Petitioner Bendol is clearly a mere nominal party in the case. His failure to sign the verification and certification on nonforum shopping is not a ground for the dismissal of the petition. The appellate court erred in dismissing outright petitioners special civil action for certiorari solely on that ground. The logical course of action now is to direct the Court of Appeals to give due course to the special civil action for certiorari. However, to obviate further delay in the resolution of this case, we shall bring the present controversy to rest.
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After weighing the parties arguments and carefully reviewing the records of this case, we agree with the findings and conclusions of the Labor Arbiter as affirmed by the NLRC. Hermosa was unjustly dismissed. For willful disobedience to be a valid cause for dismissal, the following twin elements must concur: (1) the employee's assailed conduct must have been willful, that is, characterized by a wrongful and perverse attitude; and (2) the order violated must have been reasonable, lawful, made known to the employee and must pertain 16 to the duties which he had been engaged to discharge. Both elements are lacking. We find no hint of perverse attitude in Hermosas written 17 explanation. On the contrary, it appears that the alleged company procedure for leaving the ignition key of the companys vehicles within office premises was not even made known to 18 him. Petitioners failed to prove Hermosa willfully disobeyed the said company procedure. At any rate, dismissal was too harsh a penalty for the omission imputed to him. De Castro was likewise unlawfully terminated. Contrary to petitioners claim, records show that de Castro was not merely suspended. He was dismissed for alleged abandonment of 19 work. To constitute abandonment as a just cause for dismissal, there must be: (a) absence without justifiable reason; and (b) a clear intention, as manifested by some overt act, to sever 20 the employer-employee relationship. Petitioners failed to prove that de Castro abandoned his job. A clear intention to end the employer-employee relationship is missing. He did not report for work simply because he was indefinitely suspended. Moreover, the fact that de Castro filed a case for illegal dismissal 21 against petitioners belies abandonment. In the case of Basinillo, petitioners rely solely on his purported unsworn statement alleging he was never dismissed. However, not having been sworn to, the said document has no probative value. While the Court is liberal in the conduct of proceedings for labor cases, proof 22 of authenticity as a condition for the admission of documents is nonetheless required. Petitioners failed to present evidence of Basinillos continuous contribution to SSS or uninterrupted pay slips to prove he remained under the companys employ. Hence, the 23 complaint for illegal dismissal filed by Basinillo stands and speaks for itself. Once a case for illegal dismissal is filed, the burden is on the employer to prove that the termination was for 24 valid cause. Petitioners failed to discharge this burden persuasively. Finally, petitioners lament that the Labor Arbiter erred in granting respondents separation pay and attorneys fees. We note, however, that separation pay was not awarded at all; thus, any discussion on this matter would be futile. On the other hand, the award of attorneys fees, 25 though not prayed for, is sanctioned by law and must be upheld.

WHEREFORE, the assailed Resolutions dated November 28, 2001 and September 3, 2002, respectively, of the Court of Appeals, in CA-G.R. SP No. 67755, are SET ASIDE. The NLRC Resolution affirming the Labor Arbiters Decision, finding petitioners liable for illegal dismissal, is AFFIRMED. Costs against petitioners. SO ORDERED.

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G.R. No. 159293 December 16, 2005 VETERANS SECURITY AGENCY, INC. and JESUS R. VARGAS, Petitioners, vs.FELIPE GONZALVO, JR., Respondent. CHICO-NAZARIO, J.: In this petition for review, petitioner VETERANS SECURITY AGENCY, INC. (VSAI), represented by its Executive Vice-President and General Manager, JESUS R. VARGAS, 1 challenges the Decision dated 27 January 2003 of the Court of Appeals in CA-G.R. SP No. 67043, affirming the Decision of the National Labor Relations Commission (NLRC). The NLRC reversed the Decision of the Labor Arbiter and declared respondent to have been 2 illegally dismissed. VSAI likewise implores this Court to take a look at the Resolution dated 19 June 2003 of the Court of Appeals denying their motion for reconsideration. The evidence shows that VSAI hired respondent as a security guard, with initial assignment at Overseas Workers Welfare Administration (OWWA) collection unit at the Philippines Overseas Employment Agency building in Ortigas, Pasig City from July 1991 to October 1992. His next tour of duty was at the Citytrust Bank from 20 November 1992 to 31 December 1992. He was then detailed at the National Power Corporation in Plaridel, Bulacan from January 1993 to January 1994. In February 1994 to April 1995, he was deployed at the University of Santo Tomas. Meanwhile, on 24 April 1995, respondent brought his complaint against VSAI before the Social Security System (SSS) for non-remittance of SSS contributions. As a result, petitioners formally remitted his contributions to the SSS. In May 1995, respondent was transferred to the OWWAs main office in Pasig City. On 26 August 1998, VSAI again failed to remit to the SSS his contributions and loan payments prompting respondent to file another complaint against VSAI before the SSS for non-remittance of contributions and loan payments. As a result, the OWWA Detachment Commander intimated to respondent that VSAI was annoyed by the fact that he had commenced the said action against it. Thereafter, VSAI hired three (3) additional guards for the OWWA parking lot located at San Luis Street, Pasay City. In a meeting sometime in December 1998, OWWAs Chief of Services and Property Division announced that the lease contract for said parking lot was to expire on 07 January 1999 and the three newly-hired guards posted there would have to report to VSAIs office.

On 30 December 1998, respondent, who was then manning the OWWA main office, was made to swap postings with one of these three guards manning the OWWA parking lot. This came as a surprise to respondent because such swapping would be to his disadvantage as he would have to give up his post at the OWWA main office where he was serving for almost three (3) years to give way to one of the newly-hired security guards who would soon be displaced from the OWWA parking lot as a result of the expiration of the lease contract for said property. Resultantly, on 7 January 1999, upon the expiration of the lease contract on the parking lot, the services of the guards temporarily assigned there were withdrawn, including that of respondent. The next day, when respondent reported for work at the OWWA Detachment Commander, he was told that he would have to be assigned somewhere else because his spouse was also assigned as a lady guard at the OWWA. This came as an utter surprise to the respondent who was single at that time. VSAI informed respondent that his redeployment would be at the Department of Labor and Employment (DOLE). When respondent reported to the DOLE Detachment Commander, he was required to renew his Barangay, police and National Bureau of Investigation (NBI) clearances and to undergo neurological examination. Respondent requested petitioners to assign him at either the OWWA Office in Intramuros, Manila or at the OWWA Collection Unit located in Pasig City, so he need not reapply and renew his employment requirements, but was denied. From then on, respondent was placed on a "floating status" sans pay. Consequently, on 14 April 1999, respondent filed a complaint against petitioner VSAI and its President, Alfredo Vargas, Jr., for overtime pay, premium for holiday and rest day, holiday pay, service incentive leave pay, thirteenth (13th) month pay and non-remittance of SSS 3 contribution starting January 1999. Respondent alleged, in his Position Paper, that he was terminated by VSAI to hit back at him for his filing of two (2) complaints against the company 4 for non-remittances of his contributions and loan payments with the SSS. On 29 September 1999, respondent filed an additional complaint for illegal dismissal with 5 claims for separation pay and attorneys fees. In its Position Paper, VSAI retorted that on 07 January 1999, it received a memorandum from Rafael C. Velez, Officer-in-Charge of the Administrative Department of OWWA, stating that OWWAs lease contract covering the parking area had expired for which reason the services of the three (3) guards, including respondent, had to be withdrawn. On 8 January 1999, respondent was given a posting assignment at the DOLE in lieu of his OWWA assignment, but was required to undergo an interview as well as neurological examination before final posting. Respondent did not report to work thereafter, although VSAI sent no less than three (3) memoranda for him to report for work. In its Position Paper, VSAI averred that it would

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submit copies of the payrolls for the pertinent periods to the Labor Arbiter to show that respondent had been paid in accordance with existing labor laws. However, these were never submitted. On 08 February 2000, the Labor Arbiter dismissed the complaint for lack of merit. The NLRC reversed the decision of the Labor Arbiter in a Decision dated 24 April 2001, with the following fallo: WHEREFORE, the assailed decision is hereby REVERSED and SET ASIDE and a new one entered declaring complainant-appellants dismissal as illegal and ordering respondentappellee to pay him his separation pays equivalent to one-month salary per year of service and his money claims of night shift differential pay, service incentive leave, legal holiday pay, overtime pay, computed three years backward, as follows: 1.) Separation P198 x 26 days x 7 yrs. P36,036.00 2.) Salary differential from Jan. 8, 1996 to Jan. 8, 1999 = 3 yrs. - From Jan. 8, 1996 to Feb.1, 1996 = 76 mos. P8,335.05- 4,350 (P145.00 x 30 days) = P3,985.05 x .70 mos. P 3,028.64 -From Feb.2, 1996 to Apr. 30, 1996 = 3 mos. P9,254.76 4,830 (161.00 x 30 days) = P4,424.76 x 3 mos. 13,274.28 -May 1, 1996 to Feb. 5, 1997 = 9.2 mos P9,484.71 4,950 (165.00 x 30 days) = P4,946.95 x 2.8 mos. 41,719.33 -Feb.6, 1997 to April 30, 1997 = 2.8 mos P10,346.95 5,400 (180.00 x 30 days) = P4,946.95 x 2.8 mos. 13,851.46 -May 1, 1997 to Feb. 5, 1998 = 9.2 mos P10,634.375,550 (180.00 x 30 days)= P4,946.95 x 2.8 mos. 46,776.20

-Feb. 6, 1998 to Jan. 8,1999 = 11.06 mos P11,381.655,940 (P198.00 x 30 days)= P5,441.65 x 11.06 mos. 60,184.65 Total P178,834.56. GRAND TOTAL P214,870.56
6

On 27 January 2003, the Court of Appeals affirmed the ruling of the NLRC. VSAIs motion for 7 reconsideration was denied by the Court of Appeals in the Resolution of 19 June 2003. Hard done by the said ruling, petitioner now comes to this Court as a final recourse via the instant appeal assailing the Decision and Resolution of the Court of Appeals on the following assignment of errors: I. the HONORABLE COURT OF APPEALS COMMITTED SERIOUS AND REVERSIBLE ERROR WHEN IT HELD THAT THE RESPONDENT WAS ILLEGALLY DISMISSED DESPITE A JUDICIAL ADMISSION BY RESPONDENT THAT HE WAS OFFERED SENTINEL DUTY IMMEDIATELY AFTER HIS RECALL FROM HIS POSTING ASSIGNMENT AT THE PREMISES OF OVERSEAS WORKERS WELFARE ADMINISTRATION, (OWWA). II. the honorable court of appeals committed serious and reversible error when it sustained the award by the national labor relations commission (NLRC), OF OVERTIME PAY TO THE RESPONDENT DESPITE A FINDING BY THE NLRC THAT THERE WAS NO IOTA OF EVIDENCE TO SATISFY THE BURDEN OF PROOF REQUIRED TO SUPPORT THE 8 MONEY CLAIM. The issue of whether or not respondent was constructively dismissed is the bedrock of the petition. Related to this is the issue of whether or not respondent had abandoned his job. VSAI ardently claims that there was no dismissal, constructive or otherwise. VSAI claims that respondent abandoned his post and went on Absence Without Leave. The evidence, however, points to a different direction. Constructive dismissal exist when an act of clear discrimination, insensibility or disdain on the part of the employer has become so unbearable as to leave an employee with no choice but 9 to forego continued employment. On the other hand, abandonment, as a just and valid cause for termination, requires a deliberate and unjustified refusal of an employee to resume

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his work, coupled with a clear absence of any intention of returning to his or her work. 10 Abandonment is incompatible with constructive dismissal. We find the absence of abandonment, in this case, as there was no deliberate intent on the part of the respondent to abandon his employment with VSAI. A strong indication of the intention of respondent to resume work is that on several dates, after his last assignment on January 1999, he reported to the VSAIs office regularly for reassignment, but was not given any. He then lost no time in filing the illegal dismissal case. An employee who forthwith takes steps to protest his layoff cannot by any stretch of imagination be said to have abandoned his work and the filing of the complaint is proof enough og his desire to return to work, thus 11 negating any suggestion of abandonment. Significantly, respondent, in his position 12 paper, prayed for a regular assignment or in the alternative VSAI should be ordered to pay salaries until the time he is gainfully employed. Respondents entreaty to be given a regular posting is antithetical to a charge of abandonment. Moreover, the burden of proving that respondent has abandoned his job rests with VSAI. However, VSAI failed miserably to discharge the burden. VSAI adduced in evidence three memos allegedly sent via registered mail to respondent, but as the NLRC and the Court of Appeals ruled, the evidentiary value of these documents is of dubious authenticity as the memos had not been properly identified and were only attached belatedly to the 13 petition. Moreover, we note that there was no registry return card for these memos so there is no way of telling who received these memos, if they were received at all by respondent. What is more, the three memos appear to be exact copies of each other except for the signatories and the dates and the way the addressees were written. The three memos commonly stated, viz: Re: Directive To Report to VSAI Operations Center For Re-Assignment Pursuant to the Standing Policy of our Agency to give priority assignment to security guards who have been relieved from their post of assignment and who are on a floating status, you are hereby directed to report soonest to the VSAI Personnel Office at the above address for re-assignment. Failure to comply will be tantamount to your non-interest for re-assignment and will constitute a waiver on your part of your rights under the circumstances.

Please acknowledge receipt hereof by affixing your signature over your printed name on the 14 space provided hereunder. (Emphasis supplied.) This similarity in form and substance of the memos engenders the impression that they were just pro-forma letters aimed at making it appear that VSAI have not dismissed respondent and that on three occasions it had asked respondent to report for work, but which notices the latter refused to heed. Further, it baffles the Court that the second memorandum did not mention about the previous memorandum sent to respondent. Neither did the third memorandum mention anything about the two previous memos. We find it equally implausible that none of the 3 memos touched on respondents alleged refusal to accept the posts assigned to him and the abandonment of his posts considering that such acts constitute willful disobedience and gross neglect of duty which are valid 15 grounds for dismissal. VSAI capitalized on the fact that on 7 January 1999, it received a memorandum from the Officer-in-Charge of the Administrative Department of OWWA, informing that OW WAs lease contract covering the parking area had expired for which reason the services of the three (3) guards, including respondent, had to be withdrawn. The uncontroverted fact, however, is that respondent was already previously regularly detailed at the OWWA main office, but he was uprooted from this assignment and was tossed at the OWWA parking lot in Pasay City with the knowledge that the security services in that area would soon expire, as a consequence of which he would have to be reassigned somewhere else. As the facts stand, reassignment to a new client, in this case, necessitates a renewal of Barangay clearance, training certificate, neurological test, and ultimately passing the interview by the client. In effect, he would reapply with the next client of VSAI, which is the DOLE, and in the process of application, be on "floating status" without pay, with no assurance of acceptance despite securing the said documents as he would still have to undergo the rigors of an interview. Indeed, respondent was then left uncertain as to when and where his next assignment would be. There is likewise something devious with the fact that a new recruit replaced respondent from his previous posting at OWWA main office relegating respondent to a short-lived posting at the OWWA Pasay City parking lot that would soon fold-up. VSAI further contends that respondent was only provisionally relieved from his last post and not dismissed from employment. Hence, the filing of the illegal dismissal case in April 1999 was premature. If at all, it is argued that respondent should be considered on temporary "offdetail" status. In Superstar Security Agency, Inc. vs. NLRC, we held that placing an employee on temporary "off-detail" is not equivalent to dismissal provided that such temporary inactivity
16

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should continue only for a period of six (6) months. Otherwise, the security agency concerned could be held liable for constructive dismissal under Article 286 of the Labor Code which reads: Art. 286. When employment not deemed terminated.The bona fide suspension of the operation of a business or undertaking for a period not exceeding six (6) months , or the fulfillment by the employee of a military or civic duty shall not terminate employment. In all such cases, the employer shall reinstate the employee to his former position without loss of seniority rights if he indicates his desire to resume his work not later than one (1) month from the resumption of operations of his employer or from his relief from the military or civic duty. (Emphasis supplied.) Article 286 applies only when there is a bona fide suspension of the employers operation of a business or undertaking for a period not exceeding six (6) months. In security agency parlance, being placed "off detail" or on "floating" status means "waiting to be 17 posted." Here, prior to his tour of duty in Pasay City, respondent had a regular posting, but he was dislodged by a newly-hired security guard and respondent had to be assigned to a client whose service contract was to end. Thus, there was no suspension of operation, business or undertaking,bona fide or not, that would have justified placing the respondent off18 detail and making him wait for a period of more than six months. In the same vein, the records are shorn of any indication that respondent had to be placed on temporary "off-detail" for lack of available post. VSAI just stopped giving respondent his assignment after his duty at the OWWA Parking Lot in Pasay City. True, it is the inherent prerogative of an employer to transfer and reassign its employees to meet the requirements of its business. Be that as it may, the prerogative of the management to transfer its employees must be exercised without grave abuse of discretion. The exercise of the prerogative should not defeat an employee's right to security of tenure. The employers privilege to transfer its employees to different workstations cannot be used as a subterfuge to 19 rid itself of an undesirable worker. Here, riled by respondents consecutive filing of complaint against it for nonpayment of SSS contributions, VSAI had been tossing respondent to different stations thereafter. From his assignment at University of Santo Tomas for almost a year, he was assigned at the OWWA main Office in Pasig where he served for more than three years. After three years at the OWWA main office, he was transferred to the OWWA Pasay City parking lot knowing that the security services will end forthwith. VSAI even concocted the reason that he had to be assigned somewhere because his spouse was already a lady guard assigned at the OWWA main office. Inasmuch as respondent was single at that time, this was obviously a mere faade to rid of respondent who was no longer in VSAIs good graces.

The only logical conclusion from the foregoing discussion is that the VSAI constructively dismissed the respondent. This ruling is in rhyme with the findings of the Court of Appeals and the NLRC. Dismissal is the ultimate penalty that can be meted to an employee. Inasmuch as petitioners failed to adduce clear and convincing evidence to support the legality of respondents dismissal, the latter is entitled to reinstatement and back wages as a necessary consequence. However, reinstatement is no longer feasible in this case because 20 of the palpable strained relations, thus, separation pay is awarded in lieu of reinstatement. Anent monetary claims, VSAI ardently argues that such demands must be denied for failure of respondent to adduce evidence thereon. Such logic could not withstand judicial muster. On this, the Court could not be any clearer in Mayon Hotel & Restaurant vs. Rolando Adana, 21 et al, when we held that inasmuch as respondents therein have set out with particularity in their complaint, position paper, affidavits and other documents the labor standard benefits they are entitled to, and which they alleged that petitioners therein have failed to pay them, it became incumbent upon the employers to prove that they have paid these money claims. This is in tune with the general precept that: "one who pleads payment has the burden of proving it, and even where the employees must allege nonpayment, the general rule is that the burden rests on the defendant to prove nonpayment, rather than on the plaintiff to prove 22 non payment." The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents which will show that overtime, differentials, service incentive leave and other claims of workers have been paid are not in the 23 possession of the worker but in the custody and absolute control of the employer. In the case at bar, VSAI failed to discharge the burden of proof by choosing not to fully and completely disclose information and present the necessary documents to prove payment of labor standard benefits due to respondent. Despite repeated promises, i.e., in its five-paged 24 25 Position Paper or in its two-paged Reply, that it will proffer in evidence the payrolls which it admitted are the best evidence to resolve the monetary claims of respondent, VSAI failed to submit the pertinent employee files, which would show that respondent rendered work entitling him to payment for overtime work, night shift differential, service incentive leave, and premium pay for work on holidays and rest day. Indeed, VSAIs failure to submit the necessary documents documents which are not in respondents possession but in the custody and absolute control of VSAI in spite of its previous undertaking to do so, gives rise 26 to the presumption that their presentation is prejudicial to its cause. Consequently, it failed 27 to discharge the onus prabandi thereby making it liable for such claims to respondent. In sum, respondent having been illegally dismissed, he is entitled to separation pay and salary differentials as awarded by the NLRC whose computations the Court defers to, it being 28 a matter failing within its expertise.

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One final note. The cavalier fashion by which the Labor Arbiter dealt with this case must not go unnoticed. The Decision, in its totality, was merely two pages and the rationale for the denial of respondents claims was sketchily couched in this lone paragraph, to wit: This Office is inclined to uphold the position of the respondents. Indeed, payrolls of service contractors which are performing specific work for a government office are being scrutinized by the auditors of the Commission on Audit. These auditors will not allow the payment of the billings of the service contractors unless there is sufficient showing that the employees of the 29 service contractors are paid in accordance with laws. There is absolutely no evidence on record to support the above-quoted pronouncement of the Labor Arbiter. In the ordinary course of things, it is far-fetched that COA auditors would investigate if the employees of the service contractors of government offices are properly paid. The vinculum that binds the government offices to the contractors is the contract of service. Thus, the COA auditors are normally limited to ascertaining if the payments made by the government agencies are in accordance with the service contracts and if they are properly documented with billings and receipts of payments. Ceteris paribus, other things considered equal, COA auditors are not tasked to look into the payrolls of the service contractors to make sure that their employees are properly compensated in allowing or disallowing the payment of service contractors. It was, therefore, sheer whim on the part of the Labor Arbiter to dismiss the claims of respondent on the basis of a mere presumption without stating its legal basis. With unfading fervor, the Court again strikes a chord among the quasi-judicial agencies to 30 shun from treating labor cases flippantly. In the avuncular case of San Jose v. NLRC, the Court smote hard blows on the Labor Arbiter therein for his slapdash manner of deciding a case, viz: Labor Arbiters should exert all efforts to cite statutory provisions and/or judicial decision to buttress their dispositions. An Arbiter cannot rely on simplistic statements, generalizations, and assumptions. These are not substitutes for reasoned judgment. Had the Labor Arbiter exerted more research efforts, support for the Decision could have been found in pertinent provisions of the Labor Code, its Implementing Rules, and germane decisions of the 31 Supreme Court. Indeed, not only do the claims of employees boil down to the lucre of wages, separation pay, etc., although these are the lifeblood of a minimum wage earner such as the respondent herein. Perhaps more importantly, at stake is a workingmans years of sweat and toil. Here, respondent had rendered nine (9) years of unsullied hard work, but his reward came in a

long-drawn-out floating status without pay to chastise him for lodging a legitimate grievance against VSAI for non-remittance of SSS payments. Indeed, the Court ought to deny this petition lest the wheels of justice for aggrieved workingmen grind to a halt. We ought to abate the culture of employers bestowing security of tenure to employees, not on the basis of the latters performance on the job, but on their ability to toe the line set by their employer and endure in silence the flagrant incursion of their rights, zealously protected by our labor laws and by the Constitution, no less. WHEREFORE, the present petition is hereby DENIED. Accordingly, the Decision and the Resolution dated 27 January 2003 and 19 June 2003, of the Court of Appeals in CA-G.R. SP No. 67043, are hereby AFFIRMED. Costs against petitioners. SO ORDERED.

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G.R. No. 160871

February 6, 2006

TRIAD SECURITY & ALLIED SERVICES, INC. and ANTHONY U. QUE, Petitioners, vs.SILVESTRE ORTEGA, JR., ARIEL ALVARO, RICHARD SEVILLANO, MARTIN CALLUENG, and ISAGANI CAPILA,Respondents.CHICO-NAZARIO, J.: This petition seeks to set aside the Decision dated 31 July 2003 of the Court of Appeals in CA-G.R. SP No. 77065 entitled, "Triad Security & Allied Services, Inc. and Anthony U. Que v. Labor Arbiter Edgar Bisana, et al." The dispositive portion of the decision reads: WHEREFORE, the petition is DENIED DUE COURSE and is DISMISSED. The temporary 2 restraining order earlier issued on June 12, 2003 is LIFTED. The following are the pertinent facts: Petitioner Triad Security and Allied Services, Inc., (Triad Security) is a duly licensed security agency owned by co-petitioner Anthony U. Que. It holds office at 672 Carlos Palanca St., Quiapo, Manila. On the other hand, respondents Silvestre Ortega, Jr., Ariel Alvaro, Richard Sevillano, Martin Callueng, and Isagani Capila were formerly employed by petitioner Triad Security as security guards. On 25 March 1999, respondents filed a complaint against petitioners and a certain Ret. B/Gen. Javier D. Carbonell for underpayment/nonpayment of salaries, overtime pay, premium pay for holiday and rest day, service incentive leave pay, holiday pay, and attorneys 3 fees. The complaint was amended on 20 April 1999 to include the charges of illegal dismissal, illegal deductions, underpayment/nonpayment of allowance, separation pay, and 4 claims for 13th month pay, moral and exemplary damages as well as night shift differential. According to respondents, during the time that they were in the employ of petitioners, they were receiving compensation which was below the minimum wage fixed by law. They were also made to render services everyday for 12 hours but were not paid the requisite overtime pay, nightshift differential, and holiday pay. Respondents likewise lamented the fact that petitioners failed to provide them with weekly rest period, service incentive leave pay, and 13th month pay. As a result of these perceived unfairness, respondents filed a complaint before the Labor Standards Enforcement Division of the Department of Labor on 6 January 5 1999. Upon learning of the complaint, respondents services were terminated without the benefit of notice and hearing.
1

For their part, petitioners denied respondents claim of illegal dismissal. Peti tioners explained that management policies dictate that the security guards be rotated to different assignments to avoid fraternization and that they be required to take refresher courses at their headquarters. Respondents allegedly refused to comply with these policies and instead went on leave or simply refused to report at their headquarters. As for respondents money claims, petitioners insisted that respondents worked for only eight hours a day, six days a week and that they received their premium pays for services rendered during holidays and rest day. The service incentive leave of respondents was allegedly made payable as soon as 6 respondents applied for said benefit. In his decision dated 28 February 2000, Labor Arbiter Jose G. de Vera found in favor of Respondents. The dispositive portion of his decision states: WHEREFORE, all the foregoing premises considered judgment is hereby rendered ordering the respondents to reinstate the complainants (respondents herein) to their former jobs as security guards, and to pay jointly and solidarily complainants backwages which as of February 24, 2000 already amount to P473,233.15, and to such further backwages as they accrue until reinstatement order is complied with by the respondents (petitioners herein). Further, respondents are ordered to pay jointly and solidarily separation pay computed at the aggregate sum ofP232,976.25 in the event reinstatement is no longer feasible. Furthermore, respondents are ordered to pay jointly and solidarily complainants money claims in the aggregate sum of P956, 115.30. And finally, respondents are ordered to pay attorneys fees equivalent to ten percent (10%) of 7 the judgment award. As petitioners failed to seasonably file an appeal with the National Labor Relations Commission, the decision of the labor arbiter became final and executory prompting 8 respondents to file a motion for the issuance of writ of execution on 23 June 2000. The writ 9 of execution was thereafter issued on 25 August 2000. On 18 September 2000, petitioners filed a motion to recompute money claims as 10 decreed arguing therein that respondents money claims as contained in the 28 February 2000 decision were baseless and that their former counsel was not furnished a copy of the computation nor was he allowed to submit comments thereon. Pursuant to the writ of execution, petitioner Triad Securitys funds with its clients Remal Enterprises and Don Pedro Azucarera amounting to one million two hundred twenty-four

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thousand seven hundred sixty-two pesos and forty centavos (P1,224,762.40) were 11 garnished. On 3 October 2000, petitioners filed a motion to lift notices of garnishment
13 12

On 30 January 2003, petitioners filed their comment on the computation prepared by the Computation and Examination Unit. Petitioners essentially opposed the computation based on the following grounds: (a) the balance of the unsatisfied award is only Php 603,794.77 and not Php 2,097,152.26 appearing on the computation; (b) the basis for computing the wage differential is erroneous.
24

In the order dated 14 November 2000, the labor arbiter denied, for lack of merit, petitioners motion to recompute respondents money claims as well as their motion to lift notices of garnishment. In the same order, the garnished receivables were ordered released to the NLRC cashier for proper disposition to Respondents. On 23 November 2000, respondents filed a motion seeking the release of the funds then in 14 the custody of the NLRC cashier. On 13 December 2000, petitioners filed an appeal before the NLRC assailing the denial of their motion to recompute money claims and the labor arbiters order releasing the garnished 15 funds to Respondents. This appeal was dismissed by the NLRCs first division in its order 16 promulgated on 29 May 2001. Similarly ill-fated were petitioners petition for injunction which was dismissed by the NLRC in 17 its resolution of 22 May 2001 and their motion for reconsideration of said resolution which 18 was denied for utter lack of merit on 4 September 2001. Following petitioners set-backs before the NLRC, the labor arbiter issued the order dated 31 August 2001 decreeing the release of the funds in the possession of the NLRC cashier to 19 Respondents. On 1 October 2002, the labor arbiter issued an alias writ of execution commanding the sheriff to collect from petitioners the amount of six hundred three thousand seven hundred ninety-four and seventy-seven centavos (P603,794.77) representing the unsatisfied balance of the judgment award contained in the 28 February 2000 decision. Acting on respondents motion dated 15 October 2002, the labor arbiter issued the order dated 9 December 2002 directing the cashier of Don Pedro Azucarera to release to the 21 NLRC cashier the garnished funds totalingP603,794.77. The funds were eventually ordered 22 released to respondents pursuant to the labor arbiters order of 17 December 2002. On 30 September 2002, the Computation and Examination Unit of the NLRC came up with a computation of monetary award where it appears that petitioners were liable to respondents 23 for the amount of P2,097,152.26 representing the latters backwages and separation pay.
20

On the basis of the new computation, respondents filed a motion for the issuance of 2nd alias 25 26 writ of execution. This motion was predictably opposed by petitioners. Despite petitioners protest, the labor arbiter issued the 23 April 2003 order stating as follows: The records of the case reveal that the decision ordered the respondents to reinstate the complainants to their former job as security guards and decreed that respondents shall pay to the complainants further backwages as they accrue until the order of reinstatement is complied with. The order of reinstatement is self-executing and should be complied with by the respondents upon receipt of the decision either by payroll or physical reinstatement. (Pioneer Texturizing Corporation vs. NLRC, 280 SCRA 806, in relation to Article 223 of the Labor Code, as amended). The respondents failed to comply with the order of reinstatement, hence, complainants backwages accrued. As a matter of procedure, this Office ordered the Computation and Examination Unit to compute complainants accrued backwages. On September 30, 2002, the Computation and Examination Unit came up with the total amount of TWO MILLION NINETY SEVEN THOUSAND ONE HUNDRED FIFTY TWO and 26/100 (P2,097,152.26) PESOS. The respondents filed their comment on the computation and their opposition to complainants motion for execution. We considered and studied respondents arguments in their comment and opposition and We found them inadequate to overcome the presumption of correctness and regularity of the computation; hence, the same is hereby approved.

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Further, the argument regarding the supposed prescribed period covering the month 2 February 20 April 1996 appears inconsequential in view of a manifestation during conference that (complainants are) willing to admit the same and deduct them from whatever amount is still due them. WHEREFORE, in view of the foregoing, complainants motion for the execution of their accrued backwages amounting to TWO MILLION NINETY SEVEN THOUSAND ONE HUNDRED FIFTY TWO and 26/100 (P2, 097,152.26) PESOS as computed by the Computation and Examination Unit of the NLRC is hereby granted less the amount of more or less P72,805.00 covering the wage differential for the period 2 February 20 April 1996. Let an Alias Writ of Execution for the enforcement of the P2,097,152.26 less the above27 mentioned amount, as complainants accrued backwages, be accordingly issued. Forthwith, a 2nd alias writ of execution dated 14 May 2003 was issued by the labor arbiter for the satisfaction of the amount of P2,024,347.26 "representing (respondents) unpaid accrued backwages as computed by the Computation and Examination Unit xxx, including attorneys 28 fees, plus execution fee." On 20 May 2003, petitioners filed before the Court of Appeals a petition for certiorari with 29 prayer for the issuance of a temporary restraining order and/or writ of preliminary injunction. In a resolution promulgated on 12 June 2003, the Court of Appeals issued a temporary restraining order enjoining the execution or enforcement of the 23 April 2003 order of the 30 labor arbiter. Petitioners victory with the Court of Appeals was, however, short -lived. In the decision now assailed before us, the Court of Appeals ruled that backwages payable to respondents should be computed from the date of their termination from their jobs until actual reinstatement as provided in Article 223 of the Labor Code. As petitioners failed to observe said pertinent provision of the law, the labor arbiter could not be charged with having committed a grave abuse of discretion when he issued the assailed 23 April 2003 order. Moreover, the Court of Appeals took note of the "procedural but fatal flaw" committed by petitioners when they immediately elevated their case via petition for certiorari before the Court of Appeals without first seeking recourse from the NLRC in violation not only of the Rules of Procedure of said body but also of the doctrine of exhaustion of administrative remedies. Petitioners motion for reconsideration was denied by the Court of Appeals in a resolution dated 20 November 2003.
31

Hence this petition raising the following issues: I WHETHER OR NOT THE COURT OF APPEALS ERRED WHEN IT DECLARED THAT THE REMEDY ADOPTED BY THE PETITIONERS IS ERRONEOUS II WHETHER OR NOT PETITIONERS SHOULD BE HELD LIABLE TO THE ADDITIONAL AMOUNT AS CONTAINED IN THE 23 APRIL 2003 ORDER CONSIDERING THAT THE 28 FEBRUARY 2000 DECISION HAS ALREADY BEEN FULLY SATISFIED III WHETHER OR NOT THE 30 SEPTEMBER 2002 COMPUTATION ISSUE BY THE COMPUTATION AND EXAMINATION UNIT OF THE NLRC IS CORRECT AND PROPER The petition is partially meritorious. First, we shall resolve the procedural issue posed in this petition. Petitioners contend that based on the rules of procedure of the NLRC, the order granting the issuance of the 2nd alias writ of execution could not have been the proper subject of an appeal before the NLRC neither could petitioners have sought the remedy of certiorari from the NLRC. Petitioners argue that the rules of procedure of the NLRC do not provide for any remedy or procedure for challenging the order granting a writ of execution; hence, the pertinent provision of the Revised Rules of Court should apply which in this case is Section 1 of Rule 41. It states: Section 1. Subject of appeal An appeal may be taken from a judgment or final order that completely disposes of the case, or of a particular matter therein when declared by these Rules to be appealable. No appeal may be taken from: (f) An order of execution; In all the above instances where the judgment or final order is not appealable, the aggrieved party may file an appropriate special civil action under Rule 65.

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Moreover, Rule III, Section 4 of the Rules of Procedure of the NLRC expressly proscribes the filing of a petition forcertiorari SECTION 4. PROHIBITED PLEADINGS & MOTIONS. The following pleadings, motions or petitions shall not be allowed in the cases covered by these Rules: c) Petition for Certiorari, Mandamus or Prohibition. Therefore, inasmuch as the NLRC had no authority to issue the writ of certiorari, recourse to the Court of Appeals was only proper. In addition, petitioners maintain that the doctrine of exhaustion of administrative remedies is not absolute as it accepts of certain exceptions such as when an appeal would not be an adequate remedy there being an order or execution already issued and the implementation of 32 said writ loomed as a great probability. We do not agree. It is a basic tenet of procedural rules that for a special civil action for a petition for certiorari to prosper, the following requisites must concur: (1) the writ is directed against a tribunal, a board or an officer exercising judicial or quasi-judicial functions; (2) such tribunal, board or officer has acted without or in excess of jurisdiction, or with grave abuse of discretion amounting to lack or excess of jurisdiction; and (3) there is no appeal or any plain, speedy 33 and adequate remedy in the ordinary course of law. In this case, petitioners insist that the NLRC is bereft of authority to rule on a matter involving grave abuse of discretion that may be committed by a labor arbiter. Such conclusion, however, proceeds from a limited understanding of the appellate jurisdiction of the NLRC under Article 223 of the Labor Code which states: ART. 223. APPEAL Decisions, awards, or orders of the Labor Arbiter are final and executory unless appealed to the Commission by any or both parties within ten (10) calendar days from receipt of such decisions, awards, or orders. Such appeal may be entertained only on any of the following grounds: (a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter.

In the case of Air Services Cooperative v. Court of Appeals, the scope of said article of the Labor Code to mean

34

we had the occasion to explain

x x x Also, while the title of Article 223 seems to provide only for the remedy of appeal as that term is understood in procedural law and as distinguished from the office of certiorari, nonetheless, a closer reading thereof reveals that it is not as limited as understood by the petitioners x x x. Abuse of discretion is admittedly within the ambit of certiorari and its grant thereof to the NLRC indicates the lawmakers intention to broaden the meaning of appeal as that term is 35 used in the Code x x x. Likewise, in the same case, this Court quoted with approval the following observation of the Court of Appeals: We do not see how appeal would have been inadequate or ineffectual under the premises. On the other hand, being the administrative agency especially tasked with the review of labor cases, [the NLRC] is in a far better position to determine whether petitioners grounds for certiorari are meritorious. Neither is there any cause for worry that appeal to the Commission would not be speedy as the Labor Code provides that the Commission shall decide cases 36 before it, within twenty (20) calendar days from receipt of the Answer of Appellee x x x. Given the foregoing, we hold that the Court of Appeals correctly dismissed the petition for certiorari brought before it. Notwithstanding this procedural defect committed by petitioners, in the interest of substantial justice, we shall proceed to resolve the other issues presented by petitioners. Petitioners insist that their monetary obligation, as contained in the 28 February 2000 decision of the labor arbiter, had already been fully satisfied. They posit the argument that with respondents receipt of their separation pay, they had opted not to seek reinstatement to their former jobs and elected instead to sever their employment with petitioner Triad Security. In fact, according to petitioners, respondents had already found new employments and to award them further backwages would be tantamount to unjust enrichment. Thus, petitioners maintain that there is no more basis to hold them liable for the accrued backwages stated in the 30 September 2002 computation. Again, petitioners argument is untenable. Article 279 of the Labor Code, as amended, states:

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ART. 279. 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. As the law now stands, an illegally dismissed employee is entitled to two reliefs, namely: 37 backwages and reinstatement. These are separate and distinct from each other. However, separation pay is granted where reinstatement is no longer feasible because of strained 38 relations between the employee and the employer. In effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay if reinstatement is no 39 longer viable and backwages. Backwages and separation pay are, therefore, distinct reliefs granted to one who was illegally dismissed from employment. The award of one does not preclude that of the other as this 40 court had, in proper cases, ordered the payment of both. In this case, the labor arbiter ordered the reinstatement of respondents and the payment of their backwages until their actual reinstatement and in case reinstatement is no longer viable, the payment of separation pay. Under Article 223 of the Labor Code, "the decision of the Labor Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement aspect is concerned, shall be immediately executory, even pending appeal." The same provision of the law gives the employer the option of either admitting the employee back to work under the same terms and conditions prevailing before his dismissal or separation from employment or the employer may choose to merely reinstate the employee to the payroll. It bears emphasizing that the law mandates the prompt reinstatement of the dismissed or separated employee. This, the petitioners failed to heed. They are now before this Court insisting that they have fully disposed of their legal obligation to respondents when they paid the latters separation pay. We do not agree. It should be pointed out that an order of reinstatement by the labor arbiter is not the same as actual reinstatement of a dismissed or separated employee. Thus, until the employer continuously fails to actually implement the reinstatement aspect of the decision of the labor arbiter, their obligation to respondents, insofar as accrued backwages and other benefits are concerned, continues to accumulate. It is only when the illegally dismissed employee receives the separation pay that it could be claimed with certainty that the employeremployee relationship has formally ceased thereby precluding the possibility of reinstatement. In the meantime, the illegally dismissed employees entitlement to backwages,

13th month pay, and other benefits subsists. Until the payment of separation pay is carried out, the employer should not be allowed to remain unpunished for the delay, if not outright refusal, to immediately execute the reinstatement aspect of the labor arbiters decision. The records of this case are bereft of any indication that respondents were actually reinstated to their previous jobs or to the company payroll. Instead, they were given, albeit with much resistance from petitioners, the full amount of the money judgment stated in the 28 February 2000 decision of the labor arbiter, inclusive of separation pay, more than two years after the labor arbiter had issued his decision on the illegal dismissal case filed by Respondents. As the law clearly requires petitioners to pay respondents backwages until actual reinstatement, we resolve that petitioners are still liable to respondents for accrued backwages and other benefits from 25 February 2000 until 16 December 2002, the day before the labor arbiter ordered the release to respondents of P603,794.77 representing the full satisfaction of 28 February 2000 judgment, including separation pay. Nor can we give credence to petitioners claim that they could not reinstate respondents as the latter had already found jobs elsewhere. It is worthy to note here that respondents were minimum wage earners who were left with no choice after they were illegally dismissed from their employment but to seek new employment in order to earn a decent living. Surely, we could not fault them for their perseverance in looking for and eventually securing new employment opportunities instead of remaining idle and awaiting the outcome of this case. We agree, however, with petitioners that the amount of basic salary used by the Computation and Examination Unit of the NLRC was erroneous. In said computation, the amount of respondents basic salary from 25 February 1999 until 30 September 2002 (the date of the computation) was pegged at P250.00. However, the prevailing daily minimum wage on 25 41 February 2000 was only P223.50 and it was only on 1 November 2000 when the rate was 42 increased to P250.00. Clearly, the Computation and Examination Unit of the NLRC was mistaken in its calculation. We, therefore, hold that from 25 February up to 31 October 2000, petitioners are liable for accrued backwages at the rate of P223.50 per day and from 1 November 2000 until 16 December 2002, they should be held accountable for accrued backwages of P250.00 per day. In addition, they should pay respondents any additional cost of living allowance which may have been prescribed within the period 25 February 2000 until 16 December 2002 and other benefits to which respondents are entitled to during said span of time.
WHEREFORE, premises considered, this Court AFFIRMS the Decision of the Court of Appeals dated 31 July 2003 and the Order dated 23 April 2003 of the Labor Arbiter declaring petitioners liable for additional accrued backwages. The amount of money claims due the respondents is, however, MODIFIED. Let the records of this case be remanded to the Computation and Examination Unit of the NLRC for proper computation of subject money claims as abovediscussed. Costs against petitioners.SO ORDERED.

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G.R. No. 164518

March 30, 2006

INDUSTRIAL TIMBER CORPORATION, INDUSTRIAL PLYWOOD GROUP CORPORATION, TOMAS TANGSOC, JR., LORENZO TANGSOC and TOMAS TAN, Petitioners, vs.VIRGILIO ABABON and ROBERTO TUTOR, Respondents. G.R. No. 164965 March 30, 2006

On the other hand, petitioners in G.R. No. 164518 who are also respondents in G.R. No. 164965 also filed a Motion for Partial Reconsideration seeking to delete or reduce the nominal damages awarded to each employee, considering that since August 17, 1990 it had ceased operation of its business and that the award involves a huge amount considering that 3 there are 97 workers. While we ruled in this case that the sanction should be stiffer in a dismissal based on authorized cause where the employer failed to comply with the notice requirement than a dismissal based on just cause with the same procedural infirmity, however, in instances where the execution of a decision becomes impossible, unjust, or too burdensome, modification of the decision becomes necessary in order to harmonize the disposition with the prevailing circumstances. In the determination of the amount of nominal damages which is addressed to the sound discretion of the court, several factors are taken into account: (1) the authorized cause invoked, whether it was a retrenchment or a closure or cessation of operation of the establishment due to serious business losses or financial reverses or otherwise; (2) the number of employees to be awarded; (3) the capacity of the employers to satisfy the awards, taken into account their prevailing financial status as borne by the records; (4) the employers grant of other termination benefits in favor of the employees; and (5) whether there was a bona fide attempt to comply with the notice requirements as opposed to giving no notice at all. In the case at bar, there was valid authorized cause considering the closure or cessation of ITCs business which was done in good faith and due to circumstances beyond ITCs cont rol. Moreover, ITC had ceased to generate any income since its closure on August 17, 1990. Several months prior to the closure, ITC experienced diminished income due to high production costs, erratic supply of raw materials, depressed prices, and poor market conditions for its wood products. It appears that ITC had given its employees all benefits in accord with the CBA upon their termination. Thus, considering the circumstances obtaining in the case at bar, we deem it wise and just to reduce the amount of nominal damages to be awarded for each employee to P10,000.00 each instead of P50,000.00 each. WHEREFORE, premises considered, the Motion for Reconsideration of respondents in G.R. No. 164518 who are also petitioners in G.R. No. 164965 is DENIED. The Motion for Partial Reconsideration of petitioners in G.R. No. 164518 who are also respondents in G.R. No. 164965 is GRANTED. The amount of nominal damages awarded to each employee is reduced from P50,000.00 to P10,000.00.SO ORDERED.

YNARES-SANTIAGO, J.: On January 25, 2006, the Court rendered judgment disposing of the case as follows: WHEREFORE, in view of the foregoing, the October 21, 2002 Decision of the Court of Appeals in CA-G.R. SP No. 51966, which set aside the May 24, 1995 Decision of the NLRC, as well as the July 16, 2004 Resolution denying ITCs motion for reconsideration, are hereby REVERSED. The May 24, 1995 Decision of the NLRC reinstating the decision of the Labor Arbiter finding the closure or cessation of ITCs business valid, is AFFIRMED with the MODIFICATIONS that ITC is ordered to pay separation pay equivalent to one month pay or at least one-half month pay for every year of service, whichever is higher, and P50,000.00 as nominal damages to each employee. SO ORDERED.
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On March 14, 2006, respondents in G.R. No. 164518 who are also petitioners in G.R. No. 164965 filed a Motion for Reconsideration seeking to set aside the above-stated Decision and reinstate the October 21, 2002 Decision of the Court of Appeals, with the modification that they be awarded full backwages, with the additional award of P50,000.00 as nominal damages for each worker. They insist that the holding in International Timber Corporation v. National Labor Relations 2 Commission that the closure of ITCs Butuan Plant was valid should not have been applied in the instant cases which pertain to ITCs Stanply Plant. They further claim that the findings by the Labor Arbiter that there was a shortage of raw materials; that the wood processing plaint permit has expired; that the lease contract with IPGC was terminated; and that ITC and IPGC were not business conduits, were all debunked by the NLRC. The arguments raised have been amply discussed; at any rate, they are inconsequential as to affect the assailed Decision.

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G.R. No. 165811 December 14, 2005 DAP CORPORATION, FELIX PINEDA, President, and DENSIL PINEDA, General Manager, Petitioners, vs.COURT OF APPEALS and MAUREEN MARCIAL, Respondents.YNARES-SANTIAGO, J.: Before us is a petition for review on certiorari of the Decision of the Court of Appeals in CA2 G.R. SP No. 77012 dated March 19, 2004 and the Resolution dated July 29, 2004 denying petitioners motion for reconsideration. Petitioner DAP Corporation (DAP) is a domestic enterprise engaged in the distribution of various merchandise including wines and spirits. Petitioners Felix Pineda and Densil Pineda are the corporations president and general manager, respectively. It appears that on May 8, 2001, DAP received a letter from International Distributors Corporation (IDC) informing it of the termination of their distributorship agreement. DAP alleges that by reason of this termination, it was constrained to cease its business operations and to terminate the employment of its employees, including respondent Maureen Marcial who had been DAP's salesperson from May 4, 2000 until July 2001. DAP claims that it notified its employees of the termination of their employments by reason of redundancy. On July 28, 2001, DAP paid their wages and asked them to sign the payslips. It likewise informed them that they would be paid their separation pay in installments because of liquidity problems. The checks representing the separation pay were issued to the employees. However, Marcial and 17 other employees refused to accept the checks and instead, filed a complaint for illegal dismissal, money claims for non-payment of overtime pay and separation pay and damages with the National Labor Relations Commission (NLRC) of Davao City. During the course of the proceedings before the NLRC, 16 employees withdrew their complaint. Only respondent Marcial and Jason Diapen pursued their claims. In the Decision dated November 16, 2001, the Labor Arbiter ruled that while DAP may have an authorized cause to terminate the employment of its employees because of the cancellation of the distributorship agreement, the same was implemented in violation of the law for failure to furnish the employees formal notices one month prior to the intended date of termination. Hence, it disposed of the case as follows: WHEREFORE, premises considered, judgment is hereby rendered, declaring the dismissal of complainants illegal. Respondents DAP CORPORATION/FELIX PINEDA, President-Owner, are hereby directed to jointly and solidarily pay complainants the total amount of SIXTYFOUR THOUSAND FIVE HUNDRED SIXTY SIX PESOS and 96/100 (P64,566.96)
3 1

representing their separation pay and backwages, plus 10% of the total award as attorneys fees. In case of appeal, backwages shall accrue up to the finality of the decision. The claim for damages is dismissed for lack of merit. SO ORDERED.
4

Petitioners filed an appeal with the NLRC, which affirmed the decision of the Labor Arbiter. However, the NLRC found that respondent and Diapen were entitled only to one month separation pay on the basis of their length of service. Thus, it ruled: WHEREFORE, premises considered, the appealed decision of the Labor Arbiter is hereby MODIFIED to the extent that complainants Maureen Marcial and Jason R. Diapen shall be paid one (1) month separation pay, but the same is affirmed in all other aspects. SO ORDERED.
6

The case was elevated to the Court of Appeals on a petition for certiorari. In the interim, Diapen withdrew his appeal. The appellate court affirmed the decision of the NLRC, thus: WHEREFORE, the petition is DENIED and the resolution of the National Labor Relations Commission is AFFIRMED by ordering private respondents DAP CORPORATION, FELIX PINEDA, and DENSIL PINEDA, jointly and solidarily to pay private respondent MAUREEN MARCIAL separation pay equivalent to one (1) month pay or in the amount of SIX THOUSAND PESOS (P6,000.00) and full backwages from the time her employment was terminated on July 28, 2001 up to the time the decision herein becomes final. This case is REMANDED to the Labor Arbiter for computation of the award of backwages and the ten percent (10%) of the total award as attorneys fees. SO ORDERED.
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Petitioners are before us now raising the following issues: RESPONDENT NLRC ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT CONFIRMED THE RULING OF THE LABOR ARBITER WHERE AFTER DECLARING THAT THERE WAS VALID GROUND FOR TERMINATION DUE TO REDUNDANCY, STILL IT RULED THAT THERE WAS ILLEGAL DISMISSAL.

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RESPONDENT NLRC ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT CONFIRMED THE RULING OF THE LABOR ARBITER THAT THERE WAS LACK OF NOTICE PRIOR TO THE SEPARATION OF PRIVATE RESPONDENT MARCIAL AND ORDERED THE PAYMENT OF BACKWAGES. RESPONDENT NLRC ERRED AND COMMITTED GRAVE ABUSE OF DISCRETION WHEN IT FAILED TO CATEGORICALLY RULE ON THE MAIN ISSUE WHICH IS WHETHER IT WAS LEGAL AND VALID FOR PETITIONER DAP TO PAY ON INSTALLMENT SEPARATION PAY TO PRIVATE RESPONDENT MARCIAL AS SAID PETITIONER WAS SUFFERING FROM SEVERE FINANCIAL LIQUIDITY. THE SUBJECT DECISION IS CONTRARY TO LAW, CUSTOMS AND PUBLIC POLICY. We find the petition bereft of merit. Contrary to petitioners assertion, the issue in this case does not concern the mode of payment of separation pay. As held by the NLRC, the validity of the installment payments of DAPs employees separation pay was rendered moot because the checks issued for these payments have already become due and demandable. There is likewise no question regarding the cause of the dismissal. Redundancy is one of the authorized causes provided 9 by law for the termination of employment. Respondent Marcial does not dispute which the three tribunals upheld, that the cancellation of DAPs distributorship agreement with IDC gave rise to a valid cause for the dismissal of DAPs employees. The crux of the instant petition is respondents allegation that DAP failed to comply with the notice requirement for a valid termination due to redundancy or retrenchment. Respondent claims that it was only on July 28, 2001, when the employees of DAP were given their salaries and were asked to sign the payslips, that they realized that their services were being terminated. Petitioners argue that respondent cannot complain of lack of notice because all of DAPs employees were aware of the cancellation of the distributorship agreement and the case it filed against IDP. As such, respondent's actual knowledge of the redundancy is equivalent to notice. We are not persuaded. Article 283 of the Labor Code clearly provides: Art. 283. Closure of establishment and reduction of personnel. The employer may also terminate the employment of any employee due to the installation of labor saving devices, redundancy, retrenchment to prevent losses or the closing or cessation of operation of the establishment or undertaking unless the closing is for the purpose of circumventing the
8

provisions of this Title, by serving a written notice on the workers and the Ministry of Labor and Employment at least one (1) month before the intended date thereof .... Thus, we have held that the employer must comply with the following requisites to ensure the validity of the redundancy program: 1) a written notice served on both the employees and the Department of Labor and Employment (DOLE) at least one month prior to the intended date of retrenchment; 2) payment of separation pay equivalent to at least one month pay or at least one month pay for every year of service, whichever is higher; 3) good faith in abolishing the redundant positions; and 4) fair and reasonable criteria in ascertaining what positions are 10 to be declared redundant and accordingly abolished. As mentioned earlier, respondent does not question the soundness of the redundancy program implemented by DAP, but the lack of notice required by law. The employees actual knowledge of the termination of DAPs distributorship agreement with IDP is not sufficient to replace the formal and written notice required by the law. In the written notice, the employees are informed of the specific date of the termination, at least a month prior to the date of effectivity, to give them sufficient time to make necessary arrangements. In this case, notwithstanding the employees knowledge of the cancellation of the distributorship agreement, they remained uncertain about the status of their employment when DAP failed to formally inform them about the redundancy. Furthermore, the validity of a termination can exist independently of the procedural infirmity in the dismissal. This is not the first time where the Court upheld the dismissal but held the employer liable for non-compliance with the procedural requirements. In Agabon v. National 11 Labor Relations Commission, we found that the dismissal of the employees therein as valid and for a just cause because abandonment was firmly established. Nonetheless, the employer was held liable because it was proven that the twin requirements of notice and hearing were not followed. However, in lieu of the payment of backwages, the employer was ordered to pay indemnity in the form of nominal damages, thus: 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. 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 fundamental right granted to the latter under the 12 Labor Code and its Implementing Rules.

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The above ruling was qualified in the case of Jaka Food Processing Corporation v. 13 Pacot. In Jaka, the employees were terminated because the corporation was financially distressed. However, the employer failed to comply with the notice requirement under Article 283 of the Labor Code when it failed to serve a written notice to the employees and the DOLE at least one month before the intended date of termination. Significantly, the Court distinguished the case from Agabon saying: The difference between Agabon and the instant case is that in the former, the dismissal was based on a just cause under Article 282 of the Labor Code while in the present case, respondents were dismissed due to retrenchment, which is one of the authorized causes under Article 283 of the same Code. . A dismissal for just cause under Article 282 implies that the employee concerned has committed, or is guilty of, some violation against the employer, i.e. the employee has committed some serious misconduct, is guilty of some fraud against the employer, or, as in Agabon, he has neglected his duties. Thus, it can be said that the employee himself initiated the dismissal process. On another breath, a dismissal for an authorized cause under Article 283 does not necessarily imply delinquency or culpability on the part of the employee. Instead, the dismissal process is initiated by the employers exercise of his management prerogative, i.e. when the employer opts to install labor saving devices, when he decides to cease business operations or when, as in this case, he undertakes to implement a 14 retrenchment program. Thus, we qualified the ruling in Agabon in this wise: Accordingly, it is wise to hold that: (1) if the dismissal is based on a just cause under Article 282 but the employer failed to comply with the notice requirement, the sanction to be imposed upon him should be tempered because the dismissal process was, in effect, initiated by an act imputable to the employee; and (2) if the dismissal is based on an authorized cause under Article 283 but the employer failed to comply with the notice requirement, the sanction should be stiffer because the dismissal process was initiated by the employers exercise of 15 his management prerogative. In light of the aforequoted ruling, we find the amount of P50,000.00 sufficient under the circumstances as indemnity for the violation of respondents statutory rights.

As provided in Article 283 of the Labor Code, respondent is likewise entitled to separation pay equivalent to at least her one month pay or to at least one month pay for every year of service, whichever is higher. The records clearly show that respondents length of service is one year and two months. She is therefore also entitled to separation pay equivalent to one month pay. WHEREFORE, the petition is DENIED. The assailed Decision and Resolution of the Court of Appeals dated March 19, 2004 and July 29, 2004 respectively, in CA-G.R. SP No. 77012 are SET ASIDE. A new judgment is enteredDECLARING the dismissal as VALID, but ordering petitioners to PAY respondent the amount of P50,000.00, representing nominal damages for non-compliance with statutory due process, and separation pay equivalent to one month pay.

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G.R. No. 166152 October 4, 2005 VILLAMOR GOLF CLUB, Brigadier General FILAMER J. ARTAJO, AFP (Ret.), Colonel RUBEN C. ESTEPA, Lieutenant Colonel JULIUS A. MAGNO, and Lieutenant MILAGROS A. AGUILLON, jointly represented by Major General ROBERTO I. SABULARSE, AFP (Ret.), Petitioners vs. RODOLFO F. PEHID, Respondent.CALLEJO, SR., J.: This is a petition for review on certiorari of the Decision of the Court of Appeals (CA) in CAG.R. SP No. 77654 reversing the decision of the National Labor Relations Commission (NLRC) in NLRC NCR Case No. CA-031296-02 and affirming the Labor Arbiters decision. On September 20, 1975, Rodolfo F. Pehid was employed by the Villamor Golf Club (VGC) as an attendant in the mens locker room, and, thereafter, he became the Supervisor -in-Charge. His subordinates included Juanito Superal, Jr., Patricio Parilla, Ricardo Mendoza, Cesar Velasquez, Vicente Casabon, Pepito Buenaventura and Carlito Modelo. On May 1, 1998, the afore-named employees agreed to establish a common fund from the tips they received from the customers, guests and members of the club for their mutual needs and benefits. Each member was to contribute the amount of P100.00 daily. By October 31, 1998, the contributions of the employees had reached the aggregate amount of P17,990.00 based on the logbook maintained in the locker room. This agreement, however, was not known to the VGC management. An audit of the Locker Room Section of the golf club was conducted on February 7, 1999. On 2 February 19, 1999, an additional Audit Report was submitted by Ludy Capuyan, the audit clerk, to the Administrative Department of the club stating, among others, that based on the information relayed to her, there was an undeclared and unrecorded aggregate amount of P17,990.00 for the fund during the period of May 1998 to October 1998. Further, not one in the said section admitted custody of such amount and there was no record that the money had been distributed among those employed in the locker room. In said report, Capuyan recommended that an investigation be conducted to determine the whereabouts of said amount and who was accountable therefor. In the meantime, an administrative complaint was filed by Juanito Superal, Jr., Patricio Parilla, Ricardo Mendoza, Cesar Velasquez, and Vicente Casabon charging Pehid with misappropriating the P17,990.00. An investigation of the matter was conducted by the Head of the Security Department, who then submitted a Report dated May 10, 1999 with the following recommendations:
1

10. Mr. Rodolfo Pehid should produce the common fund amounting allegedly to P17,990.00. 11. If unable to produce the money, a case of Swindling (ESTAFA) be filed against him by the locker room employees. 12. Separation from the service if found guilty of the charge by an administrative body 3 convened by the VGC. The Legal Officer of the VGC made a similar recommendation. In a Letter dated May 19, 1999, Col. Ruben Estepa, the Head of the Administrative Department, directed Pehid to submit his explanation on the said complaint and the reason why he should not be dismissed from the club for violation of VGC Rules of Conduct No. IV-E(d). On May 31, 1999, a certain Mil Raymundo, a VGC member, filed a letter-complaint against Pehid for misappropriating P3,000.00 from the common fund. On the same day, Pehid 5 submitted his verified Explanation to Col. Estepa denying the charges against him and alleging that it was Pepito Buenaventura who had custody of the fund. He also alleged that the charges filed against him stemmed from his strict management of the mens locker room and that his co-employees wanted to install Carlito Modelo as the person-in-charge in his stead. Pehid demanded that a formal investigation of the matter be conducted. After the requisite formal investigation by the Administrative Board of Inquiry, Pehid received Office Order No. 11-99 from the General Manager of the club informing him that his employment was terminated effective July 1, 1999. Based on its findings, Pehid committed gross misconduct in the performance of his duties in violation of Paragraph IV-E(d) of the 6 VGC Rules and Regulations. He was also informed that he committed acts of dishonesty which caused and tend to cause prejudice to the club for misappropriating the common fund 7 of P17,990.00 for his personal benefit. Pehid filed a complaint for illegal dismissal, unfair labor practice, separation pay/retirement benefits, damages and attorneys fees against petitioners VGC and/or Brig. Gen. Filamer Artajo (Ret. AFP), Col. Ruben Estepa, Lt. Milagros Aguillon, and the VGC Administrative Board of Inquiry. Pehid averred that he was dismissed without just cause and due process of law; that there was no basis or evidence to show that he had custody of the common fund which was used for his own benefit; that he incurred the ire of his superiors for testifying in support of Asterio Tansiongco, a former Director of Personnel who was dismissed by VGC; and that one of Tansiongcos accusers was Dario Velasquez, the brother of Cesar Velasquez, one of the locker boys who complained against him.
4

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In their Position Paper, the petitioners alleged that when confronted with the letter-complaint against him, Pehid admitted that his accountability arose from the proceeds of the sale of the golf club and golf shares entrusted to him, which he used for his personal needs without the knowledge of the persons concerned. On February 28, 2002, the Labor Arbiter rendered judgment in favor of Pehid. The dispositive portion of the decision reads: WHEREFORE, judgment is hereby rendered finding the dismissal of the complainant from his employment as illegal and concomitantly respondent[s] are ordered to pay complainant full backwages and separation pay in lieu of reinstatement in the amounts of P299,000.00 and P239,200.00, respectively. Respondents are further ordered to pay complainant 10% attorneys fees based on the total judgment award. The complaint for moral and exemplary damages are hereby dismissed for lack of merit. SO ORDERED.
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Pehid then filed with the CA a petition for certiorari under Rule 65 of the Rules of Civil Procedure, assailing the decision and resolution of the NLRC. The respondent maintained that no evidence was adduced to prove that he was the custodian of the fund. He insisted that the fund subject matter of the complaint came from the voluntary contributions of the locker room personnel to be used for their own benefit in times of need, and had no connection whatsoever with his work as personnel in the locker room. If there was any misappropriation of the said fund, the same could not in any way prejudice the club. On February 11, 2004, the CA rendered a Decision granting the petition. It reversed and set aside the decision of the NLRC and reinstated the decision of the Labor Arbiter. The CA declared that Paragraph IV-E(a) and (d) of the VGC Rules expressly provide that the funds referred to therein are funds of the club and that the P17,990.00 did not form part of such fund but belonged to the locker room personnel. The CA also declared that the management of the VGC had no personal knowledge about the funds and, in fact, had not sanctioned its existence. Moreover, VGC was not prejudiced by the loss of the fund. The petitioners filed a motion for reconsideration of the decision but the CA denied the same 16 on November 22, 2004, hence, the present petition. The petitioners raise the following issues: 1. Whether or not the process/proceeding undertaken by the Villamor Golf Club and the VGC [Administrative] Board of Inquiry is legally and factually sustainable? 2. Whether or not the Decision of the Honorable Court of Appeals is contrary to law and jurisprudence and therefore reversible? 3. Whether or not the incident of the case shall, likewise, fall within the provision of Article 17 282 paragraph (e) of the Labor Code? The petitioners insist that there is substantial evidence on record that the respondent was the custodian of fund belonging to the members of the locker room and that his misappropriation of the same constituted gross misconduct. They insist that it is an act of manifest dishonesty within the context of Paragraph IV-E(d) of the Rules of Conduct of the club, in relation to 18 Article 282(e) of the Labor Code of the Philippines, tending to prejudice the VGC. The petitioners further insist that, based on the substantial evidence on record, the respondent misappropriated the fund as his co-employees in the locker room even positively identified him as the custodian thereof. The petitioners aver that the respondents failure to account for and distribute the common fund which the locker personnel had established for their mutual aid and benefit is a manifest
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The Labor Arbiter ruled that Pehid was dismissed from his employment without any just cause. He declared that there was no formal official publication among the members of the locker room personnel designating Pehid as the custodian of the fund. Worse, the witnesses who testified against Pehid failed to prove that he was the custodian of the said mutual fund since they only concluded the same by the mere fact that he was the officer-in-charge of the locker room. Moreover, the Labor Arbiter declared that the acts attributed to Pehid were not 11 committed in connection with his work as officer-in-charge of the locker room. The petitioners appealed the decision to the NLRC. They averred that there was substantial evidence on record that the complainant was the custodian of the fund. The matter of keeping in custody the token tips necessarily involved trust and confidence among the personnel of the locker room. Pehids custody of the fund was intertwined with his duties as the officer -incharge; hence, there was justification for his dismissal from employment for loss of confidence. On December 6, 2002, the NLRC set aside and reversed the decision of the Labor 12 Arbiter. The NLRC declared that Pehid was lawfully dismissed from his employment for loss of trust and confidence on account of his misappropriation of the funds in his custody. The NLRC ruled that such misappropriation constituted serious misconduct meriting dismissal 13 from his employment. Pehid filed a motion for the reconsideration of the decision, which the 14 NLRC denied on April 2, 2003.

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dishonesty falling within the scope of the proviso "(d.) All other acts of dishonesty which cause or tend to cause prejudice to Villamor Golf Club ." The petitioners claim that this conduct caused prejudice to VGCs smooth operation and performance of services to its clientele. According to the petitioners, the bare fact that the membership in the club is exclusive makes such members the employers of VGC employees, including the respondent. Personnel who manage the daily affairs and activities of the club, like the respondent, are imbued with a high level of trust and confidence. Moreover, the respondent was expected to observe the diligence required in the maintenance of order, camaraderie, trust and confidence within the confines of his assignment. Hence, the termination of his employment for failure to deliver the cash entrusted to him as the head of the clubs locker room personnel and the custodian of the collective tips was a valid cause. The petition is denied for lack of merit. Paragraph IV-E(a) and (d) of the VGC Rules and Regulation cited by the petitioners reads: E. Dishonesty 1. The following shall constitute violation of this section. a) Misappropriation or malversation of Club funds. d) All other acts of dishonesty which cause or tend to cause prejudice to Villamor Golf Club . The CA ruled that the petitioners cannot rely on the afore-quoted rule, thus: Suffice it to state, that public respondent NLRC had overlooked and misapplied certain facts and circumstances of substance, which, if properly appreciated, would affect the disposition of the case. Foremost, contrary to the finding of respondent NLRC, VGC does not only cater its golf services to its club members who are purely officers of the Armed Forces of the Philippines. This is belied by no less than the allegations contained in the respondents REPLY TO THE POSITION PAPER OF THE COMPLAINANT xxx, the membership of VGC is categorized as follows: a) Service member; b) Special members; c) Associate member; and d) Honorary member. It is noteworthy to emphasize that under the categories of special member,
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honorary member and partly an associate member, they are not officers of the Armed Forces of the Philippines. In fact, even golfers who are not within the category of the memberships specified above, could make use of the course and the facilities of the club as long as they pay the necessary fees. Secondly, the golfers, be they members of the respondent VGC or simply walk-in paying golfers are not the employers of the personnel of respondent VGC; and lastly, in no uncertain terms that the personnel of respondent VGC are members of the Club. Prescinding therefrom, there is no doubt in our minds that the funds alleged to have been embezzled by the petitioner, belonged to the personnel of respondent VGC and not to respondent VGC. In fact, the latter had not sanctioned the purpose upon which the said funds were established. Along this line, We adhere to the Labor Arbiters disquisition ratiocinated in this wise: xxx xxx xxx. In the case at bench, the voluntary contribution by the locker personnel amongst themselves to a mutual fund for their own personal benefit in times of need is not in any way connected with the work of the locker boys and the complainant. If ever there was misappropriation or loss of the said mutual fund, the respondent will not and cannot be in any way "tend or cause to prejudice the club." Such mutual fund is a separate transaction among the employees and is not in any way connected with the employees work. Thu s, if a co-employee "A" owes employee "B" P100,000.00 and the former absconds with the money, the employer cannot terminate the employment of employee "A" for dishonesty and/or serious misconduct since 20 the same was not committed in connection with the employees work. The ruling of the CA is correct. Under the afore-quoted VGC rule, the dishonesty of an employee to be a valid cause for dismissal must relate to or involve the misappropriation or malversation of the club funds, or cause or tend to cause prejudice to VGC. The substantial evidence on record indicates that the P17,990.00, which was accumulated from a portion of the tips given by the golfers from May 1998 to October 1998 and was allegedly misappropriated by the respondent as the purported custodian thereof, did not belong to VGC but to the forced savings of its locker room personnel. The truth is, the separate affidavits of 21 22 23 24 Pepito Buenaventura, Juanito Superal, Jr., Ricardo Mendoza, Cesar Velasquez, and 25 26 Vicente Casabon, as well as the allegations in the petitioners Position Paper, show that even the VGC management did not know about the mutual fund or sanctioned its existence. Hence, the claim that the petitioners interest was prejudiced has no factual basis. Company policies and regulations are, unless shown to be grossly oppressive or contrary to law, generally valid and binding and must be complied with by the parties unless finally 27 revised or amended, unilaterally or preferably through negotiation. However, while an employee may be validly dismissed for violation of a reasonable rule or regulation adopted for

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the conduct of the companys business, an act allegedly in breach thereof must clearly and convincingly fall within the express intendment of such order. Neither may the petitioners rely on Article 282 of the Labor Code. As the CA succinctly ruled: Clearly, based on the grounds of termination provided under Article 282 of the Labor Code and the VGC Rules and Regulations, the common denominator thereof to constitute gross misconduct as a ground for a valid termination of the employee, is that it is committed in connection with the latters work or employment. In the instant case, as previously pointed out, the alleged petitioners misappropriation or malversation was committed, assuming it to be true, against the common funds of the Locker Room personnel, which did not belong nor sanctioned by respondent VGC. A fortiori, respondent VGC was not prejudiced or damaged by the loss or misappropriation thereof. Undoubtedly, the parties who were prejudiced or damaged by the alleged embezzlement, were locker room personnel, who may ventilate any proper civil or criminal action to whomsoever responsible therefor. Applying the principle in statutory construction of ejusdem generis, i.e., "where general words follow an enumeration of persons or things, by words of a particular and specific meaning, such general words are not to be construed in their widest extent, but are to be held as applying only to persons or things of the same kind or class as those specifically mentioned" ( United Residents of Dominican Hill, Inc. vs. Commission on Settlement of Land Problems, 352 SCRA 782). Elementary is the rule that when laws or rules are clear, it is incumbent upon the judge to apply them regardless of personal belief or predilections - when the law is unambiguous and unequivocal, application not interpretation thereof is imperative (De Guzman vs. Sison, 355 SCRA 69). "Serious misconduct" as a valid cause for the dismissal of an employee is defined as improper or wrong conduct; the transgression of some established and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies wrongful intent and not mere error in judgment. To be serious within the meaning and intendment of the law, the misconduct must be of such grave and aggravated character and not merely trivial or 29 unimportant. However serious such misconduct, it must, nevertheless, be in connection with the employees work to constitute just cause for his separation. The act complained of must be related to the performance of the employees 30 duties such as would show him to be unfit to continue working for the employer. IN LIGHT OF ALL THE FOREGOING, the instant petition is DENIED for lack of merit. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 77654 are AFFIRMED. Costs against the petitioners. SO ORDERED.

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G.R. No. 186732

June 13, 2013

ALPS TRANSPORTATION and/or ALFREDO E. PEREZ, Petitioners, vs.ELPIDIO M. RODRIGUEZ, Respondent.SERENO, CJ.: Before this Court is a Rule 45 Petition for Review assailing the Decision and Resolution of the Court of Appeals (CA) in CA-G.R. SP No. 100163. THE FACTS Respondent Elpidio Rodriguez (Rodriguez) was previously employed as a bus conductor. He 5 entered into an employment contract with Contract Tours Manpower (Contact Tours) and 6 was assigned to work with petitioner bus company, ALPS Transportation. During the course of his employment, Rodriguez was found to have committed irregularities 7 8 9 on 26 April 2003, 12 October 2003, and 26 January 2005. The latest irregularity report dated 26 January 2005 stated that he had collected bus fares without issuing corresponding 10 tickets to passengers. The report was annotated with the word "Terminate." Rodriguez alleged that he was dismissed from his employment on 27 January 2005, or the day after the issuance of the last irregularity report. However, he did not receive any written 11 notice of termination. He went back to the bus company a number of times, but it refused to 12 readmit him. On 11 August 2005, Rodriguez filed before the labor arbiter a complaint for illegal dismissal, nonpayment of 13th month pay, and damages against ALPS Transportation and Alfredo 13 Perez, the proprietor of petitioner bus company. In response to the complaint, petitioners stated that they did not have any prerogative to 14 dismiss Rodriguez, as he was not their employee, but that of Contact Tours. In fact, based on their agreement with Contact Tours, it was supposedly the latter that had the obligation to inform respondent of the contents of the reports and to decide on the appropriate 15 sanctions. Petitioners further explained that due to the issuance of the three irregularity reports against Rodriguez, they wrote to Contact Tours and recommended the termination of 16 respondents assignment to them. During the pendency of the illegal dismissal case before the labor arbiter, ALPS Transportation charged Rodriguez with theft before the Office of the Provincial Prosecutor of 17 Tanauan, Batangas. However, petitioners eventually filed an Affidavit of Desistance and 18 withdrew the criminal charges against respondent.
4 1 2 3

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On 12 January 2006, the labor arbiter dismissed the illegal dismissal complaint for lack of 19 merit. He explained that no evidence had been adduced to support the contention of 20 Rodriguez that the latter had been terminated on 27 January 2005. Moreover, during the mandatory conference, the representative of Contact Tours manifested that the company had not dismissed Rodriguez, and that it was in fact willing to reinstate him to his former 21 position. Thus, the labor arbiter concluded that Rodriguez had not been illegally dismissed, 22 and was actually an employee of Contact Tours, and not of ALPS Transportation. Rodriguez appealed the dismissal to the National Labor Relations Commission (NLRC). On 28 February 2007, the NLRC set aside the decision of the labor arbiter and entered a new one, the dispositive portion of which reads: WHEREFORE, the assailed Decision dated January 12, 2006 is hereby SET ASIDE and a new one is being entered, directing the respondents to reinstate the complainant to his former position without loss of seniority rights and privileges but without backwages. SO ORDERED.
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Moreover, the CA gave no credence to ALPS Transportations argument that Rodriguez had not yet been terminated when he filed the illegal dismissal complaint, as he had not yet 31 received any notice of termination. The appellate court explained that, before the illegal dismissal complaint was filed, more than six months had lapsed since respondent was last 32 given a bus assignment by ALPS Transportation. Thus, the CA concluded that the argument of the bus company was only an excuse to cover up the latters mistake in 33 terminating him without due process of law. The CA then ordered ALPS Transportation to reinstate Rodriguez and to pay him full backwages, viz: WHEREFORE, the petition is GRANTED. Alfredo Perez is declared guilty of having committed illegal dismissal. Accordingly, only the portions of the assailed dispositions ordering the reinstatement of Elpidio Rodriguez to his former position without loss of seniority rights is AFFIRMED and the phrase, "but without backwages" is ANNULLED and SET ASIDE. In lieu thereof, Alfredo Perez is ORDERED to pay Elpidio Rodriguez backwages computed from the time he was illegally dismissed until his actual reinstatement. No costs. SO ORDERED.
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In so concluding, the NLRC ruled that Contact Tours was a labor-only contractor. Thus, 25 Rodriguez should be considered as a regular employee of ALPS Transportation. As regards the claim of illegal dismissal, the NLRC found that Rodriguez failed to prove that his services were illegally terminated by petitioners, and that he was prevented from returning 26 to work. However, the bus company likewise failed to prove that he had abandoned his 27 work. Thus, citing previous rulings of this Court, the NLRC held that in case the parties fail to prove either abandonment or termination, the employer should order the employee to report back for work, accept the latter, and reinstate the employee to the latters former position. However, an award for backwages is not warranted, as the parties must bear the 28 burden of their own loss. Dissatisfied with the ruling of the NLRC, Rodriguez filed a Rule 65 Petition for Certiorari with the CA. After a review of the records, the CA concluded that the NLRC acted with grave abuse of discretion in rendering the assailed decision. The appellate court ruled that, in termination cases, it is the employer who bears the burden of proving that the employee was not illegally 29 dismissed. Here, the CA found that ALPS Transportation failed to present convincing evidence that Rodriguez had indeed collected bus fares without issuing corresponding tickets to passengers. The appellate court held that the irregularity reports were mere allegations, 30 the truth of which had not been established by evidence.

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Aggrieved by the appellate courts decision, petitioners filed the instant Rule 45 Petition before this Court. THE ISSUES As culled from the records and the submissions of the parties, the issues in this case are as follows: 1. Whether respondent Rodriguez was validly dismissed; and 2. Assuming that respondent was illegally dismissed, whether ALPS Transportation and/or Alfredo E. Perez is liable for the dismissal. THE COURTS RULING We uphold the assailed Decision and Resolution and rule that respondent Rodriguez has been illegally dismissed. For a dismissal to be valid, the rule is that the employer must comply with both substantive 35 and procedural due process requirements. Substantive due process requires that the

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dismissal must be pursuant to either a just or an authorized cause under Articles 282, 283 or 36 284 of the Labor Code. Procedural due process, on the other hand, mandates that the employer must observe the twin requirements of notice and hearing before a dismissal can 37 be effected. Thus, to determine the validity of Rodriguezs dismissal, we first discuss whether his employment was terminated for a just cause. Petitioners argue that the dismissal of Rodriguez was brought about by his act of collecting 38 fare from a passenger without issuing the corresponding ticket. This was not the first irregularity report issued against respondent, as similar reports had been issued against him 39 40 on 26 April 2003 and 12 October 2003. Thus, the company had lost trust and confidence 41 in him, as he had committed serious misconduct by stealing company revenue. Petitioners 42 therefore submit that the dismissal was valid under Article 282 of the Labor Code. For his part, Rodriguez denies the contents of the irregularity report. He states that the 44 report consists of a mere charge, but is bereft of the necessary proof. Moreover, he submits that while the bus company filed a criminal complaint against him for the same act, the complaint was dismissed pursuant to an Affidavit of Desistance, in which the bus company 45 stated that "the incident arose out of a misunderstanding between them." Finally, he contends that the companys invocation of the 2003 irregularity reports to support his 46 dismissal effected in 2005 was a mere afterthought. In any event, he maintains that even 47 those alleged infractions were not duly supported by evidence. We find for respondent and rule that the employer failed to prove that the dismissal was due to a just cause. The Labor Code provides that the burden of proving that the termination of an employee was 48 for a just or authorized cause lies with the employer. If the employer fails to meet this 49 burden, the conclusion would be that the dismissal was unjustified and, therefore, illegal. Here, we agree with Rodriguezs position that the 26 January 2005 irregularity report, which served as the basis of his dismissal, may only be considered as an uncorroborated allegation if unsupported by substantial evidence.1wphi1On this matter, we quote with favor the ruling of the appellate court: The nature of work of a bus conductor involves inherent or normal occupational risks of incurring money shortages and uncollected fares. A conductors job is to collect exact fares from the passengers and remit his collections to the company. Evidence must, therefore, be substantial and not based on mere surmises or conjectures for to allow an employer to terminate the employment of a worker based on mere allegations places the latter in an
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uncertain situation and at the sole mercy of the employer. An accusation that is not substantiated will not ripen into a holding that there is just cause for dismissal. A mere accusation of wrongdoing or a mere pronouncement of lack of confidence is not sufficient cause for a valid dismissal of an employee. Thus, the failure of the petitioners to convincingly show that the respondent misappropriated the bus fares renders the dismissal to be without a valid cause. To add, jurisprudence dictates that if doubt exists between the evidence presented by the employer and the employee, the scales of justice must be tilted in favor of 50 the latter. (Citations omitted) Thus, we rule that petitioners have failed to prove that the termination of Rodriguezs employment was due to a just cause. Turning to the issue of procedural due process, both parties are in agreement that Rodriguez was not given a written notice specifying the grounds for his termination and giving him a reasonable opportunity to explain his side; a hearing which would have given him the opportunity to respond to the charge and present evidence in his favor; and a written notice of termination indicating that after considering all the circumstances, management has concluded that his dismissal is warranted. Clearly, therefore, the inescapable conclusion is that procedural due process is wanting in the case at bar. Having found that Rodriguez was illegally dismissed, we now rule on petitioners liabilities and respondents entitlements under the law. An illegally dismissed employee is entitled to the twin remedies of reinstatement and payment 51 of full backwages. In Santos v. National Labor Relations Commission, we explained: The normal consequences of a finding that an employee has been illegally dismissed are, firstly, that the employee becomes entitled to reinstatement to his former position without loss of seniority rights and, secondly, the payment of backwages corresponding to the period from his illegal dismissal up to actual reinstatement. The statutory intent on this matter is clearly discernible. Reinstatement restores the employee who was unjustly dismissed to the position from which he was removed, that is, to his status quo ante dismissal, while the grant of backwages allows the same employee to recover from the employer that which he had lost by way of wages as a result of his dismissal. These twin remedies reinstatement and payment of backwages make the dismissed employee whole who can then look forward to continued employment. Thus, do these two remedies give meaning and substance to the constitutional right of labor to security of tenure. (Citations omitted) Thus, the CA committed no reversible error in upholding the NLRCs order to reinstate Rodriguez and in directing the payment of his full backwages, from the time he was illegally dismissed until his actual reinstatement.

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As to who should bear the burden of satisfying respondents lawful claims, petitioners submit that since Rodriguez was an employee of Contact Tours, the latter is liable for the settlement of his claims. We do not agree. "The presumption is that a contractor is a labor-only contractor unless he overcomes the 52 burden of proving that it has substantial capital, investment, tools, and the like." While ALPS Transportation is not the contractor itself, since it is invoking Contact Tours status as a legitimate job contractor in order to avoid liability, it bears the burden of proving that Contact 53 Tours is an independent contractor. It is thus incumbent upon ALPS Transportation to present sufficient proof that Contact Tours has substantial capital, investment and tools in order to successfully impute liability to the latter. However, aside from making bare assertions and offering the Kasunduan between 54 Rodriguez and Contact Tours in evidence, ALPS Transportation has failed to present any proof to substantiate the former's status as a legitimate job contractor. Hence, the legal presumption that Contact Tours is a labor-only contractor has not been overcome. As a labor-only contractor, therefore, Contact Tours is deemed to be an agent of ALPS 55 Transportation. Thus, the latter is responsible to Contact Tours' employees in the same 56 manner and to the same extent as if they were directly employed by the bus company. Finally, the CA correctly ruled that since ALPS Transportation is a sole proprietorship owned by petitioner Alfredo Perez, it is he who must be held liable for the payment of backwages to 57 Rodriguez. A sole proprietorship does not possess a juridical personality separate and 58 distinct from that of the owner of the enterprise. Thus, the owner has unlimited personal liability for all the debts and obligations of the business, and it is against him that a decision 59 for illegal dismissal is to be enforced. WHEREFORE, the instant Rule 45 Petition for Review is DENIED. The assailed Decision and Resolution of the Court of Appeals in CA-G.R. SP No. 100163 are hereby AFFIRMED. SO ORDERED.

G.R. No. 189947

January 25, 2012

MANILA PAVILION HOTEL, owned and operated by ACESITE (PHILS.) Hotel Corporation, Petitioner, vs.HENRY DELADA, Respondent. SERENO, J.: Before the Court is a Petition for Review on Certiorari filed under Rule 45 of the Revised Rules of Court, assailing the 27 July 2009 Decision and 12 October 2009 Resolution of the 1 Court of Appeals (CA). Facts The present Petition stems from a grievance filed by respondent Henry Delada against petitioner Manila Pavilion Hotel (MPH). Delada was the Union President of the Manila Pavilion Supervisors Association at MPH. He was originally assigned as Head Waiter of Rotisserie, a fine-dining restaurant operated by petitioner. Pursuant to a supervisory personnel reorganization program, MPH reassigned him as Head Waiter of Seasons Coffee Shop, another restaurant operated by petitioner at the same hotel. Respondent declined the inter-outlet transfer and instead asked for a grievance meeting on the matter, pursuant to their Collective Bargaining Agreement (CBA). He also requested his retention as Head Waiter of Rotisserie while the grievance procedure was ongoing. MPH replied and told respondent to report to his new assignment for the time being, without prejudice to the resolution of the grievance involving the transfer. He adamantly refused to assume his new post at the Seasons Coffee Shop and instead continued to report to his previous assignment at Rotisserie. Thus, MPH sent him several memoranda on various dates, requiring him to explain in writing why he should not be penalized for the following offenses: serious misconduct; willful disobedience of the lawful orders of the employer; gross insubordination; gross and habitual neglect of duties; and willful breach of trust. Despite the notices from MPH, Delada persistently rebuffed orders for him to report to his new assignment. According to him, since the grievance machinery under their CBA had already been initiated, his transfer must be held in abeyance. Thus, on 9 May 2007, MPH initiated administrative proceedings against him. He attended the hearings together with union representatives. Meanwhile, the parties failed to reach a settlement during the grievance meeting concerning the validity of MPHs transfer order. Respondent then elevated his grievance to the Peers Resources Development Director. Still, no settlement between the parties was reached. Respondent appealed the matter to the Grievance Committee level. The committee recommended that he proceed to the next level of the grievance procedure, as it was unable to reach a decision on the matter. Consequently, on 20 April 2007, Delada lodged a

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Complaint before the National Conciliation and Mediation Board. On 25 May 2007, the parties agreed to submit the following issues for voluntary arbitration: I. Whether or not the transfer of the union president from head waiter at Rotisserie to head waiter at seasons restaurant is valid and justified; II. Whether or not the preventive suspension of the complainant is valid and justified; III. Whether or not the preventive suspension of the complainant is a valid ground to strike; IV. Whether or not the respondent may be held liable for moral and exemplary damages and attorneys fees; and V. Whether or not the complainant may be held liable for moral and exemplary 2 damages and attorneys fees. While respondents Complaint concerning the validity of his transfer was pending before the Panel of Voluntary Arbitrators (PVA), MPH continued with the disciplinary action against him for his refusal to report to his new post at Seasons Coffee Shop. Citing security and safety reasons, petitioner also placed respondent on a 30-day preventive suspension. On 8 June 2007, MPH issued a Decision, which found him guilty of insubordination based on his repeated and willful disobedience of the transfer order. The Decision imposed on Delada the penalty of 90-day suspension. He opposed the Decision, arguing that MPH had lost its authority to proceed with the disciplinary action against him, since the matter had already been included in the voluntary arbitration. On 14 December 2007, the PVA issued a Decision and ruled that the transfer of Delada was a valid exercise of management prerogative. According to the panel, the transfer order was done in the interest of the efficient and economic operations of MPH, and that there was no malice, bad faith, or improper motive attendant upon the transfer of Delada to Seasons Coffee Shop. They found that the mere fact that he was the Union President did not "put color or ill motive and purpose" to his transfer. On the contrary, the PVA found that the real reason why he refused to obey the transfer order was that he asked for additional monetary benefits as a condition for his transfer. Furthermore, the panel ruled that his transfer from Rotisserie to Seasons Coffee Shop did not prejudice or inconvenience him. Neither did it result in diminution of salaries or demotion in rank. The PVA thus pronounced that Delada had no valid and justifiable reason to refuse or even to delay compliance with the management s directive. The PVA also ruled that there was no legal and factual basis to support petitioners imposition of preventive suspension on Delada. According to the panel, the mere assertion of MPH that "it is not far-fetched for Henry Delada to sabotage the food to be prepared and served to the respondents dining guest and employees because of the hostile relationship then existing"

was more imagined than real. It also found that MPH went beyond the 30-day period of preventive suspension prescribed by the Implementing Rules of the Labor Code when petitioner proceeded to impose a separate penalty of 90-day suspension on him. Furthermore, the PVA ruled that MPH lost its authority to continue with the administrative proceedings for insubordination and willful disobedience of the transfer order and to impose the penalty of 90-day suspension on respondent. According to the panel, it acquired exclusive jurisdiction over the issue when the parties submitted the aforementioned issues before it. The panel reasoned that the joint submission to it of the issue on the validity of the transfer order encompassed, by necessary implication, the issue of respondents insubordination and willful disobedience of the transfer order. Thus, MPH effectively 3 relinquished its power to impose disciplinary action on Delada. As to the other issues, the panel found that there was no valid justification to conduct any strike or concerted action as a result of Deladas preventive suspension. It also ruled that since the 30-day preventive suspension and the penalty of 90-day suspension was invalid, then MPH was liable to pay back wages and other benefits. The CA affirmed the Decision of the PVA and denied petitioners Motion for Reconsideration. Consequently, MPH filed the instant Petition. Issue Despite the various issues surrounding the case, MPH limited its appeal to the following: I. Whether MPH retained the authority to continue with the administrative case against Delada for insubordination and willful disobedience of the transfer order. II. Whether MPH is liable to pay back wages. Discussion Petitioner argues that it did not lose its authority to discipline Delada notwithstanding the joint submission to the PVA of the issue of the validity of the transfer order. According to petitioner, the specific issue of whether respondent could be held liable for his refusal to assume the new assignment was not raised before the PVA, and that the panels ru ling was limited to the validity of the transfer order. Thus, petitioner maintains that it cannot be deemed to have surrendered its authority to impose the penalty of suspension. In Sime Darby Pilipinas, Inc. v. Deputy Administrator Magsalin, we ruled that the voluntary arbitrator had plenary jurisdiction and authority to interpret the agreement to arbitrate and to determine the scope of his own authority subject only, in a proper case, to the certiorari jurisdiction of this Court. In that case, the specific issue presented was "the issue of
4

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performance bonus." We then held that the arbitrator had the authority to determine not only the issue of whether or not a performance bonus was to be granted, but also the related question of the amount of bonus, were it to be granted. We then said that there was no indication at all that the parties to the arbitration agreement had regarded "the issue of performance bonus" as a two-tiered issue, only one aspect of which was being submitted to arbitration; thus, we held that the failure of the parties to specifically limit the issues to that which was stated allowed the arbitrator to assume jurisdiction over the related issue. A more recent case is Ludo & Luym Corporation v. Saornido. In that case, we recognized that voluntary arbitrators are generally expected to decide only those questions expressly delineated by the submission agreement; that, nevertheless, they can assume that they have the necessary power to make a final settlement on the related issues, since arbitration is the final resort for the adjudication of disputes. Thus, we ruled that even if the specific issue brought before the arbitrators merely mentioned the question of "whether an employee was discharged for just cause," they could reasonably assume that their powers extended beyond the determination thereof to include the power to reinstate the employee or to grant back wages. In the same vein, if the specific issue brought before the arbitrators referred to the date of regularization of the employee, law and jurisprudence gave them enough leeway as well as adequate prerogative to determine the entitlement of the employees to higher benefits in accordance with the finding of regularization. Indeed, to require the parties to file another action for payment of those benefits would certainly undermine labor proceedings and contravene the constitutional mandate providing full protection to labor and speedy labor justice. Consequently, could the PVA herein view that the issue presented before it the question of the validity of the transfer order necessarily included the question of respondent Deladas insubordination and willful disobedience of the transfer order? Pursuant to the doctrines in Sime Darby Pilipinas and Ludo & Luym Corporation, the PVA was authorized to assume jurisdiction over the related issue of insubordination and willful disobedience of the transfer order. Nevertheless, the doctrine in the aforementioned cases is inapplicable to the present Petition. In those cases, the voluntary arbitrators did in fact assume jurisdiction over the related issues and made rulings on the matter. In the present case, however, the PVA did not make a ruling on the specific issue of insubordination and willful disobedience of the transfer order. The PVA merely said that its disagreement with the 90-day penalty of suspension stemmed from the fact that the penalty went beyond the 30-day limit for preventive suspension: But to us, what militates against the validity of Deladas preventive suspension is the fact that it went beyond the 30-day period prescribed by the Implementing Rules of the Labor Code (Section 4, Rules XIV, Book V). The preventive suspension of Delada is supposed to expire
5

on 09 June 2007, but without notifying Delada, the MPH proceeded to impose a separate penalty of 90-days suspension to him which took effect only on 18 June 2007, or way beyond the 30-day rule mandated by the Rules. While the intention of the MPH is to impose the 90day suspension as a separate penalty against Delada, the former is already proscribed from doing so because as of 05 June 2007, the dispute at hand is now under the exclusive jurisdiction of the panel of arbitrators. In fact, by its own admission, the MPH categorically stated in its Position Paper that as of 25 May 2007, or before the suspension order was issued, MPH and Delada had already formulated and submitted the issues for arbitration. For all legal intents and purposes, therefore, the MPH has now relinquished its authority to suspend Delada because the issue at this juncture is now within the Panels ambit of jurisdiction. MPHs authority to impose disciplinary action to Delada must now give way to the jurisdiction of this panel of arbitrators to rule on the issues at hand. By necessary implication, this Panel is thus constrained to declare both the preventive suspension and the separate 6 suspension of 90-days meted to Delada to be not valid and justified. First, it must be pointed out that the basis of the 30-day preventive suspension imposed on Delada was different from that of the 90-day penalty of suspension. The 30-day preventive suspension was imposed by MPH on the assertion that Delada might sabotage hotel operations if preventive suspension would not be imposed on him. On the other hand, the penalty of 90-day suspension was imposed on respondent as a form of disciplinary action. It was the outcome of the administrative proceedings conducted against him. Preventive suspension is a disciplinary measure resorted to by the employer pending investigation of an 7 alleged malfeasance or misfeasance committed by an employee. The employer temporarily bars the employee from working if his continued employment poses a serious and imminent 8 threat to the life or property of the employer or of his co-workers. On the other hand, the penalty of suspension refers to the disciplinary action imposed on the employee after an 9 official investigation or administrative hearing is conducted. The employer exercises its right 10 to discipline erring employees pursuant to company rules and regulations. Thus, a finding of validity of the penalty of 90-day suspension will not embrace the issue of the validity of the 30-day preventive suspension. In any event, petitioner no longer assails the ruling of the CA 11 on the illegality of the 30-day preventive suspension. It can be seen that, unlike in Sime Darby Pilipinas and Ludo & Luym Corporation, the PVA herein did not make a definitive ruling on the merits of the validity of the 90-day suspension. The panel only held that MPH lost its jurisdiction to impose disciplinary action on respondent. Accordingly, we rule in this case that MPH did not lose its authority to discipline respondent for his continued refusal to report to his new assignment. In relation to this point, we recall our 12 Decision in Allied Banking Corporation v. Court of Appeals. In Allied Banking Corporation, employer Allied Bank reassigned respondent Galanida from its Cebu City branch to its Bacolod and Tagbilaran branches. He refused to follow the transfer order and instead filed a Complaint before the Labor Arbiter for constructive dismissal. While
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the case was pending, Allied Bank insisted that he report to his new assignment. When he continued to refuse, it directed him to explain in writing why no disciplinary action should be meted out to him. Due to his continued refusal to report to his new assignment, Allied Bank eventually terminated his services. When the issue of whether he could validly refuse to obey the transfer orders was brought before this Court, we ruled thus: The refusal to obey a valid transfer order constitutes willful disobedience of a lawful order of an employer.1wphi1Employees may object to, negotiate and seek redress against employers for rules or orders that they regard as unjust or illegal. However, until and unless these rules or orders are declared illegal or improper by competent authority, the employees ignore or disobey them at their peril. For Galanidas continued refusal to obey Allied Bank's transfer orders, we hold that the bank dismissed Galanida for just cause in accordance with Article 282(a) of the Labor Code. Galanida is thus not entitled to reinstatement or to 14 separation pay. (Emphasis supplied, citations omitted). It is important to note what the PVA said on Deladas defiance of the transfer order: In fact, Delada cannot hide under the legal cloak of the grievance machinery of the CBA or the voluntary arbitration proceedings to disobey a valid order of transfer from the management of the hotel. While it is true that Deladas transfer to Seasons is the subject of the grievance machinery in accordance with the provisions of their CBA, Delada is expected to comply first with the said lawful directive while awaiting the results of the decision in the grievance proceedings. This issue falls squarely in the case of Allied Banking Corporation vs. 15 Court of Appeals x x x. Pursuant to Allied Banking, unless the order of MPH is rendered invalid, there is a presumption of the validity of that order. Since the PVA eventually ruled that the transfer order was a valid exercise of management prerogative, we hereby reverse the Decision and the Resolution of the CA affirming the Decision of the PVA in this respect. MPH had the authority to continue with the administrative proceedings for insubordination and willful disobedience against Delada and to impose on him the penalty of suspension. As a consequence, petitioner is not liable to pay back wages and other benefits for the period corresponding to the penalty of 90-day suspension. WHEREFORE, the Petition is GRANTED. The Decision and the Resolution of the Court of Appeals are hereby MODIFIED. We rule that petitioner Manila Pavilion Hotel had the authority to continue with the administrative proceedings for insubordination and willful disobedience against Delada and to impose on him the penalty of suspension. Consequently, petitioner is not liable to pay back wages and other benefits for the period corresponding to the penalty of 90-day suspension.SO ORDERED.

G.R. No. 199338

**

January 21, 2013

ELEAZAR S. PADILLO, Petitioner vs.RURAL BANK OF NABUNTURAN, INC. and MARK S. OROPEZA, Respondents. PERLAS-BERNABE, J.: Before the Court is a Petition for Review on Certiorari assailing the June 28, 2011 2 3 Decision and October 27, 2011 Resolution of the Cagayan de Oro City Court of Appeals (CA) in CA-G.R. SP No 03669-MIN which revoked and set aside the National Labor Relations 4 5 Commission's (NLRCs) Resolutions dated December 29, 2009 and March 31, 2010 and 6 reinstated the Labor Arbiter's (LA's) Decision dated March 13, 2009 with modification. The Facts On October 1, 1977, petitioner, the late Eleazar Padillo (Padillo), was employed by respondent Rural Bank of Nabunturan, Inc. (Bank) as its SA Bookkeeper. Due to liquidity problems which arose sometime in 2003, the Bank took out retirement/insurance plans with Philippine American Life and General Insurance Company (Philam Life) for all its employees in anticipation of its possible closure and the concomitant severance of its personnel. In this regard, the Bank procured Philam Plan Certificate of Full Payment No. 88204, Plan Type 02FP10SC, Agreement No. PP98013771 (Philam Life Plan) in favor of Padillo for a benefit 7 amount of P100,000.00 and which was set to mature on July 11, 2009. On October 14, 2004, respondent Mark S. Oropeza (Oropeza), the President of the Bank, bought majority shares of stock in the Bank and took over its management which brought about its gradual rehabilitation. The Banks finances improved and eventually, its liquidity was 8 regained. During the latter part of 2007, Padillo suffered a mild stroke due to hypertension which consequently impaired his ability to effectively pursue his work. In particular, he was diagnosed with Hypertension S/P CVA (Cerebrovascular Accident) with short term memory 9 loss, the nature of which had been classified as a total disability. On September 10, 2007, he wrote a letter addressed to respondent Oropeza expressing his intention to avail of an early retirement package. Despite several follow-ups, his request remained unheeded. On October 3, 2007, Padillo was separated from employment due to his poor and failing health as reflected in a Certification dated December 4, 2007 issued by the Bank. Not having received his claimed retirement benefits, Padillo filed on September 23, 2008 with the NLRC Regional Arbitration Branch No. XI of Davao City a complaint for the recovery of unpaid retirement benefits. He asserted, among others, that the Bank had adopted a policy of granting its aging employees early retirement packages, pointing out that one of his coemployees, Nenita Lusan (Lusan), was accorded retirement benefits in the amount
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of P348,672.72 when she retired at the age of only fifty-three (53). The Bank and Oropeza (respondents) countered that the claim of Padillo for retirement benefits was not favorably 11 acted upon for lack of any basis to grant the same. The LA Ruling On March 13, 2009, the LA issued a Decision dismissing Padillos complaint but directed the Bank to pay him the amount of P100,000.00 as financial assistance, treated as an 13 advance from the amounts receivable under the Philam Life Plan. It found Padillo disqualified to receive any benefits under Article 300 (formerly, Article 287) of the Labor Code 14 of the Philippines (Labor Code) as he was only fifty-five (55) years old when he resigned, while the law specifically provides for an optional retirement age of sixty (60) and compulsory retirement age of sixty-five (65). Dissatisfied with the LAs ruling, Padillo elevated the matter to the NLRC. The NLRC Ruling
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be given to Padillo because he was the one who initiated the severance of his employment and that even before September 10, 2007, he already stopped working due to his poor and 21 failing health. Nonetheless, Padillo was still awarded the amount of P50,000.00 as financial assistance, in addition to the benefits accruing under the Philam Life Plan, considering his twenty-nine (29) years of service with no derogatory record and that he was severed not by reason of any 22 infraction on his part but because of his failing physical condition. Displeased with the CAs ruling, Padillo (now substituted by his legal heirs due to his death on February 24, 2012) filed the instant petition contending that the CA erred when it: (a) deviated from the factual findings of the NLRC; (b) misapplied the case of Villaruel vis--vis the factual antecedents of this case; (c) drastically reduced the computation of financial assistance awarded by the NLRC; (d) failed to rule on the consequences of respondents bad 23 faith; and (e) reversed and set aside the NLRCs December 29, 2009 Resolution. The Ruling of the Court

On December 29, 2009, the NLRCs Fifth Division reversed and set aside the LAs ruling and ordered respondents to pay Padillo the amount of P164,903.70 as separation pay, on top of 15 the P100,000.00 Philam Life Plan benefit. Relying on the case of Abaquin Security and 16 Detective Agency, Inc. v. Atienza (Abaquin), the NLRC applied the Labor Code provision on termination on the ground of disease particularly, Article 297 thereof (formerly, Article 323) holding that while Padillo did resign, he did so only because of his poor health 17 condition. Respondents moved for reconsideration but the same was denied by the NLRC in 18 its Resolution dated March 31, 2010. Aggrieved, respondents filed a petition for certiorari with the CA. The CA Ruling On June 28, 2011, the CA granted respondents petition for certiorari and rendered a decision setting aside the NLRCs December 29, 2009 and March 31, 2010 Resolutions, thereby reinstating the LAs March 13, 2009 Decision but with modification. It directed the respondents to pay Padillo the amount of P50,000.00 as financial assistance exclusive of the P100,000.00 Philam Life Plan benefit which already matured on July 11, 2009. The CA held that Padillo could not, absent any agreement with the Bank, receive any retirement benefits pursuant to Article 300 of the Labor Code considering that he was only 19 fifty-five (55) years old when he retired. It likewise found the evidence insufficient to prove that the Bank has an existing company policy of granting retirement benefits to its aging 20 employees. Finally, citing the case of Villaruel v. Yeo Han Guan (Villaruel), it pronounced that separation pay on the ground of disease under Article 297 of the Labor Code should not

The petition is partly meritorious. At the outset, it must be maintained that the Labor Code provision on termination on the 24 ground of disease under Article 297 does not apply in this case, considering that it was the petitioner and not the Bank who severed the employment relations. As borne from the 25 records, the clear import of Padillos September 10, 2007 letter and the fact that he stopped working before the foregoing date and never reported for work even thereafter show that it was Padillo who voluntarily retired and that he was not terminated by the Bank. As held in Villaruel, a precedent which the CA correctly applied, Article 297 of the Labor Code contemplates a situation where the employer, and not the employee, initiates the termination of employment on the ground of the latters disease or sickness, viz: A plain reading of the [Article 297 of the Labor Code] clearly presupposes that it is the employer who terminates the services of the employee found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees. It does not contemplate a situation where it is the employee who severs his or her employment ties. This is precisely the reason why Section 8, Rule 1, Book VI of the Omnibus Rules Implementing the Labor Code, directs that an employer shall not terminate the services of the employee unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. (Emphasis, underscoring and words in brackets supplied)
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Thus, given the inapplicability of Article 297 of the Labor Code to the case at bar, it necessarily follows that petitioners claim for separation pay anchored on such p rovision must be denied. Further, it is noteworthy to point out that the NLRCs application of Abaquin misplaced considering its dissimilar factual milieu with the present case.
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and shall be entitled to retirement pay equivalent to at least one-half (1/2) month salary for every year of service, a fraction of at least six (6) months being considered as one whole year. Unless the parties provide for broader inclusions, the term one half (1/2) month salary shall mean fifteen (15) days plus one-twelfth (1/12) of the 13th month pay and the cash equivalent of not more than five (5) days of service incentive leaves. (Emphasis and underscoring supplied) Simply stated, in the absence of any applicable agreement, an employee must (1) retire when he is at least sixty (60) years of age and (2) serve at least (5) years in the company to entitle him/her to a retirement benefit of at least one-half (1/2) month salary for every year of service, with a fraction of at least six (6) months being considered as one whole year. Notably, these age and tenure requirements are cumulative and non-compliance with one negates the employees entitlement to the retirement benefits under Article 300 of the Labor Code altogether. In this case, it is undisputed that there exists no retirement plan, collective bargaining agreement or any other equivalent contract between the parties which set out the terms and condition for the retirement of employees, with the sole exception of the Philam Life Plan which premiums had already been paid by the Bank. Neither was it proven that there exists an established company policy of giving early retirement packages to the Banks aging employees. In the case of Metropolitan Bank and Trust Company v. National Labor Relations Commission, it has been pronounced that to be considered a company practice, the giving of the benefits should have been done over a long 34 period of time, and must be shown to have been consistent and deliberate. In this relation, petitioners bare allegation of the solitary case of Lusan cannot assuming such fact to be true sufficiently establish that the Banks grant of an early retirement package to her (Lusan) evolved into an established company practice precisely because of the palpable lack of the element of consistency. As such, petitioners reliance on the Lusan incident cannot bolster their claim. All told, in the absence of any applicable contract or any evolved company policy, Padillo should have met the age and tenure requirements set forth under Article 300 of the Labor Code to be entitled to the retirement benefits provided therein. Unfortunately, while Padillo was able to comply with the five (5) year tenure requirement as he served for twenty-nine (29) years he, however, fell short with respect to the sixty (60) year age requirement given that he was only fifty-five (55) years old when he retired. Therefore, without prejudice to the

was gravely

To elucidate, a careful reading of Abaquin shows that the Court merely awarded termination 28 pay on the ground of disease in favor of security guard Antonio Jose because he belonged to a "special class of employees x x x deprived of the right to ventilate demands 29 collectively." Thus, notwithstanding the fact that it was Antonio Jose who voluntarily resigned because of his sickness and it was not the security agency which terminated his employment, the Court held that Jose "deserve[d] the full measure of the laws benevolence" and still granted him separation pay because of his situation, particularly, the fact that he could not have organized with other employees belonging to the same class for the purpose of bargaining with their employer for greater benefits on account of the prohibition under the old law. In this case, it cannot be said that Padillo belonged to the same class of employees 30 prohibited to self-organize which, at present, consist of: (1) managerial employees; and (2) confidential employees who assist persons who formulate, determine, and effectuate 31 management policies in the field of labor relations. Therefore, absent this equitable peculiarity, termination pay on the ground of disease under Article 297 of the Labor Code and the Courts ruling in Abaquin should not be applied. What remains applicable, however, is the Labor Code provision on retirement. In particular, 32 33 Article 300 of the Labor Code as amended by Republic Act Nos. 7641 and 8558 partly provides: Art. 300. Retirement. Any employee may be retired upon reaching the retirement age established in the collective bargaining agreement or other applicable employment contract. In case of retirement, the employee shall be entitled to receive such retirement benefits as he may have earned under existing laws and any collective bargaining agreement and other agreements: Provided, however, That an employee's retirement benefits under any collective bargaining and other agreements shall not be less than those provided herein. 1wphi1 In the absence of a retirement plan or agreement providing for retirement benefits of employees in the establishment, an employee upon reaching the age of sixty (60) years or more, but not beyond sixty-five (65) years which is hereby declared the compulsory retirement age, who has served at least five (5) years in the said establishment, may retire

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proceeds due under the Philam Life Plan, petitioners claim for retirement benefits must be denied. Nevertheless, the Court concurs with the CA that financial assistance should be awarded but at an increased amount. With a veritable understanding that the award of financial assistance is usually the final refuge of the laborer, considering as well the supervening length of time which had sadly overtaken the point of Padillos death an employee who had devoted twenty-nine (29) years of dedicated service to the Bank the Court, in light of the dictates of social justice, holds that the CAs financial assistance award should be increased from P50,000.00 to P75,000.00, still exclusive of the P100,000.00 benefit receivable by the petitioners under the Philam Life Plan which remains undisputed.1wphi1 Finally, the Court finds no bad faith in any of respondents actuations as they were within their right, absent any proof of its abuse, to ignore Padillos misplaced cla im for retirement benefits. Respondents obstinate refusal to accede to Padillos request is precisely justified by the fact that there lies no basis under any applicable agreement or law which accords the latter the right to demand any retirement benefits from the Bank. While the Court mindfully 35 notes that damages may be recoverable due to an abuse of right under Article 21 in 36 conjunction with Article 19 of the Civil Code of the Philippines, the following elements must, however, obtain: ( 1) there is a legal right or duty; (2) exercised in bad faith; and (3) for the 37 sole intent of prejudicing or injuring another. Records reveal that none of these elements exists in the case at bar and thus, no damages on account of abuse of right may he recovered. Neither can the grant of an early retirement package to Lusan show that Padillo was unfairly discriminated upon. Records show that the same was merely an isolated incident and petitioners have failed to show that any had faith or motive attended such disparate treatment between Lusan and Padillo. lrrefragably also, there is no showing that other Bank employees were accorded the same benefits as that of Lusan which thereby dilutes the soundness of petitioners' imputation of discrimination and bad faith. Verily, it is axiomatic that held f8ith can 38 never be presumed it must be proved by clear and convincing evidence. This petitioners were unable to prove in the case at bar. WHEREFORE, the petition is PARTLY GRANTED. Accordingly, the assailed Court of Appeals' Decision dated June 28, 2011 Decision and October 27, 2011 Resolution in CAG.R. SP No. 03669-MIN are hereby MODIFIED, increasing the 8Ward of financial assist8nce of F50,000.00 to P75,000.00, exclusive of the P 100,000.00 benefit under the Phil am Life Plan. SO ORDERED.

G.R. No. 158693

November 17, 2004

JENNY M. AGABON and VIRGILIO C. AGABON, petitioners, vs. NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC. and VICENTE ANGELES, respondents. YNARES-SANTIAGO, J.: This petition for review seeks to reverse the decision of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations Commission (NLRC) in NLRC-NCR Case No. 023442-00. Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and installing ornamental and construction materials. It employed petitioners Virgilio Agabon 2 and Jenny Agabon as gypsum board and cornice installers on January 2, 1992 until February 23, 1999 when they were dismissed for abandonment of work. Petitioners then filed a complaint for illegal dismissal and payment of money claims and on December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and ordered private respondent to pay the monetary claims. The dispositive portion of the decision states: WHEREFORE, premises considered, We find the termination of the complainants illegal. Accordingly, respondent is hereby ordered to pay them their backwages up to November 29, 1999 in the sum of: 1. Jenny M. Agabon - P56, 231.93 2. Virgilio C. Agabon - 56, 231.93 and, in lieu of reinstatement to pay them their separation pay of one (1) month for every year of service from date of hiring up to November 29, 1999. Respondent is further ordered to pay the complainants their holiday pay and service incentive leave pay for the years 1996, 1997 and 1998 as well as their premium pay for holidays and rest days and Virgilio Agabon's 13th month pay differential
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amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos, or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT & 93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of Julieta C. Nicolas, OIC, Research and Computation Unit, NCR. SO ORDERED.
4

addresses of the petitioners advising them to report for work. Private respondent's manager even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to tell him about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice installation work. However, petitioners did not report for work because they had subcontracted to perform installation work for another company. Petitioners also demanded for an increase in their wage to P280.00 per day. When this was not granted, petitioners 10 stopped reporting for work and filed the illegal dismissal case. It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not only respect but even finality if the findings are supported by substantial evidence. This is 11 especially so when such findings were affirmed by the Court of Appeals. However, if the factual findings of the NLRC and the Labor Arbiter are conflicting, as in this case, the 12 reviewing court may delve into the records and examine for itself the questioned findings. Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners' dismissal was for a just cause. They had abandoned their employment and were already working for another employer. To dismiss an employee, the law requires not only the existence of a just and valid cause but also enjoins the employer to give the employee the opportunity to be heard and to defend 13 himself. Article 282 of the Labor Code enumerates the just causes for termination by the employer: (a) serious misconduct or willful disobedience by the employee of the lawful orders of his employer or the latter's representative in connection with the employee's work; (b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the employee of the trust reposed in him by his employer or his duly authorized representative; (d) commission of a crime or offense by the employee against the person of his employer or any immediate member of his family or his duly authorized representative; and (e) other causes analogous to the foregoing. Abandonment is the deliberate and unjustified refusal of an employee to resume his 14 employment. It is a form of neglect of duty, hence, a just cause for termination of 15 employment by the employer. For a valid finding of abandonment, these two factors should be present: (1) the failure to report for work or absence without valid or justifiable reason; and (2) a clear intention to sever employer-employee relationship, with the second as the more determinative factor which is manifested by overt acts from which it may be deduced that the employees has no more intention to work. The intent to discontinue the employment must be 16 shown by clear proof that it was deliberate and unjustified. In February 1999, petitioners were frequently absent having subcontracted for an installation work for another company. Subcontracting for another company clearly showed the intention to sever the employer-employee relationship with private respondent. This was not the first

On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had abandoned their work, and were not entitled to backwages and separation pay. The other 5 money claims awarded by the Labor Arbiter were also denied for lack of evidence. Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with the Court of Appeals. The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because they had abandoned their employment but ordered the payment of money claims. The dispositive portion of the decision reads: WHEREFORE, the decision of the National Labor Relations Commission is REVERSED only insofar as it dismissed petitioner's money claims. Private respondents are ordered to pay petitioners holiday pay for four (4) regular holidays in 1996, 1997, and 1998, as well as their service incentive leave pay for said years, and to pay the balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the amount of P2,150.00. SO ORDERED.
6

Hence, this petition for review on the sole issue of whether petitioners were illegally 7 dismissed. Petitioners assert that they were dismissed because the private respondent refused to give them assignments unless they agreed to work on a "pakyaw" basis when they reported for duty on February 23, 1999. They did not agree on this arrangement because it would mean losing benefits as Social Security System (SSS) members. Petitioners also claim that private 8 respondent did not comply with the twin requirements of notice and hearing. Private respondent, on the other hand, maintained that petitioners were not dismissed but 9 had abandoned their work. In fact, private respondent sent two letters to the last known

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time they did this. In January 1996, they did not report for work because they were working for another company. Private respondent at that time warned petitioners that they would be dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear intention to sever their employer-employee relationship. The record of an employee is a 17 relevant consideration in determining the penalty that should be meted out to him. In Sandoval Shipyard v. Clave, we held that an employee who deliberately absented from work without leave or permission from his employer, for the purpose of looking for a job elsewhere, is considered to have abandoned his job. We should apply that rule with more reason here where petitioners were absent because they were already working in another company. The law imposes many obligations on the employer such as providing just compensation to workers, observance of the procedural requirements of notice and hearing in the termination of employment. On the other hand, the law also recognizes the right of the employer to expect from its workers not only good performance, adequate work and diligence, but also 19 good conduct and loyalty. The employer may not be compelled to continue to employ such 20 persons whose continuance in the service will patently be inimical to his interests. After establishing that the terminations were for a just and valid cause, we now determine if the procedures for dismissal were observed. The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of the Omnibus Rules Implementing the Labor Code: Standards of due process: requirements of notice. In all cases of termination of employment, the following standards of due process shall be substantially observed: I. For termination of employment based on just causes as defined in Article 282 of the Code: (a) A written notice served on the employee specifying the ground or grounds for termination, and giving to said employee reasonable opportunity within which to explain his side; (b) A hearing or conference during which the employee concerned, with the assistance of counsel if the employee so desires, is given opportunity to respond to the charge, present his evidence or rebut the evidence presented against him; and
18

(c) A written notice of termination served on the employee indicating that upon due consideration of all the circumstances, grounds have been established to justify his termination. In case of termination, the foregoing notices shall be served on the employee's last known address. Dismissals based on just causes contemplate acts or omissions attributable to the employee while dismissals based on authorized causes involve grounds under the Labor Code which allow the employer to terminate employees. A termination for an authorized cause requires payment of separation pay. When the termination of employment is declared illegal, reinstatement and full backwages are mandated under Article 279. If reinstatement is no longer possible where the dismissal was unjust, separation pay may be granted. Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must give the employee two written notices and a hearing or opportunity to be heard if requested by the employee before terminating the employment: a notice specifying the grounds for which dismissal is sought a hearing or an opportunity to be heard and after hearing or opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based on authorized causes under Articles 283 and 284, the employer must give the employee and the Department of Labor and Employment written notices 30 days prior to the effectivity of his separation. From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for health reasons under Article 284, and due process was observed; (2) the dismissal is without just or authorized cause but due process was observed; (3) the dismissal is without just or authorized cause and there was no due process; and (4) the dismissal is for just or authorized cause but due process was not observed. In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any liability. In the second and third situations where the dismissals are illegal, Article 279 mandates that the employee is entitled to reinstatement without loss of seniority rights and other privileges and full backwages, inclusive of allowances, and other benefits or their monetary equivalent computed from the time the compensation was not paid up to the time of actual reinstatement.

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In the fourth situation, 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 . The present case squarely falls under the fourth situation. The dismissal should be upheld because it was established that the petitioners abandoned their jobs to work for another company. Private respondent, however, did not follow the notice requirements and instead argued that sending notices to the last known addresses would have been useless because they did not reside there anymore. Unfortunately for the private respondent, this is not a valid excuse because the law mandates the twin notice requirements to the employee's last known 21 address. Thus, it should be held liable for non-compliance with the procedural requirements of due process. A review and re-examination of the relevant legal principles is appropriate and timely to clarify the various rulings on employment termination in the light of Serrano v. National Labor 22 Relations Commission. Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not given any notice. In the 1989 case of Wenphil Corp. v. National Labor Relations 23 Commission, we reversed this long-standing rule and held that the dismissed employee, although not given any notice and hearing, was not entitled to reinstatement and backwages because the dismissal was for grave misconduct and insubordination, a just ground for termination under Article 282. The employee had a violent temper and caused trouble during office hours, defying superiors who tried to pacify him. We concluded that reinstating the employee and awarding backwages "may encourage him to do even worse and will render a 24 mockery of the rules of discipline that employees are required to observe." We further held that: Under the circumstances, the dismissal of the private respondent for just cause should be maintained. He has no right to return to his former employment. However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee must be for just or authorized cause and after due process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by law before dismissing petitioner from employment. Considering the circumstances of this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award depends on the facts of each case and the gravity of the omission committed 25 by the employer.

The rule thus evolved: where the employer had a valid reason to dismiss an employee but did not follow the due process requirement, the dismissal may be upheld but the employer will be penalized to pay an indemnity to the employee. This became known as the Wenphil or Belated Due Process Rule. On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held that the violation by the employer of the notice requirement in termination for just or authorized causes was not a denial of due process that will nullify the termination. However, the dismissal is ineffectual and the employer must pay full backwages from the time of termination until it is judicially declared that the dismissal was for a just or authorized cause. The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant number of cases involving dismissals without requisite notices. We concluded that the imposition of penalty by way of damages for violation of the notice requirement was not serving as a deterrent. Hence, we now required payment of full backwages from the time of dismissal until the time the Court finds the dismissal was for a just or authorized cause. Serrano was confronting the practice of employers to "dismiss now and pay later" by imposing full backwages. We believe, however, that the ruling in Serrano did not consider the full meaning of Article 279 of the Labor Code which states: ART. 279. 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. This means that the termination is illegal only if it is not for any of the justified or authorized causes provided by law. Payment of backwages and other benefits, including reinstatement, is justified only if the employee was unjustly dismissed. The fact that the Serrano ruling can cause unfairness and injustice which elicited strong dissent has prompted us to revisit the doctrine. To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a system of rights based on moral principles so deeply imbedded in the traditions and feelings of our people as to be deemed fundamental to a civilized society as conceived by our entire

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history. Due process is that which comports with the deepest notions of what is fair and right 26 and just. It is a constitutional restraint on the legislative as well as on the executive and judicial powers of the government provided by the Bill of Rights. Due process under the Labor Code, like Constitutional due process, has two aspects: substantive, i.e., the valid and authorized causes of employment termination under the Labor Code; and procedural, i.e., the manner of dismissal. Procedural due process requirements for dismissal are found in the Implementing Rules of P.D. 442, as amended, otherwise known as the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department 27 Order Nos. 9 and 10. Breaches of these due process requirements violate the Labor Code. Therefore statutory due process should be differentiated from failure to comply with constitutional due process. Constitutional due process protects the individual from the government and assures him of his rights in criminal, civil or administrative proceedings; while statutory due process found in the Labor Code and Implementing Rules protects employees from being unjustly terminated without just cause after notice and hearing. In Sebuguero v. National Labor Relations Commission , the dismissal was for a just and valid cause but the employee was not accorded due process. The dismissal was upheld by the Court but the employer was sanctioned. The sanction should be in the nature of indemnification or penalty, and depends on the facts of each case and the gravity of the omission committed by the employer. In Nath v. National Labor Relations Commission, it was ruled that even if the employee was not given due process, the failure did not operate to eradicate the just causes for dismissal. The dismissal being for just cause,albeit without due process, did not entitle the employee to reinstatement, backwages, damages and attorney's fees. Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National 30 Labor Relations Commission, which opinion he reiterated in Serrano, stated: C. Where there is just cause for dismissal but due process has not been properly observed by an employer, it would not be right to order either the reinstatement of the dismissed employee or the payment of backwages to him. In failing, however, to comply with the procedure prescribed by law in terminating the services of the employee, the employer must be deemed to have opted or, in any case, should be made liable, for the payment of separation pay. It might be pointed out that the notice to be given and the hearing to be conducted generally constitute the two-part due process requirement of law to be accorded to the employee by the employer. Nevertheless, peculiar circumstances might obtain in certain situations where to
29 28

undertake the above steps would be no more than a useless formality and where, accordingly, it would not be imprudent to apply the res ipsa loquitur rule and award, in 31 lieu of separation pay, nominal damages to the employee. x x x. After carefully analyzing the consequences of the divergent doctrines in the law on employment termination, we believe that in cases involving dismissals for cause but without observance of the twin requirements of notice and hearing, the better rule is to abandon the Serrano doctrine and to follow Wenphil by holding that the dismissal was for just cause but imposing sanctions on the employer. Such sanctions, however, must be stiffer than that imposed in Wenphil. By doing so, this Court would be able to achieve a fair result by dispensing justice not just to employees, but to employers as well. The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but not complying with statutory due process may have far-reaching consequences. This would encourage frivolous suits, where even the most notorious violators of company policy are rewarded by invoking due process. This also creates absurd situations where there is a just or authorized cause for dismissal but a procedural infirmity invalidates the termination. Let us take for example a case where the employee is caught stealing or threatens the lives of his co-employees or has become a criminal, who has fled and cannot be found, or where serious business losses demand that operations be ceased in less than a month. Invalidating the dismissal would not serve public interest. It could also discourage investments that can generate employment in the local economy. The constitutional policy to provide full protection to labor is not meant to be a sword to oppress employers. The commitment of this Court to the cause of labor does not prevent us 32 from sustaining the employer when it is in the right, as in this case. Certainly, an employer should not be compelled to pay employees for work not actually performed and in fact abandoned. The employer should not be compelled to continue employing a person who is admittedly guilty of misfeasance or malfeasance and whose continued employment is patently inimical to the employer. The law protecting the rights of the laborer authorizes neither oppression nor 33 self-destruction of the employer. It must be stressed that in the present case, the petitioners committed a grave offense, i.e., abandonment, which, if the requirements of due process were complied with, would undoubtedly result in a valid dismissal. An employee who is clearly guilty of conduct violative of Article 282 should not be protected by the Social Justice Clause of the Constitution. Social justice, as the term suggests, should

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be used only to correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice must be founded on the recognition of the necessity of interdependence among 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 34 of all persons, and of bringing about "the greatest good to the greatest number." This is not to say that the Court was wrong when it ruled the way it did in Wenphil, Serrano and related cases. Social justice is not based on rigid formulas set in stone. It has to allow for changing times and circumstances. Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labormanagement relations and dispense justice with an even hand in every case: We have repeatedly stressed that social justice or any justice for that matter is for the deserving, whether he be a millionaire in his mansion or a pauper in his hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in favor of the poor to whom the Constitution fittingly extends its sympathy and compassion. But never is it justified to give preference to the poor simply because they are poor, or reject the rich simply because they are rich, for justice must always be served for the poor and 35 the rich alike, according to the mandate of the law. Justice in every case should only be for the deserving party. It should not be presumed that every case of illegal dismissal would automatically be decided in favor of labor, as management has rights that should be fully respected and enforced by this Court. As interdependent and indispensable partners in nation-building, labor and management need each other to foster productivity and economic growth; hence, the need to weigh and balance the rights and welfare of both the employee and employer. Where the dismissal is for a 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, as ruled 36 in Reta v. National Labor Relations Commission. 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. Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized, and 37 not for the purpose of indemnifying the plaintiff for any loss suffered by him.

As enunciated by this Court in Viernes v. National Labor Relations Commissions, an employer is liable to pay indemnity in the form of nominal damages to an employee who has been dismissed if, in effecting such dismissal, the employer fails to comply with the requirements of due process. The Court, after considering the circumstances therein, fixed the indemnity at P2,590.50, which was equivalent to the employee's one month salary. This indemnity is intended not to penalize the employer but to vindicate or recognize the 39 employee's right to statutory due process which was violated by the employer. 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 40 circumstances. Considering the prevailing circumstances in the case at bar, we deem it proper to fix it at 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 fundamental right granted to the latter under the Labor Code and its Implementing Rules. Private respondent claims that the Court of Appeals erred in holding that it failed to pay petitioners' holiday pay, service incentive leave pay and 13th month pay. We are not persuaded. We affirm the ruling of the appellate court on petitioners' money claims. Private respondent is liable for petitioners' holiday pay, service incentive leave pay and 13th month pay without deductions. As a general rule, one who pleads payment has the burden of proving it. Even where the employee must allege non-payment, the general rule is that the burden rests on the employer to prove payment, rather than on the employee to prove non-payment. The reason for the rule is that the pertinent personnel files, payrolls, records, remittances and other similar documents which will show that overtime, differentials, service incentive leave and other claims of workers have been paid are not in the possession of the worker but in the custody 41 and absolute control of the employer. In the case at bar, if private respondent indeed paid petitioners' holiday pay and service incentive leave pay, it could have easily presented documentary proofs of such monetary benefits to disprove the claims of the petitioners. But it did not, except with respect to the 13th month pay wherein it presented cash vouchers showing payments of the benefit in the years 42 disputed. Allegations by private respondent that it does not operate during holidays and that it allows its employees 10 days leave with pay, other than being self-serving, do not

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constitute proof of payment. Consequently, it failed to discharge the onus probandi thereby making it liable for such claims to the petitioners. Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay, we find the same to be unauthorized. The evident intention of Presidential Decree No. 851 is to grant an additional income in the form of the 13th month pay to 43 employees not already receiving the same so as "to further protect the level of real wages 44 from the ravages of world-wide inflation." Clearly, as additional income, the 13th month pay is included in the definition of wage under Article 97(f) of the Labor Code, to wit: (f) "Wage" paid to any employee shall mean the remuneration or earnings, however designated, capable of being expressed in terms of money whether fixed or ascertained on a time, task, piece , or commission basis, or other method of calculating the same, which is payable by an employer to an employee under a written or unwritten contract of employment for work done or to be done, or for services rendered or to be rendered and includes the fair and reasonable value, as determined by the Secretary of Labor, of board, lodging, or other facilities customarily furnished by the employer to the employee" from which an employer is prohibited under Article 113 of the same Code from making any deductions without the employee's knowledge and consent. In the instant case, private respondent failed to show that the deduction of the SSS loan and the value of the shoes from petitioner Virgilio Agabon's 13th month pay was authorized by the latter. The lack of authority to deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as one of his money claims against private respondent. The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter ordering the private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00. WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and Virgilio Agabon abandoned their work, and ordering private respondent to pay each of the petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00 isAFFIRMED with the MODIFICATION that private respondent Riviera Home Improvements, Inc. is furtherORDERED to pay each of the petitioners the amount of P30,000.00 as nominal damages for non-compliance with statutory due process.
45

No costs.

G.R. No. 167462 October 25, 2005 MANLY EXPRESS INC. and SIU ENG T. CHING, Petitioners, vs. ROMUALDO PAYONG, JR., Respondent.YNARES-SANTIAGO, J.: This petition for review on certiorari under Rule 45 of the Rules of Court assails the 1 November 22, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 83800, as well as 2 the February 28, 2005 Resolution denying the motion for partial reconsideration. The facts as found by the Court of Appeals are as follows: The simple relevant facts of the case show that petitioners Hercules Balena and Romualdo Payong, Jr. were employed by Manly Express, Inc. and/or Siy Eng T. Ching on different dates, as tour coordinator (dispatcher) and welder, respectively. Balena alleged that during his employment, he demanded from his employer the payment of correct employees benefits. Nevertheless, every time he made the demand, he was told not to report for work anymore if he is not contented with the wages he was receiving. Then, herein private respondents called Balenas attention on his tardiness in work. As a result, on May 16, 2000, Balena commenced a case for constructive dismissal, payment of salaries, overtime pay, holiday pay, back wages, leave pay, 13th month pay and attorneys fees.

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Petitioner Romualdo Payong, Jr. has another story to tell. Sometime in December 1999, he was complaining of eyesight problems. Brought to an eye specialist by private respondent Ching, he was diagnosed to be suffering from eye cataract. Despite having the cataract removed in January of 2000, he was disallowed to return to his work by Ching. Much later, on 3 August 1, 2000, he was given a letter of termination of employment. The full text of the termination letter reads: 01 August 2000 Dear Mr. Romualdo Payong Jr.,
4

Thus, a complaint for illegal dismissal with money claims was filed against Manly, which was consolidated with the complaint of two other employees, namely Francisca Adsuara and Flor Palisoc, also for illegal dismissal. On July 31, 2001, the Labor Arbiter rendered judgment the dispositive portion of which reads: WHEREFORE, in view of all the foregoing, the complaint of Hercules Balena is hereby DISMISSED for want of cause of action. Furthermore, respondent company is hereby ordered to pay complainants Payong, Adsuara and Palisoc the total amount of SEVENTYFIVE THOUSAND NINE HUNDRED PESOS (P75,900.00), as discussed above. SO ORDERED.
5

Our company has been severely affected by the prevailing poor business climate. There is a reduced demand for our bus services both for shuttle and city operations and this has substantially reduced our income. At the same time, our operating costs have increased, leaving us with a difficult cash position. In order to survive, the company has decided to check on the performance of all its employees to determine productivity. Unfortunately, it has been noticed that due to your partial blindness, you can no longer work in the position that you are presently employed for. In view of the above and the fact that despite the proper medical treatment for more than six months now, the company is constrained to terminate your employment effective immediately. In line with this, you are given a grace period of 15 days to remove all your personal belongings from the company premises counted from this date. In behalf of the company, I would like to express my gratitude for the services that you have rendered our company. Kindly see the undersigned to coordinate the payment of your financial assistance and other benefits. Thank you. (Sgd.) Charles Malvin Ching Operations Manager

The National Labor Relations Commission (NLRC) modified the decision of the labor arbiter, thus: WHEREFORE, premises considered, the Decision of July 31, 2001 is hereby MODIFIED. Respondents are directed to pay the following: Hercules Balena - P3,750.00 Service incentive leave pay 22, 500.00 13th month pay P26,250.00 Romualdo Payong - P3,352.00 Service incentive leave pay 20,115.00 13th month pay P23,467.00 Flor Palisoc 20,115.00 13th month pay The other findings stand affirmed. SO ORDERED.
6

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With the denial of their motion for reconsideration, Balena and Payong elevated the case before the Court of Appeals, which rendered on November 22, 2004 a Decision, the dispositive portion of which reads: IN VIEW OF ALL THE FOREGOING, the instant petition is hereby DENIED, in so far as petitioner Hercules Balena is concerned and the NLRC Decision, as to him, is AFFIRMED. However, as to petitioner Romualdo Payong, Jr., We resolve to GRANT the petition and declare his dismissal from employment by the private respondents to be unlawful and should therefore be entitled to reinstatement and separation pay, if reinstatement is no longer viable and backwages. No pronouncement as to costs. SO ORDERED.
8

Sec. 8. Disease as a ground for dismissal. Where the employee suffers from a disease and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, the employer shall not terminate his employment unless there is a certification by a competent public health authority that the disease is of such nature or at such a stage that it cannot be cured within a period of six (6) months even with proper medical treatment. If the disease or ailment can be cured within the period, the employer shall not terminate the employee but shall ask the employee to take a leave. The employer shall reinstate such employee to his former position immediately upon the restoration of his normal health. The rule is explicit. For a dismissal on the ground of disease to be considered valid, two requisites must concur: (a) the employee suffers from a disease which cannot be cured within six months and his continued employment is prohibited by law or prejudicial to his health or to the health of his co-employees, and (b) a certification to that effect must be issued by a competent public health authority. In the present case, there was no proof that Payongs continued employment was prohibited by law or prejudicial to his health and that of his co-employees. No medical certificate by a competent public health authority was submitted that Payong was suffering from a disease that cannot be cured within a period of six months. In the absence of such certification, Payongs dismissal must necessarily be declared illegal. Manlys contention that the requirement for a medical certification does not apply in the instant case since it was Payong who refused to undergo medical treatment and his resignation from work was of his own free will, is untenable. Manly has not established Payongs refusal to undergo a medical examination or that he resigned from work on his own accord. On the contrary, the termination letter dated August 1, 2000 showed that it was Manly who initiated the termination in view of the prevailing poor business climate and Payongs partial blindness. Moreover, evidence shows that even before the termination letter was served on Payong, he was no longer allowed to work which shows Manlys intent to dismiss him from work. The burden of proving the validity of the dismissal rests on the employer. As such, the employer must prove that the requisites for a valid dismissal due to a disease have been complied with. In the absence of the required certification by a competent public health 9 authority, this Court has ruled against the validity of the employees dismissal. In Triple Eight Integrated Services, Inc. v. NLRC,
10

The Court of Appeals found that Balena prematurely filed the complaint for illegal dismissal considering that at the time of its filing, he was still gainfully employed by Manly. The appellate court noted that he failed to mention the details of the alleged dismissal or to prove the severance of his employment. It held that the managements statement that he quit his job if he is not contented with the salary he is receiving is not equivalent to constructive dismissal. As regards Payong, the appellate court observed that considering that the termination was based on his alleged partial blindness, Manly should have presented a certification by a competent public health authority that Payong was suffering from such a disease and his continued employment is prejudicial to his health and that of his co-employees. Without the certification, the dismissal was illegal. Manlys motion for partial reconsideration was denied, hence, this petition. The petition lacks merit. Article 284 of the Labor Code authorizes an employer to terminate an employee on the ground of disease, thus: Art. 284. Disease as ground for termination. An employer may terminate the services of an employee who has been found to be suffering from any disease and whose continued employment is prohibited by law or is prejudicial to his health as well as to the health of his co-employees: . However, in order to validly terminate employment on this ground, Section 8, Rule I, Book VI of the Omnibus Rules Implementing the Labor Code requires:

we held that:

The requirement for a medical certificate under Article 284 of the Labor Code cannot be dispensed with; otherwise, it would sanction the unilateral and arbitrary determination by the

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employer of the gravity or extent of the employees illness and thus defeat the public policy on the protection of labor.... We also note that Manly failed to comply with the procedure for terminating an employee. In dismissing an employee, the employer has the burden of proving that the employee has been served two notices: (1) one to apprise him of the particular acts or omissions for which his dismissal is sought, and (2) the other to inform him of his employers decision to dismiss him. The first notice must state that dismissal is sought for the act or omission charged against the 11 employee, otherwise, the notice cannot be considered sufficient compliance with the rules. All told, Payongs dismissal did not comply with both the substantive and procedural aspects 12 of due process. Clearly, his dismissal is tainted with invalidity. WHEREFORE, the petition is DENIED. The November 22, 2004 Decision of the Court of Appeals in CA-G.R. SP No. 83800 and its February 28, 2005 Resolution, are AFFIRMED. SO ORDERED.

Private respondent Joaquin A. Dequila (or Dequilla) was hired on probation by petitioner Mariwasa Manufacturing, Inc. (hereafter, Mariwasa only) as a general utility worker on January 10, 1979. Upon the expiration of the probationary period of six months, Dequila was informed by his employer that his work had proved unsatisfactory and had failed to meet the required standards. To give him a chance to improve his performance and qualify for regular employment, instead of dispensing with his service then and there, with his written consent Mariwasa extended his probation period for another three months from July 10 to October 9, 1979. His performance, however, did not improve and on that account Mariwasa terminated 1 his employment at the end of the extended period. Dequila thereupon filed with the Ministry of Labor against Mariwasa and its Vice-President for Administration, Angel T. Dazo, a complaint for illegal dismissal and violation of Presidential 2 Decrees Nos. 928 and 1389. His complaint was dismissed after hearing by Director Francisco L. Estrella, Director of the Ministry's National Capital Region, who ruled that the termination of Dequila's employment was in the circumstances justified and rejected his 3 money claims for insufficiency of evidence. On appeal to the Office of the Minister, however, said disposition was reversed. Respondent Deputy Minister Vicente Leogardo, Jr. held that Dequila was already a regular employee at the time of his dismissal, therefore, could not have been lawfully dismissed for failure to meet company standards as a probationary worker. He was ordered reinstated to his former position without loss of seniority and with full 4 back wages from the date of his dismissal until actually reinstated. This last order appears later to have been amended so as to direct payment of Dequila's back wages from the date of 5 his dismissal to December 20, 1982 only. Mariwasa and Dazo, now petitioners, thereafter be sought this Court to review Hon. Leogardo's decision oncertiorari and prohibition, urging its reversal for having been rendered 6 with grave abuse of discretion and/or without or in excess of jurisdiction.

G.R. No. 74246 January 26, 1989 MARIWASA MANUFACTURING, INC., and ANGEL T. DAZO, petitioners, vs. HON. VICENTE LEOGARDO, JR., in his capacity as Deputy Minister of Ministry of Labor and Employment judgment, and JOAQUIN A. DEQUILA, respondents. NARVASA, J.: There is no dispute about the facts in this case, and the only question for the Court is whether or not, Article 282 of the Labor Code notwithstanding, probationary employment may validly be extended beyond the prescribed six-month period by agreement of the employer and the employee.

The petition, as well as the parties' comments subsequently submitted all underscore the fact that the threshold issue here is, as first above stated, the legal one of whether employer and employee may by agreement extend the probationary period of employment beyond the six months prescribed in Art. 282 of the Labor Code, which provides that: Art. 282. Probationary Employment. Probationary employment shall not exceed six (6) months from the date the employee started working, unless it is covered by an apprenticeship agreement stipulating a longer period. The services of an employee who has been engaged on a probationary basis may be terminated for a just cause or when he fails to qualify as a regular employee in accordance with reasonable standards made known by the employer to the employee at the time of his engagement. An employee who is allowed to work after probationary period shall be considered a regular employee.'

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The Court agrees with the Solicitor General, who takes the same position as the petitioners, that such an extension may lawfully be covenanted, notwithstanding the seemingly restrictive 7 language of the cited provision.Buiser vs. Leogardo, Jr . recognized agreements stipulating longer probationary periods as constituting lawful exceptions to the statutory prescription limiting such periods to six months, when it upheld as valid an employment contract between an employer and two of its employees that provided for an eigthteen-month probation period. This Court there held: 'It is petitioners' submission that probationary employment cannot exceed six (6) months, the only exception being apprenticeship and learnership agreements as provided in the Labor Code; that the Policy Instruction of the Minister of Labor and Employment nor any agreement of the parties could prevail over this mandatory requirement of the law; that this six months prescription of the Labor Code was mandated to give further efficacy to the constitutionally-guaranteed security of tenure of workers; and that the law does not allow any discretion on the part of the Minister of Labor and Employment to extend the probationary period for a longer period except in the aforecited instances. Finally, petitioners maintain that since they are regular employees, they can only be removed or dismissed for any of the just and valid causes enumerated under Article 283. of the Labor Code. We reject petitioners' contentions. They have no basis in law. Generally, the probationary period of employment is limited to six (6) months. The exception to this general rule is when the parties to an employment contract may agree otherwise, such as when the same is established by company policy or when the same is required by the nature of work to be performed by the employee. In the latter case, there is recognition of the exercise of managerial prerogatives in requiring a longer period of probationary employment, such as in the present case where the probationary period was set for eighteen (18) months, i.e. from May, 1980 to October, 1981 inclusive, especially where the employee must learn a particular kind of work such as selling, or when the job requires certain qualifications, skills experience or training. xxx We therefore, hold and rule that the probationary employment of petitioners set to eighteen (18) months is legal and valid and that the Regional Director and the Deputy Minister of Labor and Employment committed no abuse of discretion in ruling accordingly. The single difference between Buiser and the present case: that in the former involved an eighteen-month probationary period stipulated in the original contract of employment, whereas the latter refers to an extension agreed upon at or prior to the expiration of the

statutory six-month period, is hardly such as to warrant or even suggest a different ruling here. In both cases the parties' agreements in fact resulted in extensions of the period prescribed by law. That in this case the inability of the probationer to make the grade became apparent only at or about the end of the six-month period, hence an extension could not have been pre-arranged as was done inBuiser assumes no adverse significance, given the lack, as pointed out by the Solicitor General, of any indication that the extension to which Dequila gave his agreement was a mere stratagem of petitioners to avoid the legal consequences of a probationary period satisfactorily completed. For aught that appears of record, the extension of Dequila's probation was ex gratia, an act of liberality on the part of his employer affording him a second chance to make good after having initially failed to prove his worth as an employee. Such an act cannot now unjustly be turned against said employer's account to compel it to keep on its payroll one who could not perform according to its work standards. The law, surely, was never meant to produce such an inequitable result. By voluntarily agreeing to an extension of the probationary period, Dequila in effect waived any benefit attaching to the completion of said period if he still failed to make the grade during the period of extension. The Court finds nothing in the law which by any fair interpretation prohibits such a waiver. And no public policy protecting the employee and the security of his tenure is served by prescribing voluntary agreements which, by reasonably extending the period of probation, actually improve and further a probationary employee's prospects of demonstrating his fitness for regular employment. Having reached the foregoing conclusions, the Court finds it unnecessary to consider and 8 pass upon the additional issue raised in the Supplemental Petition that the back wages adjudged in favor of private respondent Dequila were erroneously computed. WHEREFORE, the petition is granted. The orders of the public respondent complained of are reversed and set aside. Private respondent's complaint against petitioners for illegal dismissal and violation of Presidential Decrees 928 and 1389 is dismissed for lack of merit, without pronouncement as to costs. SO ORDERED.

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Private respondent Nardo Dayao was employed on February 13, 1956 by the petitioners originally as driver, later assigned as delivery man, then as checker and was last promoted to the position of assistant chief checker in the checking department with the salary of P225.00 a month until his separation on April 10, 1961. Dayao's appointment as checker states that his annual compensation was P2,400.00 "which includes the additional compensation for work on Sundays and legal holidays. Our firm being a Service Enterprise, you will be required to perform work every day in a year as follows: 8 hours work on regular days and all special holidays that may be declared but with 25% additional compensation; 4 hours work on every other Sunday of the month; 4 hours work on all legal holidays. For any work performed in excess of the hours as above mentioned, you shall be paid 25% additional compensation per hour." (Exh. 2, pp. 59-60, rec.). Days before April 10, 1961, Dayao in vain urged herein petitioners to pay them overtime pay, criticized their, employees' association for failing to protect the welfare of the employees by not securing such additional compensation for overtime, and campaigned among his coemployees to organize another labor union. Hearing of Dayao's union activities, petitioner Mariano Que called for Dayao on April 10, 1961, told him to resign and persuaded him to accept the amount of P562.50 as termination pay and to sign a clearance stating to the effect that he has no claims whatsoever of any kind and nature against herein petitioners (Exh. 1). On April 25, 1963, exactly two years and fifteen days from his separation on April 10, 1961, Dayao filed a complaint for unfair labor practice against herein petitioners for dismissing him because of his having campaigned among his co-employees to become members of a new labor union that he was then organizing (Annex A, pp. 19-20, rec.). In their answer dated May 10, 1963 to the ULP complaint, herein petitioners interposed as their only defense that Dayao "was separated from the service ... for cause because of creating trouble with another employee who was also dismissed and that even if the said complainant was separated for cause, he received compensation pay and hereby relieved respondent from whatever claim or claims that he had against respondents." Laches was not invoked by herein petitioners in their answer (Annex B, pp. 21-22, rec.), nor in their memorandum dated October 28, 1963 (Annex C, pp. 23-32, rec.), much less in their arguments dated February 12, 1964 in support of their motion dated and filed on August 3, 1964 for the reconsideration of the decision dated January 23, 1964. It is only in their instant petition for review filed on August 28, 1964 that they relied on laches, aside from estoppel, to defeat herein private respondent Dayao's ULP charge, taking a cue from the dissent dated July 27, 1964 of Judge Emiliano R. Tabigne of the herein respondent Court of Industrial Relations, from the resolution of February 25, 1964 of the Presiding Judge and three Associate Judges of the respondent Court of Industrial Relations denying herein petitioners' motion for reconsideration of their decision dated January 17, 1964.

G.R. No. L-23357 April 30, 1974 MERCURY DRUG CO., INC. and MARIANO QUE, petitioners, vs. COURT OF INDUSTRIAL RELATIONS and NARDO DAYAO, respondents. MAKASIAR, J.:p Petitioners Mercury Drug Co., Inc. and Mariano Que, as manager, seek the reversal of the decision of respondent Court of Industrial Relations dated January 17, 1964 and its order dated February 25, 1964 denying petitioners' motion for reconsideration of the said decision.

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I It is an established principle that the findings of fact of the Court of Industrial Relations, when supported by substantial evidence, are conclusive and binding on this Court (Sec. 6, R.A. No. 875; Phil. Fiber Processing Co., Inc. vs. CIR, L-29770, July 19, 1973, 52 SCRA 110, 114; Bulakea Rest. & Cat. vs. CIR, L-26796, May 25, 1972, 45 SCRA 87, 100; Compania Maritima vs. Compania Maritima Labor Union, L-29504, Feb. 29, 1972, 43 SCRA 464, 468; Cruz vs. Phil. Assn. of Free Labor Unions, L-26519, Oct. 29, 1971, 42 SCRA 68; Phil. Eng. Corp. vs. CIR, L-27880, Sept. 30, 1971, 41 SCRA 89; Castillo vs. CIR, L-26124, May 29, 1971 39 SCRA 75, 83; Lakas ng Manggagawang Makabayan vs. CIR, L-32178, Dec. 28, 1970, 36 SCRA 600). If the respondent Court ignored the evidence adduced by herein petitioners, it would be guilty of grave abuse of discretion to warrant a review by Us of the findings of fact (Caltex Filipino, etc. vs. CIR, L-30632-33, Apr. 11, 1972). Contrary to the contention of herein petitioners, the finding of fact that herein private respondent Nardo Dayao was dismissed from the service because of his union activities and that consequently herein petitioners were guilty of unfair labor practice is amply substantiated by credible evidence. Thus, the referee hearing officer, whose findings of fact and conclusions of law, were affirmed in toto by the respondent Court to be "supported by the evidence and the law on the matter," stated in his report: Dayao testified that on April 10, 1961, respondent Que summoned him in the office and inquired why he was organizing a new union in spite of the fact that there is already a labor organization existing in the company and when he replied: "I did this thing because the company has not been paying us the minimum wage the company has not been paying us for four hours work rendered on Sundays and also for four hours work rendered on special holidays" (Tsn. pp. 8-9, July 10, 1963), respondent Que said: "Ah ganoon pala. So you are organizing a new union, if that is so, from now on I do not like to see you any more in this office and you can no longer enter the service or work in the company, I don't like unionist" (Tsn. pp. 10-11, ibid); that several minutes after he was told to wait, respondent Que brought out an amount of money and a piece of paper which he was asked to sign before delivering to him the money that he told respondent Que: "I cannot sign this paper because in fact and in truth I am not resigning from the company" but respondent Que retorted: whether you sign it or not, you could no longer work so you better sign it; and that "after thinking about the matter that whether or not I sign the paper I would be laid off and if I would be laid off I would have no money, so ultimately, I signed the paper and received the amount of P562.50 stated in the paper." (Tsn. pp. 11-12, ibid). The paper referred to is a cash voucher (Exhibit "A" and also Exhibit "4") covering complainant's separation pay of 15 days for every year of service.

Dayao also declared that the proximate or immediate cause why he made efforts to organize a separate union which he actually began in February, 1961, "was because the management, particularly the manager, in spite of my several approaches to him, and in spite of my several representations made to pay us the additional twenty-five percent and excess of the four hours work on Sundays and legal holidays, did not like to give us such right or such payment" and for the further reason that "our union, the Mercury Drug Company, Incorporated Employees" Union, was anemic in that it did not do anything towards the welfare and protection of its member-employees, like for example those employees who were dismissed were not investigated and also I approached our president of the union bringing to his attention my request to the manager about the payment of extra-compensation for work on Sundays and special holidays and our union president told me that he could not do anything about that.' (Tsn. pp. 34-35, ibid). According to Dayao, among the employees he had convinced beginning February, 1961 and who agreed with him to organize another union were Josias Fideras, Nestor Talampas, Armando de Leon, Aladdin Dimagmaliw and Rogelio Orbeta. The testimonies of Josias Fideras and Nestor Talampas, assistant traffic supervisor and driver-delivery man, respectively, substantially corroborated Dayao's declaration in material points, in that sometime in February, 1961, the latter talked to them to joining a new labor union that he was organizing; that they were convinced of Dayao's explanations and agreed to go along with his activities because of the management's aversion to pay them overtime on Sundays and holidays and in of the fact that their Association in the company was not good or it was not doing anything for the interest of its welfare of its members; and that Dayao was not able to formally organize a separate union, as planned, because he was discharged from the service of the corporation. On the other hand, testifying on the cause of complainant's separation from the service, the president and general manager of the corporation, respondent Mariano Que, declared: "I think he (Dayao) quarreled with the president of their union, as a matter of fact he even have his head swollen, and he also threatened, I think Ranin. He even threatened that he would kill Ranin so I called them to the office to discuss the matter. I tried to pacify them, but they seem to be really very very mad at each other and they wanted to quarrel. So I told them if that is the case, that they want to create scandal in the office, I think it would be better for them to resign. At that time actually they were in a furious mood that they could not be pacified, so I requested that they resign from their job because I did not want to affect the office, and they both agreed that they resign." (Tsn. pp. 7-8, September 21, 1963). According to respondent Que, the quarrel between Dayao and Ranin happened on Saturday, April 8, 1961, in the Apollo Restaurant. In other words, the alleged incident did not take place in the office or premises of the respondent corporation.

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Jacinto Concepcion, personnel manager and also acting paymaster, stated that on Monday, April 10, 1961, upon instruction of Mariano Que, he prepared the cash voucher covering the separation pay of Dayao of 15 days for every year of service, as well as the corresponding check therefor in the sum of P562.50 and that after Dayao had signed the voucher, the check was delivered to him on that same day; and that Dayao likewise received the amount of P140.58 representing his salary for a certain period not shown in the records (Exhibit "3"), and also signed a clearance statement to the effect that he has no claims of whatever kind and nature against the respondents (EXHIBIT "1"). Concepcion, however, confessed no personal knowledge of the alleged quarrel between Dayao and Ranin in the Apollo Restaurant on the evening of April 8, 1961, except from what respondent Que told him on April 10, 1961. Romualdo Reyes, secretary and legal counsel of the corporation, among others, claimed that sometime before the separation of complainant, the latter had consulted him outside of the office about the vale system of the Association and asked his intercession so that said complainant could also get bigger vales like the other officers of the Association but that he refused telling Dayao that the company has nothing to do about the matter for that is the affair of the Association. Atty. Reyes was not present at the conference between respondent Que and complainant Dayao on April 10, 1961, and just like Concepcion, he was only informed by Que of what transpired therein. In the examination in chief and in rebuttal, Dayao denied having had a quarrel with the Association president, Apolinario Ranin, on any date before his dismissal and also asserted that he is not aware of whether Ranin was also dismissed or not. Fideres and Talampas also professed no knowledge about the alleged quarrel. There is no question that complainant from the respondents the two sums of money stated above, as well as having signed Exhibits "1", "3" and "4". There is also no dispute that he was called by respondent Que in the Office on April 10, 1961, and on that date was separated from employment. The only question to be decided is whether Nardo Dayao was discharged due to union activities, as he alleged, or for valid cause because of creating trouble with another employee, as claimed by the respondents. After carefully scrutinizing the records and evidence adduced in this case, the Court is not inclined to believe the version given by the respondents. Be it noted that there is no clear and positive proof establishing the fact that there really was a quarrel between Dayao and Ranin which allegedly happened in the Apollo Restaurant on the night of April 8, 1961. Respondent Que's declaration that "I think" there was such a quarrel and that he again "think" that Dayao would inflict bodily harm to Ranin could not be given credence as it was only based on surmise and belief. Likewise, the testimonies of Jacinto Concepcion and Romualdo Reyes regarding the said incident could not be given probative weight because the tales they narrated in Court relative thereto were just information they received from respondent Que, who may be said is not a disinterested party if not biased. And while it is incumbent upon Concepcion to

make investigation of troubles among the company employees in view of his position as personnel manager, as he admitted, no investigation was made in the case of Dayao and Ranin even after he was so informed of such trouble. (Tsn. p. 69, J. Concepcion, August 31, 1963). It must be noted that Dayao vehemently and steadfastly denied having had a quarrel with Ranin on any given time and expressed no knowledge of whether Ranin was also discharged or is still in the employ of the corporation. In this connection, it is significant that Ranin, then union president and one of the alleged protagonists, who could very well corroborate respondent Que's testimony on the incident and thus overcome Dayao's denial, was not presented by the respondents as a witness in this case, a circumstance which strongly militates against their cause. But granting arguendo that the quarrel did really occur, the Court nevertheless is of the opinion that it could not be a sufficient basis for discharging from employment complainant herein. The quarrel admittedly took place in a restaurant far from the company premises and, therefore, did not and could not have prejudiced and affected in any manner the normal course of business of the corporation nor, to say the least, has it relevant bearing on the complainant's employment as there is no showing that the incident happened during complainant's official working time. The added contention that the complainant resigned when told to do so by respondent Que does not generate belief. It is worthy to mention that the complainant had been continuously in the service of the corporation for more than five years since February 23, 1956, working as a driver, a delivery man, a checker, and then as assistant to the chief checker of the checking department. There is no doubt his promotions in positions were with corresponding increase in pay. He is a family man. His employment in the corporation is his only means of livelihood. This being so and taking into account the prohibitive prices of prime necessities in life nowadays, the tightness of money and scarcity of employment opportunities being felt not only in metropolitan areas but also in rural and urban places, it is hard to believe that Dayao would be so irresponsible and reckless to resign his position. He never intended leaving the service of the corporation but, as the records demonstrate the receipt of the money, execution of Exhibits "1", "3" and "4", and consequent separation from employment were forced upon him. There was no actual physical force employed by respondent Que upon the person of Davao into making him sign the documents and receive the termination pay. But the act of the president and general manager of the corporation in telling complainant herein that whether or not he signs the documents he would be dismissed just the same could be said a direct threat and a display of force and authority which afforded Dayao no alternative but to obey as he was bided to do. While troubles among the employees, according to personnel manager Concepcion, are investigated by him, no such investigation was conducted by him regarding the alleged trouble between Dayao and Ranin "because I did not want to prejudice the general manager inasmuch as he was personally handling the case." (Tsn. p. 69, August 31, 1963). If Concepcion, who belongs to the managerial staff,

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was fearful of antagonizing the president and general manager of the corporation, how much more of a minor employee like Dayao. Under such a situation, it is believed that no reasonable person would do less than what Dayao did in signing the documents and receiving the amount of his separation pay. But acceptance of termination pay does not divest a laborer the right to prosecute his employer for unfair labor practice acts (PMC vs. National Labor Union, 48 O.G. 2765; Philippine Sugar Institute vs. CIR, et al., G.R. No. L-13475, Sept. 29, 1960), much less for signing the clearance paper, Exhibit "1", considering the attendant circumstances surrounding the execution of the same. (See also Sec. 5[a], R.A. 875). The fact is that complainant herein was given the separation pay and told to leave the service of the corporation because of his union activities. It has been shown that his efforts and representations made to respondent Que for the payment of overtime compensation and for the excess hours of work rendered on Sundays and holidays were of no avail. According to the respondents, such claims are not tenable because they are fully covered by the contracts of employment. But, as the records will indicate, Dayao believed otherwise and his stand was shared by the other employees, like Josias Fideres and Ernesto Talampas. An examination of the employment or appointment paper of Nardo Dayao, dated October 30, 1959 (Exh. "B", also Exh. "2") would show that the contents thereof may be subject to interpretation, more particularly with respect to whether the employee is entitled to overtime or additional compensation to the "4 hours work on every Sunday of the month" and "4 hours work on all legal holidays," or that the same is included in the basic pay. But the Court refrains from passing on the matter because that is not the issue in this case. What is important to state is the fact that the management had received same request from the employees for clarification on whether they should be given additional compensation for four hours work on Sundays and holidays. Thus, Concepcion declared HEARING OFFICER (To the witness) On this particular matter of four hours work on every other Sunday of the month and four hours work on legal holidays, have you received a request for clarification of such matter, THE WITNESS Yes, sir. (Tsn. p. 87, August 31, 1963) Moreover, according to Atty. Reyes, in a special meeting of the Mercury Drug Company, Inc. Employees' Association held on August 31, 1969, he took the opportunity to explain to those gathered in the said meeting that the additional compensation for the four hours work on Sundays and holidays is already included in their basic pay, which only demonstrate that there was already a clamor then for such additional pay. The foregoing buttress the complainant's assertion that on several

occasions he had requested respondent Que for the payment of such additional compensation, a fact not denied or rebutted by the said respondent. It has also been established that Dayao brought to the attention of the president of the Association the matter of additional compensation with the view to having their union make a concerted request from management for the payment thereof but Apolinario Ranin, then the Association president, told him that nothing could be done about his request. This piece of evidence remained unrebutted also because Ranin was not called by the respondents to testify in this case. In relation thereto, there is reason to believe that the Association had been less vigorous and potent as an existing labor organization because before and after the present dispute arose, it had and still continues to have as its presidents persons occupying managerial and high confidential positions, whose interests are evidently allied with that of the management. This conclusion finds further support from the testimony of the present Association president, Jacinto Concepcion, that he was unaware of any meeting held during the incumbency of his predecessor, Apolinario Ranin, and that it was through his personal talks with management and not through the representation of the Association that the employees have been granted each a sack of rice or equivalent value of P25.00 a month and also the benefit of group insurance. What is even worse is that Concepcion could not state the names of the other officers of the Association during his incumbency, as well as during the term of office of Ranin. "Considering the foregoing facts and circumstances, there is reason to believe complainant's assertion that due to the failure of the management to pay them the additional compensation for services on Sundays and holidays and for the excess of the four hours work on said days and compounded by the refusal of the then Association president to take common cause with his request for the payment of such money claim, he did plan to form a separate union, no doubt, upon the hypothesis that in union there is strength. The records show that beginning February, 1961, he put into effect his plan by campaigning among his co-employees in the respondent corporation, like Josias Fideres, Nestor Talampas, Armando de Leon, Aladdin Dimagmaliw and Rogelio Orbeta. That he really exerted efforts talking to, and convincing, the employees and laborers of the corporation to join with him in organizing a new union was satisfactorily substantiated and corroborated by two witnesses, Fideres and Talampas, whose presence in Court it may be worth mentioning was made possible by the complainant herein only through the coercive processes of the Court. They, however, declared that the new union was formally established, as planned, due to the complainant's separation from the service. Be it emphasized that respondent Que never disclaimed knowledge of charging employee's union activity. In his testimony, he did not state or in any way insinuate that he was not aware of Dayao's union activity before April 10, 1961. It was Concepcion who expressed into the records no knowledge of the activity of Dayao, but whose testimony to that effect, nevertheless, is of no moment considering that he

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had no hand nor was he consulted by respondent Que in the punitive action taken against Dayao. The evidence, therefore, of the complainant that respondent Que came to know of his activity of trying to organize another union before his discharge remained unassailed. From all the foregoing discussion, it is clear that the preponderance of evidence sustains a finding in favor of the complainant's version of what occurred between him and respondent Que in the office of the corporation on April 10, 1961, and the Court, therefore, holds that respondents have interfered with complainant's union activity and that his dismissal from employment was discriminatory. (Pp. 35-42, rec.). The foregoing searching analysis by the hearing officer of the evidence submitted by the parties in the hearing of the unfair labor practice charge, is so impressive and so logical that his findings of facts and conclusions of law were unqualifiedly adhered to by the four members of the respondent Court of Industrial Relations. WE can do no less. II The insistence on the part of petitioners that the acceptance by private respondent Dayao of a separation pay and his signing a renunciation of any other claim against herein petitioners, militates against the charge of unfair labor practice gets into the teeth of the principle that such waiver of the rights of labor contravenes public policy and therefore null and void, more so in this case when the root cause of the union activities of Dayao was precisely motivated by his campaign for additional compensation for overtime pay under the Eight-Hour Labor Law, against which claim estoppel or laches is unavailing (see Manila Terminal Co., Inc. vs. CIR, et. al., 91 Phil. 625); because acceptance of termination pay does not divest a laborer of the right to prosecute his employer for unfair labor practice acts (Carino vs. ACCFA, L-19808, Sept. 29, 1966, 18 SCRA 183, 190; DMC vs. National Labor Union, 48 O.G. 2765; Phil. Sugar Institute vs. CIR, et. al., L-13475, Sept. 29, 1960). As Mr. Justice Conrado Sanchez, speaking for the Court in the Carino case, supra, stated: "Acceptance of those benefits would not amount to estoppel. The reason is plain. Employer and employee, obviously, do not stand on the same footing. The employer drove the employee to the wall. The latter must have to get hold of money. Because, out of job, he had to face the harsh necessities of life. He thus found himself in no position to resist money preferred him. His, then, in a case of adherence, not of choice. One thing sure, however, is that petitioners did not relent on their claim. They pressed it. They are deemed not to have waived any of their rights. Renuntiatio non praesumitur." As in the case at bar, private respondent has never relented in his claim. His filing was merely delayed and he is pressing it.

From the time he was employed as checker, private respondent was made to waive his right for additional compensation for overtime pay under the appointment extended to him (see pp. 59-60, rec., or pp. 14-15, Annex F). Said qualified appointment is clearly an exploitation of the employee who would be compelled to work more than eight hours on Sundays and legal holidays without additional compensation, since in his appointment additional compensation for work on Sundays and holidays was deemed or expressly included in his annual salary of P2,400.00. Under such an appointment, he can be required to work for four hours every Sunday and for four hours on every legal holiday without additional pay. III It is true that unfair labor practice charge with the prayer for reinstatement with back wages should be filed within a reasonable period of time. But laches, like estoppel, should also be alleged as a defense in the answer, otherwise the same is considered renounced. Petitioners failed to expressly allege the same in their answer to the ULP charge, in their memorandum and in their motion for reconsideration of the CIR decision. However, the lapse of two years and 15 days from the dismissal from the service to the filing of the ULP charge is not an unreasonable period of time under the circumstances. In this respect, the statute of limitations prescribed by the Civil Code of the Philippines should apply in the absence of any other specific legal provision. Article 1146 of the Civil Code of the Philippines directs that the action upon an injury to the rights of the plaintiff must be instituted within four years. An action upon a contract should be filed within 10 years (Art. 1144, CCP). All other actions whose periods are not fixed in the Civil Code or in other laws must be brought within five years from the time the right of action accrues (Art. 1149, CCP). Whether the ULP charge is based on an injury to the rights of Dayao or placed under the category of all other actions for which no law prescribes the time limit for their institution, the filing by respondent Dayao of the ULP charge against herein petitioners was well within either the prescriptive period. It should be stressed that the 1935 Constitution has been very solicitous for the welfare of labor and expressly stated that the State shall afford protection to labor (Sec. 6, Art. XIV, 1935 Constitution) and expressly committed itself to the promotion of social justice to insure the well-being and economic security of all the people (Sec. 5, Art. II, 1935 Constitution). The 1973 Constitution expanded such guarantees and imposes upon the State the duty to "assure the rights of workers to self-organization, collective bargaining, security of tenure, and just and humane conditions of work," after stipulating that the State "shall promote full employment and equality in employment, insure equal work opportunities regardless of sex, race or creed" (Sec. 9, Art. II, 1973 Constitution). WE would be denying such constitutional guarantees to herein private respondent Dayao, if the position of herein petitioners were sustained.

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Finally, if the dismissal of herein private respondent Dayao was for just cause, then there was no reason for petitioners-employers to give him termination pay; because under the Termination Pay Law, otherwise known as Republic Act No. 1052, as amended by Republic Act No. 1787, the employee whose services are terminated for just cause is not entitled to termination pay (Sec. 1, Rep. Act No. 1052, as amended). Even under the Termination Pay Law, the alleged quarrel between private respondent Dayao and one Ranin, the president of the labor union, in the presence of herein petitioner Mariano Que as manager of petitioner corporation, is not one of the grounds justifying the dismissal of private respondent Dayao. It is not even analogous to "serious misconduct or willful disobedience of the orders of his employer or its representative in connection with his work." Even if it were conceded that private respondent Dayao verbally quarrelled with the former president of their employees' association in the presence of manager Mariano Que and that both ignored the latter's admonition for them to stop quarrelling, at most the same was discourtesy which was not intended considering the origin of their quarrel the failure of Ranin, former president of the labor union, to fight for overtime pay for services rendered on Sundays and holidays. Such discourtesy, at most, merits merely a reprimand or admonition but not outright dismissal, since it did not involve the efficiency nor honesty of private respondent Dayao. The fact that Dayao had been in the service for five years and ten months, during which period of time he was promoted from driver to delivery man, to checker and finally to assistant chief checker in the Checking Department with a salary of P225.00 a month demonstrates his efficiency, competence and trustworthiness. The remaining question is how much back wages shall be allowed private respondent Dayao. While this case was submitted for decision on March 29, 1965, the delay in its resolution is not due to the parties. However, it should be noted that private respondent Dayao filed his ULP charge with reinstatement and back wages about two years and fifteen days after his separation on April 10, 1961. As aforestated, the shortest prescriptive period for the filing of all other actions for which the statute of limitations does not fix a period, is four years. The period of delay in instituting this ULP charge with claim for reinstatement and back wages, although within the prescriptive period, should be deducted from the liability of the employer to him for back wages. In order that the employee however should be relieved from proving his income during the period he was out of the service and the employer from submitting counter-proofs, which may delay the execution of the decision, the employer in the case at bar should be directed to pay private respondent Dayao back wages equivalent to one year, eleven months, and fifteen days without further disqualifications. In fairness to the employer, he should not be compelled to reinstate an employee who is no longer physically fit for the job from which he was illegally ousted.

WHEREFORE, THE PETITION IS HEREBY DISMISSED AND PETITIONERS ARE HEREBY DIRECTED: (1) TO PAY PRIVATE RESPONDENT NARDO DAYAO BACK WAGES EQUIVALENT TO ONE YEAR, ELEVEN MONTHS, AND FIFTEEN DAYS; . (2) TO REINSTATE HIM AFTER CERTIFICATION OF HIS PHYSICAL FITNESS BY A GOVERNMENT PHYSICIAN; AND (3) TO PAY THE COSTS. SO ORDERED.

G.R. No. 151818 October 14, 2005

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ORIENTAL PETROLEUM and MINERALS CORPORATION, Petitioner, vs. MARCIANO V. FUENTES, ROGER B. BELO, REYNOLD P. GACULA, ALBERTO P. RODRIGUEZ, NESTOR L. MESINA, MA. LOURDES P. BUENAVISTA, and LUZVIMINDA M. DE CASTRO, Respondents. Tinga, J.: This Petition for Review on Certiorari dated February 22, 2002 seeks a review of 2 the Decision of the Court of Appeals dated July 31, 2001 which annulled and set aside the decision of the National Labor Relations Commission (NLRC) and reinstated the decision of the labor arbiter, finding that the dismissal of respondents on account of retrenchment was illegal and awarding the latter full backwages, separation pay, and attorneys fees. A brief factual background follows. In separate letters dated June 2, 1994, petitioner petitioner Oriental Petroleum and Minerals Corporation, through its Senior Vice President for Operations and Administration, Apollo P. Madrid, informed respondents Marciano V. Fuentes, Roger B. Belo, Reynold P. Gacula, Alberto P. Rodriguez, Nestor L. Ledesma, Ma. Lourdes P. Buenavista and Luzviminda M. de Castro of its retrenchment program as a consequence of which respondents would be terminated from employment. Petitioner advised respondents that they would be getting separation pay equivalent to one-half (1/2) month salary for every year of service in accordance with the companys retirement plan. However, if respondents qualify for retirement or resignation benefits under the retirement plan, they would receive the greater amount as separation benefits. The Department of Labor and Employment (DOLE) was served a copy of the report of 4 termination on June 6, 1994. In a letter dated June 7, 1994, respondents sought clarification on the retrenchment package 6 being offered them. Petitioner replied, in a letter dated June 13, 1994, that respondents Mesina, Rodriguez, De Castro and Buenavista would be entitled to one (1) month gross salary for every year of service, while respondents Fuentes, Gacula and Belo would receive one-half (1/2) month gross salary for every year of service. Finding this unacceptable, respondents requested that the following benefits be extended to them: (a) two (2) months separation pay (gross salary) on top of one (1) month retirement fund for every year of service; (b) profit sharing; (c) one (1) month balance of the 1993 Christmas bonus; (d) two (2) months 1994 mid-year bonus; (e) loyalty bonus for those who
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have rendered fifteen (150 years of service amounting to about P10,000.00; (f) conversion to th) cash of accrued vacation and sick leaves; (g) thirteenth (13 month pay; and (h) I-care coverage to continue up to the end of coverage in December 1994 since premiums have 7 been paid for in full and no refunds are given for early cancellation. Acting on the request, petitioner countered that respondents would be given the following benefits: (1) loyalty bonus for those who have rendered at least 15 years of continuous service amounting to P10,000.00; (2) conversion to cash of the accrued 1994 vacation and sick leave credits; and (3) pro-rated 13th month pay. Dissatisfied with petitioners counter-offer, respondents filed on July 4, 1994 separate 8 complaints for illegal retrenchment with prayer for the payment of backwages, actual damages, moral and exemplary damages, and attorneys fees. After due proceedings, the labor arbiter rendered a decision dated June 29, 1995, finding the retrenchment invalid as there was allegedly no sufficient basis therefor. The dispositive portion of the decision states: WHEREFORE, viewed from the foregoing considerations, judgment is hereby rendered finding the retrenchment of all the herein complainants not legal and just, thus their termination inevitably becomes illegal. Accordingly, respondent Oriental Petroleum & Minerals Corporation (OPMC) is hereby ordered to pay all the complainants their full backwages and all appurtenant benefits from the time of their dismissal on July 4, 1994 including loyalty bonus and the cash equivalent of their accrued vacation and sick leave credits. In lieu of reinstatement however, respondent OPMC is hereby ordered to pay each complainant their separation pay equivalent to one (1) month gross salary per year of service, a fraction of at least six (6) months equivalent to one (1) whole year, the total award computed as follows: exclusive of the award of loyalty bonus prevailing at the time of complainants separation and the updated balances of complainants[] accrued vacation and sick leave, also reckoned as of July 4, 1995. Attorneys fees equivalent to ten percent (10%) of the total monetary award is likewise awarded to the complainants. The claim for damages is hereby dismissed for lack of merit.
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All individual respondents are hereby absolved of personal liability for they acted only in their official capacity. SO ORDERED.
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personnel, especially specialists and consultants with exorbitant salaries and generous fringe benefits, prior to and even during the alleged retrenchment program; regularized temporary employees; and issued and sold more than six (6) billion shares of its common stock for additional capitalization, indicating a decision to actively invest even as the company was claiming bankruptcy. Petitioner also allegedly failed to present evidence as to the criteria it used in effecting the retrenchment, such as less preferred status, efficiency, and seniority. In its Resolution dated January 14, 2002, the Court of Appeals denied petitioners motion for reconsideration. Petitioner is now before this Court arguing that it undertook a valid retrenchment as it was already actually suffering serious financial losses at the time the retrenchment was undertaken. It cites the same data and figures presented and adopted by the NLRC. Moreover, the finding that petitioner hired new personnel and regularized temporary employees prior to and during the retrenchment is allegedly without any factual and evidentiary support. Respondents, on whom the burden of proving this affirmative allegation fell, did not even bother to name who the alleged new employees were. Petitioner also notes that the OSG itself, in its comment, stated that petitioner undertook the retrenchment scheme as a last ditch effort to prevent further losses and that it complied with the required notices both to the employees concerned and to the DOLE, leaving no doubt that the retrenchment was done in good faith. Further, petitioner maintains that the NLRC decision was supported by substantial evidence; thus, the Court of Appeals should not have entertained the petition for certiorari, much less made its own independent findings of fact. Respondents filed a Comment dated September 11, 2002, arguing mainly that the instant petition should not be entertained as it raises questions of fact. They further argue that the Court of Appeals was correct in reversing the decision of the NLRC because petitioner failed to prove that it incurred substantial losses; show that retrenchment was a last resort and that other less permanent cost-cutting measures had been availed of but had failed; and prove that it followed the criteria in dismissing employees based on retrenchment; and because petitioners Corporate Secretary, Atty. Perry Pe, admitted that the decision to retrench was made ahead of the decision to cut costs. Petitioner filed a Reply
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Petitioner instituted a partial appeal of the decision of the labor arbiter insofar as the latter ruled that the retrenchment of respondents was invalid, as well as with respect to the award of backwages. Resolving the partial appeal, the NLRC held that petitioners serious financial difficulties necessitated the retrenchment of respondents. Petitioners audited financial statements allegedly showed that it had suffered a net loss in the amount of P107,812,816.00 in 1993; and that its assets went down from P312.902 million in 1992 toP212.072 million in 1993, while its liabilities soared from P376.01 million in 1992 to P519.143 million in 1993. Further, in order to raise money to meet its maturing financial obligations, petitioner sold several of its shareholdings in Magellan Capital Holdings Corporation and several assets consisting of cars, a townhouse, an office condominium unit and some equipment. The land, building and other assets of its wholly-owned subsidiary, Oriental Mahogany and Woodworks, Inc., were also sold for the same purpose. A substantial number of its unissued shares of stock were 11 likewise disposed of. The NLRC, therefore, reversed the decision of the labor arbiter and instead ordered petitioner to pay respondents the severance compensation enumerated in its June 13 and June 30, 12 1994 letters. Respondents motion for reconsideration was denied for lack of merit. Respondents filed a petition for certiorari under Rule 65 of the 1997 Rules of Civil Procedure (Rules of Court) with this Court. We required petitioner and the Office of the Solicitor General (OSG) to file their respective comments but later referred the case to the Court of Appeals in 13 view of our ruling in St. Martin Funeral Homes v. NLRC. In its assailed Decision dated July 31, 2001, the Court of Appeals reversed the decision of the NLRC and reinstated that of the labor arbiter. The appellate court proceeded to review the factual findings of the NLRC and ruled that petitioner failed to prove the existence of substantial losses that would justify the retrenchment of respondents. Quoting the findings of the labor arbiter, the Court of Appeals stated that petitioner enjoyed an increase in its operations revenue from 1992 to 1993. The appellate court made short shrift of petitioners claim that it had to sell the bulk of its assets in order to meet its financial obligations. Moreover, petitioner allegedly failed to prove that it resorted to less drastic and less permanent cost-cutting measures before the decision to retrench respondents was implemented. Petitioner also failed to rebut respondents allegation that petitioner hired new
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dated December 17, 2002, reiterating its arguments.

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In the Resolution dated January 22, 2003, the parties were required to submit their 19 respective memoranda. Accordingly, petitioner filed its Memorandum on April 21, 2003, 20 while respondents filed theirs on May 13, 2003. We first resolve the question of whether, in a petition for certiorari assailing the decision of the NLRC, the Court of Appeals may make an independent evaluation of facts. Ordinarily in certiorari proceedings, judicial review does not go as far as to examine and assess the evidence of the parties and to weigh the probative value thereof. However, in St. Martin Funeral Homes v. NLRC, supra, it was held that the special civil action of certiorari is the mode of judicial review of the decisions of the NLRC either by this Court or the Court of Appeals, although the latter court is the appropriate forum for seeking the relief desired in strict observance of the doctrine on the hierarchy of courts and that, in the exercise of its power, the Court of Appeals can review the factual findings or the legal conclusions of the 21 NLRC. The Court of Appeals in this case, therefore, cannot be faulted for making a full review of the factual findings of the NLRC. Whether it correctly disregarded these findings and reversed the resultant decision is another matter which we will now proceed to review. The fundamental question is, of course, whether the retrenchment was validly undertaken. 22 Retrenchment is one of the authorized causes recognized by the Labor Code for the dismissal of employees. It is a management prerogative resorted to by employers to avoid or minimize business losses. The Court has laid down the following standards that a company must meet to justify retrenchment and to foil abuse: Firstly, the losses expected should be substantial and not merely de minimis in extent. If the loss purportedly sought to be forestalled by retrenchment is clearly shown to be insubstantial and inconsequential in character, thebonafide nature of the retrenchment would appear to be seriously in question. Secondly, the substantial loss apprehended must be reasonably imminent, as such imminence can be perceived objectively and in good faith by the employer. There should, in other words, be a certain degree of urgency for the retrenchment, which is after all a drastic recourse with serious consequences for the livelihood of the employees retired or otherwise laid-off. Because of the consequential nature of retrenchment, it must, thirdly, be reasonably necessary and likely to effectively prevent the expected losses. The employer should have taken other measures prior or parallel to retrenchment to forestall losses, i.e., cut other costs other than labor costs. An employer who, for instance, lays off substantial numbers of workers while continuing to dispense fat executive bonuses and perquisites or so-called "golden parachutes," can scarcely claim to be retrenching in good faith to avoid losses. To impart operational meaning to the constitutional policy of providing "full protection" to labor, the employers prerogative to bring down labor costs by retrenching

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must be exercised essentially as a measure of last resort, after less drastic means e.g., reduction of both management and rank-and-file bonuses and salaries, going on reduced time, improving manufacturing efficiencies, trimming of marketing and advertising costs, etc.have been tried and found wanting. Lastly, but certainly not the least important, alleged losses if already realized, and the expected imminent losses sought to be forestalled, must be proved by sufficient and convincing evidence. The reason for requiring this quantum of proof is readily apparent: any less exacting standard of proof would render too easy the abuse of this ground for 23 termination of services of employees. Petitioner presented its audited financial statements for the years 1992 and 1993 to demonstrate that retrenchment was necessary to put a stop to its actual losses and prevent further losses. The financial statements show that petitioners total current assets dipped from P325,167,148.00 in 1992 to P221,001,191.00 in 1993. Its total current liabilities, on the other hand, swelled from P373,571,128.00 in 1992 to P517,301,874.00 in 1993. Its costs likewise increased from P262,698,049.00 in 1992 to P456,507,065.00 in 1993. The financial statements reflect that petitioner suffered a net loss of P107,812,816.00 in 1993 contrasted with its net earnings ofP148,229,404.00 in 1992. These figures do not bode well for petitioners financial future. However, while it is true that the Court has ruled that financial statements audited by independent external auditors constitute the normal method of proof of the profit and loss performance of a 24 Company, financial statements, in themselves, do not suffice to meet the stringent requirement of the law that the losses must be substantial, continuing and without any 25 immediate prospect of abating. Retrenchment being a measure of last resort, petitioner should have been able to demonstrate that it expected no abatement of its losses in the coming years. Petitioner having failed in this regard, we find that the Court of Appeals did not err in dismissing as unimpressive and insufficient petitioners audited financial statements. Nonetheless, we disagree with the appellate courts ruling that petitioner was not able to prove that retrenchment was resorted to only after less drastic means have been tried and found wanting. According to the labor arbiter and the Court of Appeals, petitioner failed to show that it adopted other cost-cutting measures short of retrenchment. However, both failed to appreciate the significance of petitioners assertion borne out by the records that it took several measures prior or parallel to retrenchment, such as: (1) the sale of its shareholdings in Magellan Capital Holdings Corporation to raise money to pay off the oil drilling operator to

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avoid being declared in default; (2) the sale of several of its assets consisting of cars, townhouse unit, and office condominium unit (where petitioner holds office), and equipment like jaw crushers and other scrap materials in the companys Sabina Mines in Mindanao; (3) the sale of the land, building and other assets of its wholly-owned subsidiary, Oriental Mahogany and Woodworks, Inc.; and (4) the call to its various stockholders to pay all of their unpaid subscriptions to petitioners capital stock and offer of pre -emptive rights to its stockholders for the sale of its Class B Common Stocks to raise capital to meet its various obligations. Even the OSG concedes that petitioner did take remedial measures to forestall losses. Further, the allegations regarding the foregoing measures taken by petitioner as prior and parallel solutions were never disputed by respondents. Interestingly, it is only the Court of Appeals which cites respondents allegation that petitioner hired new personnel, purportedly with exorbitant salaries and generous fringe benefits, and regularized temporary employees, and treats these as indicia that petitioner failed to adopt other cost-cutting measures short of retrenchment. Notably, however, the records do not bear any proof that this allegation was substantiated, at least by naming the supposed newly-hired personnel or regularized employees. Hence, it deserves no weight in law. As regards the rule that reasonable criteria be used in effecting retrenchment, such as but not limited to: (a) less preferred status (e.g., temporary employee); (b) efficiency; and (c) 26 seniority, we find that petitioner failed to demonstrate its transparency and good faith in the implementation of its decision to retrench respondents. While it contends that the termination of two (2) non-regular employees ahead of respondents shows that it complied with the requisite fair and reasonable criteria, that fact alone is insufficient, considering the importance this Court has given to the observance of fair and reasonable criteria in the implementation of a retrenchment scheme. In Philippine Tuberculosis Society, Inc. v. National Labor Union , for instance, the Court agreed with the finding of the NLRC that though petitioner therein was justified in ordering a retrenchment, its implementation of the scheme without taking seniority into account rendered the retrenchment invalid. In that case, petitioners criteria f or retrenchment included dependability, adaptability, trainability, job performance, discipline and attitude towards work. Quoting the NLRC, the Court stated: We noted with concern that the criteria used by the Society failed to consider the seniority factor in choosing those to be retrenched, a failure which, to our mind, should invalidate the retrenchment, as the omission immediately makes the selection process unfair and unreasonable. Things being equal, retaining a newly hired employee and dismissing one who had occupied the position for years, even if the scheme should result in savings for the
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employer, since he would be paying the newcomer a relatively smaller wage, is simply unconscionable and violative of the senior employees tenurial rights. In Vi llena v. NLRC, 193 SCRA 686, February 7, 1991, the Supreme Court considered the seniority factor an important ingredient for the validity of a retrenchment program. According to the Court, the following legal procedure should be observed for a retrenchment to be valid: (a) one-month prior notice to the employee as prescribed by Article 282 of the Labor Code; and (b) use of a fair and reasonable criteria in carrying out the retrenchment program, such as 1) less preferred status (as in the case of temporary employees), 2) efficiency rating, 3) seniority, and 4) proof of 28 claimed financial losses. In this case, petitioner presents the following allegation in rebuttal of the appellate courts finding that it failed to comply with the required criteria set by jurisprudence in effecting retrenchment: More importantly, it further shows that with the retrenchment of non-regular employees in the person of Atty. Sison and Mr. Gagni, the Petitioner was not remised (sic) in complying with the required fair and reasonable criteria laid down by the Supreme Court in cases of 29 retrenchment. Such a bare allegation is obviously unsatisfactory. If we struck down the retrenchment undertaken by the Philippine Tuberculosis Society, Inc. in the above-cited case for failure to take seniority into account, with more reason should the retrenchment in this case be held invalid, considering that petitioner utterly failed to show that it had any standard at all in selecting the employees to be retrenched. Verily, the assistance that two (2) non-regular employees were similarly retrenched ahead of respondents appears more like a handy excuse than any deliberate effort on petitioners part to follow the fair and reasonable criteria established by jurisprudence. WHEREFORE, the instant petition is hereby DENIED. SO ORDERED.

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UNIVERSAL ROBINA CORPORATION vs CATAPANG Case Digest [G.R. No. 164736 October 14, 2005] UNIVERSAL ROBINA CORPORATION and/or RANDY GREGORIO, Petitioners, vs. BENITO CATAPANG, JOEL VILLANUEVA, JONATHAN VILLANUEVA, and JAIME VILLEGAS, Respondents. FACTS: The respondents were hired by the petitioner company on various dates from 1991 to 1993 to work at its duck farm. The respondents were hired under an employment contract which provided for a five-month period. After the expiration of the said employment contracts, the petitioner company would renew them and re-employ the respondents. This practice continued until sometime in 1996, when the petitioners informed the respondents that they were no longer renewing their employment contracts. The respondents, then, filed separate complaints for illegal dismissal, reinstatement, backwages, damages and attorneys fees against the petitioners. The petitioners submit that the respondents are not regular employees. They aver that it is of no moment that the respondents have rendered service for more than a year since they were covered by the five-month individual contracts to which they duly acquiesced. The petitioners contend that they were free to terminate the services of the respondents at the expiration of their individual contracts. The petitioners maintain that, in doing so, they merely implemented the terms of the contracts. The petitioners further assert that the respondents contracts of em ployment were not intended to circumvent security of tenure. They point out that the respondents knowingly and voluntarily agreed to sign the contracts without the petitioners having exercised any undue advantage over them. Moreover, there is no evidence showing that the petitioners exerted moral dominance on the respondents. ISSUE: Whether or not respondents are regular employees of petitioner corporation. HELD: The SC held that the CA, the NLRC and the Labor Arbiter correctly categorized the respondents as regular employees of the petitioner company. The primary standard of determining regular employment is the reasonable connection between the particular activity performed by the employee in relation to the usual trade or business of the employer. The test is whether the former is usually necessary or desirable in the usual business or trade of the employer. The connection can be determined by considering the nature of work performed and its relation to the scheme of the particular business or trade in its entirety. Also, if the employee has been performing the job for at least a year, even if the performance

is not continuous and merely intermittent, the law deems repeated and continuing need for its performance as sufficient evidence of the necessity if not indispensability of that activity to the business. Hence, the employment is considered regular, but only with respect to such activity and while such activity exists. It is obvious that the said five-month contract of employment was used by petitioners as a convenient subterfuge to prevent private respondents from becoming regular employees. Such contractual arrangement should be struck down or disregarded as contrary to public policy or morals. To uphold the same would, in effect, permit petitioners to avoid hiring permanent or regular employees by simply hiring them on a temporary or casual basis, thereby violating the employees security of tenure in their jobs. Petitioners act of repeatedly and continuously hiring private respondents in a span of 3 to 5 years to do the same kind of work negates their contention that private respondents were hired for a specific project or undertaking only. Petition is denied.

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On December 2, 1987, the court issued a restraining order as prayed for in the petition enjoining the enforcement of the decision dated October 16, 1987 of public respondent NLRC upon petitioner posting a bond of P20,000.00. G.R. No. 80587 February 8, 1989 WENPHIL CORPORATION, petitioner, vs.NATIONAL LABOR RELATIONS COMMISSION AND ROBERTO MALLARE, respondents. GANCAYCO, J.: Once again the dismissal of an employee without affording him due process is brought to the attention of this Court by this petition. Private respondent was hired by petitioner on January 18, 1984 as a crew member at its Cubao Branch. He thereafter became the assistant head of the Backroom department of the same branch. At about 2:30 P.M. on May 20, 1985 private respondent had an altercation with a co-employee, Job Barrameda, as a result of which he and Barrameda were suspended on the following morning and in the afternoon of the same day a memorandum was issued by the Operations Manager advising private respondent of his dismissal from the service in accordance with their Personnel Manual. The notice of dismissal was served on private respondent on May 25, 1985. Thus private respondent filed a complaint against petitioner for unfair labor practice, illegal suspension and illegal dismissal. After submitting their respective position papers to the Labor Arbiter and as the hearing could not be conducted due to repeated absence of counsel for respondent, the case was submitted for resolution. Thereafter a decision was rendered by the Labor Arbiter on December 3, 1986 dismissing the complaint for lack of merit. Private respondent appealed to the National Labor Relations Commission (NLRC) wherein in due course a decision was rendered on October 16, 1987 setting aside the appealed decision and ordering the reinstatement of private respondent to his former position without loss of seniority and other related benefits and one (1) year backwages without qualification and deduction. Hence the herein petition for certiorari with preliminary injunction and/or restraining order wherein petitioner alleges that the public respondent NLRC committed a grave abuse of discretion in rendering its decision contrary to the evidence on record. The theory of the petitioner is that on the aforesaid date, May 20, 1985, when private respondent and Barrameda had a misunderstanding about tending the Salad Bar, private respondent slapped Barrameda's cap, stepped on his foot and picked up the ice scooper and brandished it against the latter. Marijo B. Kolimlim who was a management trainee tried to pacify private respondent but he defied her so Kolimlim reported the incident to the assistant manager, Delilah C. Hermosura, who immediately asked private respondent to see her. Private respondent refused to see Hermosura and it took the security guard to bring him to her. Private respondent then shouted and uttered profane words instead of making an explanation before her. He stated the matter should be settled only by him and Barrameda. The following day Kolimlim and Hermosura submitted a report on the incident and recommended the imposition of the appropriate penalties on both. It was the store manager who issued a report meting out the penalty of suspension on the two until further notice in the following morning. Later that day the Operations Manager issued a memorandum advising Barrameda of one (1) week suspension and the dismissal of private respondent from the service. The main thrust of the petition is that under the Personnel Manual of petitioner which had been read and understood by private respondent, private respondent waived his right to the investigation. It is provided therein that INVESTIGATION If the offense is punishable with a penalty higher than suspension for fifteen (15) days, upon the request of the erring employee, there shall be convened an investigation board composed of the following 1. The Parlor Manager or Supervisor on duty when the incident occurred. 2. The General Manager or the Assistant Manager. The investigation board shall discuss the merits of the case and shall issue a ruling, which shall be final and conclusive. (p. 3, Personnel Manual: Emphasis supplied). From the foregoing it appears that an investigation shall only be conducted if the offense committed by the employee is punishable with the penalty higher than suspension of fifteen (15) days and the erring employee requests for an investigation of the incident. Petitioner alleges that private respondent not having asked for an investigation he is thus deemed to have waived his right to the same. Petitioner avers that immediately after the incident when private respondent was asked to see Hermosura, he was defiant and showed that he was not interested to avail of an investigation.

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The contention of petitioner is untenable. The incident happened on May 20, 1985 and right then and there as afore repeated on the following day private respondent was suspended in the morning and was dismissed from the service in the afternoon. He received an official notice of his termination four (4) days later. The defiant attitude of private respondent immediately after the incident amounted to insubordination. Nevertheless his refusal to explain his side under the circumstances cannot be considered as a waiver of his right to an investigation. Although in the Personnel Manual of the petitioner, it states that an erring employee must request for an investigation it does not thereby mean that petitioner is thereby relieved of the duty to conduct an investigation before dismissing private respondent. Indeed said provision of the Personnel Manual of petitioner which may effectively deprive its employees of the right to due process is clearly against the law and hence null and void. The security of tenure of a 1 laborer or employee is enshrined in the Constitution, the Labor Code and other related laws. Under Section 1, Rule XIV of the Implementing Regulations of the Labor Code, it is provided that "No worker shall be dismissed except for just or authorized cause provided by law and after due process." Sections 2, 5, 6, and 7 of the same rules require that before an employer may dismiss an employee the latter must be given a written notice stating the particular act or omission constituting the grounds thereof; that the employee may answer the allegations within a reasonable period; that the employer shall afford him ample opportunity to be heard and to defend himself with the assistance of his representative, if he so desires; and that it is only then that the employer may dismiss the employee by notifying him of the decision in writing stating clearly the reasons therefor. Such dismissal is without prejudice to the right of the employee to contest its validity in the Regional Branch of the NLRC. Petitioner insists that private respondent was afforded due process but he refused to avail of his right to the same; that when the matter was brought to the labor arbiter he was able to submit his position papers although the hearing cannot proceed due to the non-appearance of his counsel; and that the private respondent is guilty of serious misconduct in threatening or coercing a co-employee which is a ground for dismissal under Article 283 of the Labor Code. The failure of petitioner to give private respondent the benefit of a hearing before he was dismissed constitutes an infringement of his constitutional right to due process of law and 2 equal protection of the laws. The standards of due process in judicial as well as administrative proceedings have long been established. In its bare minimum due process of 3 law simply means giving notice and opportunity to be heard before judgment is rendered.

The claim of petitioner that a formal investigation was not necessary because the incident which gave rise to the termination of private respondent was witnessed by his co- employees and supervisors is without merit. The basic requirement of due process is that which hears 4 before it condemns, which proceeds upon inquiry and renders judgment only after trial. However, it is a matter of fact that when the private respondent filed a complaint against petitioner he was afforded the right to an investigation by the labor arbiter. He presented his position paper as did the petitioner. If no hearing was had, it was the fault of private respondent as his counsel failed to appear at the scheduled hearings. The labor arbiter concluded that the dismissal of private respondent was for just cause. He was found guilty of grave misconduct and insubordination. This is borne by the sworn statements of witnesses. The Court is bound by this finding of the labor arbiter. By the same token, the conclusion of the public respondent NLRC on appeal that private respondent was not afforded due process before he was dismissed is binding on this Court. Indeed, it is well taken and supported by the records. However, it can not justify a ruling that private respondent should be reinstated with back wages as the public respondent NLRC so decreed. Although belatedly, private respondent was afforded due process before the labor arbiter wherein the just cause of his dismissal bad been established. With such finding, it would be arbitrary and unfair to order his reinstatement with back wages. The Court holds that the policy of ordering the reinstatement to the service of an employee without loss of seniority and the payment of his wages during the period of his separation until his actual reinstatement but not exceeding three (3) years without qualification or deduction, when it appears he was not afforded due process, although his dismissal was found to be for just and authorized cause in an appropriate proceeding in the Ministry of Labor and Employment, should be re-examined. It will be highly prejudicial to the interests of the employer to impose on him the services of an employee who has been shown to be guilty of the charges that warranted his dismissal from employment. Indeed, it will demoralize the rank and file if the undeserving, if not undesirable, remains in the service. Thus in the present case, where the private respondent, who appears to be of violent temper, caused trouble during office hours and even defied his superiors as they tried to pacify him, should not be rewarded with re-employment and back wages. It may encourage him to do even worse and will render a mockery of the rules of discipline that employees are required to observe. Under the circumstances the dismissal of the private respondent for just cause should be maintained. He has no right to return to his former employer. However, the petitioner must nevertheless be held to account for failure to extend to private respondent his right to an investigation before causing his dismissal. The rule is explicit as above discussed. The dismissal of an employee must be for just or authorized cause and

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after due process. Petitioner committed an infraction of the second requirement. Thus, it must be imposed a sanction for its failure to give a formal notice and conduct an investigation as required by law before dismissing petitioner from employment. Considering the circumstances of this case petitioner must indemnify the private respondent the amount of P1,000.00. The measure of this award depends on the facts of each case and the gravity of the omission committed by the employer. WHEREFORE, the petition is GRANTED. The questioned decision of the public respondent NLRC dated October 16, 1987 for the reinstatement with back wages of private respondent is REVERSED AND SET ASIDE, and the decision of the labor arbiter dated December 3, 1986 dismissing the complaint is revived and affirmed, but with the modification that petitioner is ordered to indemnify private respondent in the amount of P1,000.00. The restraining order issued by this Court on December 2, 1987 is hereby made permanent and the bond posted by petitioner is cancelled. This decision is immediately executory. SO ORDERED.

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