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THIRD DIVISION

G.R. No. 175678, August 22, 2012


BANK OF THE PHILIPPINE ISLANDS, PETITIONER, VS. BANK OF THE PHILIPPINE ISLANDS
EMPLOYEES UNION- METRO MANILA, 22 AUGUST 2012 RESPONDENT.
DECISION
PERALTA, J.:
For resolution of this Court is the Petition for Review under Rule 45 of the Revised Rules of Court, dated
January 20, 2007, of petitioner Bank of the Philippine Islands (BPI) which seeks to reverse and set aside the
Court of Appeals' (CA) Decision [1] and Resolution,[2] dated June 8, 2006 and November 29, 2006,
respectively, in CA-G.R. SP No. 83387.
The antecedent facts follow.
Respondent Bank of the Philippine Islands Employees Union-Metro Manila (BPIEU-MM), a legitimate labor
organization and the sole and exclusive bargaining representative of all the regular rank-and-file
employees of petitioner BPI in Metro Manila and petitioner BPI have an existing Collective Bargaining
Agreement (CBA)[3] which took effect on April 1, 2001. The CBA provides for loan benefits and relatively low
interest rates. The said provisions state:
Article VIII - Fringe Benefits
Section 14. Multi-Purpose Loan, Real Estate Secured Housing Loan and Car Loan. - The Bank agrees to
continue and maintain its present policy and practice, embodied in its Collective Bargaining Agreement
with the Union which expired on 31 March 2001, extending to qualified regular employees the multipurpose and real estate secured housing loans, subject to the increased limits and provisions hereinbelow,
to wit:
(a) Multi-Purpose Loan not exceeding FORTY THOUSAND PESOS (P40,000.00), payable within the period
not exceeding three (3) years via semi-monthly salary deductions, with interest at the rate of eight percent
(8%) per annum computed on the diminishing balance.
(b) Real Estate-Secured Housing Loan not exceeding FOUR HUNDRED FIFTY THOUSAND " PESOS
(P450,000.00), payable over a period not exceeding fifteen (15) years via semi-monthly salary deductions,
with interest at the rate of nine percent (9%) per annum computed on the diminishing balance.
The rate of interest on real estate secured loans, however, may be reduced to six percent (6%) per annum,
subject to the following conditions:
1. If the loan is accepted for coverage by the Home Insurance and Guaranty Corporation (HIGC).
2. The HIGC premium shall be paid by the borrower.
3. The borrower procures a Mortgage Redemption Insurance coverage from an insurance company
selected by the BANK.
4. The BANK may increase the six percent (6%) interest if the HIGC or the Government imposes new
conditions or restrictions necessitating a higher interest in order to maintain the BANK'S position before
such conditions or restrictions were imposed.
5. Such other terms or conditions imposed or which may be imposed by the HIGC.
6. It is distinctly understood that the rate of interest shall automatically revert to nine percent (9%) per
annum upon cancellation of the HIGC coverage for any cause.
The BANK shall make strong representations with the Bangko Sentral ng Pilipinas for a second upgrade
and/or availment under the Housing Loan Program.
(c) Car Loan. - The BANK shall submit a revised plan for the approval of the Bangko Sentral ng Pilipinas
which shall incorporate a car loan program in its existing Housing Loan Program. The said car loan shall be
a sub-limit under the program such that any availment thereof shall operate to decrease the available
housing loan limit. Therefore, the combined amount of both housing and car loans that may be availed of
shall not exceed FOUR HUNDRED FIFTY THOUSAND PESOS (P450,000.00). This supplemental revision of
the loan program shall be subject to the rules and regulations {e.g., amount of sub-limit, credit ratio, type
and age of vehicle, interest rate, etc.) which the BANK may promulgate, and to the terms of the approval
of the Bangko Sentral ng Pilipinas.
The multi-purpose and housing loans stated in the next preceding paragraphs, as well as the car loan

which shall be incorporated in the housing loan program, shall be subject further to the applicable
provisions, guidelines and restrictions set forth in the Central Bank Circular No. 561, as amended by
Central Bank Circular No. 689, and to the rules, regulations and policies of the BANK on such loans insofar
as they do not violate the provisions, guidelines and restrictions set forth in said Central Bank Circular No.
561, as amended.
Section 15. Emergency Loans. - The BANK agrees to increase the amount of emergency loans assistance,
upon approval by the Central Bank of the Philippines, from a maximum amount of Ten Thousand Pesos (PI
0,000.00) to a maximum amount of Fifteen Thousand Pesos (P15,000.00) to qualified employees intended
to cover emergencies only, i.e., expenses incurred but could not be foreseen such as those arising from
natural calamities, emergency medical treatment and/or hospitalization of an employee and/or his
immediate family and other genuine emergency cases of serious hardship as the BANK may determine.
Hospital expenses for caesarian delivery of a female employee or an employee's wife not covered by the
Group Hospitalization Insurance Plan shall qualify for the emergency loan.
Emergency loans shall be playable in twenty-four (24) months via semi-monthly salary deductions and
shall be charged interest at the minimal rate of Seven percent (7%) per annum for the first P10,000.00 and
Nine percent (9%) for the additional P5.000.00 computed on the diminishing balance. The emergency loan
assistance program shall be governed by the rules, regulations and policies of the BANK and such
amendments or modifications thereof which the BANK may issue from time to time. [4]
Thereafter, petitioner issued a "no negative data bank policy" [5] for the implementation/availment of the
manpower loans which the respondent objected to, thus, resulting into labor-management dialogues.
Unsatisfied with the result of those dialogues, respondent brought the matter to the grievance machinery
and afterwards, the issue, not having been resolved, the parties raised it to the Voluntary Arbitrator.
In his decision, the Voluntary Arbitrator found merit in the respondent's cause. Hence, the dispositive
portion of the said decision reads as follows:
WHEREFORE, viewed in the light of the foregoing circumstances, this Arbitrator hereby rules:
1. That the imposition of the NO NEGATIVE DATA BANK as a new condition for the implementation and
availment of the manpower loan benefits by the employees evidently violates the CBA;
2. That all employees who were not allowed or deprived of the manpower loan benefits due to the NO
NEGATIVE DATA BANK POLICY be immediately granted in accordance with their respective loan benefits
applied for;
3. That the respondent herein is ordered likewise to pay ten percent (10%) of the total amount of all loans
to be granted to all employees concerned as Attorney's Fees; and
4. That the parties herein are directed to report compliance with the above directives within ten (10) days
from receipt of this ORDER.
SO ORDERED.[6]
Aggrieved, petitioner appealed the case to the CA via Rule 43, but the latter affirmed the decision of the
Voluntary Arbitrator with the modification that the award of attorney's fees be deleted. The dispositive
portion states:
WHEREFORE, premises considered, the Voluntary Arbitrator's Decision dated April 5, 2004 is hereby
AFFIRMED with the MODIFICATION that the award of attorney's fees is hereby deleted.
SO ORDERED.[7]
Petitioner filed a motion for reconsideration, but it was denied in a Resolution [8] dated November 29, 2006.
Hence, the present petition.
Petitioner raises the following arguments:
A. The "No NDB policy" is a valid and reasonable requirement that is consistent with sound banking
practice and is meant to inculcate among officers and employees of the petitioner the need for fiscal
responsibility and discipline, especially in an industry where the element of trust is paramount.
B. The "No NDB policy" does not violate the parties' Collective Bargaining Agreement.
C. The "No NDB policy" conforms to existing BSP regulations and circulars, and to safe and sound banking
practices.[9]
Respondent, on the other hand, claims that the petition did not comply with Section 4, Rule 45 of the
Revised Rules of Court and must be dismissed outright in accordance with Section 5 of the same rule; that
the CA did not commit any reversible error in the questioned judgment to warrant the exercise of its
discretionary appellate jurisdiction; and that the Voluntary Arbitrator and the CA duly passed upon the
same issues raised in the instant petition and their decisions are based on substantial evidence and are in

accordance with law and jurisprudence.[10]


Tn its Reply[11] dated September 21, 2007, petitioner reiterates the issues it presented in its petition. It also
argues that the present petition must not be dismissed based on mere technicality.
Subsequently, the parties submitted their respective memoranda.
Petitioner's arguments are mere rehash of those it raised in the CA. It insists that the rationale behind the
use of the "no negative data bank policy" aims to encourage employees of a banking institution to exercise
the highest standards of conduct, considering the bank's fiduciary relationship with its depositors and
clients. It likewise contends that a scrutiny of the CBA reveals an express conformity to petitioner's
prerogative to issue policies that would guide the parties in the availment of manpower loans under the
CBA.
Furthermore, petitioner avers that the subject policy does not only conform to the provisions of the parties'
CBA, but it is also in harmony with the circulars and regulations of the Bangko Sentral ng Pilipinas.
The petition lacks merit.
In a petition for review on certiorari, this Court's jurisdiction is limited to reviewing errors of law in the
absence of any showing that the factual findings complained of are devoid of support in the records or are
glaringly erroneous.[13] Firm is the doctrine that this Court is not a trier of facts, and this applies with
greater force in labor cases. [14] The issues presented by the petitioner are factual in nature. Nevertheless,
the CA committed no error in its questioned decision and resolution.
A CBA refers to the negotiated contract between a legitimate labor organization and the employer
concerning wages, hours of work and all other terms and conditions of employment in a bargaining unit,
including mandatory provisions for grievances and arbitration machineries. [15] As in all other contracts,
there must be clear indications that the parties reached a meeting of the minds. [16] Therefore, the terms
and conditions of a CBA constitute the law between the parties. [17]
The CBA in this case contains no provision on the "no negative data bank policy" as a prerequisite in the
entitlement of the benefits it set forth for the employees. In fact, a close reading of the CBA would show
that the terms and conditions contained therein relative to the availment of the loans are plain and clear,
thus, all they need is the proper implementation in order to reach their objective. The CA was, therefore,
correct when it ruled that, although it can be said that petitioner is authorized to issue rules and
regulations pertinent to the availment and administration of the loans under the CBA, the additional rules
and regulations, however, must not impose new conditions which are not contemplated in the CBA and
should be within the realm of reasonableness. The "no negative data bank policy" is a new condition which
is never contemplated in the CBA and at some points, unreasonable to the employees because it provides
that before an employee or his/her spouse can avail of the loan benefits under the CBA, the said employee
or his/her spouse must not be listed in the negative data bank, or if previously listed therein, must obtain a
clearance at least one year or six months as the case may be, prior to a loan application.
It must be remembered that negotiations between an employer and a union transpire before they agree on
the terms and conditions contained in the CBA. If the petitioner, indeed, intended to include a "no negative
data bank policy" in the CBA, it should have presented such proposal to the union during the negotiations.
To include such policy after the effectivity of the CBA is deceptive and goes beyond the original agreement
between the contracting parties.
This Court also notes petitioner's argument that the "no negative data bank policy" is intended to exact a
high standard of conduct from its employees. However, the terms and conditions of the CBA must prevail.
Petitioner can propose the inclusion of the said policy upon the expiration of the CBA, during the
negotiations for a new CBA, but in the meantime, it has to honor the provisions of the existing CBA.
Article 1702 of the New Civil Code provides that, in case of doubt, all labor legislation and all labor
contracts shall be construed in favor of the safety and decent living of the laborer. Thus, this Court has
ruled that any doubt or ambiguity in the contract between management and the union members should be
resolved in favor of the latter.[18] Therefore, there is no doubt, in this case, that the welfare of the laborers
stands supreme.
WHEREFORE, the Petition for Review under Rule 45 of the Revised Rules of Court, dated January 20, 2007,
of petitioner Bank of the Philippine Islands, is hereby DENIED and the Court of Appeals' Decision and
Resolution, dated June 8, 2006 and November 29, 2006, respectively, are hereby AFFIRMED.

SO ORDERED.
Velasco, Jr., (Chairperson), Abad, Mendoza, and Perlas-Bernabe, JJ., concur.
PHIL JOURNALIST v JOURNALS EMPLOYEE UNION
The coverage of the term legal dependent as used in a stipulation in a collective bargaining agreement
(CBA) granting funeral or bereavement benefit to a regular employee for the death of a legal dependent, if
the CBA is silent about it, is to be construed as similar to the meaning that contemporaneous social
legislations have set. This is because the terms of such social legislations are deemed incorporated in or
adopted by the CBA.
The decision of the Court of Appeals (CA) under review summarizes the factual and procedural
antecedents, as follows:
Complainant Judith Pulido alleged that she was hired by respondent as proofreader on 10 January 1991;
that she was receiving a monthly basic salary of P-15,493.66 plus P-155.00 longevity pay plus other
benefits provided by law and their Collective Bargaining Agreement; that on 21 February 2003, as union
president, she sent two letters to President Gloria Arroyo, regarding their complaint of mismanagement
being committed by PIJ executive; that sometime in May 2003, the union was fumished with a letter by
Secretary Silvestre Afable, Jr. head of Presidential Management Staff (PMS), endorsing their letter-complaint
to Ombudsman Simeon V. Marcelo; that respondents took offense and started harassments to complainant
union president; that on 30 May 2003, complainant received
Respondents.
G.R. No. 192601
Present:
SERENO, C.J, LEONARDO-DE CASTRO, BERSAMIN, VILLARAMA, JR., and REYES,JJ
Promulgated:
Decision 2 G.R. No. 192601
a letter from respondent Fundador Soriano, International Edition managing editor, regarding complainants
attendance record; that complainant submitted her reply to said memo on 02 June 2003; that on 06 June
2003, complainant received a memorandum of reprimand; that on 04 July 2003, complainant received
another memo from Mr. Soriano, for not wearing her company ID, which she replied the next day 05 July
2003; that on 04 August 2003, complainant again received a memo regarding complainants tardiness;
that on 05 August 2003, complainant received another memorandum asking her to explain why she should
not be accused of fraud, which she replied to on 07 August 2003; and that on the same day between 3:00
to 4:00 P.M., Mr. Ernesto Estong San Agustin, a staff of HRD handed her termination paper.
Complainant added that in her thirteen (13) years with the company and after so many changes in its
management and executives, she had never done anything that will cause them to issue a memorandum
against her or her work attitude, more so, reasons to terminate her services; that she got dismissed
because she was the Union President who was very active in defending and pursuing the rights of her
union members, and in fighting against the abuses of respondent Corporate Officers; and that she got the
ire of respondents when the employees filed a complaint against the Corporate Officers before Malacanang
and which was later indorsed to the Office of the Ombudsman.
The second complainant Michael L. Alfante alleged that he started to work with respondents as computer
technician at Management Information System under manager Neri Torrecampo on 16 May 2000; that on
15 July 2001, he was regularized receiving a monthly salary of P9,070.00 plus other monetary benefits;
that sometime in 2001, Rico Pagkalinawan replaced Torrecampo, which was opposed by complainant and
three other co-employees; that Pagkalinawan took offense of their objection; that on 22 October 2002,
complainant Alfante received a memorandum from Pagkalinawan regarding his excessive tardiness; that
on 10 June 2003, complainant Alfante received a memorandum from Executive Vice-President Arnold
Banares, requiring him to explain his side on the evaluation of his performance submitted by manager
Pagkalinawan; that one week after complainant submitted his explanation, he was handed his notice of
dismissal on the ground of poor performance; and that complainant was dismissed effective 28 July
2003.
Complainant Alfante submitted that he was dismissed without just cause.
Respondents, in their position paper, averred that complainants Pulido and Alfante were dismissed for
cause and with due process.
With regard to complainant Pulido, respondents averred that in a memorandum dated 30 May 2003,
directed complainant to explain her habitual tardiness, at least 75 times from January to May of 2003. In a
memorandum, dated 06 June 2003, directed complainant to observe the 3 p.m. rule to avoid grammatical
lapses, use of stale stories just to beat the 10:00 p.m. deadline. In the same memorandum complainant
was given the warning that any repeated violation of the rules shall be dealt with more severely. Once

again, in a memorandum, dated 04 August 2003, complainant Pulido was required to explain why no
disciplinary action should be taken against her for habitual tardiness 18 times out of the 23
Decision 3 G.R. No. 192601
reporting days during the period from 27 June 27 July 2003 and on 05 August 2003, complainant was
directed to explain in writing why complainant should not be administratively sanctioned for committing
fraud or attempting to commit fraud against respondents. Respondents found complainants explanations
unsatisfactory. On 07 August 2003, respondents dismissed complainant Pulido for habitual tardiness, gross
insubordination, utter disrespect for superiors, and committing fraud or attempting to commit fraud which
led to the respondents loss of confidence upon complainant Pulido.
In case of complainant Alfante, respondents averred in defense that complainant was dismissed for poor
performance after an evaluation by his superior, and after being forewarned that complainant may be
removed if there was no showing of improvement in his skills and knowledge on current technology.
In both instances, respondents maintained that they did not commit any act of unfair labor practices; that
they did not commit acts tantamount to interfering, restraining, or coercing employees in the exercise of
their right to self-organization.
Respondents deny liabilities as far as complainants monetary claims are concerned. Concerning violations
of the provision on wage distortion under Wage Order No. 9, respondents stressed that complainants were
not affected since their salary is way over the minimum wage.
With respect to the alleged non-adjustment of longevity pay and burial aid, respondent PJI pointed out that
it complies with the provisions of the CBA and that both complainants have not claimed for the burial aid.
Respondents put forward the information that the alleged non- payment of rest days every Monday for
the past three (3) years is a matter that is still at issue in NLRC Case No. 02-0402973-93, which case is still
pending before this Commission.
Respondents asserted that the respondents Arturo Dela Cruz, Bobby Capco, Arnold Banares, Ruby RuizBruno and Fundador Soriano should not be held liable on account of complainants dismissal as they
merely acted as agents of respondent PJI.1
Upon the foregoing backdrop, Labor Arbiter Corazon C. Borbolla rendered her decision on March 29, 2006,
disposing thusly:
WHEREFORE, foregoing premises considered, judgment is hereby rendered, finding complainant Judith
Pulido to have been illegally dismissed. As such, she is entitled to reinstatement and backwages from 07
August 2003 up to her actual or payroll reinstatement. To date, complainants backwages is P294,379.54.
Respondent Philippine Journalist, Inc. is hereby ordered to pay complainant Judith Pulido her backwages
from 07 August 2003 up to her actual or payroll reinstatement and to reinstate her to her former position
without loss of seniority right.
Respondent is further ordered to submit a report to this Office on complainants reinstatement ten (10)
days from receipt of this decision. The charge of illegal dismissal by Michael Alfante is hereby dismissed for
lack of merit.
The charge of unfair labor practice is dismissed for lack of basis. SO ORDERED.2
Complainant Michael Alfante (Alfante), joined by his labor organization, Journal Employees Union (JEU),
filed a partial appeal in the National Labor Relations Commission (NLRC).3
In the meantime, on May 10, 2006, petitioner and Judith Pulido (Pulido), the other complainant, jointly
manifested to the NLRC that the decision of March 29, 2006 had been fully satisfied as to Pulido under the
following terms, namely: (a) she would be reinstated to her former position as editorial staffmember, or an
equivalent position, without loss of seniority rights, effective May 15, 2006; (b) she would go on maternity
leave, and report to work after giving birth; (c) she would be entitled to backwages of P130,000.00; and (d)
she would execute the quitclaim and release on May 11, 2006 in favor of petitioner. 4 This left Alfante as
the remaining complainant. On January 31, 2007, the NLRC rendered its decision dismissing the partial
appeal for lack of merit.5
JEU and Alfante moved for the reconsideration of the decision, but the NLRC denied their motion on April
24, 2007.6
Thereafter, JEU and Alfante assailed the decision of the NLRC before the CA on certiorari (C.A.-G.R. SP No.
99407).
The twin Resolutions dated January 31, 2007 and April 24, 2007, respectively, of the Third Division of the
National Labor Relations Commission (NLRC), in NLRC NCR CA No. 048785-06 (NLRC NCR Case No. 00-1011413-04), are MODIFIED insofar as the funeral or bereavement aid is concerned, which is hereby
GRANTED, but only after submission of conclusive proofs that the deceased is a parent, either father or
mother, of the employees concerned, as well as the death certificate to establish the fact of death of the
deceased legal dependent.
The rest of the findings of fact and law in the assailed Resolutions are hereby AFFIRMED.
SO ORDERED.

Both parties moved for reconsideration, but the CA denied their


respective motions for reconsideration on June 2, 2010.8
JEU and Alfante appealed to the Court (G.R. No. 192478) to challenge the CAs dispositions regarding the
legality of: (a) Alfantes dismissal; (b) the non-compliance with Minimum Wage Order No. 9; and (c) the
non-payment of the rest day.9
On August 18, 2010, the Court denied due course to the petition in G.R. No. 192478 for failure of
petitioners to sufficiently show that the CA had committed any reversible error to warrant the Courts
exercise of its discretionary appellate jurisdiction.10
The Court denied with finality JEU and Alfantes ensuing motion for reconsideration through the resolution
of December 8, 2010.11 The entry of judgment in G.R. No. 192478 issued in due course on February 1,
2011.12
On its part, petitioner likewise appealed (G.R. No. 192601), seeking the review of the CAs disposition in
the decision of February 5, 2010 on the granting of the funeral and bereavement aid stipulated in the CBA.
In its petition for review, petitioner maintained that under Section 4, Article XIII of the CBA, funeral and
bereavement aid should be granted upon the death of a legal dependent of a regular employee; that
consistent with the definition provided by the Social Security System (SSS), the term legal dependent
referred to the spouse and children of a married regular employee, and to the parents and siblings, 18
years old and below, of a single regular employee;13 that the CBA considered the term dependents to
have the same meaning as beneficiaries, as provided in Section 5, Article XIII of the CBA on the payment of
death benefits;14 that its earlier granting of claims for funeral and bereavement aid without regard to the
foregoing definition of the legal dependents of married or single regular employees did not ripen into a
company policy whose unilateral withdrawal would constitute a violation of Article 100 of the Labor
Code,15 the law disallowing the non-diminution of benefits;16 that it had approved only four claims from
1999 to 2003 based on its mistaken interpretation of the term legal dependents, but later corrected the
same in 2000;17 that the grant of funeral and bereavement aid for the death of an employees legal
dependent, regardless of the employees civil status, did not occur over a long period of time, was not
consistent and deliberate, and was partly due to its mistake in appreciating a doubtful question of law; and
that its denial of subsequent claims did not amount to a violation of the law against the non-diminution of
benefits.18
In their comment,19 JEU and Alfante countered that the CBA was a bilateral contractual agreement that
could not be unilaterally changed by any party during its lifetime; and that the grant of burial benefits had
already become a company practice favorable to the employees, and could not anymore be reduced,
diminished, discontinued or eliminated by petitioner.
Issue
In view of the entry of judgment issued in G.R. No. 192478, JEU and Alfantes submissions on the illegality
of his dismissal, the non-payment of his rest days, and the violation of Minimum Wage Order No. 9 shall no
longer be considered and passed upon.
The sole remaining issue is whether or not petitioners denial of respondents claims for funeral and
bereavement aid granted under Section 4, Article XIII of their CBA constituted a diminution of benefits in
violation of Article 100 of the Labor Code.
Ruling
The petition for review lacks merit.
The nature and force of a CBA are delineated in Honda Phils., Inc. v.
Samahan ng Malayang Manggagawa sa Honda,20 thuswise:
A collective bargaining agreement (or CBA) refers to the negotiated contract between a legitimate labor
organization and the employer concerning wages, hours of work and all other terms and conditions of
employment in a bargaining unit. As in all contracts, the parties in a CBA may establish such stipulations,
clauses, terms and conditions as they may deem convenient provided these are not contrary to law,
morals, good customs, public order or public policy. Thus, where the CBA is clear and unambiguous, it
becomes the law between the parties and compliance therewith is mandated by the express policy of the
law.
Accordingly, the stipulations, clauses, terms and conditions of the CBA, being the law between the parties,
must be complied with by them.21 The literal meaning of the stipulations of the CBA, as with every other
contract, control if they are clear and leave no doubt upon the intention of the contracting parties.22
Here, a conflict has arisen regarding the interpretation of the term legal dependent in connection with the
grant of funeral and bereavement aid to a regular employee under Section 4, Article XIII of the CBA,23
which stipulates as follows:
SECTION 4. Funeral/Bereavement Aid. The COMPANY agrees to grant a funeral/bereavement aid in the
following instances:
a. Death of a regular employee in line of duty P50,000
b. Death of a regular employee not in line of duty P40,000

c. Death of legal dependent of a regular employee P15,000. (Emphasis supplied)


Petitioner insists that notwithstanding the silence of the CBA, the term legal dependent should follow the
definition of it under Republic Act (R.A.) 20 21 Appeals, G.R. No. 165486, May 31, 2006, 490 SCRA 61, 72.
22 23
G.R. No. 145561, June 15, 2005, 460 SCRA 186, 190-191.
TSPIC Corporation v. TSPIC Employees Union (FFW), G.R. No. 163419, February 13, 2008, 545 SCRA 215,
citing Centro Escolar University Faculty and Allied Workers Union-Independent v. Court of
Article 1370, Civil Code. Rollo, p. 134.
No. 8282 (Social Security Law),24 so that in the case of a married regular employee, his or her legal
dependents include only his or her spouse and children, and in the case of a single regular employee, his
or her legal dependents include only his or her parents and siblings, 18 years old and below; and that the
term dependents has the same meaning as beneficiaries as used in Section 5, Article XIII of the CBA.
We cannot agree with petitioners insistence.
Social legislations contemporaneous with the execution of the CBA have given a meaning to the term legal
dependent. First of all, Section 8(e) of the Social Security Law provides that a dependent shall be the
following, namely: (a) the legal spouse entitled by law to receive support from the member; (b) the
legitimate, legitimated, or legally adopted, and illegitimate child who is unmarried, not gainfully employed
and has not reached 21 of age, or, if over 21 years of age, is congenitally or while still a minor has been
permanently incapacitated and incapable of self-support, physically or mentally; and (c) the parent who is
receiving regular support from the member. Secondly, Section 4(f) of R.A. No. 7875, as amended by R.A.
No. 9241,25 enumerates who are the legal dependents, to wit: (a) the legitimate spouse who is not a
member; (b) the unmarried and unemployed legitimate, legitimated, illegitimate, acknowledged children
as appearing in the birth certificate; legally adopted or step-children below 21 years of age; (c) children
who are 21 years old and order but suffering from congenital disability, either physical or mental, or any
disability acquired that renders them totally dependent on the member of our support; and (d) the parents
who are 60 years old or older whose monthly income is below an amount to be determined by the
Philippine Health Insurance Corporation in accordance with the guiding principles set forth in Article I of
R.A. No. 7875. And, thirdly, Section 2(f) of Presidential Decree No. 1146, as amended by R.A. No. 8291,26
states that dependents shall include: (a) the legitimate spouse dependent for support upon the member or
pensioner; (b) the legitimate, legitimated, legally adopted child, including the illegitimate child, who is
unmarried, not gainfully employed, not over the age of majority, or is over the age of majority but
incapacitated and incapable of self-support due to a mental or physical defect acquired prior to age of
majority; and (c) the parents dependent upon the member for support.
It is clear from these statutory definitions of dependent that the civil status of the employee as either
married or single is not the controlling
24Act No. 1161, As Amended, Otherwise Known as the Social Security Law.
26 An Act Further Strengthening the Social Security System Thereby Amending for this Purpose Republic
An Act Instituting a National Health Insurance Program for All Filipinos and Establishing the
25 Philippine Health Insurance Corporation for the Purpose.
An Act Amending Presidential Decree No. 1146, as amended, Expanding and Increasing the Coverage and
Benefits of the Government Service Insurance System, Instituting Reforms Therein and for Other Purposes
Decision 9 G.R. No. 192601
consideration in order that a person may qualify as the employees legal dependent. What is rather
decidedly controlling is the fact that the spouse, child, or parent is actually dependent for support upon the
employee. Indeed, the Court has adopted this understanding of the term dependent in Social Security
System v. De Los Santos,27 viz:
Social Security System v. Aguas is instructive in determining the extent of the required dependency
under the SS Law. In Aguas, the Court ruled that although a husband and wife are obliged to support each
other, whether one is actually dependent for support upon the other cannot be presumed from the fact of
marriage alone.
Further, Aguas pointed out that a wife who left her family until her husband died and lived with other men,
was not dependent upon her husband for support, financial or otherwise, during the entire period.
Said the Court:
In a parallel case involving a claim for benefits under the GSIS law, the Court defined a dependent as one
who derives his or her main support from another. Meaning, relying on, or subject to, someone else for
support; not able to exist or sustain oneself, or to perform anything without the will, power, or aid of
someone else. It should be noted that the GSIS law likewise defines a dependent spouse as the
legitimate spouse dependent for support upon the member or pensioner. In that case, the Court found it
obvious that a wife who abandoned the family for more than 17 years until her husband died, and lived

with other men, was not dependent on her husband for support, financial or otherwise, during that entire
period. Hence, the Court denied her claim for death benefits.
The obvious conclusion then is that a wife who is already separated de facto from her husband cannot be
said to be dependent for support upon the husband, absent any showing to the contrary. Conversely, if it
is proved that the husband and wife were still living together at the time of his death, it would be safe to
presume that she was dependent on the husband for support, unless it is shown that she is capable of
providing for herself.
Considering that existing laws always form part of any contract, and are deemed incorporated in each and
every contract,28 the definition of legal dependents under the aforecited social legislations applies herein
in the absence of a contrary or different definition mutually intended and adopted by the parties in the
CBA. Accordingly, the concurrence of a legitimate spouse does not disqualify a child or a parent of the
employee from being a legal dependent provided substantial evidence is adduced to prove the actual
dependency of the child or parent on the support of the employee.
27 G.R. No. 164790, August 29, 2008, 563 SCRA 693, 703-704.
Sulo sa Nayon, Inc. v. Nayong Pilipino Foundation, G.R. No. 170923, January 20, 2009, 576 SCRA
Decision 10 G.R. No. 192601
In this regard, the differentiation among the legal dependents is significant only in the event the CBA has
prescribed a hierarchy among them for the granting of a benefit; hence, the use of the terms primary
beneficiaries and secondary beneficiaries for that purpose. But considering that Section 4, Article XIII of the
CBA has not included that differentiation, petitioner had no basis to deny the claim for funeral and
bereavement aid of Alfante for the death of his parent whose death and fact of legal dependency on him
could be substantially proved.
Pursuant to Article 100 of the Labor Code, petitioner as the employer could not reduce, diminish,
discontinue or eliminate any benefit and supplement being enjoyed by or granted to its employees. This
prohibition against the diminution of benefits is founded on the constitutional mandate to protect the
rights of workers and to promote their welfare and to afford labor full protection.29 The application of the
prohibition against the diminution of benefits presupposes that a company practice, policy or tradition
favorable to the employees has been clearly established; and that the payments made by the employer
pursuant to the practice, policy, or tradition have ripened into benefits enjoyed by them.30 To be
considered as a practice, policy or tradition, however, the giving of the benefits should have been done
over a long period of time, and must be shown to have been consistent and deliberate.31 It is relevant to
mention that we have not yet settled on the specific minimum number of years as the length of time
sufficient to ripen the practice, policy or tradition into a benefit that the employer cannot unilaterally
withdraw.32
The argument of petitioner that the grant of the funeral and bereavement benefit was not voluntary but
resulted from its mistaken interpretation as to who was considered a legal dependent of a regular
employee deserves scant consideration. To be sure, no doubtful or difficult question of law was involved
inasmuch as the several cogent statutes existing at the time the CBA was entered into already defined
who were qualified as the legal dependents of another. Moreover, the voluntariness of the grant of the
benefit became even manifest from petitioners admission that, despite the memorandum it issued in
200033 in order to correct the interpretation of the term legal dependent, it still approved in 2003 the
claims for funeral and bereavement aid of two employees, namely: (a) Cecille Bulacan, for the death of her
father; and (b) Charito Cartel, for the death of her mother, based on its supposedly mistaken
interpretation.34
29185665, February 8, 2012, 665 SCRA 516, 533.
Eastern Telecommunications Philippines, Inc. v. Eastern Telecoms Employees Union, G.R. No. Boncodin v.
National Power Corporation Employees Consolidated Union (NECU), G.R. No. 162716,
30 September 27, 2006, 503 SCRA 611, 628.
31 June 18, 2009, 589 SCRA 376, 384. 32 33 34
Sevilla Trading Company v. Semana, G.R. No. 152456, April 28, 2004, 428 SCRA 239, 249. Rollo, p. 41
Id. at 40.
Metropolitan Bank and Trust Company v. National Labor Relations Commission, G.R. No. 152928,
Decision II G.R. No. I9260I
It is further worthy to note that petitioner granted claims for funeral and bereavement aid as early as
1999, then issued a memorandum in 2000 to correct its erroneous interpretation of legal dependent under
Section 4, Article XIII of the CBA. This notwithstanding, the 2001-2004 CBA35 still contained the same
provision granting funeral or bereavement aid in case of the death of a legal dependent of a regular
employee without differentiating the legal dependents according to the employee's civil status as married
or single. The continuity in the grant of the funeral and bereavement aid to regular employees for the

death of their legal dependents has undoubtedly ripened into a company policy. With that, the denial of
Alfante's qualified claim for such benefit pursuant to Section 4, Article XIII of the CBA violated the law
prohibiting the diminution of benefits.
WHEREFORE, the Court AFFIRMS the decision promulgated on February 5, 201 0; and ORDERS petitioner to
pay the costs of suit.
SO ORDERED.
SECOND DIVISION
G.R. No. 177524, July 23, 2014
NATIONAL UNION OF WORKERS IN HOTEL RESTAURANT AND ALLIED INDUSTRIES
(NUWHRAIN-APL-IUF), PHILIPPINE PLAZA CHAPTER, Petitioner, v. PHILIPPINE PLAZA
HOLDINGS, INC., Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari,1 challenging the January 31, 2007 decision2 and
the April 20, 2007 resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 93698.
This CA decision reversed the July 4, 2005 decision4 of the National Labor Relations Commission
(NLRC) in NLRC NCR CA No. 031977-02 (NLRC NCR-30-05-02011-01) that in turn, reversed and set
aside the April 30, 2002 decision5 of the Labor Arbiter (LA).
The LA dismissed the complaint for non-payment of service charges filed by petitioner National
Union of Workers in Hotel Restaurant and Allied Industries (NUWHRAIN-APL-IUF), Philippine Plaza
Chapter (Union).
The Factual Antecedents
The Union is the collective bargaining agent of the rank-and-file employees of respondent
Philippine Plaza Holdings, Inc. (PPHI). On November 24, 1998, the PPHI and the Union executed
the Third Rank-and-File Collective Bargaining Agreement as Amended 6 (CBA). The CBA
provided, among others, for the collection, by the PPHI, of a ten percent (10%) service charge on
the sale of food, beverage, transportation, laundry and rooms. The pertinent CBA provisions
read:SECTION 68. COLLECTION. The HOTEL shall continue to collect ten percent (10%) service
charge on the sale of food, beverage, transportation, laundry and rooms except on negotiated
contracts and special rates. [Emphasis supplied]
SECTION 69. DISTRIBUTION. The service charge to be distributed shall consist of the following:
Effective
1998
1997

Food & Beverage


95%
95%

Room, Transportation & valet


100%
100%

The distributable amount will be shared equally by all HOTEL employees, including managerial
employees but excluding expatriates, with three shares to be given to PPHI Staff and three shares
to the UNION (one for the national and two for the local funds) that may be utilized by them for
purposes for which the UNION may decide.
These provisions merely reiterated similar provisions found in the PPHI-Unions earlier collective
bargaining agreement executed on August 29, 1995.7
On February 25, 1999, the Unions Service Charge Committee informed the Union President,
through an audit report (1st audit report),8 of uncollected service charges for the last quarter of
1998 amounting to ?2,952,467.61. Specifically, the audit report referred to the service charges
from the following items: (1) Journal Vouchers; (2) Banquet Other Revenue; and (3)
Staff and Promo. The Union presented this audit report to the PPHIs management during the
February 26, 1999 Labor Management Cooperation Meeting (LMCM).9 The PPHIs management
responded that the Hotel Financial Controller would need to verify the audit report.
Through a letter dated June 9, 1999,10 the PPHI admitted liability for P80,063.88 out of the
P2,952,467.61 that the Union claimed as uncollected service charges. The PPHI denied the rest

of the Unions claims because: (1) they were exempted from the service charge being revenues
from special promotions (revenue from the Westin Gold Card sales) or negotiated contracts
(alleged revenue from the Maxi-Media contract); (2) the revenues did not belong to the PPHI but
to third-party suppliers; and (3) no revenue was realized from these transactions as they were
actually expenses incurred for the benefit of executives or by way of good-will to clients and
government officials.
During the July 12, 1999 LMCM,11 the Union maintained its position on uncollected service
charges so that a deadlock on the issue ensued. The parties agreed to refer the matter to a third
party for the solution. They considered two options voluntary arbitration or court action and
promised to get back to each other on their chosen option.
In its formal reply (to the PPHIs June 9, 1999 letter) dated July 21, 1999 (2nd audit report),12 the
Union modified its claims. It claimed uncollected service charges from: (1) Journal Vouchers Westin Gold Revenue and Maxi-Media (F&B and Rooms Barter); (2) Banquet and Other
Revenue; and (3) Staff and Promo.
On August 10, 2000, the Unions Service Charge Committee made another service charge audit
report for the years 1997, 1998 and 1999 (3rd audit report).13 This 3rd audit report reflected total
uncollected service charges of P5,566,007.62 from the following entries: (1) Journal
Vouchers; (2) Guaranteed No Show; (3) Promotions; and (4) F & B Revenue. The
Union President presented the 3rd audit report to the PPHI on August 29, 2000.
When the parties failed to reach an agreement, the Union, on May 3, 2001, filed before the LA
(Regional Arbitration Branch of the NLRC) a complaint 14 for non-payment of specified service
charges. The Union additionally charged the PPHI with unfair labor practice (ULP) under Article
248 of the Labor Code, i.e., for violation of their collective bargaining agreement.
In its decision15 dated April 30, 2002, the LA dismissed the Unions complaint for lack of merit.
The LA declared that the Union failed to show, by law, contract and practice, its entitlement to
the payment of service charges from the entries specified in its audit reports (specified
entries/transactions).
The LA pointed out that Section 68 of the CBA explicitly requires, as a precondition for the
distribution of service charges in favor of the covered employees, the collection of the 10%
service charge on the sale of food, beverage, transportation, laundry and rooms; at the same
time, the provision exempts from its coverage negotiated contracts and special rates that the
LA deemed as non-revenue generating transactions involving food, beverage, transportation,
laundry and rooms. The Union failed to prove that the PPHI collected 10% service charges on the
specified entries/transactions that could have triggered the PPHIs obligation under this provision.
Particularly, the LA pointed out that, first, the only evidence on record that could have formed the
basis of the Unions claim for service charges was the PPHIs admission that, as a matter of
policy, it has been charging, collecting and distributing to the covered employees 10% service
charge on the fifty percent (50%) of the total selling price of the Maxi-Media F & B and on the
Average House rate of the Maxi-Media Rooms. And it did so, notwithstanding the fact that
the Maxi-Media F & B and Rooms Barter is a negotiated contract and/or special rate that
Section 68 explicitly excludes from the service charge coverage.
Second, while the PPHI derived revenues from the sale of the Westin Gold Cards (Westin Gold
Revenue), the PPHI did not and could not have collected a 10% service charge as these
transactions could not be considered as sale of food, beverage, transportation, laundry and
rooms that Section 68 contemplates.
Third, the Staff and Business Promotion and Banquet entry refers to the expenses incurred by
the PPHIs Marketing Department and Department Heads and Hotel executives either as part of
their perks or the PPHIs marketing tool/public relations. These are special rates that are
essentially non-revenue generating items.
Fourth, the Backdrop entry refers to services undertaken by third parties payment for which
were made of course to them; hence, this entry/transaction could not likewise be considered as

sale of services by PPHI for which collection of the 10% service charge was warranted.
Lastly, the LA equally brushed aside the Unions claim of ULP declaring that the PPHI was well
within its legal and contractual right to refuse payment of service charges for entries from which
it did not collect any service charge pursuant to the provision of their CBA.
The NLRCs ruling In its decision16 of July 4, 2005, the NLRC reversed the LAs decision and
considered the specified entries/transactions as service chargeable. As the PPHI failed to prove
that it paid or remitted the required service charges, the NLRC held the PPHI liable to pay the
Union P5,566,007.62 representing the claimed uncollected service charges for the years 1997,
1998 and 1999 per the 3rd audit report.
The PHHI went to the CA on a petition for certiorari17 after the NLRC denied its motion for
reconsideration.18
The CAs ruling The CA granted the PPHIs petition in its January 31, 2007 decision. 19 It affirmed
the LAs decision but ordered the PPHI to pay the Union the amount of P80,063.88 as service
charges that it found was due under the circumstances. The CA declared that no service charges
were due from the specified entries/transactions; either these constituted negotiated contracts
and special rates that Section 68 of the CBA explicitly excludes from the coverage of service
charges, or they were cited bases that the Union failed to sufficiently prove.
The CA pointed out that: one, the Westin Gold Card Revenues entry involved the sale, not of
food, beverage, transportation, laundry and rooms, but of a contractual right to be charged a
lesser rate for the products and services that the Hotel and the stores within it provide. At any
rate, the PPHI charges, collects and distributes to the covered employees the CBA-agreed service
charges whenever any Westin Gold Card member purchases food, beverage, etc. Two, the MaxiMedia F & B and Rooms and Barter entry did not involve any sale transaction that Section 68
contemplates. The CA pointed out that the arrangement20 between the PPHI and Maxi-Media
International, Inc. was not one of sale but an innominate contract of facio ut des, i.e., in exchange
for the professional entertainment services provided by Maxi-Media, the Hotel agreed to give the
former P2,800,000.00 worth of products and services. The CA added that this agreement falls
under negotiated contracts that Section 68 explicitly exempts. Three, the sale of Gift
Certificates does not involve the CBA-contemplated sale of food, beverage, etc. Four, the
Union failed to show the source of its computations for its Guaranteed No Show and F & B
Revenue claims. Five, the Business Promotions entry likewise did not involve any sale; these
were part of the PPHIs business expenses in the form of either signing benefits for the PPHIs
executives or as marketing tool used by the PPHIs marketing personnel to generate goodwill.
And six, the Unions claims for service charges that the PPHI allegedly collected prior to May 3,
1998 or three years before the Union filed its complaint on May 3, 2001 had already prescribed
per Article 291 of the Labor Code.
The Union filed the present petition after the CA denied its motion for reconsideration 21 in the
CAs April 20, 2007 resolution.22
The Petition The Union argues that the CA clearly misapprehended and misappreciated, with
grave abuse of discretion, the facts and evidence on record. It maintains that the specified
entries/transactions are revenue based transactions which, per Section 68 and 69 of the CBA,
clearly called for the collection and distribution of a 10% service charge in favor of the covered
employees.
Particularly, the Union argues that: (1) the Westin Gold Cards serve not only as a discount card
but also as a pre-paid card that provide its purchasing members complimentary amenities for
which the Hotel employees rendered services and should, therefore, had been subjected to the
10% service charge; (2) the PPHI failed to prove that it had paid and distributed to the covered
employees the service charge due on the actual discounted sales of food, beverage, etc.,
generated by the Westin Gold Cards; (3) the Hotel employees likewise rendered services
whenever the Maxi-Media International, Inc. consumed or availed part of the P2,800,000.00
worth of goods and services pursuant to its agreement with the PPHI; (4) the Maxi-Media
discounts should be charged to the PPHI as part of its expenses and not the Unions share in the
service charges; (5) the PPHI has a separate budget for promotions, hence the Business

Promotions entry should likewise had been subjected to the 10% service charge; (6) the sale of
Gift Certificates, recorded in the PPHIs Journal Vouchers as other revenue/income,
constituted a revenue transaction for which service charges were due; (7) the PPHI admitted that
service charges from Guaranteed No Show were due; and (8) it properly identified through
reference numbers the uncollected service charges from Food and Beverage Revenue. The
Union contends that in refusing to collect and remit the CBA-mandated service charges that the
PPHI insists were non-revenue transactions falling under Negotiated Contracts and/or Special
Rates, the PPHI, in effect, contravened the employees rights to service charges under the law
and the CBA.
The Union also contends that the term Negotiated Contracts should be applied to airline
contracts only that they (the Union and the PPHI) intended when they executed the CBA. It
points out that at the time the CBA was executed, the PPHI had an existing agreement with
Northwest Airlines to which the term Negotiated Contracts clearly referred to.
Further, the Union argues that its claim for unpaid services charges for the year 1997 and part of
1998 had not yet prescribed. Applying Article 1155 of the Civil Code in relation to Article 291 of
the Labor Code, the Union points out that the running of the prescriptive period for the filing of its
claim was interrupted when it presented to the PPHI its 1st audit report during the February 26,
1999 LMCM and when the PPHI admitted the service charges due to the Union in the PPHIs June
9, 1999 letter.
The Union additionally argues that the PPHI failed to conform to the generally accepted
accounting standards when it reclassified the revenue items as expense items.
Finally, the Union contends that the PPHIs refusal, despite repeated demands, to distribute the
unremitted service charges and recognize its right to service charges on the specified entries; the
PPHIs deliberate failure to disclose its financial transactions and audit reports; and the PPHIs
reclassification of the revenues into expense items constitute gross violation of the CBA that
amounts to what the law considers as ULP.
The Case for the Respondent
The PPHI primarily counters, in its comment, 23that the Unions call for the Court to thoroughly reexamine the records violates the Rule 45 proscription against questions of facts. The PPHI points
out that Rule 45 of the Rules of Court under which the petition is filed requires that only questions
of law be raised. In addition, the factual findings of the LA that had been affirmed by the CA
deserve not only respect but even finality.
On the petitions merits, the PPHI argues that the specified entries/transactions for which the
Union claims service charges: (1) were not revenue generating transactions; (2) that did not
involve a sale of food, beverage, rooms, transportation or laundry; and/or (3) were in the nature
of negotiated contracts and special rates that Section 68 of the CBA specifically excepts from the
collection of service charges. Correlatively, Article 96 of the Labor Code requires the collection of
service charges as a condition precedent to its distribution or payment. Thus, as no service
charges were collected on the specified entries/transactions that the CBA expressly excepts, the
Unions claim for unpaid service charges clearly had no basis.
To be precise, the PPHI points out that, first, the sale per se of the Westin Gold Cards did not
involve a sale of food, beverage, etc. that Section 68 of the CBA contemplates. The discounted
sales of food, beverage, etc. to Westin Gold Card holders, on the other hand, had already been
subjected to service charges inclusive of the discount, i.e., computed on the gross sales of food,
beverage, etc. to the card holders, and which service charges it had already distributed to the
covered employees. Second, its agreement with Maxi-Media involved an exchange or barter
transaction, i.e., its food and Hotel services in exchange for Maxi-Medias entertainment services
that did not generate income. This agreement likewise falls under Negotiated Contracts that
Section 68 clearly excepts. And, in any case, it had already collected, and distributed to the
covered employees, the service charges on the food, beverage, etc. that Maxi-Media consumed
based on the monthly average rate of the rooms and on the 50% rate of the price of the
consumed food and beverage. Third, the Union failed to prove its claims for uncollected service
charges from Guaranteed No Show and Business Promotions. Fourth, the Food and

Beverage other Revenue entry refers to the PPHIs transactions with external service providers
the payment for whose services could not be considered as the PPHIs revenue. Fifth, the sale
per se of the Gift Certificates also did not involve the Section 68-contemplated sale of food,
beverage, etc. and the Union failed to prove that the presented Gift Certificates had actually
been consumed, i.e., used within the Hotel premises for food, beverage, etc. And sixth, it had
never been its practice to collect service charges on the specified entries/transactions that could
have otherwise resulted in what the Union considers as partial abolition of service charges
when it refused to collect service charges from them.
The PPHI also disputes what it considers as the Unions strained interpretation of the CBA
exception of Negotiated Contracts as applicable to airline contracts only. It points out that the
clear wordings of Section 68 of the CBA plainly show the intent to except, in a general and broad
sense, Negotiated Contracts and Special Rates as to include the Westin Gold Cards and
Maxi-Media barter agreement. The PPHI additionally argues that the CBAs exception of
Negotiated Contracts and Special Rates from the collection of service charges does not
violate Article 96 of the Labor Code. It points out that Article 96 merely provides for the
minimum percentage distribution, between it (the PPHI) as the employer and the Hotels covered
employees, of the collected service charges which their CBA more than satisfied. It also points
out that Article 96 does not prohibit the exception of certain transactions from the coverage
and/or collection of service charges that it (as the employer) and the Union (in behalf of the
covered Hotel employees) had voluntarily and mutually agreed on in their CBA. And in fact, the
Unions refusal to recognize these clear and express exceptions constituted a violation of their
agreement.
Further, the PPHI maintains that the Unions claim for the alleged uncollected service charges for
the year 1997 and the early months of 1998 had already prescribed per Article 291 of the Labor
Code.
Finally, the PPHI points out that the issue in this case is not whether service charges had been
paid. Rather, the clear issue is whether or not service charges should have been collected (and
distributed to the covered employees) for the specified entries/transactions that the LA and the
CA correctly addressed and which the NLRC clearly missed as it rendered a decision without any
factual or legal basis.
The Courts Ruling
We find the petition unmeritorious.
Preliminary considerations: jurisdictional
limitations of the Courts Rule 45 review of
the CAs Rule 65 decision in labor cases; the
Montoya ruling and factual-issue-bar-rule
In a petition for review on certiorari under Rule 45 of the Rules of Court, we review the legal
errors that the CA may have committed in the assailed decision, in contrast with the review for
jurisdictional errors that we undertake in an original certiorari action. In reviewing the legal
correctness of the CA decision in a labor case taken under Rule 65 of the Rules of Court, we
examine the CA decision in the context that it determined the presence or the absence of grave
abuse of discretion in the NLRC decision before it and not on the basis of whether the NLRC
decision, on the merits of the case, was correct. In other words, we proceed from the premise
that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision challenged
before it. Within this limited scope of our Rule 45 review, the question that we ask is: Did the CA
correctly determine whether the NLRC committed grave abuse of discretion in ruling on the case?
24

In addition, the Courts jurisdiction in a Rule 45 petition for review on certiorari is limited to
resolving only questions of law. A question of law arises when the doubt or controversy exists as
to what law pertains to a particular set of facts; and a question of fact arises when the doubt or
controversy pertains to the truth or falsity of the alleged facts.25
The present petition essentially raises the question whether the Union may collect from the
PPHI, under the terms of the CBA, its share of the service charges. This is a clear question of law

that falls well within the Courts power in a Rule 45 petition.


Resolution of this question of law, however, is inextricably linked with the largely factual issue of
whether the specified entries/transactions fall within the generally covered sale of food,
beverage, transportation, etc. from which service charges are due or within the CBA excepted
Negotiated Contracts and Special Rates. It also unavoidably requires resolution of another
factual issue, i.e., whether the Unions claim for service charges collected for the year 1997 and
the early months of 1998 had already prescribed. As questions of fact, they are proscribed by
our Rule 45 jurisdiction; we generally cannot address these factual issues except to the extent
necessary to determine whether the CA correctly found the NLRC in grave abuse of discretion in
granting the Unions claim for service charges from the specified entries/transactions.
The jurisdictional limitations of our Rule 45 review of the CAs Rule 65 decision in labor cases
constrain us to deny the present petition for clear lack of legal error in the CAs decision. Our
consideration of the facts taken within this limited scope of our factual review power, convinces
us that grave abuse of discretion attended the NLRCs decision. At what point and to what extent
the NLRC gravely abused its discretion is the matter we shall discuss below.
The NLRCs patently erroneous appreciation
of the real issue in the present controversy,
along with the facts and the evidence, amounted
to grave abuse of discretion
In granting the Unions claim, the NLRC simply declared that the PPHI has not shown any proof
that it paid or remitted what is due to the Union and its members and concluded that the
specified entries/transactions were service chargeable. This NLRC conclusion plainly failed to
appreciate that it involved only the alleged uncollected service charges from the specified
entries/transactions. The NLRC likewise, in the course of its ruling, did not point to any evidence
supporting its conclusion.
In deciding as it did, the NLRC patently proceeded from the wrong premise, i.e., that the PPHI did
not at all distribute to the Hotels covered employees their share in the collected service
charges. It likewise erroneously assumed that all the specified entries/transactions were subject
to service charges and that the PPHI collected service charges from them as its ruling was
patently silent on this point. The NLRC also erroneously assumed that each and every
transaction that the PPHI entered into was subject to a service charge.
What the NLRC clearly and conveniently overlooked was the underlying issue of whether service
charges are due from the specified entries/transactions, i.e., whether the specified
entries/transactions are covered by the CBAs general-rule provisions on the collection of service
charges or whether they are excepted because they fall within the excepted Negotiated
Contracts and Special Rates or simply did not involve a sale of food, beverage, etc. from
which service charges are due. This understanding of this cases real issue is an indispensable
requisite in the proper resolution of the controversy and a task that the NLRC, as a tribunal
exercising quasi-judicial power, must perform with circumspection and utmost diligence. The
patent failure led to its manifestly flawed conclusions that were belied by the underlying facts.
By so doing, the NLRC acted outside the clear contemplation of the law. 26
Accordingly, we affirm the CAs decision to be legally correct as it correctly reversed the NLRC
decision for grave abuse of discretion.
Nature of a CBA; rules in the interpretation of CBA provisions
A collective bargaining agreement, as used in Article 252 (now Article 262) 27 of the Labor Code, is
a contract executed at the request of either the employer or the employees exclusive bargaining
representative with respect to wages, hours of work and all other terms and conditions of
employment, including proposals for adjusting any grievances or questions under such
agreement.28 Jurisprudence settles that a CBA is the law between the contracting parties who are
obliged under the law to comply with its provisions.29
As a contract and the governing law between the parties, the general rules of statutory
construction apply in the interpretation of its provisions. Thus, if the terms of the CBA are plain,

clear and leave no doubt on the intention of the contracting parties, the literal meaning of its
stipulations, as they appear on the face of the contract, shall prevail. 30 Only when the words
used are ambiguous and doubtful or leading to several interpretations of the parties agreement
that a resort to interpretation and construction is called for. 31
No service charges were due from the specified
entries/transactions; they either fall within the
CBA-excepted Negotiated Contracts and
Special Rates or did not involve a sale
of food, beverage, etc.
The Union anchors its claim for services charges on Sections 68 and 69 of the CBA, in relation
with Article 96 of the Labor Code. Section 68 states that the sale of food, beverage,
transportation, laundry and rooms are subject to service charge at the rate of ten percent (10%).
Excepted from the coverage of the 10% service charge are the so-called negotiated contracts
and special rates.
Following the wordings of Section 68 of the CBA, three requisites must be present for the
provisions on service charges to operate: (1) the transaction from which service charge is sought
to be collected is a sale; (2) the sale transaction covers food, beverage, transportation,
laundry and rooms; and (3) the sale does not result from negotiated contracts and/or at
special rates.
In plain terms, all transactions involving a sale of food, beverage, transportation, laundry and
rooms are generally covered. Excepted from the coverage are, first, non-sale transactions or
transactions that do not involve any sale even though they involve food, beverage, etc.
Second, transactions that involve a sale but do not involve food, beverage, etc. And third,
transactions involving negotiated contracts and special rates i.e., a sale of food, beverage,
etc. resulting from negotiated contracts or at special rates; non-sale transactions involving
food, beverage, etc. resulting from negotiated contracts and/or special rates; and sale
transactions, but not involving food, beverage, etc., resulting from negotiated contracts and
special rates.
Notably, the CBA does not specifically define the terms negotiated contracts and special
rates. Nonetheless, the CBA likewise does not explicitly limit the use of these terms to specified
transactions. With particular reference to negotiated contracts, the CBA does not confine its
application to airline contracts as argued by the Union. Thus, as correctly declared by the CA,
the term negotiated contracts should be read as applying to all types of negotiated contracts
and not to airlines contracts only. This is in line with the basic rule of construction that when
the terms are clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall prevail. A constricted interpretation of this term, i.e., as
applicable to airlines contracts only, must be positively shown either by the wordings of the
CBA or by sufficient evidence of the parties intention to limit its application. The Union
completely failed to provide support for its constricted reading of the term negotiated
contracts, either from the wordings of the CBA or from the evidence.
In reversing the NLRCs ruling and denying the Unions claim, the CA found the specified
entries/transactions as either falling under the excepted negotiated contracts and/or special rates
or not involving a sale of food, beverage, etc. Specifically, it considered the entries Westin Gold
Cards Revenue and Maxi Media Barter to be negotiated contracts or contracts under special
rates, and the entries Business Promotions and Gift Certificates as contracts that did not
involve a sale of food, beverage, etc. The CA also found no factual and evidentiary basis to
support the Unions claim for service charges on the entries Guaranteed No show and F & B
Revenue.
Our consideration of the records taken under our limited factual review power convinces us that
these specified entries/transactions are indeed not subject to a 10% service charge. We thus see
no reason to disturb the CAs findings on these points.
The PPHI did not violate Article 96 of the
Labor Code when they refused the Unions
claim for service charges on the

specified entries/transactions
Article 96 of the Labor Code provides for the minimum percentage distribution between the
employer and the employees of the collected service charges, and its integration in the covered
employees wages in the event the employer terminates its policy of providing for its collection.
It pertinently reads:
Art. 96. Service Charges.
x x x In case the service charge is abolished, the share of the covered employees shall be
considered integrated in their wages. This last paragraph of Article 96 of the Labor Code
presumes the practice of collecting service charges and the employers termination of this
practice. When this happens, Article 96 requires the employer to incorporate the amount that
the employees had been receiving as share of the collected service charges into their wages. In
cases where no service charges had previously been collected (as where the employer never had
any policy providing for collection of service charges or had never imposed the collection of
service charges on certain specified transactions), Article 96 will not operate.
In this case, the CA found that the PPHI had not in fact been collecting services charges on the
specified entries/transactions that we pointed out as either falling under negotiated contracts
and/or special rates or did not involve a sale of food, beverage, etc. Accordingly, Article 96 of
the Labor Code finds no application in this case; the PPHI did not abolish or terminate the
implementation of any company policy providing for the collection of service charges on specified
entries/transactions that could have otherwise rendered it liable to pay an amount representing
the covered employees share in the alleged abolished service charges.
The Unions claim for service charges for the year
1997 and the early months of 1998 could not have
yet prescribed at the time it filed its complaint on
May 3, 2001; Article 1155 of the Civil Code applies
suppletorily to Article 291 of the Labor Code
Article 291 (now Article 305)32 of the Labor Code states that all money claims arising from
employer-employee relations x x x shall be filed within three (3) years from the time the
cause of action accrued; otherwise, they shall forever be barred. [Emphasis supplied]
Like other causes of action, the prescriptive period for money claims under Article 291 of the
Labor Code is subject to interruption. And, in the absence of an equivalent Labor Code provision
for determining whether Article 291s three-year prescriptive period may be interrupted, Article
1155 of the Civil Code33 may be applied. Thus, the period of prescription of money claims under
Article 291 is interrupted by: (1) the filing of an action; (2) a written extrajudicial demand by the
creditor; and (3) a written acknowledgment of the debt by the debtor.
In the present petition, the facts indisputably showed that as early as 1998, the Union demanded,
via the 1st audit report, from the PPHI the payment and/or distribution of the alleged uncollected
service charges for the year 1997. From thereon, the parties went through negotiations (LCMC)
to settle and reconcile on their respective positions and claims.
Under these facts the Unions written extrajudicial demand through its 1st audit report and the
successive negotiation meetings between the Union and the PPHI the running of the three-year
prescriptive period under Article 291 of the Labor Code could have effectively been interrupted.
Consequently, the Unions claims for the alleged uncollected service charges for the year 1997
could not have yet prescribed at the time it filed its complaint on May 3, 2001.
This non-barring effect of prescription, notwithstanding (i.e., that the running of the three-year
prescriptive period had effectively been interrupted by the Unions written extrajudicial demand
on the PPHI), the CA, as it affirmed the LA, still correctly denied the Unions claims for the alleged
uncollected and/or undistributed service charges on the specified entries/transactions for the
year 1997 and the early part of 1998. As the CA found and discussed in its decision, and with
which we agree as amply supported by factual and legal bases, the nature of these specified
entries/transactions as either excepted from the collection of service charges or not constituting
a sale of food, beverage, etc., and the Unions failure to support its claims by sufficient

evidence warranted, without doubt, the denial of the Unions action.


In sum, we find the CAs denial of the Unions claim for service charges from the specified
entries/transactions legally correct and to be well supported by the facts and the law. The CA
correctly reversed for grave abuse of discretion the NLRCs decision.
WHEREFORE, in light of these considerations, we hereby DENY the petition. We AFFIRM the
decision dated January 31, 2007 and resolution dated April 20, 2007 of the Court of Appeals in
CA-G.R. Sp No. 93698.
SO ORDERED.
Carpio, (Chairperson), Del Castillo, Perez, and Perlas-Bernabe, JJ., concur.
Petitioner Best Wear Garments is a sole proprietorship represented by its General Manager Alex
Sitosta. Respondents CecileM. Ocubillo and Adelaida B. Respondents De Lemos (De Lemos et al )
were hired as sewers on piece-rate basis by petitioners.Respondents De Lemos et al. filed a
complaint against Best Wear, alleging that in August 2003, Sitosta arbitrarily transferred them to
other areas of operation of Best Wears garments company, which they said amounted to
constructive dismissal as it resulted in less earnings for them.Respondents De Lemos claimed
that after two months in her new assignment, she was able to adjust but Sitosta againtransferred
her to a "different operation where she could not earn as much as before because by-products
require long periodof time to finish." She said that the reason for her transfer was her refusal "to
render overtime work up to 7:00 p.m."
Shefurther alleged that her last salary was withheld by Best Wear.Ocubillo, on the other hand,
alleged that her transfer was precipitated by her having "incurred excessive absencessince
2001." Her absences were due to the fact that her father became very sick, and she herself
became very sickly. Sheclaimed that from September to October 2003, Sitosta assigned her to
different machines "whichever is available" and that "there were times, she could not earn for a
day because there was no available machine to work with." Sitosta also allegedlyrequired her to
render overtime work up to 7:00 p.m. which she refused "because she was only paid up to 6:25
p.m."Best Wear denied having terminated the employment of Respondents De Lemos et al. who
supposedly committed numerousabsences without leave (AWOL). They claimed that sometime in
February 2004, Respondents De Lemos informed Sitosta that due to personal problem, she
intends to resign from the company. She then demanded the payment of separation pay. InMarch
2004, Ocubillo likewise intimated her intention to resign and demanded separation pay. Sitosta
explained to bothRespondents De Lemos and Ocubillo that the company had no existing policy on
granting separation pay, and hence he couldnot act on their request. Respondents De Lemos
never reported back to work since March 2004, while Ocubillo failed to report for work from
October 2004 to the present.As to the allegation that the reason for their transfer was their
refusal to render overtime work until 7:00 p.m., Best Wear asserted that Respondents De Lemos
et al. are piece-rate workers and hence they are not paid according to the numberof hours
worked.The Labor Arbiter ruled in favor of Respondents De Lemos et al., holding that they were
illegally dismissed andgranting them separation pay and backwages.The NLRC reversed the
decision, holding that there was no constructive dismissal and that the transfer of Respondents
De Lemos et al. was a valid exercise of management prerogative. It also ordered Respondents De
Lemos et al toreport back to work since there was no dismissal.The CA reversed the decision of
NLRC, and reinstated the decision of the Labor Arbiter.
ISSUE: Whether Respondents De Lemos, et al. were constructively dismissed by petitioner.
RULING: SC held that the CA erred in reversing the NLRCs ruling that respondents were not
constructively dismissed.
Respondents De Lemos et al. were not dismissed.
The right of employees to security of tenure does not give them vested rights to their positions to
the extent of depriving management of its prerogative to change their assignments or to transfer
them. Thus, it has been held that theemployer must be able to show that the transfer is not
unreasonable, inconvenient or prejudicial to the employee; nor does it involve a demotion in rank
or a diminution of his salaries, privileges and other benefits. Should the employer fail to
overcome
this burden of proof, the employees transfer shall be tantamount to constructive dismissal,
which has been defined as a

quitting because continued employment is rendered impossible, unreasonable or unlikely; as an


offer involving a demotion inrank and diminution in pay. Likewise, constructive dismissal exists
when an act of clear discrimination, insensibility or disdainby an employer has become so
unbearable to the employee leaving him with no option but to forego with his
continuedemployment.Being piece- rate workers assigned to individual sewing machines,
respondents earnings depended on the quality and quantity of finished products.
That their work output might have been affected by the change in their specific workassignments
does not necessarily imply that any resulting reduction in pay is tantamount to constructive
dismissal. Workersunder piece-rate employment have no fixed salaries and their compensation is
computed on the basis of accomplished tasks.As admitted by Respondents De Lemos, some
garments or by-products took a longer time to finish so they could not earn asmuch as before.
Also, the type of sewing jobs available would depend on the specifications made by the clients of
Best Wear.Under these circumstances, it cannot be said that the transfer was unreasonable,
inconvenient or prejudicial to therespondents. Such deployment of sewers to work on different
types of garments as dictated by present business necessity iswithin the ambit of management
prerogative, which, in the absence of bad faith, ill motive or discrimination, should not
beinterfered with by the courts.The constitutional policy of providing full protection to labor is not
intended to oppress or destroy management.While the Constitution is committed to the policy of
social justice and the protection of the working class, it should not be
Case Digest: TOYOTA MOTOR PHILIPPINES CORP. WORKERS ASSOCIATION (TPCWA) vs. NATIONAL
LABOR RELATIONS COMMISSION, et al. G.R. Nos 158798-99
19 October 2007
FACTS:
The Union is the sole and exclusive bargaining agent of all Toyota rank and file employees. After the
holding of a certification election, and the issuance of an Order certifying the Union as the sole and
exclusive bargaining agent of all the Toyota rank and file employees, Toyota challenged said Order via
appeal to the DOLE Secretary. Thus, Toyota refused to negotiate CBAs with the Union pending said appeal.
The Unions subsequent notice to strike was converted into a preventive mediation case.
The 21 February 2001 hearing on the exclusion of the votes of alleged supervisory employees from the
votes cast during the certification election was cancelled and reset to the next day The Union requested
that its members be absent on 22 February, but the same was denied. Despite said denal, more than 200
employees staged mass actions on 22 and 23 February in front of the BLR and DOLE offices, to protest the
partisan and anti-union stance of Toyota. Due to the loss of the said number of employees, Toyota
experienced losses due to inability to meet production goals. Soon thereafter, Toyota sent individual
letters to some 360 employees requiring them to explain within 24 hours why they should not be
dismissed for their obstinate defiance of the companys directives. The letters specifically cited the
Companys Code of Conduct wherein inciting or participating in riots, disorders, alleged strikes, or
concerted actions detrimental to Toyotas interest wherein the first offense would amount to dismissal.
In response to the letters, the Union circulated a Manifesto which urged its members to participate in a
strike/picket and to abandon their posts. The Union members explained that their refusal to work on their
scheduled work time for two consecutive days was simply an exercise of their constitutional right to
peaceably assemble and to petition the government for redress of grievances. On 16 March 2001, Toyota
terminated 227 employees for participation in concerted actions in violation of its Code of Conduct and for
misconduct under Article 282 of the Labor Code. In reaction to the dismissal of its union members and
officers, the Union went on strike on 17 March, 28 March ad 12 April. In the latter dates, the Union
intensified its strike by barricading the gates of Toyotas Bicutan and Sta. Rosa plants. The strikers
prevented workers who reported for work from entering the plants.
ISSUE(S):
1.
Whether the mass actions committed by the Union on different occasions are illegal strikes; and
2.
Whether separation pay should be awarded to the Union members who participated in the illegal
strikes.
HELD:

Yes. The alleged protest rallies in front of the offices of BLR and DOLE Secretary and at the Toyota plants
constituted illegal strikes. Even if the Union claims that the said acts were not strikes, there was a lack of
permit from the City of Manila to hold rallies, nor were there any filing of a notice in the two-day walkout. Shrouded by demonstrations, they were in reality temporary stoppages of work perpetrated through
the converted action of the employees who deliberately failed to report for work on the convenient excuse
that they will hold a rally at the BLR and DOLE offices in Intramuros, Manila. It is obvious that the real and
ultimate goal of the Union is to coerce Toyota to finally acknowledge the Union as the sole bargaining
agent of the company. This is not a legal and valid exercise of the right of assembly and to demand
redress of grievance. A valid strike should comply with the prerequisites under Article 263 of the Labor
Code. These requisites were not complied with by the Union. Furthermore, the February 2001 strikes are
in blatant violation of Toyotas Code of Conduct to which the Union and its members are bound to. To make
matters worse, the barricade done during the March and April strikes are in palpable violation of Article
264(e) of the Labor Code, which proscribes acts of violence, coercion, or intimidation, or which obstruct the
free ingress to and egress from the company premises.
No. There can be no good faith in intentionally incurring absences in a collective fashion from work just to
attend DOLE hearings. The Union members should know from common sense that the company will incur
substantial amounts of losses. In a slew of cases, the Court refrained from awarding separation pay or
financial assistance to union officers and members who were separated from service due to their
participation in or commission of illegal acts during strikes.
G.R. No. 184011

September 18, 2013

REYNALDO HAYAN MOYA, Petitioner,


vs.
FIRST SOLID RUBBER INDUSTRIES, INC., Respondent.
DECISION
PEREZ, J.:
Before the Court is a Petition for Review on Certiorari1 from the Decision2 of the Special Third Division of
the Court of Appeals in CA-G.R. SP No. 99500 dated 30 April 2008, modifying the Decision of the National
Labor Relations Commission (NLRC) by deleting the award of separation pay in favor of Reynaldo Hayan
Moya (Moya). The dispositive portion of the assailed decision reads:
WHEREFORE, premises considered, the petition is hereby GRANTED. The Resolutions dated January 31,
2007 and April 24, 2007 of the National Labor Relations Commission in NLRC NCR CA No. 048653-06 (NLRC
NCR Case No. 00-11-12626 2004) affirming the Decision dated February 28, 2006 of the Labor Arbiter
Pablo C. Espiritu, Jr. is MODIFIED by deleting the award for separation pay in favor of private respondent
Reynaldo Hayan Moya.3
The facts as gathered by this Court follow:
On 25 January 2005, Moya filed before the NLRC-National Capital Region a complaint for illegal dismissal
against First Solid Rubber Industries, Inc. (First Solid) and its President Edward Lee Sumulong. In his
complaint-affidavit,4 Moya alleged that:
1. Sometime in May 1993, he was hired by the company First Solid, a business engaged in manufacturing
of tires and rubbers, as a machine operator;
2. Through years of dedication to his job, he was promoted as head of the Tire Curing Department of the
company;
3. On October 15, 2004, he reported an incident about an under curing of tires within his department
which led to the damage of five tires;
4. The company conducted an investigation of the incident and he was later required to explain;
5. In his explanation, he stated that the damage was caused by machine failure and the incident was
without any fault of the operator;

6. Despite his explanation of what transpired, he was terminated by the company through a letter dated
November 9, 2004.
From the foregoing, he prayed that payment of backwages, separation pay, moral damages and exemplary
damages be adjudged in his favor due to the illegal dismissal he suffered from the company.
Moya, through his Reply,5 added that his termination fell short of any of the just causes of serious
misconduct, gross and habitual neglect of duties and willful breach of trust. He pointed out that the
company failed to prove that his act fell within the purview of improper or wrong misconduct, and that a
single act of negligence as compared to eleven (11) years of service of good record with the company will
not justify his dismissal.
First Solid, in its Position Paper,6 Reply7 and Memorandum,8 admitted that Moya was a former employee of
the company and was holding the position of Officer-in-Charge of the Tire Curing Department until his valid
dismissal. However, it denied that it illegally dismissed Moya and maintained that his severance from the
company was due to a valid exercise of management prerogative.9 The company insisted on its right to
validly dismiss an employee in good faith if it has a reasonable ground to believe that its employee is
responsible of misconduct, and the nature of his participation therein renders him absolutely unworthy of
the trust and confidence demanded by his position.10
Opposing the story of Moya, the company countered that Moya, who was exercising supervision and
control over the employees as a department head, failed to exercise the diligence required of him to see to
it that the machine operator, Melandro Autor, properly operated the machine. This act is considered as a
gross and habitual neglect of duty which caused actual losses to the company.11
During the initial investigation, Moya, in his Explanation Letter12 dated 15 October 2004, insisted that the
cause of the damage of five (5) tires was due to premature hauling of the tires below curing time.
Unsatisfied with the explanation, the company sent Moya a Letter13 dated 26 October 2004 stating that
he failed to explain what really transpired in the under curing of tires. The company informed Moya that
the damage was caused by the operators unlawful setting of the timer from manual to automatic without
Moyas permission. To make the matter worse, Moya failed to disclose the real situation that the operator
was at fault.
Moya was given twenty-four (24) hours to defend himself and explain the matter. In response, Moya
admitted in a letter dated 29 October 2004 his mistake of not disclosing the true incident and explained
that he found it more considerate to just let the operator be suspended and be fined for the damage
committed. He denied any willful intention to conceal the truth or cover up the mistake of his employee.
Finally, he asked for the companys forgiveness for the fault he had committed.14 In a letter dated 3
November 2004, Moya reiterated his plea for forgiveness and asked for another chance to continue his
employment with the company.15
Procedural due process, through issuance of twin notices, was also complied with by the company. Moya
was informed of the charges against him through a memorandum16 indicating his violation and was given
an opportunity to answer or rebut the charges. After giving his explanation through several letters to the
company, a notice was sent informing him of the managements decision of his dismissal and termination
from services on9 November 2004 based on serious misconduct, gross and habitual neglect of duty and
willful breach of trust reposed upon him by the company.17
On 28 February 2006, Labor Arbiter Pablo C. Espiritu, Jr. rendered a judgment18 finding sufficient and valid
grounds to dismiss Moya for concealing and lying to First Solid about the factual circumstances leading to
the damage of five (5) tires on 15 October 2004. However, it ruled that the dismissal from service of the
complainant was too harsh as a penalty since it was a first offense and there was no willful and malicious
intention on his part to cause damage. The dispositive portion reads:
WHEREFORE, judgment is hereby rendered ordering Respondents First Solid Rubber Industrial, Inc. and
Edward Lee Sumulong to jointly and severally pay complainant separation pay in lieu of reinstatement the
amount of P63, 654.00.
All other claims whether monetary or otherwise are hereby DISMISSED for lack of merit.19

In justifying his decision, the Labor Arbiter explained that the length of time during which the complainant
was deprived of employment was sufficient penalty for the act he had committed against the company. As
a result, his reinstatement without backwages to his former position was in order. However, since the
employment was already strained and Moya was no longer seeking to be reinstated, he decided that it was
for the best interest of both parties to award instead a separation pay of one (1) month salary for every
year of credited service less the total of cash advances of the complainant amounting to P19,000.00.20
Not in total accord with the outcome of the decision, First Solid filed its partial appeal before the NLRC on
13 April 2006. The company assailed as error on the part of the Labor Arbiter the grant of separation pay
in favor of Moya despite the finding that there was a just cause for the employees dismissal from service.
It was submitted that the complainants length of service to the company cannot be invoked to justify the
award. It was argued that Moya was dismissed for just causes; hence, to award separation pay would be
tantamount to giving a prize for disloyalty and breach of trust.21
On 31 January 2007, the NLRC affirmed the Decision of the Labor Arbiter in its entirety.22
The NLRC affirmed the finding of the Labor Arbiter that a separation pay should be given to Moya in lieu of
reinstatement citing primarily his length of service and years of contribution to the profitable business
operation of the company. It also noted that this transgression was the first mistake of Moya in the
performance of his functions. Finally, it cited as justification the Courts ruling in St. Michaels Institute v.
Santos,23 wherein the Court held that "even when an employee is found to have transgressed the
employers rules, in the actual imposition of penalties upon the erring employee, due consideration must
still be given to his length of service and the number of violations committed during his employment."24
In its Motion for Reconsideration,25 First Solid insisted that length of service cannot mitigate breach of
trust which is penalized with dismissal.
On 24 April 2007, the NLRC denied the motion of First Solid as it found no compelling justification to
overturn its findings.26
In its Petition for Certiorari before the Court of Appeals, the company reiterated its previous arguments
that separation pay cannot be awarded to validly dismissed employees and that length of service was not
a ground to reduce the penalty of dismissal due to breach of trust.27
In his Comment28 and Memorandum,29 Moya capitalized on the pronouncement of the Labor Arbiter that
his alleged infraction does not merit a penalty of dismissal from service given his length of service to the
company as well as the failure of the company to prove that he acted maliciously and with the intention to
cause damage.
First Solid, in its Reply30 and Memorandum,31 argued that Moya, being a supervisor, the company reposed
on him its trust and confidence. He was expected to remain loyal and trustworthy and promote the best
interest of the company. His act of concealing, by making a fraudulent report to the company regarding the
transgression of the machine operator under him, is a valid basis for dismissal based on breach of trust
and confidence. The company further contended that the award of separation pay made by the labor
tribunals was contrary to law and jurisprudence.
In its Decision,32 the Court of Appeals ruled in favor of the company and reversed the decisions of the
labor tribunals. The dispositive portions reads:
WHEREFORE, premises considered, the petition is GRANTED. The Resolutions dated January 31, 2007 and
April 24, 2007 of the National Labor Relations Commission in NLRC NCR CA No. 048653-06(NLRC NCR Case
No. 00-11-12626-2004) affirming the Decision dated February 28, 2006 of the Labor Arbiter Pablo C.
Espiritu, Jr. is MODIFIED by deleting the award for separation pay in favor of private respondent Reynaldo
Hayan Moya.33
The appellate court ruled that an employee found to be guilty of serious misconduct or other acts
reflecting his moral character is not entitled to separation pay. Moya who held a supervisory position as the
Head of the Curing Department breached the trust reposed upon him when he did not disclose what was
actually done by the machine operator which eventually caused the damage. It was only when the
company discovered that the report was not in accordance with what really transpired that Moya admitted

its mistake. In sum, the appellate court agreed that First Solid presented substantial proof to consider Moya
as dishonest and disloyal to the company.
It took the position that instead of being a basis for the award of separation pay, Moyas length of service
should have been taken against him. The reason for his dismissal was his lack of integrity and loyalty to
the company reflecting upon his moral character.
The appellate court emphasized that while the law is considerate to the welfare of the employees
whenever there is a labor conflict, it also protects the right of an employer to exercise its management
prerogative in good faith.
The Courts Ruling
That there is a valid ground for the dismissal of Moya based on breach and loss of trust and confidence is
no longer at issue. The Labor Arbiter, NLRC and the appellate court were unanimous in their rulings on this
matter. The remaining question is whether or not petitioner employee is entitled to separation pay based
on his length of service.
Petitioner is not entitled to separation pay. Payment of separation pay cannot be justified by his length of
service.
It must be stressed that Moya was not an ordinary rank-and-file employee. He was holding a supervisory
rank being an Officer-in-Charge of the Tire Curing Department. The position, naturally one of trust, required
of him abiding honesty as compared to ordinary rank-and-file employees. When he made a false report
attributing the damage of five tires to machine failure, he breached the trust and confidence reposed upon
him by the company.
In a number of cases,34 this Court put emphasis on the right of an employer to exercise its management
prerogative in dealing with its companys affairs including its right to dismiss its erring employees. We
recognized the right of the employer to regulate all aspects of employment, such as the freedom to
prescribe work assignments, working methods, processes to be followed, regulation regarding transfer of
employees, supervision of their work, lay-off and discipline, and dismissal and recall of workers.35 It is a
general principle of labor law to discourage interference with an employers judgment in the conduct of his
business. As already noted, even as the law is solicitous of the welfare of the employees, it also recognizes
employers exercise of management prerogatives. As long as the companys exercise of judgment is in
good faith to advance its interest and not for the purpose of defeating or circumventing the rights of
employees under the laws or valid agreements, such exercise will be upheld.36
Following the ruling in The Coca-Cola Export Corporation v. Gacayan,37 the employers have a right to
impose a penalty of dismissal on employees by reason of loss of trust and confidence. More so, in the case
of supervisors or personnel occupying positions of responsibility, does loss of trust justify termination. Loss
of confidence as a just cause for termination of employment is premised on the fact that an employee
concerned holds a position of trust and confidence. This situation holds where a person is entrusted with
confidence on delicate matters, such as the custody, handling, or care and protection of the employers
property. But, in order to constitute a just cause for dismissal, the act complained of must be "workrelated" such as would show the employee concerned to be unfit to continue working for the employer.38
The foregoing as viewpoint, the right of First Solid to handle its own affairs in managing its business must
be respected. The clear consequence is the denial of the grant of separation pay in favor of Moya.
As pronounced in the recent case of Unilever Philippines, Inc., v. Rivera,39 an employee who has been
dismissed for any of the just causes enumerated under Article 28240 of the Labor Code, including breach
of trust, is not entitled to separation pay.41 This is further bolstered by Section 7,Rule I, Book VI of the
Omnibus Rules Implementing the Labor Code which provides that:
Sec. 7. Termination of employment by employer. The just causes for terminating the services of an
employee shall be those provided in Article 282 of the Code. The separation from work of an employee for
a just cause does not entitle him to the termination pay provided in the Code, without prejudice, however,
to whatever rights, benefits and privileges he may have under the applicable individual or collective
agreement with the employer or voluntary employer policy or practice.1wphi1

However, this Court also provides exceptions to the rule based on "social justice" or on "equitable grounds"
following the ruling in Philippine Long Distance Telephone Co. v. NLRC,42 stating that separation pay shall
be allowed as a measure of social justice only in those instances where the employee is validly dismissed
for causes other than serious misconduct or those reflecting on his moral character. Where the reason for
the valid dismissal is, for example, habitual intoxication or an offense involving moral turpitude, like theft
or illicit sexual relations with a fellow worker, the employer may not be required to give the dismissed
employee separation pay, or financial assistance, or whatever other name it is called, on the ground of
social justice.43
The PLDT case further elucidates why an erring employee could not benefit under the cloak of social
justice in the award of separation pay, we quote:
The policy of social justice is not intended to countenance wrongdoing simply because it is committed by
the underprivileged. At best it may mitigate the penalty but it certainly will not condone the offense.
Compassion for the poor is an imperative of every humane society but only when the recipient is not a
rascal claiming an undeserved privilege. Social justice cannot be permitted to be refuge of scoundrels any
more than can equity be an impediment to the punishment of the guilty. Those who invoke social justice
may do so only if their hands are clean and their motives blameless and not simply because they happen
to be poor. This great policy of our Constitution is not meant for the protection of those who have proved
they are not worthy of it, like the workers who have tainted the cause of labor with the blemishes of their
own character.44
Moyas dismissal is based on one of the grounds under Art. 282 of the Labor Code which is willful breach by
the employee of the trust reposed in him by his employer. Also, he is outside the protective mantle of the
principle of social justice as his act of concealing the truth from the company is clear disloyalty to the
company which has long employed him.1wphi1
Indeed, as found below, Moyas length of service should be taken against him. The pronouncement in Reno
Foods, Inc. v. Nagkakaisang Lakas ng Manggagawa (NLM) Katipunan45 is instructive on the matter:
x x x Length of service is not a bargaining chip that can simply be stacked against the employer. After all,
an employer-employee relationship is symbiotic where both parties benefit from mutual loyalty and
dedicated service. If an employer had treated his employee well, has accorded him fairness and adequate
compensation as determined by law, it is only fair to expect a long-time employee to return such fairness
with at least some respect and honesty. Thus, it may be said that betrayal by a long-time employee is
more insulting and odious for a fair employer.46 (Emphasis supplied).
WHEREFORE, we DENY the petition for review on certiorari. The Decision dated 30 April 2008 and
Resolution dated 1 August 2008 of the Special Third Division of the Court of Appeals in CA-G.R. SP No.
99500 are hereby AFFIRMED.