G.R. No.

78909 June 30, 1989

MATERNITY CHILDREN'S HOSPITAL, represented by ANTERA L. DORADO,
President,
petitioner,
vs.
THE HONORABLE SECRETARY OF LABOR AND THE REGIONAL DlRECTOR OF
LABOR, REGION X, respondents.
MEDIALDEA, J.:
This is a petition for certiorari seeking the annulment of the Decision of the respondent
Secretary of Labor dated September 24, 1986, affirming with modification the Order of
respondent Regional Director of Labor, Region X, dated August 4, 1986, awarding salary
differentials and emergency cost of living allowances (ECOLAS) to employees of
petitioner, and the Order denying petitioner's motion for reconsideration dated May 13,
1987, on the ground of grave abuse of discretion.
Petitioner is a semi-government hospital, managed by the Board of Directors of the
Cagayan de Oro Women's Club and Puericulture Center, headed by Mrs. Antera Dorado,
as holdover President. The hospital derives its finances from the club itself as well as
from paying patients, averaging 130 per month. It is also partly subsidized by the
Philippine Charity Sweepstakes Office and the Cagayan De Oro City government.
Petitioner has forty-one (41) employees. Aside from salary and living allowances, the
employees are given food, but the amount spent therefor is deducted from their
respective salaries (pp. 77-78, Rollo).
On May 23, 1986, ten (10) employees of the petitioner employed in different
capacities/positions filed a complaint with the Office of the Regional Director of Labor
and Employment, Region X, for underpayment of their salaries and ECOLAS, which was
docketed as ROX Case No. CW-71-86.
On June 16, 1986, the Regional Director directed two of his Labor Standard and Welfare
Officers to inspect the records of the petitioner to ascertain the truth of the allegations in
the complaints (p. 98, Rollo). Payrolls covering the periods of May, 1974, January, 1985,
November, 1985 and May, 1986, were duly submitted for inspection.
On July 17, 1986, the Labor Standard and Welfare Officers submitted their report
confirming that there was underpayment of wages and ECOLAs of all the employees by
the petitioner, the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, deficiency on wage and ecola as verified and
confirmed per review of the respondent payrolls and interviews with the
complainant workers and all other information gathered by the team, it is
respectfully recommended to the Honorable Regional Director, this office,
that Antera Dorado, President be ORDERED to pay the amount of SIX
HUNDRED FIFTY FOUR THOUSAND SEVEN HUNDRED FIFTY SIX & 01/100
(P654,756.01), representing underpayment of wages and ecola to the
THIRTY SIX (36) employees of the said hospital as appearing in the attached
Annex "F" worksheets and/or whatever action equitable under the premises.
(p. 99, Rollo)
Based on this inspection report and recommendation, the Regional Director issued an
Order dated August 4, 1986, directing the payment of P723,888.58, representing
underpayment of wages and ECOLAs to all the petitioner's employees, the dispositive
portion of which reads:
WHEREFORE, premises considered, respondent Maternity and Children
Hospital is hereby ordered to pay the above-listed complainants the total
amount indicated opposite each name, thru this Office within ten (10) days

from receipt thereof. Thenceforth, the respondent hospital is also ordered to

pay its employees/workers the prevailing statutory minimum wage and
allowance.
SO ORDERED. (p. 34, Rollo)
Petitioner appealed from this Order to the Minister of Labor and Employment, Hon.
Augusto S. Sanchez, who rendered a Decision on September 24, 1986, modifying the
said Order in that deficiency wages and ECOLAs should be computed only from May 23,
1983 to May 23, 1986, the dispositive portion of which reads:
WHEREFORE, the August 29, 1986 order is hereby MODIFIED in that the
deficiency wages and ECOLAs should only be computed from May 23, 1983
to May 23, 1986. The case is remanded to the Regional Director, Region X,
for recomputation specifying the amounts due each the complainants under
each of the applicable Presidential Decrees. (p. 40, Rollo)
On October 24, 1986, the petitioner filed a motion for reconsideration which was denied
by the Secretary of Labor in his Order dated May 13, 1987, for lack of merit (p. 43 Rollo).
The instant petition questions the all-embracing applicability of the award involving
salary differentials and ECOLAS, in that it covers not only the hospital employees who
signed the complaints, but also those (a) who are not signatories to the complaint, and
(b) those who were no longer in the service of the hospital at the time the complaints
were filed.
Petitioner likewise maintains that the Order of the respondent Regional Director of Labor,
as affirmed with modifications by respondent Secretary of Labor, does not clearly and
distinctly state the facts and the law on which the award was based. In its "Rejoinder to
Comment", petitioner further questions the authority of the Regional Director to award
salary differentials and ECOLAs to private respondents, (relying on the case of
Encarnacion vs. Baltazar, G.R. No. L-16883, March 27, 1961, 1 SCRA 860, as authority for
raising the additional issue of lack of jurisdiction at any stage of the proceedings, p. 52,
Rollo), alleging that the original and exclusive jurisdiction over money claims is properly
lodged in the Labor Arbiter, based on Article 217, paragraph 3 of the Labor Code.
The primary issue here is whether or not the Regional Director had jurisdiction over the
case and if so, the extent of coverage of any award that should be forthcoming, arising
from his visitorial and enforcement powers under Article 128 of the Labor Code. The
matter of whether or not the decision states clearly and distinctly statement of facts as
well as the law upon which it is based, becomes relevant after the issue on jurisdiction
has been resolved.
This is a labor standards case, and is governed by Art. 128-b of the Labor Code, as
amended by E.O. No. 111. Labor standards refer to the minimum requirements
prescribed by existing laws, rules, and regulations relating to wages, hours of work, cost
of living allowance and other monetary and welfare benefits, including occupational,
safety, and health standards (Section 7, Rule I, Rules on the Disposition of Labor
Standards Cases in the Regional Office, dated September 16, 1987). 1 Under the present
rules, a Regional Director exercises both visitorial and enforcement power over labor
standards cases, and is therefore empowered to adjudicate money claims, provided
there still exists an employer-employee relationship, and the findings of the regional
office is not contested by the employer concerned.
Prior to the promulgation of E.O. No. 111 on December 24, 1986, the Regional Director's
authority over money claims was unclear. The complaint in the present case was filed on
May 23, 1986 when E.O. No. 111 was not yet in effect, and the prevailing view was that

stated in the case of Antonio Ong, Sr. vs. Henry M. Parel, et al., G.R. No. 76710, dated
December 21, 1987, thus:
. . . the Regional Director, in the exercise of his visitorial and enforcement
powers under Article 128 of the Labor Code, has no authority to award
money claims, properly falling within the jurisdiction of the labor arbiter. . . .
. . . If the inspection results in a finding that the employer has violated
certain labor standard laws, then the regional director must order the
necessary rectifications. However, this does not include adjudication of
money claims, clearly within the ambit of the labor arbiter's authority under
Article 217 of the Code.
The Ong case relied on the ruling laid down in Zambales Base Metals Inc. vs. The
Minister of Labor, et al., (G.R. Nos. 73184-88, November 26, 1986, 146 SCRA 50) that the
"Regional Director was not empowered to share in the original and exclusive jurisdiction
conferred on Labor Arbiters by Article 217."
We believe, however, that even in the absence of E. O. No. 111, Regional Directors
already had enforcement powers over money claims, effective under P.D. No. 850, issued
on December 16, 1975, which transferred labor standards cases from the arbitration
system to the enforcement system.
To clarify matters, it is necessary to enumerate a series of rules and provisions of law on
the disposition of labor standards cases.
Prior to the promulgation of PD 850, labor standards cases were an exclusive function of
labor arbiters, under Article 216 of the then Labor Code (PD No. 442, as amended by PD
570-a), which read in part:
Art. 216. Jurisdiction of the Commission. The Commission shall have
exclusive appellate jurisdiction over all cases decided by the Labor Arbiters
and compulsory arbitrators.
The Labor Arbiters shall have exclusive jurisdiction to hear and decide the
following cases involving all workers whether agricultural or nonagricultural.
(c) All money claims of workers, involving non-payment or
underpayment of wages, overtime compensation, separation
pay, maternity leave and other money claims arising from
employee-employer relations, except claims for workmen's
compensation, social security and medicare benefits;
(d) Violations of labor standard laws;
The Regional Director exercised visitorial rights only under then Article 127 of the Code
as follows:
ART. 127. Visitorial Powers. The Secretary of Labor or his duly authorized
representatives, including, but not restricted, to the labor inspectorate, shall
have access to employers' records and premises at any time of the day or
night whenever work is being undertaken therein, and the right to copy
therefrom, to question any employee and investigate any fact, condition or
matter which may be necessary to determine violations or in aid in the
enforcement of this Title and of any Wage Order or regulation issued
pursuant to this Code.
With the promulgation of PD 850, Regional Directors were given enforcement powers, in
addition to visitorial powers. Article 127, as amended, provided in part:

SEC. 10. Article 127 of the Code is hereby amended to read as follows:
Art. 127. Visitorial and enforcement powers.
(b) The Secretary of Labor or his duly authorized
representatives shall have the power to order and
administer, after due notice and hearing,
compliance with the labor standards provisions of
this Code based on the findings of labor
regulation officers or industrial safety engineers
made in the course of inspection, and to issue
writs of execution to the appropriate authority for
the enforcement of their order.
Labor Arbiters, on the other hand, lost jurisdiction over labor standards cases. Article
216, as then amended by PD 850, provided in part:
SEC. 22. Article 216 of the Code is hereby amended to read as follows:
Art. 216. Jurisdiction of Labor Arbiters and the Commission.
(a) The Labor Arbiters shall have exclusive jurisdiction to hear
and decide the following cases involving all workers, whether
agricultural or non-agricultural:
xxx xxx xxx
(3) All money claims of workers involving nonpayment or underpayment of wages, overtime or
premium compensation, maternity or service
incentive leave, separation pay and other money
claims arising from employer-employee relations,
except claims for employee's compensation,
social security and medicare benefits and as
otherwise provided in Article 127 of this Code.
xxx xxx xxx
(Emphasis supplied)
Under the then Labor Code therefore (PD 442 as amended by PD 570-a, as further
amended by PD 850), there were three adjudicatory units: The Regional Director, the
Bureau of Labor Relations and the Labor Arbiter. It became necessary to clarify and
consolidate all governing provisions on jurisdiction into one document. 2 On April 23,
1976, MOLE Policy Instructions No. 6 was issued, and provides in part (on labor standards
cases) as follows:
POLICY INSTRUCTIONS NO. 6
TO: All Concerned
SUBJECT: DISTRIBUTION OF JURISDICTION OVER LABOR CASES
xxx xxx xxx
1. The following cases are under the exclusive original
jurisdiction of the Regional Director.
a) Labor standards cases arising from violations of
labor standard laws discovered in the course of
inspection or complaints where employeremployee relations still exist;
xxx xxx xxx
2. The following cases are under the exclusive original
jurisdiction of the Conciliation Section of the Regional Office:
a) Labor standards cases where employeremployee relations no longer exist;
xxx xxx xxx

6. The following cases are certifiable to the Labor Arbiters:

a) Cases not settled by the Conciliation Section of
the Regional Office, namely:
1) labor standard cases where employeremployee relations no longer exist;
xxx xxx xxx
(Emphasis supplied)
MOLE Policy Instructions No. 7 (undated) was likewise subsequently issued, enunciating
the rationale for, and the scope of, the enforcement power of the Regional Director, the
first and second paragraphs of which provide as follows:
POLICY INSTRUCTIONS NO. 7
TO: All Regional Directors
SUBJECT: LABOR STANDARDS CASES
Under PD 850, labor standards cases have been taken from the arbitration
system and placed under the enforcement system, except where a)
questions of law are involved as determined by the Regional Director, b) the
amount involved exceeds P100,000.00 or over 40% of the equity of the
employer, whichever is lower, c) the case requires evidentiary matters not
disclosed or verified in the normal course of inspection, or d) there is no
more employer-employee relationship.
The purpose is clear: to assure the worker the rights and benefits due to
him under labor standards laws without having to go through arbitration.
The worker need not litigate to get what legally belongs to him. The whole
enforcement machinery of the Department of Labor exists to insure its
expeditious delivery to him free of charge. (Emphasis supplied)
Under the foregoing, a complaining employee who was denied his rights and benefits
due him under labor standards law need not litigate. The Regional Director, by virtue of
his enforcement power, assured "expeditious delivery to him of his rights and benefits
free of charge", provided of course, he was still in the employ of the firm.
After PD 850, Article 216 underwent a series of amendments (aside from being renumbered as Article 217) and with it a corresponding change in the jurisdiction of, and
supervision over, the Labor Arbiters:
1. PD 1367 (5-1-78) gave Labor Arbiters exclusive
jurisdiction over unresolved issues in collective bargaining,
etc., and those cases arising from employer-employee
relations duly indorsed by the Regional Directors. (It also
removed his jurisdiction over moral or other damages) In other
words, the Labor Arbiter entertained cases certified to him.
(Article 228, 1978 Labor Code.)
2. PD 1391 (5-29-78) all regional units of the National Labor
Relations Commission (NLRC) were integrated into the
Regional Offices Proper of the Ministry of Labor; effectively
transferring direct administrative control and supervision over
the Arbitration Branch to the Director of the Regional Office of
the Ministry of Labor. "Conciliable cases" which were thus
previously under the jurisdiction of the defunct Conciliation
Section of the Regional Office for purposes of conciliation or
amicable settlement, became immediately assignable to the
Arbitration Branch for joint conciliation and compulsory

arbitration. In addition, the Labor Arbiter had jurisdiction even

over termination and labor-standards cases that may be
assigned to them for compulsory arbitration by the Director of
the Regional Office. PD 1391 merged conciliation and
compulsory arbitration functions in the person of the Labor
Arbiter. The procedure governing the disposition of cases at
the Arbitration Branch paralleled those in the Special Task
Force and Field Services Division, with one major exception:
the Labor Arbiter exercised full and untrammelled authority in
the disposition of the case, particularly in the substantive
aspect, his decisions and orders subject to review only on
appeal to the NLRC. 3
3. MOLE Policy Instructions No. 37 Because of the seemingly
overlapping functions as a result of PD 1391, MOLE Policy
Instructions No. 37 was issued on October 7, 1978, and
provided in part:
POLICY INSTRUCTIONS NO. 37
TO: All Concerned
SUBJECT: ASSIGNMENT OF CASES TO LABOR ARBITERS
Pursuant to the provisions of Presidential Decree No. 1391 and
to insure speedy disposition of labor cases, the following
guidelines are hereby established for the information and
guidance of all concerned.
1. Conciliable Cases.
Cases which are conciliable per se i.e., (a) labor standards
cases where employer-employee relationship no longer exists;
(b) cases involving deadlock in collective bargaining, except
those falling under P.D. 823, as amended; (c) unfair labor
practice cases; and (d) overseas employment cases, except
those involving overseas seamen, shall be assigned by the
Regional Director to the Labor Arbiter for conciliation and
arbitration without coursing them through the conciliation
section of the Regional Office.
2. Labor Standards Cases.
Cases involving violation of labor standards laws where
employer- employee relationship still exists shall be assigned
to the Labor Arbiters where:
a) intricate questions of law are involved; or
b) evidentiary matters not disclosed or verified in
the normal course of inspection by labor
regulations officers are required for their proper
disposition.
3. Disposition of Cases.
When a case is assigned to a Labor Arbiter, all issues raised
therein shall be resolved by him including those which are
originally cognizable by the Regional Director to avoid
multiplicity of proceedings. In other words, the whole case, and
not merely issues involved therein, shall be assigned to and
resolved by him.
xxx xxx xxx
(Emphasis supplied)

4. PD 1691(5-1-80) original and exclusive jurisdiction over

unresolved issues in collective bargaining and money claims,
which includes moral or other damages.
Despite the original and exclusive jurisdiction of labor arbiters over money
claims, however, the Regional Director nonetheless retained his
enforcement power, and remained empowered to adjudicate uncontested
money claims.
5. BP 130 (8-21-8l) strengthened voluntary arbitration. The
decree also returned the Labor Arbiters as part of the NLRC,
operating as Arbitration Branch thereof.
6. BP 227(6-1- 82) original and exclusive jurisdiction over
questions involving legality of strikes and lock-outs.
The present petition questions the authority of the Regional Director to issue the Order,
dated August 4, 1986, on the basis of his visitorial and enforcement powers under Article
128 (formerly Article 127) of the present Labor Code. It is contended that based on the
rulings in the Ong vs. Parel (supra) and the Zambales Base Metals, Inc. vs. The Minister
of Labor (supra) cases, a Regional Director is precluded from adjudicating money claims
on the ground that this is an exclusive function of the Labor Arbiter under Article 217 of
the present Code.
On August 4, 1986, when the order was issued, Article 128(b)

read as follows:

(b) The Minister of Labor or his duly authorized representatives

shall have the power to order and administer, after due notice
and hearing, compliance with the labor standards provisions of
this Code based on the findings of labor regulation officers or
industrial safety engineers made in the course of inspection,
and to issue writs of execution to the appropriate authority for
the enforcement of their order, except in cases where the
employer contests the findings of the labor regulations officer
and raises issues which cannot be resolved without
considering evidentiary matters that are not verifiable in the
normal course of inspection. (Emphasis supplied)
On the other hand, Article 217 of the Labor Code as amended by P.D. 1691, effective
May 1, 1980; Batas Pambansa Blg. 130, effective August 21, 1981; and Batas Pambansa
Blg. 227, effective June 1, 1982, inter alia, provides:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The
Labor Arbiters shall have the original and exclusive jurisdiction to hear and
decide within thirty (30) working days after submission of the case by the
parties for decision, the following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours of work
and other terms and conditions of employment;
3. All money claims of workers, including those based on nonpayment or underpayment of wages, overtime compensation,
separation pay and other benefits provided by law or
appropriate agreement, except claims for employees'
compensation, social security, medicare and maternity
benefits;

4. Cases involving household services; and

5. Cases arising from any violation of Article 265 of this Code,
including questions involving the legality of strikes and lockouts. (Emphasis supplied)
The Ong and Zambales cases involved workers who were still connected with the
company. However, in the Ong case, the employer disputed the adequacy of the
evidentiary foundation (employees' affidavits) of the findings of the labor standards
inspectors while in the Zambales case, the money claims which arose from alleged
violations of labor standards provisions were not discovered in the course of normal
inspection. Thus, the provisions of MOLE Policy Instructions Nos. 6, (Distribution of
Jurisdiction Over Labor Cases) and 37 (Assignment of Cases to Labor Arbiters) giving
Regional Directors adjudicatory powers over uncontested money claims discovered in
the course of normal inspection, provided an employer-employee relationship still exists,
are inapplicable.
In the present case, petitioner admitted the charge of underpayment of wages to
workers still in its employ; in fact, it pleaded for time to raise funds to satisfy its
obligation. There was thus no contest against the findings of the labor inspectors.
Barely less than a month after the promulgation on November 26, 1986 of the Zambales
Base Metals case, Executive Order No. 111 was issued on December 24, 1986, 5
amending Article 128(b) of the Labor Code, to read as follows:
(b) THE PROVISIONS OF ARTICLE 217 OF THIS CODE TO THE
CONTRARY NOTWITHSTANDING AND IN CASES WHERE THE
RELATIONSHIP OF EMPLOYER-EMPLOYEE STILL EXISTS, the
Minister of Labor and Employment or his duly authorized
representatives shall have the power to order and administer,
after due notice and hearing, compliance with the labor
standards provisions of this Code AND OTHER LABOR
LEGISLATION based on the findings of labor regulation officers
or industrial safety engineers made in the course of inspection,
and to issue writs of execution to the appropriate authority for
the enforcement of their orders, except in cases where the
employer contests the findings of the labor regulation officer
and raises issues which cannot be resolved without
considering evidentiary matters that are not verifiable in the
normal course of inspection. (Emphasis supplied)
As seen from the foregoing, EO 111 authorizes a Regional Director to order compliance
by an employer with labor standards provisions of the Labor Code and other legislation.
It is Our considered opinion however, that the inclusion of the phrase, " The provisions of
Article 217 of this Code to the contrary notwithstanding and in cases where the
relationship of employer-employee still exists" ... in Article 128(b), as amended, abovecited, merely confirms/reiterates the enforcement adjudication authority of the Regional
Director over uncontested money claims in cases where an employer-employee
relationship still exists. 6
Viewed in the light of PD 850 and read in coordination with MOLE Policy Instructions Nos.
6, 7 and 37, it is clear that it has always been the intention of our labor authorities to
provide our workers immediate access (when still feasible, as where an employeremployee relationship still exists) to their rights and benefits, without being
inconvenienced by arbitration/litigation processes that prove to be not only nervewracking, but financially burdensome in the long run.

Note further the second paragraph of Policy Instructions No. 7 indicating that the transfer
of labor standards cases from the arbitration system to the enforcement system is
. . to assure the workers the rights and benefits due to him under labor
standard laws, without having to go through arbitration. . .
so that
. . the workers would not litigate to get what legally belongs to him. ..
ensuring delivery . . free of charge.
Social justice legislation, to be truly meaningful and rewarding to our workers, must not
be hampered in its application by long-winded arbitration and litigation. Rights must be
asserted and benefits received with the least inconvenience. Labor laws are meant to
promote, not defeat, social justice.
This view is in consonance with the present "Rules on the Disposition of Labor Standard
Cases in the Regional Offices " 7 issued by the Secretary of Labor, Franklin M. Drilon on
September 16, 1987.
Thus, Sections 2 and 3 of Rule II on "Money Claims Arising from Complaint Routine
Inspection", provide as follows:
Section 2. Complaint inspection. All such complaints shall immediately be
forwarded to the Regional Director who shall refer the case to the
appropriate unit in the Regional Office for assignment to a Labor Standards
and Welfare Officer (LSWO) for field inspection. When the field inspection
does not produce the desired results, the Regional Director shall summon
the parties for summary investigation to expedite the disposition of the
case. . . .
Section 3. Complaints where no employer-employee relationship actually
exists. Where employer-employee relationship no longer exists by reason
of the fact that it has already been severed, claims for payment of
monetary benefits fall within the exclusive and original jurisdiction of the
labor arbiters. . . . (Emphasis supplied)
Likewise, it is also clear that the limitation embodied in MOLE Policy Instructions No. 7 to
amounts not exceeding P100,000.00 has been dispensed with, in view of the following
provisions of pars. (b) and (c), Section 7 on "Restitution", the same Rules, thus:
xxx xxx xxx
(b) Plant-level restitutions may be effected for money claims
not exceeding Fifty Thousand (P50,000.00). . . .
(c) Restitutions in excess of the aforementioned amount shall
be effected at the Regional Office or at the worksite subject to
the prior approval of the Regional Director.
which indicate the intention to empower the Regional Director to award money claims in
excess of P100,000.00; provided of course the employer does not contest the findings
made, based on the provisions of Section 8 thereof:
Section 8. Compromise agreement. Should the parties arrive at an
agreement as to the whole or part of the dispute, said agreement shall be
reduced in writing and signed by the parties in the presence of the Regional
Director or his duly authorized representative.
E.O. No. 111 was issued on December 24, 1986 or three (3) months after the
promulgation of the Secretary of Labor's decision upholding private respondents' salary
differentials and ECOLAs on September 24, 1986. The amendment of the visitorial and
enforcement powers of the Regional Director (Article 128-b) by said E.O. 111 reflects the
intention enunciated in Policy Instructions Nos. 6 and 37 to empower the Regional

Directors to resolve uncontested money claims in cases where an employer-employee

relationship still exists. This intention must be given weight and entitled to great respect.
As held in Progressive Workers' Union, et. al. vs. F.P. Aguas, et. al. G.R. No. 59711-12,
May 29, 1985, 150 SCRA 429:
. . The interpretation by officers of laws which are entrusted to their
administration is entitled to great respect. We see no reason to detract from
this rudimentary rule in administrative law, particularly when later events
have proved said interpretation to be in accord with the legislative intent. ..
The proceedings before the Regional Director must, perforce, be upheld on the basis of
Article 128(b) as amended by E.O. No. 111, dated December 24, 1986, this executive
order "to be considered in the nature of a curative statute with retrospective
application." (Progressive Workers' Union, et al. vs. Hon. F.P. Aguas, et al. (Supra); M.
Garcia vs. Judge A. Martinez, et al., G.R. No. L- 47629, May 28, 1979, 90 SCRA 331).
We now come to the question of whether or not the Regional Director erred in extending
the award to all hospital employees. We answer in the affirmative.
The Regional Director correctly applied the award with respect to those employees who
signed the complaint, as well as those who did not sign the complaint, but were still
connected with the hospital at the time the complaint was filed (See Order, p. 33 dated
August 4, 1986 of the Regional Director, Pedrito de Susi, p. 33, Rollo).
The justification for the award to this group of employees who were not signatories to
the complaint is that the visitorial and enforcement powers given to the Secretary of
Labor is relevant to, and exercisable over establishments, not over the individual
members/employees, because what is sought to be achieved by its exercise is the
observance of, and/or compliance by, such firm/establishment with the labor standards
regulations. Necessarily, in case of an award resulting from a violation of labor legislation
by such establishment, the entire members/employees should benefit therefrom. As
aptly stated by then Minister of Labor Augusto S. Sanchez:
. . It would be highly derogatory to the rights of the workers, if after
categorically finding the respondent hospital guilty of underpayment of
wages and ECOLAs, we limit the award to only those who signed the
complaint to the exclusion of the majority of the workers who are similarly
situated. Indeed, this would be not only render the enforcement power of
the Minister of Labor and Employment nugatory, but would be the pinnacle
of injustice considering that it would not only discriminate but also deprive
them of legislated benefits.
. . . (pp. 38-39, Rollo).
This view is further bolstered by the provisions of Sec. 6, Rule II of the "Rules on the
Disposition of Labor Standards cases in the Regional Offices" (supra) presently enforced,
viz:
SECTION 6. Coverage of complaint inspection. A complaint inspection
shall not be limited to the specific allegations or violations raised by the
complainants/workers but shall be a thorough inquiry into and verification of
the compliance by employer with existing labor standards and shall cover
all workers similarly situated. (Emphasis supplied)
However, there is no legal justification for the award in favor of those employees who
were no longer connected with the hospital at the time the complaint was filed, having
resigned therefrom in 1984, viz:
1. Jean (Joan) Venzon (See Order, p. 33, Rollo)
2. Rosario Paclijan

3. Adela Peralta
4. Mauricio Nagales
5. Consesa Bautista
6. Teresita Agcopra
7. Felix Monleon
8. Teresita Salvador
9. Edgar Cataluna; and
10.Raymond Manija ( p.7, Rollo)
The enforcement power of the Regional Director cannot legally be upheld in cases of
separated employees. Article 129 of the Labor Code, cited by petitioner (p. 54, Rollo) is
not applicable as said article is in aid of the enforcement power of the Regional Director;
hence, not applicable where the employee seeking to be paid underpayment of wages is
already separated from the service. His claim is purely a money claim that has to be the
subject of arbitration proceedings and therefore within the original and exclusive
jurisdiction of the Labor Arbiter.
Petitioner has likewise questioned the order dated August 4, 1986 of the Regional
Director in that it does not clearly and distinctly state the facts and the law on which the
award is based.
We invite attention to the Minister of Labor's ruling thereon, as follows:
Finally, the respondent hospital assails the order under appeal as null and
void because it does not clearly and distinctly state the facts and the law on
which the awards were based. Contrary to the pretensions of the
respondent hospital, we have carefully reviewed the order on appeal and
we found that the same contains a brief statement of the (a) facts of the
case; (b) issues involved; (c) applicable laws; (d) conclusions and the
reasons therefor; (e) specific remedy granted (amount awarded). (p. 40,
Rollo)
ACCORDINGLY, this petition should be dismissed, as it is hereby DISMISSED, as regards
all persons still employed in the Hospital at the time of the filing of the complaint, but
GRANTED as regards those employees no longer employed at that time.
SO ORDERED.

G.R. No. L-68147 June 30, 1988

AMADA RANCE, MERCEDES LACUESTA, MELBA GUTIERREZ, ESTER FELONGCO,
CATALINO ARAGONES, CONSOLACION DE LA ROSA, AMANCIA GAY, EDUARDO
MENDOZA,
ET
AL.,
petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION, POLYBAG MANUFACTURING
CORPORATION, VIRGINIA MALLARI, JOHNNY LEE, ROMAS VILLAMIN, POLYBAG
WORKERS UNION, PONCIANO FERNANDEZ, AND ANTONIO ANTIQUERA,
respondents.
PARAS, J.:
A review of the records shows that a Collective Bargaining Agreement was entered into
on April 30, 1981 by and between respondents Polybag Manufacturing Corporation and
Polybag Workers Union which provides among others:

ARTICLE V
UNION SECURITY
Any employee within the bargaining agreement who is a member of the
union at the time of the effectivity of this agreement or becomes a member
of the UNION thereafter, shall during the term thereof or any extention,
continue to be a member in good standing of the UNION as a condition of
continued employment in the COMPANY.
Any employee hired during the effectivity of this agreement shall, within 30
days after becoming regular join the UNION and continue to be a member in
good standing thereof as a condition of continued employment in the
COMPANY.
On the basis of a board resolution of the UNION, the COMPANY shall dismiss
from the service any member of the UNION who loses his membership in
good standing either by resignation therefrom or expulsion therefrom for
any of the following causes:
1. Disloyalty to the UNION;
2. Commission of acts inimical to the interest of the UNION;
3. Failure and refusal to pay UNION dues and other assessments;
4. Conviction for any offense or crime; or
5. Organizing and/or joining another labor organization claiming jurisdiction
similar to that of the UNION.
Provided, however, that in case expulsion proceedings are instituted against
any member of the UNION, pending such proceedings, the COMPANY, on
the basis of a board resolution of the UNION, shall suspend the member
concerned; and provided further, that the UNION, jointly and severally with
the officers and members of the board voting for the dismissal or
suspension, shall hold and render the COMPANY, its executive, owners, and
officers free from any and all claims and liabilities. (Rollo, p. 64).
Petitioners herein were among the members of the respondent union who were expelled
by the latter for disloyalty in that they allegedly joined the NAFLU a large federation.
Because of the expulsion, petitioners were dismissed by respondent Corporation.
Petitioners sued for reinstatement and backwages stating their dismissal was without
due process. Losing both in the decisions of the Labor Arbiter and the National Labor
Relations Commission (NLRC), they elevated their cause to the Supreme Court.
Respondent Polybag Workers Union as already stated expelled 125 members on the
ground of disloyalty and acts inimical to the interests of the Union (Resolution No. 84,
series of 1982, Rollo, p. 16) based on the findings and recommendations of the panel of
investigators. Both the Labor Arbiter and the NLRC found the Collective Bargaining
Agreement and the "Union Security Clause" valid and considered the termination of the
petitioners justified thereunder, for having committed an act of disloyalty to the Polybag
Workers Union by having affiliated with and having joined the NAFLU, another labor
union claiming jurisdiction similar to the former, while still members of respondent union
(Rollo, pp. 45-46).
Among the disputed portions of the NLRC decision is its finding that it has been
substantially proven that the petitioners committed acts of disloyalty to their union as a
consequence of the filing by NAFLU for and in their behalf of the complaint in question
(Rollo, p. 46).
Petitioners insist that their expulsion from the Union and consequent dismissal from
employment have no basis whether factual or legal, because they did not in fact affiliate
themselves with another Union, the NAFLU. On the contrary, they claim that there is a

connivance between respondents Company and Union in their illegal dismissal in order
to avoid the payment of separation pay by respondent company.
Petitioners' contention that they did not authorize NAFLU to file NLRC-AB Case No. 64275-82 for them is borne out by the records which show that they did not sign the
complaint, neither did they sign any document of membership application with NAFLU
(Rollo, p. 323). Significantly, none of private respondents was able to present any
evidence to the contrary except for one employee who admitted having authorized
NAFLU to file the complaint but only for the purpose of questioning the funds of the
Union (Rollo, p. 216).
Placed in proper perspective, the mere act of seeking help from the NAFLU cannot
constitute disloyalty as contemplated in the Collective Bargaining Agreement. At most it
was an act of self-preservation of workers who, driven to desperation found shelter in the
NAFLU who took the cudgels for them.
It will be recalled that 460 employees were temporarily laid off; some were laid-off as
early as March 22, 1982 although the actual official announcement and notice of the
intended shutdown was made only on May 27, 1982 (Rollo, p. 151). The laid-off
employees did not receive any separation pay because as alleged by respondent
company their dismissal was due to serious business reverses suffered by it. The only aid
offered by the company which was offered when the disgruntled employees began to
discuss among themselves their plight, was a 1/2 sack of rice monthly and P 50.00
weekly. Most of the employees did not avail themselves of the aid as those who did were
allegedly made to sign blank papers. To aggravate matters, petitioners complained that
their pleas for their union officers to fight for their right to reinstatement, fell on deaf
ears. Their union leaders continued working and were not among those laid-off, which
explains the lack of positive action on the part of the latter to help or even sympathize
with the plight of the members. All they could offer was a statement "marunong pa kayo
sa may-ari ng kumpanya" ("you know more than the company owners") (Rollo, p. 80).
Under the circumutances, petitioners cannot be blamed for seeking help wherever it
could be found.
In fact even assuming that petitioners did authorize NAFLU to file the action for them, it
would have been pointless because NAFLU cannot file an action for members of another
union. The proper remedy would be to drop the union as party to the action and place
the names of the employees instead (Lakas v. Marcelo Enterprises, 118 SCRA 422
[1982]) as what appears to have been done in this case before the Court.
Petitioners claim that the NLRC erred in ruling that the expulsion proceeding conducted
by the Union was in accordance with its by-laws. Respondent Union had notified and
summoned herein petitioners to appear and explain why they should not be expelled
from the union for having joined and affiliated with NAFLU.
Petitioners contend that the requisites of due process were not complied with in that,
there was no impartial tribunal or union body vested with authority to conduct the
disciplinary proceeding under the union constitution and by-laws, and, that complainants
were not furnished notice of the charge against them, nor timely notices of the hearings
on the same (Rollo, p. 48).
According to the minutes of the special meeting of the Board of Directors of respondent
Union held on September 14, 1982, the Chairman of the Board of Directors showed the
members of the board, copies of the minutes of the investigation proceedings of each
individual member, together with a consolidated list of Union members found guilty as
charged and recommended for expulsion as members of the respondent Union. The
Board members examined the minutes and the list (Rollo, p. 219).

It is to be noted, however, that only two (2) of the expelled petitioners appeared before
the investigation panel (Rollo, pp. 203, 235). Most of the petitioners boycotted the
investigation proceedings. They alleged that most of them did not receive the notice of
summons from respondent Union because they were in the provinces. This fact was not
disproved by private respondents who were able to present only a sample copy of proof
of service, Annex "14" (Rollo, p. 215). Petitioners further claim that they had no Idea that
they were charged with disloyalty; those who came were not only threatened with
persecution but also made to write the answers to questions as dictated to them by the
Union and company representatives. These untoward incidents prompted petitioners to
request for a general investigation with all the petitioners present but their request was
ignored by the panel of investigators (Rollo, pp. 280, 307). Again, these allegations were
not denied by private respondents.
In any event, even if petitioners who were complainants in NLRC-AB Case No. 6-4275-82
appeared in the supposed investigation proceedings to answer the charge of disloyalty
against them, it could not have altered the fact that the proceedings were violative of
the elementary rule of justice and fair play. The Board of Directors of respondent union
would have acted as prosecutor, investigator and judge at the same time. The
proceeding would have been a farce under the circumstances (Lit Employees Association
v. Court of Industrial Relations, 116 SCRA 459 [1982] citing Kapisanan ng Mga
Manggagawa sa MRR v. Rafael Hernandez, 20 SCRA 109). The filing of the charge of
disloyalty against petitioners was instigated by the Chairman of the Board of Directors
and Acting Union President, Ponciano Fernandez, in the special meeting of the members
of the Board of Directors as convened by the Union President on August 16, 1982 (Rollo,
p. 213). The Panel of Investigators created under the Board's Resolution No. 83, s. 1982
was composed of the Chairman of the Board, Ponciano Fernandez, and two (2) members
of the Board, Samson Yap and Carmen Garcia (Rollo, p. 214). It is the same Board that
expelled its 125 members in its Resolution No. 84, s. of 1982 (Rollo, p. 219).
All told, it is obvious, that in the absence of any full blown investigation of the expelled
members of the Union by an impartial body, there is no basis for respondent Union's
accusations.
It is the policy of the state to assure the right of workers to "security of tenure" (Article
XIII, Sec. 3 of the New Constitution, Section 9, Article II of the 1973 Constitution). The
guarantee is an act of social justice. When a person has no property, his job may
possibly be his only possession or means of livelihood. Therefore, he should be protected
against any arbitrary deprivation of his job. Article 280 of the Labor Code has construed
security of tenure as meaning that "the employer shall not terminate the services of an
employee except for a just cause or when authorized by" the code (Bundoc v. People's
Bank and Trust Company, 103 SCRA 599 [1981]). Dismissal is not justified for being
arbitrary where the workers were denied due process (Reyes v. Philippine Duplicators,
Inc., 109 SCRA 489 [1981] and a clear denial of due process, or constitutional right must
be safeguarded against at all times, (De Leon v. National Labor Relations Commission,
100 SCRA 691 [1980]). This is especially true in the case at bar where there were 125
workers mostly heads or sole breadwinners of their respective families.
Time and again, this Court has reminded employers that while the power to dismiss is a
normal prerogative of the employer, the same is not without limitations. The employer is
bound to exercise caution in terminating the services of his employees especially so
when it is made upon the request of a labor union pursuant to the Collective Bargaining
Agreement, as in the instant case. Dismissals must not be arbitrary and capricious. Due
process must be observed in dismissing an employee because it affects not only his
position but also his means of livelihood. Employers should, therefore, respect and
protect the rights of their employees, which include the right to labor (Liberty Cotton
Mills Workers Union v. Liberty Cotton Mills, Inc., 90 SCRA 393 [1979], Resolution).

In the case at bar, the scandalous haste with which respondent corporation dismissed
125 employees lends credence to the claim that there was connivance between
respondent corporation and respondent Union. It is evident that private respondents
were in bad faith in dismissing petitioners. They, the private respondents, are guilty of
unfair labor practice.
PREMISES CONSIDERED, (1) the decision of respondent National Labor Relations
Commission in NLRC-NCR-11-6881-82 dated April 26, 1984 is REVERSED and SET ASIDE;
and (2) respondent corporation is ordered: (1) to reinstate petitioners to their former
positions without reduction in rank, seniority and salary; (b) to pay petitioners three-year
backwages, without any reduction or qualification, jointly and solidarily with respondent
Union; and (c) to pay petitioners exemplary damages of P500.00 each. Where
reinstatement is no longer feasible, respondent corporation and respondent union are
solidarily ordered to pay, considering their length of service their corresponding
separation pay and other benefits to which they are entitled under the law.
SO ORDERED.

G.R. No. L-43835 March 31, 1981

DOMINGO F. BONDOC, petitioner,
vs.
PEOPLE'S BANK AND TRUST COMPANY, BANK OF THE PHILIPPINES ISLANDS
(Surviving Bank) and JACOBO C. CLAVE (as Presidential Executive Assitant),
respondents.
AQUINO, J.:
This certiorari case involves the issue of whether respondent Presidential Executive
Assistant committed a grave abuse of discretion amounting to lack of jurisdiction in
confirming the abolition of petitioner's position as a department manager in a bank and
the payment to him of separation pay instead of reinstating him with backwages.
Domingo F. Bondoc, who used to be an assistant of Jaime C. Velazquez in the Ayala
Secutrities Corporation (p. 116, Rollo), joined the People's Bank and Trust Company on
October 1, 1966 upon the recommendation of Velazquez, a director, to Roman Azanza,
the bank president (p. 35, Rollo).
He replaced Ariston Estrada, Jr. (p. 37, Rollo). Bondoc was chosen by the bank's board of
directors on February 21, 1967 as the first manager of the bank's department of
economic research and statistics which was organized in January, 1967 (Exh. 4 and 5).
That department had only four employees: a stenographer and three clerks who were
formerly employed in the comtroller's office, accounting department and office of the
corporate secretary (p. 117-118, Rollo).
Every year, from 1968 to 1973, Bondoc was elected to the position of department
manager and assistant vice-president by the bank's board of directors at its annual
organizational meeting (Exh. 1-B to 1-F).
On May 15, 1973, Bondoc reported in writing to Manuel Chuidian, a bank director, certain
anomalies committed by the officers of the bank. The Central Bank found that some
officers of the bank utilized its found for their own interests. Because of those anomalies,
the Monetary Board suspendedBenito R. Araneta, a director and vice-president, and
reprimanded the other officers involved, namely, Severino Coronacion, Nicanor O.
Corpus, Guillermo D. Teodoro, Feldres G. San Pedro, Carlos Villaluz, Godofredo Galindez,
Fernando Macalanlayand Manuel P. Elepao (pp. 6-8 Rollo).
On September 19, 1973, the board of directors of the People's Bank, in the course of its
deliberation on the bank's projected merger with the Bank of the Philippine islands,
resolved to abolish itts department of economic research and statistics which, as already
noted, was headed by Bondoc (p. 35, Rollo).
The board regarded the said department as a rededant unit whose functions could be
performed by other departments. The Bank of P.I., like twenty-three other commercial
banks, has no such department (p. 117, Rollo). Bondoc's four subordinates were
absorbed by the accounting department.
Bondoc was advised of the abolition ofhis department in the later part of September,
1973. He asked the personnel manager to compute his separations pay. Bondoc was told
that his separation pay was equivalent to seventy-five percent of his salary for every
year of service. It amounted to P10,481.33 under its car finacing plan. (p. 118, Rollo).
Bondoc allegedly told the personnel manager that he would use his separation pay to
liquidate his debt and issue a check for P3,012.08 to cover the balance of his debt. He
requested the personnel manager to expedite the preparation of the bill of sale for the

Toyota car so that he could get the document on the following day. But he did not show
up that day (p. 118, Rollo).
It is relevant to state that the merger of the two banks was effected in accompliance
with the Central Bank's requirement that commercial banks should increase their capital
stock to a minimum of one hundred million pesos through mergers and consolidations or
other lawful means. The merger was approved by the Monetary Board and the Securities
and Exchange Commission. The merger agreement was signed in January, 1974. It was
consummated on June 1, 1974.
On November 2, 1973, the People's Bank, pursuant to section 11 of Presidential Decree
No. 21 (creating the ad hoc National Labor Relations Commission), applied with the
Secretary of Labor for clearnce to terminate Bondoc's services effective on November 5
(p. 35, Rollo).
He lost no time in filing with the NLRC his opposition to the termination his services. He
alleged in his opposition that he was dismissed without cause (p. 114, Rollo).
As all efforts for the amicable settlement of the case were fruitless, it was submitted for
compulsory arbitration.
During the hearing, Bondoc tried to prove that the abolition of his position was a reprisal
for his aforementioned exposure of some anomalies in the bank which resulted in the
suspension or reprimand by the Monetary Board of certain senior officers of the bank
headed by Benito R. Araneta, a nephew of J. Antonio Araneta, the chairman of the board
(p. 48, Rollo).
After hearing, the NLRC arbitrator recommended to the Secretary of Labor the denial of
the application to terminate Bondoc's employment and ordered the People's Bank to
reinstate him with backwages from November 16, 1973 and with allowances and other
benefits guaranteed by law and without loss of status and seniority rights (pp. 42-43,
Rollo).
On appeal, the NLRC (Commissioners Castro, Borromeo ans Seno) in its decision of
January 21, 1975 reversed the decision of the arbitrartor, approved the clearance for
Bondoc's dismissal and ordered the People's Bank to pay him seventy five percent (75%)
of his monthly salary for every year of service in lieu of one-half month salary for every
year of service fixed in the Termination Pay Law, Republic Act No. 1052, as amended by
Republic Act no. 1787 (p. 45, Rollo).
The NLRC adduced as reason to justify the abolition of Bondoc's position (1) the fact that
his position as manager being confidential in character, the bank had the rperogative to
terminate his employment anytimel (2) Bondoc's department was nolonger necessary to
the efficient operation of the bank in view of the merger; (3) the management is not
precluded from undertakings a reorganization or making changes to meet the demands
of the present and (4) in case of mergers, departments or position may be abolished or
new ones created, as the necessity for them requires (p. 44-45, Rollo).
Bondoc appealed tot he Secretary of Labor. That high official in the resolution of
September 29, 1975 reversed the NLRC's decision on the grounds that the motivation for
the termination of Bondoc's services was not taken into account by the NLRC and that
the People's Bank should not have abolished Bondoc's department without prior
clearance. He denied the application for clearance to dismiss Bondocs (p. 50, Rollo).
He ordered the People's Bank to reinstate Bondoc to his former position or any
substantially equivalent position with backwages equivalent to his salary for six months,
it being undrstood that the Bank of the P.I. has assumred all the liabilities and obligations

of the People's Bank. The Secretary denied the application for clearance to dismiss
Bondoc. (pp. 48-50, Rollo).
From the resolution, the Bank of P.I., as successor of the People's Bank, appealed tot he
president of the Philippines.
One the grounds relied upon in that appeal was that Bondoc was convicted of bigamy, a
crime involving moral turpitude (Criminal Case No. 7185, Manila CFI, Exh. 1).
The Bank of P.I. cited Central Bank Circular No. 356, which disqualifies a person
convicted of a crime involving moral turpitude from becoming an officer of a bank (pp.
213-4, Rollo).
In a decision dated May 17, 1976, Presidential Executive Assistant Jacobo C. Clave set
aside the decisions of the arbitrator and the Secretary and confirmed in toto the NLRC's
decision (p. Rollo).
The office of the President held that under the Termination Pay Law an employment
without a definite period may be terminated with or without a cause, thatthe abolition of
Bondoc's position was a necesary incident of the merger of the two banks and that his
services were no longer indispensable to them. hence, the clearance for his removal was
authorized for his removal was authorized (pp. 52-54, Rollo).
The review of the Presidential decision was sought by Bondoc in the petition which he
filed in this Courton May 27, 1976. This is the fifth decision to be rendered in this case.
We hold that under the peculiar or particular facts of this case the termination of
bondoc's employment was lawful and justified and that no grave abuse of discretion was
lawful and justified and that no grave abuse of discretion amounting to lack of
jurisdiction was committed by the Presidential Executive Assistant in affirming the
NLRC's decision sustaining ther termination of his employment.
Bondoc was not employed for a fixed period. He held his position of department
manager at the pleasure of the bank's board of directors. He occupied a managerial
position and his stay in therein depended on his retention of the trust and confidence of
the management and whether there was any need for his services.
Although some vindictive motivation might have impelled the aboliton of his position,
yet, it is undeniable that the bank's board of directors possessed the power to remove
him and to determine whether the interest of the bank justified the existence of his
department.
Under the old Termination Pay Law, it was held that in the absence of a contract of
employment for a specific period the employer has the right to dismiss his employees at
anytime with or without just cause (De Dios vs. Bristol Laboratories (Phils.), Inc., L25530, January 29, 1974, 55 SCRA 349, 358; Jaguar Transportation Co., Inc. vs. Cornista,
L-32959, May 11, 1978, 83 SCRA 77).
It may be noted that under Policy Instructions No. 8 of the Secretary of Labor "the
employer is not required to obtain a previous written clearnace to terminate managerial
employees in order to enable him to manage effectively". (SEe Associated Citizens Bank
vs. Ople, L-48896, February 24, 1981.)
The petitioner invokes the policy of the State to assure the right of "workers" to security
of tenure (Sec. 9, Art. II, Constitution).

That guarantee is an act of social justice. When a person has no property, his job may
possibly be his only possession or means of livelihood. Therefore, he should be protected
against any arbitrary and unjust deprivation of his job.
Article 280 of the Labor Code has construed security of tenure as referring to regular
employment and as meaning that "the employer shall not terminate the services of an
employee except for a just cause or when authorized by" the Code.
As already noted above, the facts of this case do not warrant the conclusion that
Bondoc's right to security of tenure was oppressively abridged. He knew all along that
his tenure as a department manager rested in the discretion of the bank's board of
directors and that at anytime his services might be dispensed with or his position might
be abolished.
On equitable considerations, we hold that Bondoc should be paid as separation pay his
salary and allowances, if any, for seven months.
WHEREFORE, the decision of respondent Presidential Executive Assistant is affirmed with
the modification that the Bank of the P.I. should pay to the petitioner separation pay
equivalent to his salary and allowances (if any) for seven months. No costs.
SO ORDERED.

G.R. Nos. L-7771-73

May 31, 1955
PHILIPPINE MOVIE PICTURES WORKERS' ASSOCIATION, petitioner,
vs.
PREMIERE PRODUCTIONS, INC., respondent.
MONTEMAYOR, J.:
With the view taken by the Court of these cases, there is no need of making a long and
elaborate statement of the facts involved. The petitioner in each of these cases,
Philippine Movie Pictures Workers' Association later referred to as the Association, is a
labor organization whose members were employees and laborers of the respondent
Premiere Productions, Inc., referred to later as the Company, a corporation engaged in
the production of movie pictures. On October 2, 1951, respondent company filed a
petition with the Court of Industrial Relations (CIR) for permission to lay-off its personnel
working in three of its departments, numbering about 44 on the ground that it was losing
in the operation of its business. Judge Arsenio C. Roldan, presiding judge of the CIR after
an ocular inspection of the company's premises, and after conferring with the personnel
he found therein, granted the petition and the personnel were laid off.
After shutting the studios, the company filed another petition with the CIR for permission
or authority to lease its equipments, studios, and other facilities to Eddie Infante, Braulio
Calma and others. The association objected to the proposed lease on the ground that it
was an attempt by the company to make use of its properties through other persons
which would mean disturbance of the status quo while the dispute between the
association and the company was pending. Then the company filed a motion to withdraw
its petition saying that it was convinced that the lease of its properties was a mere
exercise of its proprietary rights, and that court permission was unnecessary. The motion
was granted. Thereafter, on February 7, 1952, the company transferred some of its
equipment to Polo, Bulacan to be leased and used as in fact they were used by one
Artemio Marquez in the filming of the picture "Bakas Ng Kahapon". For this action of the
company the association on February 9, 1952, filed an urgent petition with the CIR,
incidental case No. 98 V-8, for contempt and for injunction on the ground that the
company had no right to remove its equipment from its studios to be leased to Marquez
without court authority. Thereafter, the company again leased its equipment and
facilities to one Efren Reyes for the filming of the picture "Larawan Ng Buhay". The
association again filed another urgent petition, incidental case No. 598 V-10, for
contempt and injunction. Again, on March 5, 1952, the company leased its other sound
equipment to one Manuel Vistan for the filming of the picture "Troubador" and to Artemio
Marquez in filming the picture "Boys Town". The association again filed another petition,
incidental case No. 598 V-11, for contempt and injunction.

After the company had answered the three petitions for contempt and injunction, by
agreement of the parties, these three incidental cases were heard jointly. During the
hearing held before Presiding Judge Roldan and in the presence of one Martin Dolorico, a
Commissioner of the CIR, the parties entered into a stipulation of facts and stated
therein their respective contention, after which, both parties submitted the cases for
decision without further evidence. This was on October 7, 1952. However, no decision
was immediately rendered because both parties asked for time to enable them to
bargain collectively, the negotiations commencing in January, 1953 and lasting until July
of the same year. In the meantime, on April 18, 1953, the association filed a
"Supplemental petition to annul lease contracts and for contempt of court and for
injunction", and on June 14, 1953, the association filed a "Motion for production of
document" under section 1, Rule 21, of the Rules of Court, alleging that the movie
company had in the meantime entered into other contracts of lease, and asking that Dr.
Ciriaco Santiago, president of the movie company or his representative produce before
the court the contracts referred to for purposes of inspection, copying or photographing
thereof, and to set for hearing the urgent petitions of February 9, 1952 and April 18,
1953 regarding the simulated leases.
Thereafter, Commissioner Martin Dolorico filed his report, which report was approved
and completely adopted by Judge Roldan in his decision rendered on July 29, 1953,
wherein he found that the leases of the equipment, studios and other properties of the
movie company to third parties were not simulated but genuine, and that they were
valid; that it was entirely proper for the movie company to lease its equipment which
was lying idle because of the shutting down of its studios so as to make money and
perhaps enable it to rehabilitate itself financially and to re-employ the same personnel
who had been laid off, that the association should not object to these leases because it
was the understanding at the time that they were laid off that in case it was later
decided by the court that they had been improperly made to stop working, they would
not only be reinstated but they would also be given backpay for the entire period of the
lay-off. As to the supplemental petition to annul he lease contracts and for contempt of
court and for injunction filed on April 18, 1953 and the motion filed on June 14th, Judge
Roldan held that they would be heard separately from the incidental cases, for purposes
of expediency. The decision ended by denying the three petitions for injunction and for
contempt of court.
Upon motion for reconsideration by the association and over the opposition of the
company, the CIR in banc by resolution dated November 13, 1953, reconsidered the
decision aforementioned and set it aside, as premature, saying that before rendering a
final decision, the court should have awaited further presentation of evidence on the
supplemental petition of April 18, 1953, "so that all ingredients for the proper disposal of
the case would have been complete." The resolution was penned by Judge Jose Bautista
and concurred in by Judges Castillo and Yanson. Judge Roldan wrote a dissenting opinion
concurred in by Judge Juan E. Lanting.
The association has now filed these petitions for review by certiorari, not only of the
decision of Judge Roldan but also of the resolution of the majority of the CIR, to set the
same aside, and for the rendition of another decision holding the leases entered into by
the movie company to be illegal and that the company and its officers and agents be
held to have committed contempt of court in entering into those leases without authority
of the CIR.
The majority of the Tribunal believe that it is unnecessary to go into the merits of the
present cases, because the resolution of the majority of the CIR setting aside the
decision of Judge Roldan, left the cases without any decision to appeal from, and that
said resolution is in the nature of a mere interlocutory order, which is not subject to
appeal.

In view of the foregoing, these petitions for certiorari are hereby denied, and the cases
are ordered remanded to the CIR for further proceedings. No costs.

G.R. No. 161787 April 27, 2011

MASING AND SONS DEVELOPMENT CORPORATION and
CRISPIN CHAN, versus - LEONARDO-DE CASTRO,
BERSAMIN,
DEL CASTILLO, andVILLARAMA, JR., JJ.
DECISION
BERSAMIN, J.:
In any controversy between a laborer and his master, doubts reasonably arising
from the evidence are resolved in favor of the laborer.
We re-affirm this principle, as we uphold the decision of the Court of Appeals (CA)
that reversed the uniform finding that there existed no employment relationship
between the petitioners, as employers, and the respondent, as employee, made by the
National Labor Relations Commission (NLRC) and the Labor Arbiter (LA).
Petitioners Masing and Sons Development Corporation (MSDC) and Crispin Chan
assail the October 24, 2003 decision, 1[1] whereby the CA reversed the decision dated
January 28, 2000 of the NLRC that affirmed the decision of the LA (dismissing the claim
of the respondent for retirement benefits on the ground that he had not been employed
by the petitioners but by another employer).
Antecedents
On May 19, 1997, respondent Gregorio P. Rogelio (Rogelio) brought against Chan a
complaint for retirement pay pursuant to Republic Act No. 7641, 2[2] in relation to Article
287 of the Labor Code, holiday and rest days premium pay, service incentive leave, 13 th

1
2

month pay, cost of living allowances (COLA), underpayment of wages, and attorneys
fees. On January 20, 1998, Rogelio amended his complaint to include MSDC as a corespondent. His version follows.
Rogelio was first employed in 1949 by Pan Phil. Copra Dealer, MSDCs predecessor,
which engaged in the buying and selling of copra in Ibajay, Aklan, with its main office
being in Kalibo, Aklan. Masing Chan owned and managed Pan Phil. Copra Dealer, and the
Branch Manager in Ibajay was a certain So Na. In 1965, Masing Chan changed the
business name of Pan Phil. Copra Dealer to Yao Mun Tek, and appointed Jose Conanan
Yap Branch Manager in Ibajay. In the 1970s, the business name of Yao Mun Tek was
changed to Aklan Lumber and General Merchandise, and Leon Chan became the Branch
Manager in Ibajay. Finally, in 1984, Masing Chan adopted the business name of Masing
and Sons Development Corporation (MSDC), appointing Wynne or Wayne Lim (Lim) as
the Branch Manager in Ibajay. Crispin Chan replaced his father, Masing Chan, in 1990 as
the manager of the entire business.
In all that time, Rogelio worked as a laborer in the Ibajay Branch, along with
twelve other employees. In January 1974, Rogelio was reported for Social Security
System (SSS) coverage. After paying contributions to the SSS for more than 10 years, he
became entitled to receive retirement benefits from the SSS. Thus, in 1991, he availed
himself of the SSS retirement benefits, and in order to facilitate the grant of such
benefits, he entered into an internal arrangement with Chan and MSDC to the effect that
MSDC would issue a certification of his separation from employment notwithstanding
that he would continue working as a laborer in the Ibajay Branch.
The certification reads as follows: 3[3]
CRISPIN AMIGO CHAN COPRA DEALER
IBAJAY, AKLAN
August 10, 1991
CERTIFICATION OF SEPARATION FROM EMPLOYMENT
To whom it may concern:
This is to certify that my employee, GREGORIO P. ROGELIO bearing SSS
ID No. 07-0495213-7 who was first covered effective January, 1974 up to
June 30, 1989 inclusive, is now officially separated from my employ
effective the 1st of July, 1989.
Please be guided accordingly.
(SGD.) CRISPIN AMIGO CHAN
Proprietor
SSS ID No. 07-0595800-4
On March 17, 1997, Rogelio was paid his last salary. Lim, then the Ibajay Branch
Manager, informed Rogelio that he was deemed retired as of that date. Chan confirmed
to Rogelio that he had already reached the compulsory retirement age when he went to
the main office in Kalibo to verify his status. Rogelio was then 67 years old.
Considering that Rogelio was supposedly receiving a daily salary of P70.00 until
1997, but did not receive any 13th month pay, service incentive leave, premium pay for
holidays and rest days and COLA, and even any retirement benefit from MSDC upon his
retirement in March 1997, he commenced his claim for such pay and benefits.

In substantiation, Rogelio submitted the January 19, 1998 affidavits of his coworkers, namely: Domingo Guevarra, 4[4] Juanito Palomata,5[5] and Ambrosio Seeres,6[6]
whereby they each declared under oath that Rogelio had already been working at the
Ibajay Branch by the time that MSDCs predecessor had hired them in the 1950s to work
in that branch; and that MSDC and Chan had continuously employed them until their
own retirements, that is, Guevarra in 1994, and Palomata and Seeres in 1997. They
thereby corroborated the history of MSDC and the names of the various Branch
Managers as narrated by Rogelio, and confirmed that like Rogelio, they did not receive
any retirement benefits from Chan and MSDC upon their retirement.
In their defense, MSDC and Chan denied having engaged in copra buying in
Ibajay, insisting that they did not ever register in such business in any government
agency. They asserted that Lim had not been their agent or employee, because he had
been an independent copra buyer. They averred, however, that Rogelio was their former
employee, hired on January 3, 1977 and retired on June 30, 1989; 7[7] and that Rogelio
was thereafter employed by Lim starting from July 1, 1989 until the filing of the
complaint.
MSDC and Chan submitted the affidavit of Lim, whereby Lim stated that Rogelio
was one of his employees from 1989 until the termination of his services. 8[8] They also
submitted SSS Form R-1A, Lims SSS Report of Employee-Members (showing that Rogelio
and Palomata were reported as Lims employees); 9[9] Lims application for registration as
copra buyer;10[10] Chans affidavit;11[11] and the affidavit of Guevarra12[12] and Seeres,13
[13] whereby said affiants denied having executed or signed the January 19, 1998
affidavits submitted by Rogelio.
In his affidavit, Guevarra recanted the statement attributed to him that he had
been employed by Chan and MSDC, and declared that he had been an employee of Lim.
Likewise, Guevarras daughter executed an affidavit, 14[14] averring that his father had
been an employee of Lim and that his father had not signed the affidavit dated January
19, 1998.
On April 5, 1999, the LA dismissed the complaint against Chan and MSDC, ruling
thus:
From said evidence, it is our considered view that there exists no
employer-employee relationship between the parties effective July 1, 1989
up to the date of the filing of the instant complaint complainant was an
employee of Wynne O. Lim. Hence, his claim for retirement should have
been filed against the latter for he admitted that he was the employer of
herein complainant in his sworn statement dated June 9, 1998.
Complainants claim for retirement benefits against herein respondents
under RA No. 7641 has been barred by prescription considering the fact that

4
5
6
7
8
9
10
11
12
13
14

it partakes of the nature of a money claim which prescribed after the lapse
of three years after its accrual.
The rest of the claims are also dismissed for the same accrued during
complainants employment with Wynne O. Lim.
WHEREFORE, PREMISES CONSIDERED, this case is hereby DISMISSED
for lack of merit.
SO ORDERED.15[15]
Rogelio appealed, but the NLRC affirmed the decision of the LA on January 28,
2000, observing that there could be no double retirement in the private sector; that with
the double retirement, Rogelio would be thereby enriching himself at the expense of the
Government; and that having retired in 1991, Rogelio could not avail himself of the
benefits under Republic Act No. 7641 entitled An Act Amending Article 287 of
Presidential Decree No. 442, As Amended, Otherwise Known as The Labor Code Of The
Philippines, By Providing for Retirement Pay to Qualified Private Sector Employees in the
Absence Of Any Retirement Plan in the Establishment, which took effect only on January
7, 1993.16[16]
The NLRC denied Rogelios motion for reconsideration.

Ruling of the CA
Rogelio commenced a special civil action for certiorari in the CA, charging the
NLRC with grave abuse of discretion in denying to him the benefits under Republic Act
No. 7641, and in rejecting his money claims on the ground of prescription.
On October 24, 2003, the CA promulgated its decision, 17[17] holding that Rogelio
had substantially established that he had been an employee of Chan and MSDC, and that
the benefits under Republic Act No. 7641 were apart from the retirement benefits that a
qualified employee could claim under the Social Security Law, conformably with the
ruling in Oro Enterprises, Inc. v. NLRC (G.R. No. 110861, November 14, 1994, 238 SCRA
105).
The CA decreed:
WHEREFORE, premises considered, the Decision of the public
respondent NLRC is hereby VACATED and SET ASIDE. This case is remanded
to the Labor Arbiter for the proper computation of the retirement benefits of
the petitioner based on Article 287 of the Labor Code, as amended, to be
pegged at the minimum wage prevailing in Ibajay, Aklan as of March 17,
1997, and attorneys fees based on the same. Without costs.
SO ORDERED.
Chan and MSDCs motion for reconsideration was denied by the CA.
Issues
In this appeal, Chan and MSDC contend that the CA erred: (a) in taking cognizance
of Rogelios petition for certiorari despite the decision of the NLRC having become final

15
16
17

and executory almost two months before the petition was filed; (b) in concluding that
Rogelio had remained their employee from July 6, 1989 up to March 17, 1997; and (c) in
awarding retirement benefits and attorneys fees to Rogelio.
Ruling
The petition for review is barren of merit.
I
Certiorari was timely commenced in the CA
Anent the first error, the Court finds that the CA did not err in taking cognizance of
the petition for certiorari of Rogelio.
Based on the records, Rogelio received the NLRCs denial of his motion for
reconsideration on January 16, 2003. He then had 60 days from January 16, 2003, or
until March 17, 2003, within which to file his petition for certiorari. It is without doubt,
therefore, that his filing was timely considering that the CA received his petition for
certiorari at 2:44 oclock in the afternoon of March 17, 2003.
The petitioners insistence, that the issuance of the entry of judgment with respect
to the NLRCs decision precluded Rogelio from filing a petition for certiorari, was
unwarranted. It ought to be without debate that the finality of the NLRCs decision was of
no consequence in the consideration of whether or not he could bring a special civil
action for certiorari within the period of 60 days for doing so under Section 4, Rule 65,
Rules of Court, simply because the question being thereby raised was jurisdictional.
II
Respondent
separation

remained

the

petitioners

employee

despite

his

supposed

Did Rogelio remain the employee of the petitioners from July 6, 1989 up to March
17, 1997?
The issue of whether or not an employer-employee relationship existed between
the petitioners and the respondent in that period was essentially a question of fact. 18[18]
In dealing with such question, substantial evidence that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion 19[19] is
sufficient. Although no particular form of evidence is required to prove the existence of
the relationship, and any competent and relevant evidence to prove the relationship may
be admitted,20[20] a finding that the relationship exists must nonetheless rest on
substantial evidence.
Generally, the Court does not review errors that raise factual questions, primarily
because the Court is not a trier of facts. However, where, like now, there is a conflict
between the factual findings of the Labor Arbiter and the NLRC, on the one hand, and
those of the CA, on the other hand, 21[21] it is proper, in the exercise of our equity
jurisdiction, to review and re-evaluate the factual issues and to look into the records of
the case and re-examine the questioned findings.
The CA delved on and resolved the issue of the existence of an employeremployee relationship between the petitioners and the respondent thusly:

18
19
20
21

As to the factual issue, the petitioners evidence consists of his own

statements and those of his alleged co-worker from 1950 until 1997, Juanito
Palomata, who unlike his former co-workers Domingo Guevarra and
Ambrosio Seeres, did not disown the Sinumpaang Salaysay he executed, in
corroboration of petitioners allegations; and the Certification dated August
10, 1991 stating that petitioner was first placed under coverage of the SSS
in January 1974 to June 30, 1989 and was separated from service effective
July 1, 1989, a certification executed by respondent Crispin Amigo Chan
which, petitioner maintains, was only intended for his application for
retirement benefits with the SSS.
Private respondents evidence, on the other hand, consisted of
respondent Crispin Amigo Chans counter statements as well as
documentary evidence consisting of (1) Wayne Lims Affidavit which
petitioner acknowledged in his Reply dated July 11, 1998, par. 8, admitting
to being the employer of petitioner from July 1, 1989 until the filing of the
complaint; (2) Certification dated October 22, 1991 showing petitioners
employment with respondents to have been between January 3, 1977 until
July 1, 1989; (3) Affidavits of Guevarra and Seeres disowning their
signatures in the affidavits submitted in evidence by the petitioner; (4) SSS
report executed by Wayne Lim of his initial list of employees as of July 1,
1989 which includes the petitioner. On appeal, the respondents further
submitted documentary evidence showing that Wayne Lim registered his
business name on July 11, 1989 and apparently went into business buying
copra.
At this point, we should note the following factual
discrepancies in the evidence on hand: First, the respondents
issued certificates stating the commencement of petitioners
employment on different dates, i.e. January 1974 and January 1977,
although the earlier date referred only to the period when
petitioner was first placed under the coverage of the SSS, which
need not necessarily refer to the commencement of his
employment. Secondly, while respondent Crispin Amigo Chan
denied having ever engaged in copra buying in Ibajay, the
certificates he issued both dated in 1991 state otherwise, for he
declared himself as a copra dealer with address in Ibajay. Then
there is the statement of the petitioner that Wayne Lim was the
respondents manager in their branch office in Ibajay since 1984, a
statement
that
respondents
failed
to
disavow.
Instead,
respondents insisted on their non sequitur argument that they had
never engaged in copra buying activities in Ibajay, and that Wayne
Lim was in business all by himself in regard to such activity.
The denial on respondents part of their copra buying activities in Ibajay
begs the obvious question: What were petitioner and his witness Juanito
Palomata then doing for respondents as laborers in Ibajay prior to July 1,
1989? Indeed, what did petitioner do for the respondents as the latters
laborer prior to July 1, 1989, which was different from what he did after said
date? The records showed that he continued doing the same job, i.e. as
laborer and trusted employee tasked with the responsibility of getting
money from the Kalibo office of respondents which was used to buy copra
and pay the employees salaries. He did not only continue doing the same
thing but he apparently did the same at or from the same place, i.e. the
bodega in Ibajay, which his co-worker Palomata believed to belong to the
respondent Masing & Sons. Since respondents admitted to employing
petitioner from 1977 to 1989, we have to conclude that, indeed, the bodega

in Ibajay was owned by respondents at least prior to July 1, 1989 since

petitioner had consistently stated that he worked for the respondents
continuously in their branch office in Ibajay under different managers and
nowhere else.
We believe that the respondents strongest evidence in regard
to the alleged separation of petitioner from service effective July 1,
1989 would be the affidavit of Wayne Lim, owning to being the
employer of petitioner since July 1, 1989 and the SSS report that he
executed listing petitioner as one of his employees since said date.
But in light of the incontrovertible physical reality that petitioner
and his co-workers did go to work day in and day out for such a
long period of time, doing the same thing and in the same place,
without apparent discontinuity, except on paper, these documents
cannot be taken at their face value. We note that Wayne Lim
apparently inherited, at least on paper, ten (10) employees of
respondent Crispin Amigo Chan, including petitioner, all on the
same day, i.e. on July 1, 1989. We note, too, that while there exists
an initial report of employees to the SSS by Wayne Lim, no other
document apart from his affidavit and business registration was
offered by respondents to bolster their contention, irrespective of
the fact that Wayne Lim was not a party respondent. What were
the circumstances underlying such alleged mass transfer of
employment? Unfortunately, the evidence for the respondents does
not provide us with ready answers. We could conclude that
respondents sold their business in Ibajay and assets to Wayne Lim
on July 1, 1989; however, as pointed out above, respondent Crispin
Amigo Chan himself said that he was a copra dealer from Ibajay in
August and October of 1991. Whether or not he was registered as a
copra buyer is immaterial, given that he declared himself a copra
dealer and had apparently engaged in the activity of buying copra,
as shown precisely by the employment of petitioner and Palomata.
If Wayne Lim, from being the respondents manager in Ibajay
became an independent businessman and took over the
respondents business in Ibajay along with all their employees, why
did not the respondents simply state that fact for the record? More
importantly, why did the petitioner and Palomata continue
believing that Wayne Lim was only the respondents manager?
Given the long employment of petitioner with the respondents, was
it possible for him and his witness to make such mistake? We do
not think so. In case of doubt, the doubt is resolved in favor of
labor, in favor of the safety and decent living for the laborer as
mandated by Article 1702 of the Civil Code. The reality of the
petitioners toil speaks louder than words. xxx22[22]
We agree with the CAs factual findings, because they were based on the evidence
and records of the case submitted before the LA. The CA essentially complied with the
guidepost that the substantiality of evidence depends on both its quantitative and its
qualitative aspects.23[23] Indeed, the records substantially established that Chan and
MSDC had employed Rogelio until 1997. In contrast, Chan and MSDC failed to adduce
credible substantiation of their averment that Rogelio had been Lims employee from July
1989 until 1997. Credible proof that could outweigh the showing by Rogelio to the
contrary was demanded of Chan and MSDC to establish the veracity of their allegation,
for their mere allegation of Rogelios employment under Lim did not constitute

22
23

evidence,24[24] but they did not submit such proof, sadly failing to discharge their burden
of proving their own affirmative allegation. 25[25] In this regard, as we pointed out at the
start, the doubts reasonably arising from the evidence are resolved in favor of the
laborer in any controversy between a laborer and his master.
III
Respondent entitled to retirement benefits
from the petitioners
Article 287 of the Labor Code, as amended by Republic Act No. 7641, provides:
Article 287. Retirement. Any employee may be retired upon reaching
the retirement age established in the collective bargaining agreement or
other applicable employment contract.
In case of retirement, the employee shall be entitled to receive such
retirement benefits as he may have earned under existing laws and any
collective bargaining agreement and other agreements; Provided, however,
That an employees retirement benefits under any collective bargaining and
other agreements shall not be less than those provided herein.
In the absence of a retirement plan or agreement providing for
retirement benefits of employees in the establishment, an
employee upon reaching the age of sixty (60) years or more, but
not beyond sixty-five (65) years which is hereby declared the
compulsory retirement age, who has served at least five (5) years
in the said establishment, may retire and shall be entitled to
retirement pay equivalent to at least one-half (1/2) month salary
for every year of service, a fraction of at least six (6) months being
considered as one whole year.
Unless the parties provide for broader inclusions, the term
one-half (1/2) month salary shall mean fifteen (15) days plus onetwelfth (1/12) of the 13th month pay and the cash equivalent of not
more than five (5) days of service incentive leaves.
Retail, service and agricultural establishments or operations employing
not more than ten (10) employees or workers are exempted from the
coverage of this provision.
Violation of this provision is hereby declared unlawful and subject to
the penal provisions provided under Article 288 of this Code.
Was Rogelio entitled to the retirement benefits under Article 287 of the Labor
Code, as amended by Republic Act No. 7641?
The CA held so in its decision, to wit:
Having reached the conclusion that petitioner was an employee of the
respondents from 1950 to March 17, 1997, and considering his
uncontroverted allegation that in the Ibajay branch office where he was
assigned, respondents employed no less than 12 workers at said later date,
thus affording private respondents no relief from the duty of providing
retirement benefits to their employees, we see no reason why petitioner
should not be entitled to the retirement benefits as provided for under
Article 287 of the Labor Code, as amended. The beneficent provisions of
said law, as applied in Oro Enterprises Inc. v. NLRC, is apart from the

24
25

retirement benefits that can be claimed by a qualified employee under the

social security law. Attorneys fees are also granted to the petitioner. But the
monetary benefits claimed by petitioner cannot be granted on the basis of
the evidence at hand.26[26]
We concur with the CAs holding. The third paragraph of the aforequoted provision
of the Labor Code entitled Rogelio to retirement benefits as a necessary consequence of
the finding that Rogelio was an employee of MSDC and Chan. Indeed, there should be
little, if any, doubt that the benefits under Republic Act No. 7641, which was enacted as
a labor protection measure and as a curative statute to respond, in part at least, to the
financial well-being of workers during their twilight years soon following their life of
labor, can be extended not only from the date of its enactment but retroactively to the
time the employment contracts started. 27[27]
WHEREFORE, the Court denies the petition for review on certiorari, and affirms
the decision promulgated on October 24, 2003 in CA-G.R. SP No.75983.
Costs of suit to be paid by the petitioners.
SO ORDERED.

26
27

G.R. No. 144664

March 15, 2004
ASIAN TRANSMISSION CORPORATION, petitioner,
vs.
The Hon. COURT OF APPEALS, Thirteenth Division, HON. FROILAN M.
BACUNGAN as Voluntary Arbitrator, KISHIN A. LALWANI, Union, Union
representative to the Panel Arbitrators; BISIG NG ASIAN TRANSMISSION LABOR
UNION (BATLU); HON. BIENVENIDO T. LAGUESMA in his capacity as Secretary of
Labor and Employment; and DIRECTOR CHITA G. CILINDRO in her capacity as
Director of Bureau of Working Conditions, respondents.
DECISION
CARPIO-MORALES, J.:
Petitioner, Asian Transmission Corporation, seeks via petition for certiorari under Rule 65
of the 1995 Rules of Civil Procedure the nullification of the March 28, 2000 Decision 1 of
the Court of Appeals denying its petition to annul 1) the March 11, 1993 "Explanatory
Bulletin"2 of the Department of Labor and Employment (DOLE) entitled "Workers
Entitlement to Holiday Pay on April 9, 1993, Araw ng Kagitingan and Good Friday", which
bulletin the DOLE reproduced on January 23, 1998, 2) the July 31, 1998 Decision 3 of the
Panel of Voluntary Arbitrators ruling that the said explanatory bulletin applied as well to
April 9, 1998, and 3) the September 18, 1998 4 Resolution of the Panel of Voluntary
Arbitration denying its Motion for Reconsideration.
The following facts, as found by the Court of Appeals, are undisputed:
The Department of Labor and Employment (DOLE), through Undersecretary Cresenciano
B. Trajano, issued an Explanatory Bulletin dated March 11, 1993 wherein it clarified, inter
alia, that employees are entitled to 200% of their basic wage on April 9, 1993, whether
unworked, which[,] apart from being Good Friday [and, therefore, a legal holiday], is
also Araw ng Kagitingan [which is also a legal holiday].
The bulletin reads:
"On the correct payment of holiday compensation on April 9, 1993 which apart from
being Good Friday is also Araw ng Kagitingan, i.e., two regular holidays falling on the
same day, this Department is of the view that the covered employees are entitled to at
least two hundred percent (200%) of their basic wage even if said holiday is unworked.
The first 100% represents the payment of holiday pay on April 9, 1993 as Good Friday
and the second 100% is the payment of holiday pay for the same date as Araw ng
Kagitingan.
Said bulletin was reproduced on January 23, 1998, when April 9, 1998 was both Maundy
Thursday and Araw ng Kagitingan x x x x
Despite the explanatory bulletin, petitioner [Asian Transmission Corporation] opted to
pay its daily paid employees only 100% of their basic pay on April 9, 1998. Respondent
Bisig ng Asian Transmission Labor Union (BATLU) protested.
In accordance with Step 6 of the grievance procedure of the Collective Bargaining
Agreement (CBA) existing between petitioner and BATLU, the controversy was submitted
for voluntary arbitration. x x x x On July 31, 1998, the Office of the Voluntary Arbitrator
rendered a decision directing petitioner to pay its covered employees "200% and not just
100% of their regular daily wages for the unworked April 9, 1998 which covers two
regular holidays, namely, Araw ng Kagitignan and Maundy Thursday." (Emphasis and
underscoring supplied)

Subject of interpretation in the case at bar is Article 94 of the Labor Code which reads:
ART. 94. Right to holiday pay. - (a) Every worker shall be paid his regular daily wage
during regular holidays, except in retail and service establishments regularly employing
less than ten (10) workers;
(b) The employer may require an employee to work on any holiday but such
employee shall be paid a compensation equivalent to twice his regular rate; and
(c) As used in this Article, "holiday" includes: New Years Day, Maundy Thursday,
Good Friday, the ninth of April, the first of May, the twelfth of June, the fourth of
July, the thirtieth of November, the twenty-fifth and thirtieth of December and the
day designated by law for holding a general election,
which was amended by Executive Order No. 203 issued on June 30, 1987, such that the
regular holidays are now:
1. New Years Day January 1
2. Maundy Thursday Movable Date
3. Good Friday Movable Date
4. Araw ng Kagitingan April 9 (Bataan and Corregidor Day)
5. Labor Day May 1
6. Independence Day June 12
7. National Heroes Day Last Sunday of August
8. Bonifacio Day November 30
9. Christmas Day December 25
10. Rizal Day December 30
In deciding in favor of the Bisig ng Asian Transmission Labor Union (BATLU), the
Voluntary Arbitrator held that Article 94 of the Labor Code provides for holiday pay for
every regular holiday, the computation of which is determined by a legal formula which
is not changed by the fact that there are two holidays falling on one day, like on April 9,
1998 when it was Araw ng Kagitingan and at the same time was Maundy Thursday; and
that that the law, as amended, enumerates ten regular holidays for every year should
not be interpreted as authorizing a reduction to nine the number of paid regular holidays
"just because April 9 (Araw ng Kagitingan) in certain years, like 1993 and 1998, is also
Holy Friday or Maundy Thursday."
In the assailed decision, the Court of Appeals upheld the findings of the Voluntary
Arbitrator, holding that the Collective Bargaining Agreement (CBA) between petitioner
and BATLU, the law governing the relations between them, clearly recognizes their intent
to consider Araw ng Kagitingan and Maundy Thursday, on whatever date they may fall in
any calendar year, as paid legal holidays during the effectivity of the CBA and that
"[t]here is no condition, qualification or exception for any variance from the clear intent
that all holidays shall be compensated." 5
The Court of Appeals further held that "in the absence of an explicit provision in law
which provides for [a] reduction of holiday pay if two holidays happen to fall on the same
day, any doubt in the interpretation and implementation of the Labor Code provisions on
holiday pay must be resolved in favor of labor."
By the present petition, petitioners raise the following issues:
I
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN ERRONEOUSLY INTERPRETING THE TERMS OF THE COLLECTIVE
BARGAINING AGREEMENT BETWEEN THE PARTIES AND SUBSTITUTING ITS OWN
JUDGMENT IN PLACE OF THE AGREEMENTS MADE BY THE PARTIES THEMSELVES
II

WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF

DISCRETION IN HOLDING THAT ANY DOUBTS ABOUT THE VALIDITY OF THE POLICIES
ENUNCIATED IN THE EXPLANATORY BULLETIN WAS LAID TO REST BY THE REISSUANCE OF
THE SAID EXPLANATORY BULLETIN
III
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN UPHOLDING THE VALIDITY OF THE EXPLANATORY BULLETIN EVEN WHILE
ADMITTING THAT THE SAID BULLEITN WAS NOT AN EXAMPLE OF A JUDICIAL, QUASIJUDICIAL, OR ONE OF THE RULES AND REGULATIONS THAT [Department of Labor and
Employment] DOLE MAY PROMULGATE
IV
WHETHER OR NOT THE SECRETARY OF THE DEPARTMENT OF LABOR AND EMPLOYMENT
(DOLE) BY ISSUING EXPLANATORY BULLETIN DATED MARCH 11, 1993, IN THE GUISE OF
PROVIDING GUIDELINES ON ART. 94 OF THE LABOR CODE, COMMITTED GRAVE ABUSE OF
DISCRETION, AS IT LEGISLATED AND INTERPRETED LEGAL PROVISIONS IN SUCH A
MANNER AS TO CREATE OBLIGATIONS WHERE NONE ARE INTENDED BY THE LAW
V
WHETHER OR NOT THE RESPONDENT COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION IN SUSTAINING THE SECRETARY OF THE DEPARTMENT OF LABOR IN
REITERATING ITS EXPLANATORY BULLETIN DATED MARCH 11, 1993 AND IN ORDERING
THAT THE SAME POLICY OBTAINED FOR APRIL 9, 1998 DESPITE THE RULINGS OF THE
SUPREME COURT TO THE CONTRARY
VI
WHETHER OR NOT RESPONDENTS ACTS WILL DEPRIVE PETITIONER OF PROPERTY
WITHOUT DUE PROCESS BY THE "EXPLANATORY BULLETIN" AS WELL AS EQUAL
PROTECTION OF LAWS
The petition is devoid of merit.
At the outset, it bears noting that instead of assailing the Court of Appeals Decision by
petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
petitioner lodged the present petition for certiorari under Rule 65.
[S]ince the Court of Appeals had jurisdiction over the petition under Rule 65, any alleged
errors committed by it in the exercise of its jurisdiction would be errors of judgment
which are reviewable by timely appeal and not by a special civil action of certiorari. If the
aggrieved party fails to do so within the reglementary period, and the decision
accordingly becomes final and executory, he cannot avail himself of the writ of certiorari,
his predicament being the effect of his deliberate inaction.
The appeal from a final disposition of the Court of Appeals is a petition for review under
Rule 45 and not a special civil action under Rule 65 of the Rules of Court, now Rule 45
and Rule 65, respectively, of the 1997 Rules of Civil Procedure. Rule 45 is clear that the
decisions, final orders or resolutions of the Court of Appeals in any case, i.e., regardless
of the nature of the action or proceeding involved, may be appealed to this Court by
filing a petition for review, which would be but a continuation of the appellate process
over the original case. Under Rule 45 the reglementary period to appeal is fifteen (15)
days from notice of judgment or denial of motion for reconsideration.
xxx
For the writ of certiorari under Rule 65 of the Rules of Court to issue, a petitioner must
show that he has no plain, speedy and adequate remedy in the ordinary course of law
against its perceived grievance. A remedy is considered "plain, speedy and adequate" if
it will promptly relieve the petitioner from the injurious effects of the judgment and the
acts of the lower court or agency. In this case, appeal was not only available but also a
speedy and adequate remedy. 6

The records of the case show that following petitioners receipt on August 18, 2000 of a
copy of the August 10, 2000 Resolution of the Court of Appeals denying its Motion for
Reconsideration, it filed the present petition for certiorari on September 15, 2000, at
which time the Court of Appeals decision had become final and executory, the 15-day
period to appeal it under Rule 45 having expired.
Technicality aside, this Court finds no ground to disturb the assailed decision.
Holiday pay is a legislated benefit enacted as part of the Constitutional imperative that
the State shall afford protection to labor. 7 Its purpose is not merely "to prevent
diminution of the monthly income of the workers on account of work interruptions. In
other words, although the worker is forced to take a rest, he earns what he should earn,
that is, his holiday pay." 8 It is also intended to enable the worker to participate in the
national celebrations held during the days identified as with great historical and cultural
significance.
Independence Day (June 12), Araw ng Kagitingan (April 9), National Heroes Day (last
Sunday of August), Bonifacio Day (November 30) and Rizal Day (December 30) were
declared national holidays to afford Filipinos with a recurring opportunity to
commemorate the heroism of the Filipino people, promote national identity, and deepen
the spirit of patriotism. Labor Day (May 1) is a day traditionally reserved to celebrate the
contributions of the working class to the development of the nation, while the religious
holidays designated in Executive Order No. 203 allow the worker to celebrate his faith
with his family.
As reflected above, Art. 94 of the Labor Code, as amended, affords a worker the
enjoyment of ten paid regular holidays. 9 The provision is mandatory, 10 regardless of
whether an employee is paid on a monthly or daily basis. 11 Unlike a bonus, which is a
management prerogative,12 holiday pay is a statutory benefit demandable under the law.
Since a worker is entitled to the enjoyment of ten paid regular holidays, the fact that two
holidays fall on the same date should not operate to reduce to nine the ten holiday pay
benefits a worker is entitled to receive.
It is elementary, under the rules of statutory construction, that when the language of the
law is clear and unequivocal, the law must be taken to mean exactly what it says. 13 In
the case at bar, there is nothing in the law which provides or indicates that the
entitlement to ten days of holiday pay shall be reduced to nine when two holidays fall on
the same day.
Petitioners assertion that Wellington v. Trajano14 has "overruled" the DOLE March 11,
1993 Explanatory Bulletin does not lie. In Wellington, the issue was whether monthlypaid employees are entitled to an additional days pay if a holiday falls on a Sunday. This
Court, in answering the issue in the negative, observed that in fixing the monthly salary
of its employees, Wellington took into account "every working day of the year including
the holidays specified by law and excluding only Sunday." In the instant case, the issue is
whether daily-paid employees are entitled to be paid for two regular holidays which fall
on the same day.15
In any event, Art. 4 of the Labor Code provides that all doubts in the implementation and
interpretation of its provisions, including its implementing rules and regulations, shall be
resolved in favor of labor. For the working mans welfare should be the primordial and
paramount consideration.16
Moreover, Sec. 11, Rule IV, Book III of the Omnibus Rules to Implement the Labor Code
provides that "Nothing in the law or the rules shall justify an employer in withdrawing or
reducing any benefits, supplements or payments for unworked regular holidays as
provided in existing individual or collective agreement or employer practice or policy." 17

From the pertinent provisions of the CBA entered into by the parties, petitioner had
obligated itself to pay for the legal holidays as required by law. Thus, the 1997-1998 CBA
incorporates the following provision:
ARTICLE XIV
PAID LEGAL HOLIDAYS
The following legal holidays shall be paid by the COMPANY as required by law:
1. New Years Day (January 1st)
2. Holy Thursday (moveable)
3. Good Friday (moveable)
4. Araw ng Kagitingan (April 9th)
5. Labor Day (May 1st)
6. Independence Day (June 12th)
7. Bonifacio Day [November 30]
8. Christmas Day (December 25th)
9. Rizal Day (December 30th)
10. General Election designated by law, if declared public non-working holiday
11. National Heroes Day (Last Sunday of August)
Only an employee who works on the day immediately preceding or after a regular
holiday shall be entitled to the holiday pay.
A paid legal holiday occurring during the scheduled vacation leave will result in holiday
payment in addition to normal vacation pay but will not entitle the employee to another
vacation leave.
Under similar circumstances, the COMPANY will give a days wage for November 1st and
December 31st whenever declared a holiday. When required to work on said days, the
employee will be paid according to Art. VI, Sec. 3B hereof. 18
WHEREFORE, the petition is hereby DISMISSED.
SO ORDERED.

G.R. No. 152012

LAND AND HOUSING DEVELOPMENT CORPORATION and ABV ROCK GROUPversus - Corona,
Carpio Morales, and Garcia, JJ
DECISION
PANGANIBAN, J.:
uitclaims, releases and other waivers of benefits granted by laws or contracts in
favor of workers should be strictly scrutinized to protect the weak and the
disadvantaged. The waivers should be carefully examined, in regard not only to
the words and terms used, but also the factual circumstances under which they
have been executed.

The Case
Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to
set aside the July 27, 2001 Decision[2] and the January 29, 2002 Resolution[3] of the
Court of Appeals (CA) in CA-GR SP No. 50679. The dispositive portion of the Decision
reads as follows:
WHEREFORE, premises considered, the decision dated May 30, 1997 of
public respondent is hereby ANNULLED and SET ASIDE and the decision, dated
February 27, 1997 of Labor Arbiter Andres Zavalla is REINSTATED and
AFFIRMED in toto. Costs against [herein petitioners].[4]
The assailed Resolution denied petitioners Motion for Reconsideration.
The Facts
The antecedents are narrated by the CA as follows:
[Respondent] Marianito C. Esquillo was hired as a structural engineer by
[Petitioner] ABV Rock Group (ABV) based in Jeddah, Kingdom of Saudi Arabia. He
commenced employment on July 27, 1989, with an initial monthly salary of
US$1,000.00 that was gradually increased, on account of his good performance
and the annual renewal of his employment contract, until it reached US$1,300.00.
Private respondent Land & Housing Development Corporation (LHDC), a local
placement agency, facilitated [respondents] employment papers.

Although [respondents] employment contract was supposed to be valid

until July 26, 1995, it was pre-terminated, through an Inter-Office Memo on Notice
of Termination, dated November 17, 1994, allegedly, for the reason, reduction of
force. Petitioner however, claims that the reason adduced was negated by the fact
that a lot of transferees from other sites were taken in and promotions as well as
re-classifications in the lower ranks were done as shown by the list of fifteen (15)
transferees from Riyadh effective November 5, 1994, as well as letters of
promotion and re-classification. He further claimed that [Petitioner] ABV
maliciously confiscated his iqama or resident visa despite the fact that it was
[respondents] previous employer, FEAL IBC., which secured his iqama.
Consequently, [respondent] was prevented from getting another job in Jeddah.
[Respondent] subsequently received the amount of twenty-three thousand,
one hundred fifty-three Saudi Riyals (SR23,153.00) from [Petitioner] ABV, as final
settlement of his claims and was issued an exit visa that required him to
immediately go back to the Philippines.
As a result of the foregoing, [respondent] filed a complaint for breach of
contract and/or illegal dismissal, before the Philippine Overseas Employment
Administration which was referred to the National Labor Relations Commission,
Sub-Regional Arbitration Branch No. IV, San Pablo City, and docketed as SRAB-IV-40053-96-L. The parties were required to file their position papers and responsive
pleadings.
In their position paper, [petitioners] maintained that [respondents]
dismissal was for valid cause, that is, reduction of force. Due to the Gulf War, the
projects of [Petitioner] ABV were reduced and it was forced to terminate the
contracts of workers whose job were not so immediate and urgent and retain only
those workers whose skills were needed just to maintain the projects.
[Respondent] was informed, one month in advance, of the pre-termination of his
contract, and he was paid his salary, overtime pay, bonus and other benefits in
the total amount of US$6,716.00 or Saudi Riyals SR25,192.00. With respect to the
alleged confiscation of [respondents] iqama, [petitioners] alleged that the law
requires its surrender to the Saudi authorities upon the termination of the
employees contract of employment.
Upon the submission of the case for resolution, the Hon. Labor Arbiter
Andres Zavalla issued his Decision, dated February 27, 1997, decreeing, as
follows:
WHEREFORE, premises considered, judgment is hereby
rendered ordering [petitioners] jointly and severally to pay
[respondent] his salaries corresponding to the unexpired
portion of his contract from December 19, 1994 up to July 26,
1995 in the total amount of NINE THOUSAND FOUR HUNDRED
FORTY SEVEN U.S. Dollars (US$9,447.00) and ten percent
(10%) of his monetary award as attorneys fees both in
Philippine currency to be computed at the prevailing rate at
the time of payment.
All other claims of [respondent] are hereby dismissed for
lack of merit.
SO ORDERED.
When [petitioners] filed their joint appeal, docketed as NLRC NCR CA No.
012650-97, [the NLRC] in a Decision, dated May 30, 1997, reversed the aforecited

decision and dismissed the [respondents] complaint for lack of merit.

[Respondents] motion for reconsideration was denied in a Resolution, dated July
10, 1997.[5]
Ruling of the Court of Appeals
The Court of Appeals ruled that despite the absence of a written categorical objection to
the sufficiency of the payment received as consideration for the execution of the
quitclaim, jurisprudence supported the right of respondent to demand what was
rightfully his under our labor laws. Hence, he should have been allowed to recover the
difference between the amount he had actually received and the amount he should have
received.
The CA also found that the NLRC had erroneously applied RA 8042 to the case. The
appellate court held that respondent was entitled to the salaries corresponding to the
unexpired portion of his Contract, in addition to what he had already received.
Hence, this Petition.[6]
The Issues
Petitioners raise the following issues for this Courts consideration:
A. Whether or not the Honorable Court of Appeals committed reversible error
when it took cognizance of an issue of fact which was raised for the first time on
appeal.
B. Whether or not the Honorable Court of Appeals committed reversible error in its
27 July 2001 Decision and 29 January 2002 Resolution by affirming the 27
February 1997 Decision of the Labor Arbiter which rendered as null and void and
without binding effect the release and quitclaim executed by the respondent in
favor of the petitioners, and, thereafter, granted the respondent monetary award.
[7]
In the main, the issue is whether respondent, despite having executed a quitclaim, is
entitled to a grant of his additional monetary claims.
The Courts Ruling
The Petition has no merit.
At the outset, the Court notes the Manifestation of the Office of the Solicitor
General (OSG), recommending that the decision dated May 30, 1997 of the NLRC be
annulled and set aside and that [Respondent] Esquillo be awarded the total amount of
his salaries corresponding to the unexpired portion of his contract of employment.[8]
Main Issue:
Entitlements of a Dismissed
Employee Who Has Executed a Quitclaim
The factual findings of labor officials, who are deemed to have acquired expertise in
matters within their respective jurisdictions, are generally accorded not only respect but
finality.[9] In the present case, the labor arbiter found respondents dismissal to be illegal
and devoid of any just or authorized cause. The factual findings of the NLRC and the CA
on this matter were not contradictory. Hence, the Court finds no reason to deviate from
their factual finding that respondent was dismissed without any legal cause.
Indeed, an employee cannot be dismissed except for cause, as provided by law, and only
after due notice and hearing.[10] Employees who are dismissed without cause have the

right to be reinstated without loss of seniority rights and other privileges; and to be paid
full back wages, inclusive of allowances and other benefits, plus proven damages.
With regard to contract workers, in cases arising before the effectivity of RA 8042 (the
Migrant Workers and Overseas Filipinos Act[11]), it is settled that if the contract is for a
fixed term and the employee is dismissed without just cause, he is entitled to the
payment of his salaries corresponding to the unexpired portion of his contract.[12] In the
present case, the Contract of respondent was until July 26, 1995. Since his dismissal
from service effective December 18, 1994, was not for a just cause, he is entitled to be
paid his salary corresponding to the unexpired portion of his Contract, in the total
amount of US$9,447.
We now go to the Release and Quitclaim signed by respondent. The document, which
was prepared by Petitioner ABV Rock Group,[13] states:
KNOW ALL MEN BY THESE PRESENTS:
That for and in consideration of the sum of Saudi Riyals SR: TWENTY THREE
THOUSAND ONE HUNDRED FIFTY THREE (SR23,153) receipt of which is hereby
acknowledged to my full and complete satisfaction, I, MARIANITO C. ESQUILLO do
discharge my employer, ABV ROCK GROUP KB, JEDDAH, & its recruitment agent,
the LAND & HOUSING DEVP. CORP., from any and all claims, demands, debts,
dues, actions, or causes of action, arising from my employment with aforesaid
company/firm/entity.
I hereby certify that I am of legal age, that I fully understand this instrument and
agree that this is a full and final release and discharge of the parties referred to
herein, and I further agree that this release may be pleaded as absolute and final
bar to any suit or suits or legal proceedings that may hereafter be prosecuted by
me against aforementioned companies/entities.
IN WITNESS WHEREOF, I HAVE HEREUNTO SET MY HANDS THIS 29 day of NOV,
1994 at JEDDAH.
SIGNED MARIANITO C. ESQUILLO.[14]
Petitioners claim that the foregoing Release and Quitclaim has forever released them
from any and all claims, demands, dues, actions, or causes of action arising from
respondents employment with them. They also contend that the validity of the document
can no longer be questioned.
Unfortunately for petitioners, jurisprudence does not support their stance. The fact that
employees have signed a release and/or quitclaim does not necessarily result in the
waiver of their claims. The law strictly scrutinizes agreements in which workers agree to
receive less compensation than what they are legally entitled to. That document does
not always bar them from demanding benefits to which they are legally entitled.[15] The
reason for this policy was explained, inter alia, in Marcos v. National Labor Relations
Commission, which we quote:
We have heretofore explained that the reason why quitclaims are commonly
frowned upon as contrary to public policy, and why they are held to be ineffective
to bar claims for the full measure of the workers legal rights, is the fact that the
employer and the employee obviously do not stand on the same footing. The
employer drove the employee to the wall. The latter must have to get hold of
money. Because, out of a job, he had to face the harsh necessities of life. He thus
found himself in no position to resist money proffered. His, then, is a case of
adherence, not of choice. One thing sure, however, is that petitioners did not

relent on their claim. They pressed it. They are deemed not [to] have waived any
of their rights. Renuntiatio non praesumitur.
Along this line, we have more trenchantly declared that quitclaims and/or
complete releases executed by the employees do not estop them from pursuing
their claims arising from unfair labor practices of the employer. The basic reason
for this is that such quitclaims and/or complete releases are against public policy
and, therefore, null and void. The acceptance of termination does not divest a
laborer of the right to prosecute his employer for unfair labor practice acts. While
there may be possible exceptions to this holding, we do not perceive any in the
case at bar.
We have pointed out in Veloso, et al. vs. Department of Labor and
Employment, et al., that:
While rights may be waived, the same must not be
contrary to law, public order, public policy, morals or good
customs or prejudicial to a third person with a right recognized
by law.
Article 6 of the Civil Code renders a quitclaim agreement
void ab initio where the quitclaim obligates the workers
concerned to forego their benefits while at the same time
exempting the employer from any liability that it may choose
to reject. This runs counter to Art. 22 of the Civil Code which
provides that no one shall be unjustly enriched at the expense
of another.[16]
In Periquet v. NLRC, this Court set the guidelines and the current doctrinal policy
regarding quitclaims and waivers, as follows:
Not all waivers and quitclaims are invalid as against public policy. If the
agreement was voluntarily entered into and represents a reasonable settlement, it
is binding on the parties and may not later be disowned simply because of a
change of mind. It is only where there is clear proof that the waiver was wangled
from an unsuspecting or gullible person, or the terms of settlement are
unconscionable on its face, that the law will step in to annul the questionable
transaction. But where it is shown that the person making the waiver did so
voluntarily, with full understanding of what he was doing, and the consideration
for the quitclaim is credible and reasonable, the transaction must be recognized as
a valid and binding undertaking.[17]
Hence, quitclaims in which employees voluntarily accept a reasonable amount or
consideration as settlement are deemed valid. These agreements cannot be set aside
merely because the parties have subsequently changed their minds.[18] Consistent with
this doctrine, a tribunal has the duty of scrutinizing quitclaims brought to its attention by
either party, in order to determine their validity.
In the present case, petitioners themselves offered the Release and Quitclaim as a
defense. Even though respondent -- in his pleadings before the labor arbiter -- was silent
on the matter, he nonetheless filed this case and questioned his dismissal immediately,
a few days after setting foot in the Philippines. In asking for payment for the unexpired
portion of his employment Contract, he was eloquently taking issue with the validity of
the quitclaim. His actions spoke loudly enough; words were not necessary.
To determine whether the Release and Quitclaim is valid, one important factor that must
be taken into account is the consideration accepted by respondent; the amount must

constitute a reasonable settlement. The NLRC considered the amount of US$6,716 or

SR23,153 reasonable, when compared with (1) $3,900, the three-month salary that he
would have been entitled to recover if RA 8042 were applied; and (2) US$9,447, his
salaries for the unexpired portion of his Contract.
It is relevant to point out, however, that respondent was dismissed prior to the effectivity
of RA 8042. As discussed at the outset, he is entitled to his salaries corresponding to the
unexpired portion of his Contract. This amount is exclusive of the SR23,153 that he
received based on the November 29, 1994 Final Settlement. The latter amount was
comprised of overtime pay, vacation pay, indemnity, contract reward and notice pay -items that were due him under his employment Contract. For these reasons, the
consideration stated in the Release and Quitclaim cannot be deemed a reasonable
settlement; hence, that agreement must be set aside.
That respondent is a professional structural engineer did not make him less susceptible
to disadvantageous financial offers, faced as he was with the prospect of unemployment
in a country not his own. This Court has allowed supervisory employees to seek payment
of benefits and a manager to sue for illegal dismissal even though, for a consideration,
they executed deeds of quitclaims releasing their employers from liability.[19]
To stress, in case of doubt, laws should be interpreted to favor the working class -whether in the government or in the private sector -- in order to give flesh and vigor to
the pro-poor and pro-labor provisions of our Constitution.[20]
WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution
AFFIRMED. Costs against petitioners.
SO ORDERED.

G.R. No. 101535 January 22, 1993

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner,
vs.
THE HONORABLE NATIONAL LABOR RELATIONS COMMISSION, SECOND
DIVISION, PHILIPPINE OVERSEAS EMPLOYMENT ADMINISTRATION, RAUL
ABRICO, RODRIGO VASALLO, EDUARDO A. SIBBALUCA, and BENIGNO M.
MANASIS, respondents.
CAMPOS, JR., J.:
Subject of this petition is the Resolution ** of the National Labor Relations Commission
(NLRC) affirming the decision of the Philippine Overseas Employment Administration
(POEA) which held herein petitioner Philippine National Construction Corporation (PNCC)
liable to private respondents Raul Abrico, Rodrigo Vasallo, Eduardo A. Sibbaluca, and
Benigno M. Manasis for salary, overtime pay, vacation and sick leave, and completion
bonus differentials.

The facts are as follows:

Herein private respondents Raul C. Abrico, Rodrigo Vasallo, Eduardo A. Sibbaluca, and
Benigno M. Manasis were deployed by herein petitioner for overseas employment to Iraq
as security guards pursuant to individual appointment contracts dated April 15, 1985.
These were submitted to the POEA and were validated by the latter on April 22, 1985.
The contracts provided for a US$350.00/month salary.p
However, on May 12, 1985, a second overseas contract was executed by the PNCC which
was accepted by private respondents. It modified the April 15, 1985 contract by
providing for a monthly salary of US$260.00 for the same position. The contract was for
a two-year period. When the period lapsed, private respondents were repatriated and
were extended local employment. However, all of them filed their voluntary resignation
effective August 31, 1987 so that they could avail of more benefits under the Retirement
Program offered by the PNCC.
On August 17, 1987, private respondents filed a complaint before the POEA for, among
others, (a) non-payment of promotional pay increase for Raul C. Abrico and Rodrigo J.
Vasallo; (b) underpayment of salaries, overtime pay, bonuses, night differential pay, sick
leave, and vacation leave benefits; (c) assigning Friday overtime guarding duties to nonguards.
In disposing of the complaint, the POEA ruled as follows:
The issues to be resolved in these are:
1. Whether or not herein complainants are entitled to salary and overtime
pay differentials.
2. Whether or not herein complainants are entitled to vacation leave and
sick leave differentials, bonus differential and night shift differential.
3. Whether or not complainants Raul Abrico and Rodrigo J. Vasallo are
entitled to promotional pay differential.
This Office, after a thorough examination of the allegations as well as the
evidence of the parties finds the answer of the first issue to be affirmative,
affirmative also to the second issue as far as vacation and sick leaves (sic)
differentials as well as bonus differential are concerned and negative as to
the rest of the issues.
. . . The only dispute which remains unsolved is whether or not the monthly
salary of herein complainants is US$350.00 a month or US$260.00.
As correctly invoked by complainants paragraph (1) of Article 34 of the
Labor Code prohibits the substitution or alteration of employment contracts
approved and verified by the Department of Labor from the time (of) the
actual signing thereof by the parties up to and including the period of
expiration of the same without the approval of the Department of Labor.
With regard to the first issue in this case the approved contract of
employment of the herein complainants with the respondent is US$350.00 a
month. This can be inferred from the POEA approved contract of
employment and by the certification issued by respondent's chief recruiting
officer. This being so, herein complainants have the right to be paid as
monthly salaries the aforementioned amount.
Complainants having been granted voluntarily by the respondent a twohour daily overtime (Exh. "G", "G-1") during the durations of their contract,
are also entitled to be paid thereto based on the monthly salaries of
US$350.00 and not US$260.00.

In connection with the second issues of vacation and sick leaves (sic)
differentials as well as bonus differential, there being no refutation from the
respondent of the allegation of the complainants that they were paid the
said benefits in accordance with the monthly rate they were receiving while
working in Iraq, that is US$260.00, instead of US$350.00, their salary rate in
their approved employment contract, this Office finds it proper to award the
complainants the difference of the two (2) aforementioned amounts as far
as their vacation and sick leaves (sic) benefits as well as completion bonus
are concerned. Subparagraph a of paragraph seven of the master
employment contract of the respondent in its Iraq project during the year
1985 provides a vacation leave of 20 days and sick leave of 10 days or a
total of thirty (30) days leave for each of their employees for twelve (12)
months service. The said leaves (sic) benefits are commutable to cash at
the rate of 100% of the employee's salary at the end of employees foreign
assignment (subpar. c par. 7, respondent's Master Employment Contract).
Respondent's master employment contract also provides for completion
bonus of fifteen (15) days for every year of service (par. 15). Respondents
having paid the complainants the said benefits in accordance with the
monthly rate they actually received while working in Iraq, this Office finds it
proper for the respondent to pay to complainants the difference of the two
aforementioned amounts. 1
From the decision of the POEA, the PNCC appealed to the NLRC. It alleged that the POEA
erred in applying Article 34(i) of the Labor Code; and in holding that the notice of
employment, dated April 15, 1985, providing for a monthly salary of US$350.00 was the
actual overseas employment contract instead of the one dated May 12, 1985 which
provided for a salary of US$260.00/month.
In affirming the POEA decision, the NLRC stated:
. . . suffice it to state that in its aforestated Rejoinder respondent-appellant
corporation admitted as ". . . beyond question . . . that the contracts dated
April 15, 1985 were amended or modified on May 12, 1985" (Rollo 60) the
latter sans ". . . the approval of the Department of Labor . . ." and/or the
POEA, thus within the context of prohibited practices under Art. 34 (i) of the
Labor Code, as amended.
As validated by the POEA, the approved employment contracts of
complainants-appellees were for US$350.00 a month salary. Ms. Solis
certified to the aforesaid salary as PNCC Recruitment Head (Rollo 25-28);
also, as per POEA Accreditation Department certification dated 25 June
1987. (Rollo 24).
Relative to the last assignment of error, respondent-appellant corporation
insists that the POEA('s) basis for the computation of the awarded
differentials are erroneous for being without evidentiary basis or contrary to
the evidence.
It must be noted that complainants-appellees presented its (sic) claims
(Annex "M", "N", "O", "P"; Rollo 122-136, 73-98) for differentials in overtime
pay, sick leave and vacation leave benefits and completion bonus, as well
as its (sic) Exhibits "G" and "G-1", all of which served as POEA bases for
entitlement (Rollo 181, 182) to the several money claims; and the formula
bases for the aforestated computation were detailed besides, in the
assailed decision (pages 6, 7; Rollo 179, 180).
The record is bereft however, of evidence of compliance with the aforesaid
employment contracts relative to the aforesaid claims.

Absolutely no evidence appears to have been submitted for respondentappellants relative to satisfaction of the aforementioned claims: whether of
payments for any overtime as authorized and rendered, or availment of
leave benefits or its computation (sic) to cash, etc., where the pertinent
employment records, particularly disbursements for services rendered, as
well as for fringe benefits usually are for the account of the deploying
employer. 2
A Motion for Reconsideration of this Resolution having been denied on August 23, 1991,
petitioner filed this petition for certiorari alleging that the public respondents committed
grave abuse of discretion amounting to lack or excess of jurisdiction in holding that the
notice of employment dated April 15, 1985 was the actual employment contract and that
Article 34 (i) of the Labor Code was applicable.
We find no sufficient ground to annul the decision of the NLRC due to a capricious and
whimsical exercise of judgment. The petitioner's claim that the public respondent NLRC
gravely abused its discretion in holding that the private respondents were entitled to a
monthly salary of US$350.00 pursuant to the April 15, 1985 employment contract has
not been adequately substantiated. One of the axioms governing judicial review through
certiorari is that the administrative decision may properly be annulled or set aside only
upon clear showing that the administrative official or tribunal has acted with grave abuse
of discretion. 3
The assailed NLRC decision which affirmed the POEA ruling was based on the exhibits
presented by the parties, among which were the confirmation letters 4 issued to each of
the private respondents and the certification 5 issued by the POEA on June 25, 1987
stating that the approved rate for the position of a company guard for the PNCC was
US$350.00. More importantly, the NLRC relied upon the admission made by the PNCC.
Thus, it held:
. . . suffice it to state that in its aforestated Rejoinder respondent-appellant
corporation admitted [Emphasis supplied] as ". . . beyond question . . . that
the contracts dated April 12, 1985 were amended or modified on May 12,
1985" (Rollo 60), the latter sans ". . . the approval of the Department of
Labor . . ." and/or the POEA, thus within the context of prohibited practices
under Art. 34 (i) of the Labor Code, as amended. 6
The PNCC now finds fault in that decision by saying that the April 15, 1985 document
was but a mere notice/offer of employment. Petitioner alleges further that it was never
signed and accepted by private respondents. Consequently, it never became a binding
contract between the parties concerned. Petitioner further stated that the real contract
of employment was the one executed on May 12, 1985 which provided for a monthly
salary of US$260.00 and which was accepted by private respondents.
While the allegations of the PNCC may cast doubt on the real nature of the April 12, 1985
document, our Civil Code 7 states:
In case of doubt, all labor legislation and all labor contracts shall be
construed in favor of the safety and decent living for the laborers.
The mandate of the law for a liberal interpretation of labor contracts in favor of the
working man was applied in the case of Ditan vs. POEA Administrator 8 where We made
the following pronouncement:
A strict interpretation of the cold facts before us might support the position
taken by the respondents. However, we are dealing here not with an
ordinary transaction but with a labor contract which deserves special
treatment and a liberal interpretation in favor of the worker . . . the

Constitution mandates the protection of labor and the sympathetic concern

of the State for the working class conformably to the social justice
policy. . . .
xxx xxx xxx
Under the policy of social justice, the law bends over backward to
accommodate the interests of the working class on the humane justification
that those with less privileges in life should have more privileges in
law. . . . .
WHEREFORE, in view of the foregoing, the questioned Resolution of the NLRC is hereby
AFFIRMED. Consequently, this petition is DISMISSED. With costs.
SO ORDERED.

[G.R. No. 79560 : December 3, 1990.]

191 SCRA 823
ANDRES E. DITAN, Petitioner, vs. PHILIPPINE OVERSEAS EMPLOYMENT
ADMINISTRATION ADMINISTRATOR, NATIONAL LABOR RELATIONS COMMISSION,
ASIAWORLD RECRUITMENT, INC., AND/OR INTRACO SALES CORPORATION,
Respondents.
DECISION
CRUZ, J.:
The petitioner had the rare experience of being taken hostage in 1984, along with a
number of his co-workers, by the rebels in Angola. His captivity for more than two
months and the events that followed his release are the subject of the present petition.
Andres E. Ditan was recruited by private respondent Intraco Sales Corporation, through
its local agent, Asia World, the other private respondent, to work in Angola as a welding
supervisor. The contract was for nine months, at a monthly salary of US$1,100.00 or
US$275.00 weekly, and contained the required standard stipulations for the protection of
our overseas workers.
Arriving on November 30, 1984, in Luanda, capital of Angola, the petitioner was assigned
as an ordinary welder in the INTRACO central maintenance shop from December 2 to 25,
1984. On December 26, 1984, he was informed, to his distress, that would be transferred
to Kafunfo, some 350 kilometers east of Luanda. This was the place where, earlier that
year, the rebels had attacked and kidnapped expatriate workers, killing two Filipinos in
the raid. Naturally, Ditan was reluctant to go. However, he was assured by the INTRACO
manager that Kafunfo was safe and adequately protected by government troops;
moreover and this was more persuasive he was told he would be sent home if he
refused the new assignment. In the end, with much misgiving, he relented and agreed.:
nad
On December 29, 1984, his fears were confirmed. The Unita rebels attacked the diamond
mining site where Ditan was working and took him and sixteen other Filipino hostages,
along with other foreign workers. The rebels and their captives walked through jungle
terrain for 31 days to the Unita stronghold near the Namibian border. They trekked for
almost a thousand kilometers. They subsisted on meager fare. Some of them had
diarrhea. Their feet were blistered. It was only on March 16, 1985, that the hostages
were finally released after the intercession of their governments and the International
Red Cross. Six days later, Ditan and the other Filipino hostages were back in the
Philippines. 1
The repatriated workers had been assured by INTRACO that they would be given priority
in re-employment abroad, and eventually eleven of them were taken back. Ditan having
been excluded, he filed in June 1985 a complaint against the private respondents for
breach of contract and various other claims. Specifically, he sought the amount of
US$4,675.00, representing his salaries for the unexpired 17 weeks of his contract;
US$25,000.00 as war risk bonus; US$2,196.50 as the value of his lost belongings;
US$1,100 for unpaid vacation leave; and moral and exemplary damages in the sum of
US$50,000.00, plus attorney's fees.
All these claims were dismissed by POEA Administrator Tomas D. Achacoso in a decision
dated January 27, 1987. 2 This was affirmed in toto by respondent NLRC in a resolution
dated July 14, 1987, 3 which is now being challenged in this petition.
Going over the record, we find that the public respondent correctly rejected the
petitioner's claim for paid vacation leave. The express stipulation in Clause 5 of the
employment contract reads:

Should the Employee enter into a further 9 to 12 months contract at the completion
contract, he will be entitled to one month's paid vacation before commencement of his
second or subsequent contract.
It appears that the petitioner had not entered into a second contract with the employer
after the expiration of the first. Such re-employment was not a matter of right on the
part of the petitioner but dependent on the need for his skills in another project the
employer might later be undertaking.
As regards the cost of his belongings, the evidence shows that they were not really lost
but in fact returned to him by the rebels prior to their release. If he had other properties
that were not recovered, there was no proof of their loss that could support his
allegations. They were therefore also properly rejected.
We find, though, that the claims for breach of contract and war risk bonus deserve a little
more reflection in view of the peculiar circumstances of this case.
The fact that stands out most prominently in the record is the risk to which the petitioner
was subjected when he was assigned, after his reluctant consent, to the rebel-infested
region of Kafunfo. This was a dangerous area. This same place had earlier been the
target of a rebel attack that had resulted in the death of two Filipino workers and the
capture of several others. Knowing all this, INTRACO still pressured Ditan into agreeing to
be transferred to that place, dismissing his initial objection and, more important,
threatening to send him home if he refused.
We feel that in failing to provide for the safety of the petitioner, the private respondents
were clearly remiss in the discharge of one of the primary duties of the employer. Worse,
they not only neglected that duty but indeed deliberately violated it by actually
subjecting and exposing Ditan to a real and demonstrated danger. It does not help to
argue that he was not forced to go to Kafunfo and had the option of coming home. That
was a cruel choice, to say the least. The petitioner had gone to that foreign land in
search of a better life that he could share with his loved ones after his stint abroad. That
choice would have required him to come home empty-handed to the disappointment of
an expectant family.
It is not explained why the petitioner was not paid for the unexpired portion of his
contract which had 17 more weeks to go. The hostages were immediately repatriated
after their release, presumably so they could recover from their ordeal. The promise of
INTRACO was that they would be given priority in re-employment should their services
be needed. In the particular case of the petitioner, the promise was not fulfilled. It would
seem that his work was terminated, and not again required, because it was really
intended all along to assign him only to Kafunfo.:-cralaw
The private respondents stress that the contract Ditan entered into called for his
employment in Angola, without indication of any particular place of assignment in the
country. This meant he agreed to be assigned to work anywhere in that country,
including Kafunfo. When INTRACO assigned Ditan to that place in the regular course of
its business, it was merely exercising its rights under the employment contract that
Ditan had freely entered into. Hence, it is argued, he cannot now complain that there
was a breach of that contract for which he is entitled to monetary redress.
The private respondents also reject the claim for war risk bonus and point out that POEA
Memorandum Circular No. 4, issued pursuant to the mandatory war risk coverage
provision in Section 2, Rule VI, of the POEA Rules and Regulations on Overseas
Employment, categorizing Angola as a war risk took effect only on February 6, 1985,
"after the petitioner's deployment to Angola on November 27, 1984." Consequently, the

stipulation could not be applied to the petitioner as it was not supposed to have a
retroactive effect.
A strict interpretation of the cold facts before us might support the position taken by the
respondents. However, we are dealing here not with an ordinary transaction but with a
labor contract which deserves special treatment and a liberal interpretation in favor of
the worker. As the Solicitor General observes in his Comment supporting the petitioner,
the Constitution mandates the protection of labor and the sympathetic concern of the
State for the working class conformably to the social justice policy. This is a command we
cannot disregard in the resolution of the case before us.
The paramount duty of this Court is to render justice through law. The law in this case
allows two opposite interpretations, one strictly in favor of the employers and the other
liberally in favor of the worker. The choice is obvious. We find, considering the totality of
the circumstances attending this case, that the petitioner is entitled to relief.
The petitioner went to Angola prepared to work as he had promised in accordance with
the employment contract he had entered into in good faith with the private respondents.
Over his objection, he was sent to a dangerous assignment and as he feared was taken
hostage in a rebel attack that prevented him from fulfilling his contract while in captivity.
Upon his release, he was immediately sent home and was not paid the salary
corresponding to the unexpired portion of his contract. He was immediately repatriated
with the promise that he would be given priority in re-employment, which never came. To
rub salt on the wound, many of his co-hostages were re-employed as promised. The
petitioner was left only with a bleak experience and nothing to show for it except dashed
hopes and a sense of rejection.
In these circumstances, the Court feels that the petitioner should be paid the salary
corresponding to the 17 unserved weeks of his contract, which was terminated by the
private respondents despite his willingness to work out the balance of his term. In
addition, to assuage the ordeal he underwent while in captivity by the rebels, the Court
has also decided in its discretion to award him nominal damages in the sum of
P20,000.00. This is not payment of the war risk claim which, as earlier noted, was not
provided for in the employment contract in question, or indemnification for any loss
suffered by him. This is but a token of the tenderness of the law towards the petitioning
workman vis-a-vis the private respondents and their more comfortable resources.: nad
Under the policy of social justice, the law bends over backward to accommodate the
interests of the working class on the humane justification that those with less privileges
in life should have more privileges in law. That is why our judgment today must be for
the petitioner.
WHEREFORE, the challenged resolution of the NLRC is hereby MODIFIED. The private
respondents are hereby DIRECTED jointly and severally to pay the petitioner: a) the
current equivalent in Philippine pesos of US$4,675.00, representing his unpaid salaries
for the balance of the contract term; b) nominal damages in the amount of P20,000.00;
and c) 10% attorney's fees. No costs.
SO ORDERED.

G.R. No. 75704 July 19, 1989

RUBBERWORLD
(PHILS.),
INC.
and
ELPIDIO
HIDALGO,
petitioners,
vs.
THE NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION) and NESTOR
MALABANAN, respondents.
MEDIALDEA, J.:
This is a petition for certiorari under Rule 65 of the Rules of Court seeking the annulment
of the decision of the respondent National Labor Relations Commission dated June 17,
1986 (p. 23, Rollo) in NLRC NCR Case No. 6-2158-84 entitled "Nestor Malabanan and
Jonathan Transmil, Complainants, versus Rubberworld (Phils.), Inc. and Elpidio Hidalgo,
Respondents," reversing the decision of the Labor Arbiter which dismissed the complaint
for illegal dismissal for lack of merit.
The antecedent facts are as follows:
Respondent Malabanan was employed by petitioner Rubberworld (Phils.), Inc. on
September 25,1978 as an ordinary clerk. In May, 1980, he was promoted to the position
of production scheduler with a corresponding salary increase. He was again transferred
to the Inventory Control Section as stock clerk on September 1, 1983.
On April 6,1984, Elpidio Hidalgo, the Plant I General Manager of petitioner company,
received a copy of the Financial Audit Report from the Internal Audit Department of the
company showing a significant material variance between the year-end actual inventory
and that of the Cards (SC)/EDP Control Records. As a result thereof, Noel Santiago,
Section Head of the Inventory Control Section, where respondent Malabanan was
assigned, conducted an investigation of the reported discrepancies in the stock cards
upon the request of the Plant General Manager. Santiago then submitted his report to
the general manager recommending the dismissal of respondent Malabanan.
Consequently, Malabanan's case was endorsed to the Human Resources Division of
petitioner company, which conducted a reinvestigation on the matter and which affirmed
the recommendation of the Inventory Control Section Head for the termination of
employment of respondent Malabanan.
On June 6, 1984, respondent Malabanan was dismissed by petitioner company.
On June 16, 1984, respondent Malabanan, along with another complainant named
Jonathan Transmit, filed a complaint for unfair labor practice and illegal dismissal against

petitioner company alleging that they (respondent Malabanan and complainant Transmil)
were members of the monthly salaried employees' union affiliated with TUPAS; that
petitioner company forced them to disaffiliate from the union; and that due to their
refusal to resign from the union, they were ultimately dismissed from employment by
petitioner company.
Petitioner company on the other hand, denied complainants' allegations and averred that
respondent Malabanan's dismissal was due to gross and habitual neglect of his duty and
not due to his union affiliation.
During the hearing of the case, the other complainant, Jonathan Transmil withdrew from
the case since he already found another employment abroad.
On January 30, 1985, the Labor Arbiter rendered a decision (pp. 17- 22, Rollo), the
dispositive portion of which reads:
WHEREFORE, premises considered, this case should be, as it is hereby,
DISMISSED, for lack of merit.
SO ORDERED.
Respondent Malabanan appealed from the adverse decision to the respondent
Commission. On June 17, 1986, respondent Commission reversed the appealed decision
of the Labor Arbiter and stated, inter alia:
Confronted with this factual backgrounds, we find ourselves inclined to the
view that the appealed decision merits a reversal.
xxx
WHEREFORE, premises considered, the appealed decision should be, as it is
hereby REVERSED. Consequently, the respondents are directed to reinstate
complainant Nestor Malabanan to his former position as production
scheduler, with full backwages from the time he was illegally terminated up
to actual reinstatement, without loss of seniority rights and benefits
appurtenant thereto.
SO ORDERED. (pp. 23-27, Rollo)
The petitioner company moved for a reconsideration on the ground that the respondent
Commission's decision is not in accordance with facts and evidence on record. On July
23, 1986, the said motion for reconsideration was denied.
On September 3, 1986, petitioner filed the instant petition contending that the
respondent Commission committed grave abuse of discretion amounting to lack of
jurisdiction in reversing the Labor Arbiter's decision.
The two issues to be resolved in the instant case are: (1) whether or not the dismissal of
respondent Malabanan is tainted with unfair labor practice; and (2) whether or not a just
and valid cause exists for the dismissal of private respondent Malabanan.
Petitioner alleges that the National Labor Relations Commission gravely erred in
concluding that the demotion of Malabanan from production scheduler to a stock clerk at
the Stock and Inventory Section was intended to discourage Malabanan from union
membership. It argued that the Labor Arbiter was correct in finding that the private
respondent had not shown ample proof to the effect that he was a member of a labor
organization prior to his transfer to another position.
We believe that the foregoing contentions are impressed with merit. Art. 248 of the
Labor Code, PD No. 442, as amended, provides:

Art. 248. Unfair labor practices of employers. It shall be unlawful for an

employer to commit any of the following unfair labor practices:
(a) To interfere with, restrain or coerce employees in the exercise of their
right to self-organization;
xxx
The question of whether an employee was dismissed because of his union activities is
essentially a question of fact as to which the findings of the administrative agency
concerned are conclusive and binding if supported by substantial evidence. Substantial
evidence has been defined as such relevant evidence as a reasonable mind might accept
as adequate to support a conclusion. It means such evidence which affords a substantial
basis from which the fact in issue can be reasonably inferred (Philippine Metal Foundries,
Inc. v. Court of Industrial Relations, et. al., No. L- 34948-49, May 15, 1979, 90 SCRA 135).
The findings of the Labor Arbiter on the non-existence of unfair labor practice on the part
of the company are more in accord and supported by the evidence submitted by the
parties in the instant case, to wit:
Complainant had stated that he was a member of the monthly salaried
employees union affiliated with TUPAS. He, however, offered no proof to
support his allegation. In fact, no evidence was presented to prove the
existence of such union. We (note] from the records that, as the usual
practice, in cases like this one, complainant is usually supported by the
union of which he is a member. And ordinarily, the union itself is impleaded
as a co- complainant. Such circumstances, surprisingly, [are] not present in
this case. In fact, complainant categorically alleged that he had solicited the
services of the PAFLU Labor Union in filing this case. It is, indeed, surprising
that complainant had to solicit the help of a labor union (PAFLU) of which he
was not a member instead of soliciting the aid of the labor union (TUPAS) of
which he was allegedly a member. These circumstances alone [destroy] the
credibility of complainant's allegations. (p. 21, Rollo).
Nowhere in the records can We find that the company actually performed positive acts to
restrain the union participation of private respondent. For one, it is doubtful whether
Malabanan was really engaged in the organization of a labor union affiliated with the
federation TUPAS. The only evidence presented by him to prove this contention is his
affidavit and that of his father. It is therefore, not in accordance with ordinary experience
and common practice that the private respondent pursued his battle alone, without the
aid and support of his co-members in the union and his federation especially in a case of
serious nature as this one involving company intervention with union activity.
As a rule, it is the prerogative of the company to promote, transfer or even demote its
employees to other positions when the interests of the company reasonably demand it.
Unless there are instances which directly point to interference by the company with the
employees' right to self-organization, the transfer of private respondent should be
considered as within the bounds allowed by law. Furthermore, although private
respondent was transferred to a lower position, his original rank and salary remained
undiminished, which fact was not refuted or questioned by private respondent.
In view of the foregoing conclusions of the Labor Arbiter, We are compelled to agree with
the latter that the petitioner company did not commit any unfair labor practice in
transferring and thereafter dismissing private respondent.
The remaining issue to be resolved on this point is whether the dismissal of respondent
Malabanan was for a just and lawful cause. Article 282 of the Labor Code, as amended,
provides:
Article 282. Termination by employer. An employer may terminate an
employment for any of the following just causes:
b) Gross and habitual neglect by the employee of his duties;

Petitioner contends that private respondent Malabanan was guilty of gross negligence
when he caused the posting of incorrect entries in the stock card without counter
checking the actual movement status of the items at the warehouse, thereby resulting
into unmanageable inaccuracies in the data posted in the stock cards. The respondent
Commission correctly ruled:
Penultimately, even assuming for the sake of argument that herein
complainant 'posted entries in the stock card without counter checking the
actual movement status of the items at the warehouse, thereby resulting in
an inaccurate posting of data on the stock cards," to our impression does
not constitute as a just cause for dismissal. Records show that he was only
transferred to the Inventory Control Section on September 1, 1983 and was
not so familiar and experienced as a stock clerk, and prior to his transfer,
the record shows no derogatory records in terms of his performance. His
failure to carry out efficiently his duties as a stock clerk is not so gross and
habitual. In other words he was not notoriously negligent to warrant his
severance from the service. Considering that there is nothing on record that
shows that he wilfully defied instructions of his superior with regards to his
duties and that he gained personal benefit of the discrepancy, his dismissal
is unwarranted. (p. 26, Rollo).
It does not appear that private respondent Malabanan is an incorrigible offender or that
what he did inflicted serious damage to the company so much so that his continuance in
the service would be patently inimical to the employer's interest. Assuming, in gratia
argumenti that the private respondent had indeed committed the said mistakes in the
posting of accurate data, this was only his first infraction with regard to his duties. It
would thus be cruel and unjust to mete out the drastic penalty of dismissal, for it is not
proportionate to the gravity of the misdeed.
In fact, the promotion of the private respondent from the position of ordinary clerk to
production scheduler establishes the presumption that his performance of his work is
acceptable to the company. The petitioner even admitted that it was due to heavy
financial and business reverses that the company assigned the private respondent to the
position of Stock Clerk and not because of his unsatisfactory performance as production
scheduler (p. 6, Rollo). It has been held that there must be fair and reasonable criteria to
be used in selecting employees to be dismissed (Asiaworld Publishing House, Inc. v.
Ople, No. L-56398, July 23, 1987, 152 SCRA 219).
It is worthy to note that the prerogative of management to dismiss or lay-off an
employee must be done without abuse of discretion, for what is at stake is not only
petitioner's position, but also his means of livelihood. This is so because the preservation
of the lives of the citizens is a basic duty of the State, more vital than the peservation of
corporate profits (Euro-Linea, Phils., Inc. v. NLRC, L-75782, December 1, 1987,156 SCRA
79).
The law regards the worker with compassion. Our society is a compassionate one. Where
a penalty less punitive would suffice, whatever missteps may be committed by the
worker should not be visited by the supreme penalty of dismissal. This is not only
because of the law's concern for the working man. There is in addition, his family to
consider. After all, labor determinations should not only be secundum rationem but also
secundum caritatem (Almira, et al., v. BF Goodrich Philippines, Inc., et al., G.R. No. L34974, July 25, 1974, 58 SCRA 120).
ACCORDINGLY, the petition is DISMISSED for lack of merit. However, the decision of the
public respondent is hereby MODIFIED to the effect that petitioner company is ordered to
reinstate private respondent Nestor Malabanan to the position of stock clerk or

substantially equivalent position, with the same rank and salary he is enjoying at the
time of his termination, with three years backwages and without loss of seniority rights
and benefits appurtenant thereto.
Should the reinstatement of the private respondent as herein ordered be rendered
impossible by the supervention of circumstances which prevent the same, the petitioner
is further ordered to pay private respondent separation pay equivalent to one (1)
month's salary for every year of service rendered, computed at his last rate of salary.
SO ORDERED.

G.R. No. L-69870 November 29, 1988

NATIONAL SERVICE CORPORATION (NASECO) AND ARTURO L. PEREZ, petitioners,
vs.
THE HONORABLE THIRD DIVISION, NATIONAL LABOR RELATIONS COMMISSION,
MINISTRY OF LABOR AND EMPLOYMENT, MANILA AND EUGENIA C. CREDO,
respondents.
G.R. No. 70295 November 29,1988
EUGENIA C. CREDO, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION, NATIONAL SERVICES CORPORATION
AND ARTURO L. PEREZ, respondents.
PADILLA, J.:
Consolidated special civil actions for certiorari seeking to review the decision * of the
Third Division, National Labor Relations Commission in Case No. 11-4944-83 dated 28
November 1984 and its resolution dated 16 January 1985 denying motions for
reconsideration of said decision.
Eugenia C. Credo was an employee of the National Service Corporation (NASECO), a
domestic corporation which provides security guards as well as messengerial, janitorial
and other similar manpower services to the Philippine National Bank (PNB) and its
agencies. She was first employed with NASECO as a lady guard on 18 July 1975. Through
the years, she was promoted to Clerk Typist, then Personnel Clerk until she became Chief
of Property and Records, on 10 March 1980. 1

Sometime before 7 November 1983, Credo was administratively charged by Sisinio S.

Lloren, Manager of Finance and Special Project and Evaluation Department of NASECO,
stemming from her non-compliance with Lloren's memorandum, dated 11 October 1983,
regarding certain entry procedures in the company's Statement of Billings Adjustment.
Said charges alleged that Credo "did not comply with Lloren's instructions to place some
corrections/additional remarks in the Statement of Billings Adjustment; and when [Credo]
was called by Lloren to his office to explain further the said instructions, [Credo] showed
resentment and behaved in a scandalous manner by shouting and uttering remarks of
disrespect in the presence of her co-employees." 2
On 7 November 1983, Credo was called to meet Arturo L. Perez, then Acting General
Manager of NASECO, to explain her side before Perez and NASECO's Committee on
Personnel Affairs in connection with the administrative charges filed against her. After
said meeting, on the same date, Credo was placed on "Forced Leave" status for 1 5 days,
effective 8 November 1983. 3
Before the expiration of said 15-day leave, or on 18 November 1983, Credo filed a
complaint, docketed as Case No. 114944-83, with the Arbitration Branch, National
Capital Region, Ministry of Labor and Employment, Manila, against NASECO for placing
her on forced leave, without due process. 4
Likewise, while Credo was on forced leave, or on 22 November 1983, NASECO's
Committee on Personnel Affairs deliberated and evaluated a number of past acts of
misconduct or infractions attributed to her. 5 As a result of this deliberation, said
committee resolved:
1. That, respondent [Credo] committed the following offenses in the Code of
Discipline, viz:
OFFENSE vs. Company Interest & Policies
No. 3 Any discourteous act to customer, officer and employee of client
company or officer of the Corporation.
OFFENSE vs. Public Moral
No. 7 Exhibit marked discourtesy in the course of official duties or use of
profane or insulting language to any superior officer.
OFFENSE vs. Authority
No. 3 Failure to comply with any lawful order or any instructions of a
superior officer.
2. That, Management has already given due consideration to respondent's
[Credo] scandalous actuations for several times in the past. Records also
show that she was reprimanded for some offense and did not question it.
Management at this juncture, has already met its maximum tolerance point
so it has decided to put an end to respondent's [Credo] being an
undesirable employee. 6
The committee recommended Credo's termination, with forfeiture of benefits.

On 1 December 1983, Credo was called age to the office of Perez to be informed that she
was being charged with certain offenses. Notably, these offenses were those which
NASECO's Committee on Personnel Affairs already resolved, on 22 November 1983 to
have been committed by Credo.
In Perez's office, and in the presence of NASECO's Committee on Personnel Affairs, Credo
was made to explain her side in connection with the charges filed against her; however,
due to her failure to do so, 8 she was handed a Notice of Termination, dated 24
November 1983, and made effective 1 December 1983. 9 Hence, on 6 December 1983,

Credo filed a supplemental complaint for illegal dismissal in Case No. 11-4944-83,
alleging absence of just or authorized cause for her dismissal and lack of opportunity to
be heard. 10
After both parties had submitted their respective position papers, affidavits and other
documentary evidence in support of their claims and defenses, on 9 May 1984, the labor
arbiter rendered a decision: 1) dismissing Credo's complaint, and 2) directing NASECO to
pay Credo separation pay equivalent to one half month's pay for every year of service. 11
Both parties appealed to respondent National Labor Relations Commission (NLRC) which,
on 28 November 1984, rendered a decision: 1) directing NASECO to reinstate Credo to
her former position, or substantially equivalent position, with six (6) months' backwages
and without loss of seniority rights and other privileges appertaining thereto, and 2)
dismissing Credo's claim for attorney's fees, moral and exemplary damages. As a
consequence, both parties filed their respective motions for reconsideration, 12 which the
NLRC denied in a resolution of 16 January 1985. 13
Hence, the present recourse by both parties. In G.R. No. 68970, petitioners challenge as
grave abuse of discretion the dispositive portion of the 28 November 1984 decision
which ordered Credo's reinstatement with backwages. 14 Petitioners contend that in
arriving at said questioned order, the NLRC acted with grave abuse of discretion in
finding that: 1) petitioners violated the requirements mandated by law on termination, 2)
petitioners failed in the burden of proving that the termination of Credo was for a valid or
authorized cause, 3) the alleged infractions committed by Credo were not proven or,
even if proved, could be considered to have been condoned by petitioners, and 4) the
termination of Credo was not for a valid or authorized cause. 15
On the other hand, in G.R. No. 70295, petitioner Credo challenges as grave abuse of
discretion the dispositive portion of the 28 November 1984 decision which dismissed her
claim for attorney's fees, moral and exemplary damages and limited her right to
backwages to only six (6) months. 16
As guidelines for employers in the exercise of their power to dismiss employees for just
causes, the law provides that:
Section 2. Notice of dismissal. Any employer who seeks to dismiss a
worker shall furnish him a written notice stating the particular acts or
omission constituting the grounds for his dismissal.
xxx xxx xxx
Section 5. Answer and Hearing. The worker may answer the allegations
stated against him in the notice of dismissal within a reasonable period
from receipt of such notice. The employer shall afford the worker ample
opportunity to be heard and to defend himself with the assistance of his
representative, if he so desires.
Section 6. Decision to dismiss. The employer shall immediately notify a
worker in writing of a decision to dismiss him stating clearly the reasons
therefor. 17
These guidelines mandate that the employer furnish an employee sought to be
dismissed two (2) written notices of dismissal before a termination of employment can
be legally effected. These are the notice which apprises the employee of the particular
acts or omissions for which his dismissal is sought and the subsequent notice which
informs the employee of the employer's decision to dismiss him.
Likewise, a reading of the guidelines in consonance with the express provisions of law on
protection to labor 18 (which encompasses the right to security of tenure) and the
broader dictates of procedural due process necessarily mandate that notice of the
employer's decision to dismiss an employee, with reasons therefor, can only be issued

after the employer has afforded the employee concerned ample opportunity to be heard
and to defend himself.
In the case at bar, NASECO did not comply with these guidelines in effecting Credo's
dismissal. Although she was apprised and "given the chance to explain her side" of the
charges filed against her, this chance was given so perfunctorily, thus rendering illusory
Credo's right to security of tenure. That Credo was not given ample opportunity to be
heard and to defend herself is evident from the fact that the compliance with the
injunction to apprise her of the charges filed against her and to afford her a chance to
prepare for her defense was dispensed in only a day. This is not effective compliance
with the legal requirements aforementioned.
The fact also that the Notice of Termination of Credo's employment (or the decision to
dismiss her) was dated 24 November 1983 and made effective 1 December 1983 shows
that NASECO was already bent on terminating her services when she was informed on 1
December 1983 of the charges against her, and that any hearing which NASECO thought
of affording her after 24 November 1983 would merely be pro forma or an exercise in
futility.
Besides, Credo's mere non-compliance with Lorens memorandum regarding the entry
procedures in the company's Statement of Billings Adjustment did not warrant the
severe penalty of dismissal of the NLRC correctly held that:
... on the charge of gross discourtesy, the CPA found in its Report, dated 22
November 1983 that, "In the process of her testimony/explanations she
again exhibited a conduct unbecoming in front of NASECO Officers and
argued to Mr. S. S. Lloren in a sarcastic and discourteous manner,
notwithstanding, the fact that she was inside the office of the Acctg.
General Manager." Let it be noted, however, that the Report did not even
describe how the so called "conduct unbecoming" or "discourteous manner"
was done by complainant. Anent the "sarcastic" argument of complainant,
the purported transcript 19 of the meeting held on 7 November 1983 does
not indicate any sarcasm on the part of complainant. At the most,
complainant may have sounded insistent or emphatic about her work being
more complete than the work of Ms. de Castro, yet, the complaining officer
signed the work of Ms. de Castro and did not sign hers.
As to the charge of insubordination, it may be conceded, albeit unclear, that
complainant failed to place same corrections/additional remarks in the
Statement of Billings Adjustments as instructed. However, under the
circumstances obtaining, where complainant strongly felt that she was
being discriminated against by her superior in relation to other employees,
we are of the considered view and so hold, that a reprimand would have
sufficed for the infraction, but certainly not termination from services. 20
As this Court has ruled:
... where a penalty less punitive would suffice, whatever missteps may be
committed by labor ought not to be visited with a consequence so severe. It
is not only because of the law's concern for the working man. There is, in
addition, his family to consider. Unemployment brings untold hardships and
sorrows on those dependent on the wage-earner. 21
Of course, in justifying Credo's termination of employment, NASECO claims as additional
lawful causes for dismissal Credo's previous and repeated acts of insubordination,
discourtesy and sarcasm towards her superior officers, alleged to have been committed
from 1980 to July 1983. 22

If such acts of misconduct were indeed committed by Credo, they are deemed to have
been condoned by NASECO. For instance, sometime in 1980, when Credo allegedly
"reacted in a scandalous manner and raised her voice" in a discussion with NASECO's
Acting head of the Personnel Administration 23 no disciplinary measure was taken or
meted against her. Nor was she even reprimanded when she allegedly talked 'in a
shouting or yelling manner" with the Acting Manager of NASECO's Building Maintenance
and Services Department in 1980 24 or when she allegedly "shouted" at NASECO's
Corporate Auditor "in front of his subordinates displaying arrogance and unruly behavior"
in 1980, or when she allegedly shouted at NASECO's Internal Control Consultant in 1981.
25
But then, in sharp contrast to NASECO's penchant for ignoring the aforesaid acts of
misconduct, when Credo committed frequent tardiness in August and September 1983,
she was reprimanded. 26
Even if the allegations of improper conduct (discourtesy to superiors) were satisfactorily
proven, NASECO's condonation thereof is gleaned from the fact that on 4 October 1983,
Credo was given a salary adjustment for having performed in the job "at least
[satisfactorily]" 27 and she was then rated "Very Satisfactory" 28as regards job
performance, particularly in terms of quality of work, quantity of work, dependability,
cooperation, resourcefulness and attendance.
Considering that the acts or omissions for which Credo's employment was sought to be
legally terminated were insufficiently proved, as to justify dismissal, reinstatement is
proper. For "absent the reason which gave rise to [the employee's] separation from
employment, there is no intention on the part of the employer to dismiss the employee
concerned." 29 And, as a result of having been wrongfully dismissed, Credo is entitled to
three (3) years of backwages without deduction and qualification. 30
However, while Credo's dismissal was effected without procedural fairness, an award of
exemplary damages in her favor can only be justified if her dismissal was effected in a
wanton, fraudulent, oppressive or malevolent manner. 31 A judicious examination of the
record manifests no such conduct on the part of management. However, in view of the
attendant circumstances in the case, i.e., lack of due process in effecting her dismissal, it
is reasonable to award her moral damages. And, for having been compelled to litigate
because of the unlawful actuations of NASECO, a reasonable award for attorney's fees in
her favor is in order.
In NASECO's comment 32 in G.R. No. 70295, it is belatedly argued that the NLRC has no
jurisdiction to order Credo's reinstatement. NASECO claims that, as a government
corporation (by virtue of its being a subsidiary of the National Investment and
Development Corporation (NIDC), a subsidiary wholly owned by the Philippine National
Bank (PNB), which in turn is a government owned corporation), the terms and conditions
of employment of its employees are governed by the Civil Service Law, rules and
regulations. In support of this argument, NASECO cites National Housing Corporation vs.
JUCO, 33 where this Court held that "There should no longer be any question at this time
that employees of government-owned or controlled corporations are governed by the
civil service law and civil service rifles and regulations."
It would appear that, in the interest of justice, the holding in said case should not be
given retroactive effect, that is, to cases that arose before its promulgation on 17
January 1985. To do otherwise would be oppressive to Credo and other employees
similarly situated, because under the same 1973 Constitution ,but prior to the ruling in
National Housing Corporation vs. Juco, this Court had recognized the applicability of the
Labor Code to, and the authority of the NLRC to exercise jurisdiction over, disputes
involving terms and conditions of employment in government owned or controlled
corporations, among them, the National Service Corporation (NASECO).<re||an1w>
34

Furthermore, in the matter of coverage by the civil service of government-owned or

controlled corporations, the 1987 Constitution starkly varies from the 1973 Constitution,
upon which National Housing Corporation vs. Juco is based. Under the 1973 Constitution,
it was provided that:
The civil service embraces every branch, agency, subdivision, and
instrumentality of the Government, including every government-owned or
controlled corporation. ... 35
On the other hand, the 1987 Constitution provides that:
The civil service embraces all branches, subdivisions, instrumentalities, and
agencies of the Government, including government-owned or controlled
corporations with original charter. 36 (Emphasis supplied)
Thus, the situations sought to be avoided by the 1973 Constitution and expressed by the
Court in the National Housing . Corporation case in the following manner
The infirmity of the respondents' position lies in its permitting a
circumvention or emasculation of Section 1, Article XII-B of the constitution.
It would be possible for a regular ministry of government to create a host of
subsidiary corporations under the Corporation Code funded by a willing
legislature. A government-owned corporation could create several
subsidiary corporations. These subsidiary corporations would enjoy the best
of two worlds. Their officials and employees would be privileged individuals,
free from the strict accountability required by the Civil Service Decree and
the regulations of the Commission on Audit. Their incomes would not be
subject to the competitive restrains of the open market nor to the terms
and conditions of civil service employment. Conceivably, all governmentowned or controlled corporations could be created, no longer by special
charters, but through incorporations under the general law. The
Constitutional amendment including such corporations in the embrace of
the civil service would cease to have application. Certainly, such a situation
cannot be allowed to exist. 37
appear relegated to relative insignificance by the 1987 Constitutional provision that the
Civil Service embraces government-owned or controlled corporations with original
charter; and, therefore, by clear implication, the Civil Service does not include
government-owned or controlled corporations which are organized as subsidiaries of
government-owned or controlled corporations under the general corporation law.
The proceedings in the 1986 Constitutional Commission also shed light on the
Constitutional intent and meaning in the use of the phrase "with original charter." Thus
THE PRESIDING OFFICER (Mr. Trenas) Commissioner Romulo is
recognized.
MR. ROMULO. I beg the indulgence of the Committee. I was
reading the wrong provision.
I refer to Section 1, subparagraph I which reads:
The Civil Service embraces all branches, subdivisions, instrumentalities, and
agencies of the government, including government-owned or controlled
corporations.
My query: Is Philippine Airlines covered by this provision? MR. FOZ. Will the
Commissioner please state his previous question?
MR. ROMULO. The phrase on line 4 of Section 1, subparagraph
1, under the Civil Service Commission, says: "including
government-owned or controlled corporations.' Does that

include a corporation, like the Philippine Airlines which is

government-owned or controlled?
MR. FOZ. I would like to throw a question to the Commissioner.
Is the Philippine Airlines controlled by the government in the
sense that the majority of stocks are owned by the
government?
MR. ROMULO. It is owned by the GSIS. So, this is what we
might call a tertiary corporation. The GSIS is owned by the
government. Would this be covered because the provision says
"including government-owned or controlled corporations."
MR. FOZ. The Philippine Airlines was established as a private
corporation. Later on, the government, through the GSIS,
acquired the controlling stocks. Is that not the correct
situation?
MR. ROMULO. That is true as Commissioner Ople is about to
explain. There was apparently a Supreme Court decision that
destroyed that distinction between a government-owned
corporation created under the Corporation Law and a
government-owned corporation created by its own charter.
MR. FOZ. Yes, we recall the Supreme Court decision in the case
of NHA vs. Juco to the effect that all government corporations
irrespective of the manner of creation, whether by special
charter or by the private Corporation Law, are deemed to be
covered by the civil service because of the wide-embracing
definition made in this section of the existing 1973
Constitution. But we recall the response to the question of
Commissioner Ople that our intendment in this provision is just
to give a general description of the civil service. We are not
here to make any declaration as to whether employees of
government-owned or controlled corporations are barred from
the operation of laws, such as the Labor Code of the
Philippines.
MR. ROMULO. Yes.
MR. OPLE. May I be recognized, Mr. Presiding Officer, since my
name has been mentioned by both sides.
MR. ROMULO. I yield part of my time.
THE PRESIDING OFFICER (Mr.Trenas). Commissioner Ople is
recognized.
MR. OPLE. In connection with the coverage of the Civil Service
Law in Section 1 (1), may I volunteer some information that
may be helpful both to the interpellator and to the Committee.
Following the proclamation of martial law on September 21,
1972, this issue of the coverage of the Labor Code of the
Philippines and of the Civil Service Law almost immediately
arose. I am, in particular, referring to the period following the
coming into force and effect of the Constitution of 1973, where
the Article on the Civil Service was supposed to take
immediate force and effect. In the case of LUZTEVECO, there
was a strike at the time. This was a government-controlled and
government-owned corporation. I think it was owned by the

PNOC with just the minuscule private shares left. So, the
Secretary of Justice at that time, Secretary Abad Santos, and
myself sat down, and the result of that meeting was an opinion
of the Secretary of Justice which 9 became binding
immediately on the government that government corporations
with original charters, such as the GSIS, were covered by the
Civil Service Law and corporations spun off from the GSIS,
which we called second generation corporations functioning as
private subsidiaries, were covered by the Labor Code. Samples
of such second generation corporations were the Philippine
Airlines, the Manila
Hotel and the Hyatt. And that demarcation worked very well. In fact, all of
these companies I have mentioned as examples, except for the Manila
Hotel, had collective bargaining agreements. In the Philippine Airlines, there
were, in fact, three collective bargaining agreements; one, for the ground
people or the PALIA one, for the flight attendants or the PASAC and one for
the pilots of the ALPAC How then could a corporation like that be covered by
the Civil Service law? But, as the Chairman of the Committee pointed out,
the Supreme Court decision in the case of NHA vs. Juco unrobed the whole
thing. Accordingly, the Philippine Airlines, the Manila Hotel and the Hyatt
are now considered under that decision covered by the Civil Service Law. I
also recall that in the emergency meeting of the Cabinet convened for this
purpose at the initiative of the Chairman of the Reorganization Commission,
Armand Fabella, they agreed to allow the CBA's to lapse before applying the
full force and effect of the Supreme Court decision. So, we were in the
awkward situation when the new government took over. I can agree with
Commissioner Romulo when he said that this is a problem which I am not
exactly sure we should address in the deliberations on the Civil Service Law
or whether we should be content with what the Chairman said that Section
1 (1) of the Article on the Civil Service is just a general description of the
coverage of the Civil Service and no more.
Thank you, Mr. Presiding Officer.
MR. ROMULO. Mr. Presiding Officer, for the moment, I would be
satisfied if the Committee puts on records that it is not their
intent by this provision and the phrase "including governmentowned or controlled corporations" to cover such companies as
the Philippine Airlines.
MR. FOZ. Personally, that is my view. As a matter of fact, when
this draft was made, my proposal was really to eliminate, to
drop from the provision, the phrase "including governmentowned or controlled corporations."
MR. ROMULO. Would the Committee indicate that is the intent
of this provision?
MR. MONSOD. Mr. Presiding Officer, I do not think the
Committee can make such a statement in the face of an
absolute exclusion of government-owned or controlled
corporations. However, this does not preclude the Civil Service
Law to prescribe different rules and procedures, including
emoluments for employees of proprietary corporations, taking
into consideration the nature of their operations. So, it is a
general coverage but it does not preclude a distinction of the
rules between the two types of enterprises.

MR. FOZ. In other words, it is something that should be left to

the legislature to decide. As I said before, this is just a general
description and we are not making any declaration
whatsoever.
MR. MONSOD. Perhaps if Commissioner Romulo would like a
definitive understanding of the coverage and the Gentleman
wants
to
exclude
government-owned
or
controlled
corporations like Philippine Airlines, then the recourse is to
offer an amendment as to the coverage, if the Commissioner
does not accept the explanation that there could be a
distinction of the rules, including salaries and emoluments.
MR. ROMULO. So as not to delay the proceedings, I will reserve
my right to submit such an amendment.
xxx xxx xxx
THE PRESIDING OFFICE (Mr. Trenas) Commissioner Romulo is
recognized.
MR. ROMULO. On page 2, line 5, I suggest the following
amendment after "corporations": Add a comma (,) and the
phrase EXCEPT THOSE EXERCISING PROPRIETARY FUNCTIONS.
THE PRESIDING
Committee say?
SUSPENSION OF SESSION

OFFICER

(Mr.

Trenas).

What

does

MR. MONSOD. May we have a suspension of the session?

THE PRESIDING OFFICER (Mr. Trenas). The session
suspended.
It was 7:16 p.m.
RESUMPTION OF SESSION
At 7:21 p.m., the session was resumed.
THE PRESIDING OFFICER (Mr. Trenas). The session is resumed.
Commissioner Romulo is recognized.

the

is

MR. ROMULO. Mr. Presiding Officer, I am amending my original proposed

amendment to now read as follows: "including government-owned or
controlled corporations WITH ORIGINAL CHARTERS." The purpose of this
amendment is to indicate that government corporations such as the GSIS
and SSS, which have original charters, fall within the ambit of the civil
service. However, corporations which are subsidiaries of these chartered
agencies such as the Philippine Airlines, Manila Hotel and Hyatt are
excluded from the coverage of the civil service.
THE PRESIDING OFFICER (Mr. Trenas). What does the
Committee say?
MR. FOZ. Just one question, Mr. Presiding Officer. By the term
"original charters," what exactly do we mean?
MR. ROMULO. We mean that they were created by law, by an
act of Congress, or by special law.
MR. FOZ. And not under the general corporation law.
MR. ROMULO. That is correct. Mr. Presiding Officer.
MR. FOZ. With that understanding and clarification, the
Committee accepts the amendment.

MR. NATIVIDAD. Mr. Presiding officer, so those created by the

general corporation law are out.
MR. ROMULO. That is correct:

38

On the premise that it is the 1987 Constitution that governs the instant case because it
is the Constitution in place at the time of decision thereof, the NLRC has jurisdiction to
accord relief to the parties. As an admitted subsidiary of the NIDC, in turn a subsidiary of
the PNB, the NASECO is a government-owned or controlled corporation without original
charter.
Dr. Jorge Bocobo, in his Cult of Legalism, cited by Mr. Justice Perfecto in his concurring
opinion in Gomez vs. Government Insurance Board (L-602, March 31, 1947, 44 O.G. No.
8, pp. 2687, 2694; also published in 78 Phil. 221) on the effectivity of the principle of
social justice embodied in the 1935 Constitution, said:
Certainly, this principle of social justice in our Constitution as generously
conceived and so tersely phrased, was not included in the fundamental law
as a mere popular gesture. It was meant to (be) a vital, articulate,
compelling principle of public policy. It should be observed in the
interpretation not only of future legislation, but also of all laws already
existing on November 15, 1935. It was intended to change the spirit of our
laws, present and future. Thus, all the laws which on the great historic
event when the Commonwealth of the Philippines was born, were
susceptible of two interpretations strict or liberal, against or in favor of
social justice, now have to be construed broadly in order to promote and
achieve social justice. This may seem novel to our friends, the advocates of
legalism but it is the only way to give life and significance to the abovequoted principle of the Constitution. If it was not designed to apply to these
existing laws, then it would be necessary to wait for generations until all our
codes and all our statutes shall have been completely charred by removing
every provision inimical to social justice, before the policy of social justice
can become really effective. That would be an absurd conclusion. It is more
reasonable to hold that this constitutional principle applies to all legislation
in force on November 15, 1935, and all laws thereafter passed.
WHEREFORE, in view of the foregoing, the challenged decision of the NLRC is AFFIRMED
with modifications. Petitioners in G.R. No. 69870, who are the private respondents in G.R.
No. 70295, are ordered to: 1) reinstate Eugenia C. Credo to her former position at the
time of her termination, or if such reinstatement is not possible, to place her in a
substantially equivalent position, with three (3) years backwages, from 1 December
1983, without qualification or deduction, and without loss of seniority rights and other
privileges appertaining thereto, and 2) pay Eugenia C. Credo P5,000.00 for moral
damages and P5,000.00 for attorney's fees.
If reinstatement in any event is no longer possible because of supervening events,
petitioners in G.R. No. 69870, who are the private respondents in G.R. No. 70295 are
ordered to pay Eugenia C. Credo, in addition to her backwages and damages as above
described, separation pay equivalent to one-half month's salary for every year of service,
to be computed on her monthly salary at the time of her termination on 1 December
1983.
SO ORDERED.

G.R. No. 85279 July 28, 1989

SOCIAL SECURITY SYSTEM EMPLOYEES ASSOCIATION (SSSEA), DIONISION T.
BAYLON, RAMON MODESTO, JUANITO MADURA, REUBEN ZAMORA, VIRGILIO DE
ALDAY, SERGIO ARANETA, PLACIDO AGUSTIN, VIRGILIO MAGPAYO, petitioner,
vs.
THE COURT OF APPEALS, SOCIAL SECURITY SYSTEM (SSS), HON. CEZAR C.
PERALEJO, RTC, BRANCH 98, QUEZON CITY, respondents.
CORTES, J:
Primarily, the issue raised in this petition is whether or not the Regional Trial Court can
enjoin the Social Security System Employees Association (SSSEA) from striking and order
the striking employees to return to work. Collaterally, it is whether or not employees of
the Social Security System (SSS) have the right to strike.
The antecedents are as follows:
On June 11, 1987, the SSS filed with the Regional Trial Court of Quezon City a complaint
for damages with a prayer for a writ of preliminary injunction against petitioners,
alleging that on June 9, 1987, the officers and members of SSSEA staged an illegal strike
and baricaded the entrances to the SSS Building, preventing non-striking employees
from reporting for work and SSS members from transacting business with the SSS; that
the strike was reported to the Public Sector Labor - Management Council, which ordered
the strikers to return to work; that the strikers refused to return to work; and that the
SSS suffered damages as a result of the strike. The complaint prayed that a writ of
preliminary injunction be issued to enjoin the strike and that the strikers be ordered to
return to work; that the defendants (petitioners herein) be ordered to pay damages; and
that the strike be declared illegal.
It appears that the SSSEA went on strike after the SSS failed to act on the union's
demands, which included: implementation of the provisions of the old SSS-SSSEA
collective bargaining agreement (CBA) on check-off of union dues; payment of accrued
overtime pay, night differential pay and holiday pay; conversion of temporary or
contractual employees with six (6) months or more of service into regular and
permanent employees and their entitlement to the same salaries, allowances and
benefits given to other regular employees of the SSS; and payment of the children's
allowance of P30.00, and after the SSS deducted certain amounts from the salaries of
the employees and allegedly committed acts of discrimination and unfair labor practices
[Rollo, pp. 21-241].

The court a quo, on June 11, 1987, issued a temporary restraining order pending
resolution of the application for a writ of preliminary injunction [Rollo, p. 71.] In the
meantime, petitioners filed a motion to dismiss alleging the trial court's lack of
jurisdiction over the subject matter [Rollo, pp. 72-82.] To this motion, the SSS filed an
opposition, reiterating its prayer for the issuance of a writ of injunction [Rollo, pp. 209222]. On July 22,1987, in a four-page order, the court a quo denied the motion to dismiss
and converted the restraining order into an injunction upon posting of a bond, after
finding that the strike was illegal [Rollo, pp. 83- 86]. As petitioners' motion for the
reconsideration of the aforesaid order was also denied on August 14, 1988 [Rollo, p. 94],
petitioners filed a petition for certiorari and prohibition with preliminary injunction before
this Court. Their petition was docketed as G.R. No. 79577. In a resolution dated October
21, 1987, the Court, through the Third Division, resolved to refer the case to the Court of
Appeals. Petitioners filed a motion for reconsideration thereof, but during its pendency
the Court of Appeals on March 9,1988 promulgated its decision on the referred case
[Rollo, pp. 130-137]. Petitioners moved to recall the Court of Appeals' decision. In the
meantime, the Court on June 29,1988 denied the motion for reconsideration in G.R. No.
97577 for being moot and academic. Petitioners' motion to recall the decision of the
Court of Appeals was also denied in view of this Court's denial of the motion for
reconsideration [Rollo, pp. 141- 143]. Hence, the instant petition to review the decision
of the Court of Appeals [Rollo, pp. 12-37].
Upon motion of the SSS on February 6,1989, the Court issued a temporary restraining
order enjoining the petitioners from staging another strike or from pursuing the notice of
strike they filed with the Department of Labor and Employment on January 25, 1989 and
to maintain the status quo [Rollo, pp. 151-152].
The Court, taking the comment as answer, and noting the reply and supplemental reply
filed by petitioners, considered the issues joined and the case submitted for decision.
The position of the petitioners is that the Regional Trial Court had no jurisdiction to hear
the case initiated by the SSS and to issue the restraining order and the writ of
preliminary injunction, as jurisdiction lay with the Department of Labor and Employment
or the National Labor Relations Commission, since the case involves a labor dispute.
On the other hand, the SSS advances the contrary view, on the ground that the
employees of the SSS are covered by civil service laws and rules and regulations, not the
Labor Code, therefore they do not have the right to strike. Since neither the DOLE nor
the NLRC has jurisdiction over the dispute, the Regional Trial Court may enjoin the
employees from striking.
In dismissing the petition for certiorari and prohibition with preliminary injunction filed by
petitioners, the Court of Appeals held that since the employees of the SSS, are
government employees, they are not allowed to strike, and may be enjoined by the
Regional Trial Court, which had jurisdiction over the SSS' complaint for damages, from
continuing with their strike.
Thus, the sequential questions to be resolved by the Court in deciding whether or not the
Court of Appeals erred in finding that the Regional Trial Court did not act without or in
excess of jurisdiction when it took cognizance of the case and enjoined the strike are as
follows:
1. Do the employees of the SSS have the right to strike?
2. Does the Regional Trial Court have jurisdiction to hear the case initiated by the SSS
and to enjoin the strikers from continuing with the strike and to order them to return to
work?
These shall be discussed and resolved seriatim
I

The 1987 Constitution, in the Article on Social Justice and Human Rights, provides that
the State "shall guarantee the rights of all workers to self-organization, collective
bargaining and negotiations, and peaceful concerted activities, including the right to
strike in accordance with law" [Art. XIII, Sec. 31].
By itself, this provision would seem to recognize the right of all workers and employees,
including those in the public sector, to strike. But the Constitution itself fails to expressly
confirm this impression, for in the Sub-Article on the Civil Service Commission, it
provides, after defining the scope of the civil service as "all branches, subdivisions,
instrumentalities, and agencies of the Government, including government-owned or
controlled corporations with original charters," that "[t]he right to self-organization shall
not be denied to government employees" [Art. IX(B), Sec. 2(l) and (50)]. Parenthetically,
the Bill of Rights also provides that "[tlhe right of the people, including those employed
in the public and private sectors, to form unions, associations, or societies for purposes
not contrary to law shall not abridged" [Art. III, Sec. 8]. Thus, while there is no question
that the Constitution recognizes the right of government employees to organize, it is
silent as to whether such recognition also includes the right to strike.
Resort to the intent of the framers of the organic law becomes helpful in understanding
the meaning of these provisions. A reading of the proceedings of the Constitutional
Commission that drafted the 1987 Constitution would show that in recognizing the right
of government employees to organize, the commissioners intended to limit the right to
the formation of unions or associations only, without including the right to strike.
Thus, Commissioner Eulogio R. Lerum, one of the sponsors of the provision that "[tlhe
right to self-organization shall not be denied to government employees" [Art. IX(B), Sec.
2(5)], in answer to the apprehensions expressed by Commissioner Ambrosio B. Padilla,
Vice-President of the Commission, explained:
MR. LERUM. I think what I will try to say will not take that long. When we
proposed this amendment providing for self-organization of government
employees, it does not mean that because they have the right to organize,
they also have the right to strike. That is a different matter. We are only
talking about organizing, uniting as a union. With regard to the right to
strike, everyone will remember that in the Bill of Rights, there is a provision
that the right to form associations or societies whose purpose is not
contrary to law shall not be abridged. Now then, if the purpose of the state
is to prohibit the strikes coming from employees exercising government
functions, that could be done because the moment that is prohibited, then
the union which will go on strike will be an illegal union. And that provision
is carried in Republic Act 875. In Republic Act 875, workers, including those
from the government-owned and controlled, are allowed to organize but
they are prohibited from striking. So, the fear of our honorable VicePresident is unfounded. It does not mean that because we approve this
resolution, it carries with it the right to strike. That is a different matter. As a
matter of fact, that subject is now being discussed in the Committee on
Social Justice because we are trying to find a solution to this problem. We
know that this problem exist; that the moment we allow anybody in the
government to strike, then what will happen if the members of the Armed
Forces will go on strike? What will happen to those people trying to protect
us? So that is a matter of discussion in the Committee on Social Justice. But,
I repeat, the right to form an organization does not carry with it the right to
strike. [Record of the Constitutional Commission, vol. 1, p. 569].
It will be recalled that the Industrial Peace Act (R.A. No. 875), which was repealed by the
Labor Code (P.D. 442) in 1974, expressly banned strikes by employees in the
Government, including instrumentalities exercising governmental functions, but
excluding entities entrusted with proprietary functions:

.Sec. 11. Prohibition Against Strikes in the Government. The terms and
conditions of employment in the Government, including any political
subdivision or instrumentality thereof, are governed by law and it is
declared to be the policy of this Act that employees therein shall not strike
for the purpose of securing changes or modification in their terms and
conditions of employment. Such employees may belong to any labor
organization which does not impose the obligation to strike or to join in
strike: Provided, however, That this section shall apply only to employees
employed in governmental functions and not those employed in proprietary
functions of the Government including but not limited to governmental
corporations.
No similar provision is found in the Labor Code, although at one time it recognized the
right of employees of government corporations established under the Corporation Code
to organize and bargain collectively and those in the civil service to "form organizations
for purposes not contrary to law" [Art. 244, before its amendment by B.P. Blg. 70 in
1980], in the same breath it provided that "[t]he terms and conditions of employment of
all government employees, including employees of government owned and controlled
corporations, shall be governed by the Civil Service Law, rules and regulations" [now Art.
276]. Understandably, the Labor Code is silent as to whether or not government
employees may strike, for such are excluded from its coverage [Ibid]. But then the Civil
Service Decree [P.D. No. 807], is equally silent on the matter.
On June 1, 1987, to implement the constitutional guarantee of the right of government
employees to organize, the President issued E.O. No. 180 which provides guidelines for
the exercise of the right to organize of government employees. In Section 14 thereof, it
is provided that "[t]he Civil Service law and rules governing concerted activities and
strikes in the government service shall be observed, subject to any legislation that may
be enacted by Congress." The President was apparently referring to Memorandum
Circular No. 6, s. 1987 of the Civil Service Commission under date April 21, 1987 which,
"prior to the enactment by Congress of applicable laws concerning strike by government
employees ... enjoins under pain of administrative sanctions, all government officers and
employees from staging strikes, demonstrations, mass leaves, walk-outs and other forms
of mass action which will result in temporary stoppage or disruption of public service."
The air was thus cleared of the confusion. At present, in the absence of any legislation
allowing government employees to strike, recognizing their right to do so, or regulating
the exercise of the right, they are prohibited from striking, by express provision of
Memorandum Circular No. 6 and as implied in E.O. No. 180. [At this juncture, it must be
stated that the validity of Memorandum Circular No. 6 is not at issue].
But are employees of the SSS covered by the prohibition against strikes?
The Court is of the considered view that they are. Considering that under the 1987
Constitution "[t]he civil service embraces all branches, subdivisions, instrumentalities,
and agencies of the Government, including government-owned or controlled
corporations with original charters" [Art. IX(B), Sec. .2(l) see also Sec. 1 of E.O. No. 180
where the employees in the civil service are denominated as "government employees"]
and that the SSS is one such government-controlled corporation with an original charter,
having been created under R.A. No. 1161, its employees are part of the civil service
[NASECO v. NLRC, G.R. Nos. 69870 & 70295, November 24,1988] and are covered by the
Civil Service Commission's memorandum prohibiting strikes. This being the case, the
strike staged by the employees of the SSS was illegal.
The statement of the Court in Alliance of Government Workers v. Minister of Labor and
Employment [G.R. No. 60403, August 3, 1:983, 124 SCRA 11 is relevant as it furnishes
the rationale for distinguishing between workers in the private sector and government
employees with regard to the right to strike:

The general rule in the past and up to the present is that 'the terms and
conditions of employment in the Government, including any political
subdivision or instrumentality thereof are governed by law" (Section 11, the
Industrial Peace Act, R.A. No. 875, as amended and Article 277, the Labor
Code, P.D. No. 442, as amended). Since the terms and conditions of
government employment are fixed by law, government workers cannot use
the same weapons employed by workers in the private sector to secure
concessions from their employers. The principle behind labor unionism in
private industry is that industrial peace cannot be secured through
compulsion by law. Relations between private employers and their
employees rest on an essentially voluntary basis. Subject to the minimum
requirements of wage laws and other labor and welfare legislation, the
terms and conditions of employment in the unionized private sector are
settled through the process of collective bargaining. In government
employment, however, it is the legislature and, where properly given
delegated power, the administrative heads of government which fix the
terms and conditions of employment. And this is effected through statutes
or administrative circulars, rules, and regulations, not through collective
bargaining agreements. [At p. 13; Emphasis supplied].
Apropos is the observation of the Acting Commissioner of Civil Service, in his position
paper submitted to the 1971 Constitutional Convention, and quoted with approval by the
Court in Alliance, to wit:
It is the stand, therefore, of this Commission that by reason of the nature of
the public employer and the peculiar character of the public service, it must
necessarily regard the right to strike given to unions in private industry as
not applying to public employees and civil service employees. It has been
stated that the Government, in contrast to the private employer, protects
the interest of all people in the public service, and that accordingly, such
conflicting interests as are present in private labor relations could not exist
in the relations between government and those whom they employ. [At pp.
16-17; also quoted in National Housing Corporation v. Juco, G.R. No. 64313,
January 17,1985,134 SCRA 172,178-179].
E.O. No. 180, which provides guidelines for the exercise of the right to organize of
government employees, while clinging to the same philosophy, has, however, relaxed
the rule to allow negotiation where the terms and conditions of employment involved are
not among those fixed by law. Thus:
.SECTION 13. Terms and conditions of employment or improvements
thereof, except those that are fixed by law, may be the subject of
negotiations between duly recognized employees' organizations and
appropriate government authorities.
The same executive order has also provided for the general mechanism for the
settlement of labor disputes in the public sector to wit:
.SECTION 16. The Civil Service and labor laws and procedures, whenever
applicable, shall be followed in the resolution of complaints, grievances and
cases involving government employees. In case any dispute remains
unresolved after exhausting all the available remedies under existing laws
and procedures, the parties may jointly refer the dispute to the [Public
Sector Labor- Management] Council for appropriate action.

Government employees may, therefore, through their unions or associations, either

petition the Congress for the betterment of the terms and conditions of employment
which are within the ambit of legislation or negotiate with the appropriate government
agencies for the improvement of those which are not fixed by law. If there be any
unresolved grievances, the dispute may be referred to the Public Sector Labor Management Council for appropriate action. But employees in the civil service may not
resort to strikes, walk-outs and other temporary work stoppages, like workers in the
private sector, to pressure the Govemment to accede to their demands. As now provided
under Sec. 4, Rule III of the Rules and Regulations to Govern the Exercise of the Right of
Government- Employees to Self- Organization, which took effect after the instant dispute
arose, "[t]he terms and conditions of employment in the government, including any
political subdivision or instrumentality thereof and government- owned and controlled
corporations with original charters are governed by law and employees therein shall not
strike for the purpose of securing changes thereof."
II
The strike staged by the employees of the SSS belonging to petitioner union being
prohibited by law, an injunction may be issued to restrain it.
It is futile for the petitioners to assert that the subject labor dispute falls within the
exclusive jurisdiction of the NLRC and, hence, the Regional Trial Court had no jurisdiction
to issue a writ of injunction enjoining the continuance of the strike. The Labor Code itself
provides that terms and conditions of employment of government employees shall be
governed by the Civil Service Law, rules and regulations [Art. 276]. More importantly,
E.O. No. 180 vests the Public Sector Labor - Management Council with jurisdiction over
unresolved labor disputes involving government employees [Sec. 16]. Clearly, the NLRC
has no jurisdiction over the dispute.
This being the case, the Regional Trial Court was not precluded, in the exercise of its
general jurisdiction under B.P. Blg. 129, as amended, from assuming jurisdiction over the
SSS's complaint for damages and issuing the injunctive writ prayed for therein. Unlike
the NLRC, the Public Sector Labor - Management Council has not been granted by law
authority to issue writs of injunction in labor disputes within its jurisdiction. Thus, since it
is the Council, and not the NLRC, that has jurisdiction over the instant labor dispute,
resort to the general courts of law for the issuance of a writ of injunction to enjoin the
strike is appropriate.
Neither could the court a quo be accused of imprudence or overzealousness, for in fact it
had proceeded with caution. Thus, after issuing a writ of injunction enjoining the
continuance of the strike to prevent any further disruption of public service, the
respondent judge, in the same order, admonished the parties to refer the unresolved
controversies emanating from their employer- employee relationship to the Public Sector
Labor - Management Council for appropriate action [Rollo, p. 86].
III
In their "Petition/Application for Preliminary and Mandatory Injunction," and reiterated in
their reply and supplemental reply, petitioners allege that the SSS unlawfully withheld
bonuses and benefits due the individual petitioners and they pray that the Court issue a
writ of preliminary prohibitive and mandatory injunction to restrain the SSS and its
agents from withholding payment thereof and to compel the SSS to pay them. In their
supplemental reply, petitioners annexed an order of the Civil Service Commission, dated
May 5, 1989, which ruled that the officers of the SSSEA who are not preventively
suspended and who are reporting for work pending the resolution of the administrative
cases against them are entitled to their salaries, year-end bonuses and other fringe
benefits and affirmed the previous order of the Merit Systems Promotion Board.

The matter being extraneous to the issues elevated to this Court, it is Our view that
petitioners' remedy is not to petition this Court to issue an injunction, but to cause the
execution of the aforesaid order, if it has already become final.
WHEREFORE, no reversible error having been committed by the Court of Appeals, the
instant petition for review is hereby DENIED and the decision of the appellate court
dated March 9, 1988 in CA-G.R. SP No. 13192 is AFFIRMED. Petitioners'
"Petition/Application for Preliminary and Mandatory Injunction" dated December 13,1988
is DENIED.
SO ORDERED.

G.R. No. 113161 August 29, 1995

PEOPLE OF THE PHILIPPINES, plaintiff-appellee,
vs.
LOMA GOCE y OLALIA, DAN GOCE and NELLY D. AGUSTIN, accused. NELLY D.
AGUSTIN, accused-appellant.
REGALADO, J.:

On January 12, 1988, an information for illegal recruitment committed by a syndicate

and in large scale, punishable under Articles 38 and 39 of the Labor Code (Presidential
Decree No. 442) as amended by Section 1(b) of Presidential Decree No. 2018, was filed
against spouses Dan and Loma Goce and herein accused-appellant Nelly Agustin in the
Regional Trial Court of Manila, Branch 5, alleging
That in or about and during the period comprised between May 1986 and
June 25, 1987, both dates inclusive, in the City of Manila, Philippines, the
said accused, conspiring and confederating together and helping one
another, representing themselves to have the capacity to contract, enlist
and transport Filipino workers for employment abroad, did then and there
willfully and unlawfully, for a fee, recruit and promise employment/job
placement abroad, to (1) Rolando Dalida y Piernas, (2) Ernesto Alvarez y
Lubangco, (3) Rogelio Salado y Savillo, (4) Ramona Salado y Alvarez, (5)
Dionisio Masaya y de Guzman, (6) Dave Rivera y de Leon, (7) Lorenzo
Alvarez y Velayo, and (8) Nelson Trinidad y Santos, without first having
secured the required license or authority from the Department of Labor. 1
On January 21, 1987, a warrant of arrest was issued against the three accused but not
one of them was arrested. 2 Hence, on February 2, 1989, the trial court ordered the case
archived but it issued a standing warrant of arrest against the accused. 3
Thereafter, on learning of the whereabouts of the accused, one of the offended parties,
Rogelio Salado, requested on March 17, 1989 for a copy of the warrant of arrest. 4
Eventually, at around midday of February 26, 1993, Nelly Agustin was apprehended by
the Paraaque police. 5 On March 8, 1993, her counsel filed a motion to revive the case
and requested that it be set for hearing "for purposes of due process and for the accused
to immediately have her day in court" 6 Thus, on April 15, 1993, the trial court reinstated
the case and set the arraignment for May 3, 1993, 7 on which date of Agustin pleaded
not guilty 8 and the case subsequently went to trial.
Four of the complainants testified for the prosecution. Rogelio Salado was the first to
take the witness stand and he declared that sometime in March or April, 1987, he was
introduced by Lorenzo Alvarez, his brother-in-law and a co-applicant, to Nelly Agustin in
the latter's residence at Factor, Dongalo, Paraaque, Metro Manila. Representing herself
as the manager of the Clover Placement Agency, Agustin showed him a job order as
proof that he could readily be deployed for overseas employment. Salado learned that
he had to pay P5,000.00 as processing fee, which amount he gave sometime in April or
May of the same year. He was issued the corresponding receipt. 9
Also in April or May, 1987, Salado, accompanied by five other applicants who were his
relatives, went to the office of the placement agency at Nakpil Street, Ermita, Manila
where he saw Agustin and met the spouses Dan and Loma Goce, owners of the agency.
He submitted his bio-data and learned from Loma Goce that he had to give P12,000.00,
instead of the original amount of P5,000.00 for the placement fee. Although surprised at
the new and higher sum, they subsequently agreed as long as there was an assurance
that they could leave for abroad. 10
Thereafter, a receipt was issued in the name of the Clover Placement Agency showing
that Salado and his aforesaid co-applicants each paid P2,000.00, instead of the
P5,000.00 which each of them actually paid. Several months passed but Salado failed to
leave for the promised overseas employment. Hence, in October, 1987, along with the
other recruits, he decided to go to the Philippine Overseas Employment Administration
(POEA) to verify the real status of Clover Placement Agency. They discovered that said
agency was not duly licensed to recruit job applicants. Later, upon learning that Agustin
had been arrested, Salado decided to see her and to demand the return of the money he
had paid, but Agustin could only give him P500.00. 11

Ramona Salado, the wife of Rogelio Salado, came to know through her brother, Lorenzo
Alvarez, about Nelly Agustin. Accompanied by her husband, Rogelio, Ramona went to see
Agustin at the latter's residence. Agustin persuaded her to apply as a cutter/sewer in
Oman so that she could join her husband. Encouraged by Agustin's promise that she and
her husband could live together while working in Oman, she instructed her husband to
give Agustin P2,000.00 for each of them as placement fee, or the total sum of P4,000.00.
12

Much later, the Salado couple received a telegram from the placement agency requiring
them to report to its office because the "NOC" (visa) had allegedly arrived. Again, around
February, or March, 1987, Rogelio gave P2,000.00 as payment for his and his wife's
passports. Despite follow-up of their papers twice a week from February to June, 1987,
he and his wife failed to leave for abroad. 13
Complainant Dionisio Masaya, accompanied by his brother-in-law, Aquiles Ortega,
applied for a job in Oman with the Clover Placement Agency at Paraaque, the agency's
former office address. There, Masaya met Nelly Agustin, who introduced herself as the
manager of the agency, and the Goce spouses, Dan and Loma, as well as the latter's
daughter. He submitted several pertinent documents, such as his bio-data and school
credentials. 14
In May, 1986, Masaya gave Dan Goce P1,900.00 as an initial downpayment for the
placement fee, and in September of that same year, he gave an additional P10,000.00.
He was issued receipts for said amounts and was advised to go to the placement office
once in a while to follow up his application, which he faithfully did. Much to his dismay
and chagrin, he failed to leave for abroad as promised. Accordingly, he was forced to
demand that his money be refunded but Loma Goce could give him back only P4,000.00
in installments. 15
As the prosecution's fourth and last witness, Ernesto Alvarez took the witness stand on
June 7, 1993. He testified that in February, 1987, he met appellant Agustin through his
cousin, Larry Alvarez, at her residence in Paraaque. She informed him that "madalas
siyang nagpapalakad sa Oman" and offered him a job as an ambulance driver at the
Royal Hospital in Oman with a monthly salary of about $600.00 to $700.00. 16
On March 10, 1987, Alvarez gave an initial amount of P3,000.00 as processing fee to
Agustin at the latter's residence. In the same month, he gave another P3,000.00, this
time in the office of the placement agency. Agustin assured him that he could leave for
abroad before the end of 1987. He returned several times to the placement agency's
office to follow up his application but to no avail. Frustrated, he demanded the return of
the money he had paid, but Agustin could only give back P500.00. Thereafter, he looked
for Agustin about eight times, but he could no longer find her. 17
Only herein appellant Agustin testified for the defense. She asserted that Dan and Loma
Goce were her neighbors at Tambo, Paraaque and that they were licensed recruiters
and owners of the Clover Placement Agency. Previously, the Goce couple was able to
send her son, Reynaldo Agustin, to Saudi Arabia. Agustin met the aforementioned
complainants through Lorenzo Alvarez who requested her to introduce them to the Goce
couple, to which request she acceded. 18
Denying any participation in the illegal recruitment and maintaining that the recruitment
was perpetrated only by the Goce couple, Agustin denied any knowledge of the receipts
presented by the prosecution. She insisted that the complainants included her in the
complaint thinking that this would compel her to reveal the whereabouts of the Goce
spouses. She failed to do so because in truth, so she claims, she does not know the
present address of the couple. All she knew was that they had left their residence in
1987. 19

Although she admitted having given P500.00 each to Rogelio Salado and Alvarez, she
explained that it was entirely for different reasons. Salado had supposedly asked for a
loan, while Alvarez needed money because he was sick at that time. 20
On November 19, 1993, the trial court rendered judgment finding herein appellant guilty
as a principal in the crime of illegal recruitment in large scale, and sentencing her to
serve the penalty of life imprisonment, as well as to pay a fine of P100,000.00. 21
In her present appeal, appellant Agustin raises the following arguments: (1) her act of
introducing complainants to the Goce couple does not fall within the meaning of illegal
recruitment and placement under Article 13(b) in relation to Article 34 of the Labor Code;
(2) there is no proof of conspiracy to commit illegal recruitment among appellant and the
Goce spouses; and (3) there is no proof that appellant offered or promised overseas
employment to the complainants. 22 These three arguments being interrelated, they will
be discussed together.
Herein appellant is accused of violating Articles 38 and 39 of the Labor Code. Article 38
of the Labor Code, as amended by Presidential Decree No. 2018, provides that any
recruitment activity, including the prohibited practices enumerated in Article 34 of said
Code, undertaken by non-licensees or non-holders of authority shall be deemed illegal
and punishable under Article 39 thereof. The same article further provides that illegal
recruitment shall be considered an offense involving economic sabotage if any of these
qualifying circumstances exist, namely, (a) when illegal recruitment is committed by a
syndicate, i.e., if it is carried out by a group of three or more persons conspiring and/or
confederating with one another; or (b) when illegal recruitment is committed in large
scale, i.e., if it is committed against three or more persons individually or as a group.
At the outset, it should be made clear that all the accused in this case were not
authorized to engage in any recruitment activity, as evidenced by a certification issued
by Cecilia E. Curso, Chief of the Licensing and Regulation Office of the Philippine
Overseas Employment Administration, on November 10, 1987. Said certification states
that Dan and Loma Goce and Nelly Agustin are neither licensed nor authorized to recruit
workers for overseas employment. 23 Appellant does not dispute this. As a matter of fact
her counsel agreed to stipulate that she was neither licensed nor authorized to recruit
applicants for overseas employment. Appellant, however, denies that she was in any
way guilty of illegal recruitment. 24
It is appellant's defensive theory that all she did was to introduce complainants to the
Goce spouses. Being a neighbor of said couple, and owing to the fact that her son's
overseas job application was processed and facilitated by them, the complainants asked
her to introduce them to said spouses. Allegedly out of the goodness of her heart, she
complied with their request. Such an act, appellant argues, does not fall within the
meaning of "referral" under the Labor Code to make her liable for illegal recruitment.
Under said Code, recruitment and placement refers to any act of canvassing, enlisting,
contracting, transporting, utilizing, hiring or procuring workers, and includes referrals,
contract services, promising or advertising for employment, locally or abroad, whether
for profit or not; provided, that any person or entity which, in any manner, offers or
promises for a fee employment to two or more persons shall be deemed engaged in
recruitment and placement. 25 On the other hand, referral is the act of passing along or
forwarding of an applicant for employment after an initial interview of a selected
applicant for employment to a selected employer, placement officer or bureau. 26
Hence, the inevitable query is whether or not appellant Agustin merely introduced
complainants to the Goce couple or her actions went beyond that. The testimonial
evidence hereon show that she indeed further committed acts constitutive of illegal
recruitment. All four prosecution witnesses testified that it was Agustin whom they

initially approached regarding their plans of working overseas. It was from her that they
learned about the fees they had to pay, as well as the papers that they had to submit. It
was after they had talked to her that they met the accused spouses who owned the
placement agency.
As correctly held by the trial court, being an employee of the Goces, it was therefore
logical for appellant to introduce the applicants to said spouses, they being the owners
of the agency. As such, appellant was actually making referrals to the agency of which
she was a part. She was therefore engaging in recruitment activity. 27
Despite Agustin's pretensions that she was but a neighbor of the Goce couple, the
testimonies of the prosecution witnesses paint a different picture. Rogelio Salado and
Dionisio Masaya testified that appellant represented herself as the manager of the
Clover Placement Agency. Ramona Salado was offered a job as a cutter/sewer by Agustin
the first time they met, while Ernesto Alvarez remembered that when he first met
Agustin, the latter represented herself as "nagpapaalis papunta sa Oman." 28 Indeed,
Agustin played a pivotal role in the operations of the recruitment agency, working
together with the Goce couple.
There is illegal recruitment when one gives the impression of having the ability to send a
worker abroad." 29 It is undisputed that appellant gave complainants the distinct
impression that she had the power or ability to send people abroad for work such that
the latter were convinced to give her the money she demanded in order to be so
employed. 30
It cannot be denied that Agustin received from complainants various sums for purpose of
their applications. Her act of collecting from each of the complainants payment for their
respective passports, training fees, placement fees, medical tests and other sundry
expenses unquestionably constitutes an act of recruitment within the meaning of the
law. In fact, appellant demanded and received from complainants amounts beyond the
allowable limit of P5,000.00 under government regulations. It is true that the mere act of
a cashier in receiving money far exceeding the amount allowed by law was not
considered per se as "recruitment and placement" in contemplation of law, but that was
because the recipient had no other participation in the transactions and did not conspire
with her co-accused in defrauding the victims. 31 That is not the case here.
Appellant further argues that "there is no evidence of receipts of collections/payments
from complainants to appellant." On the contrary, xerox copies of said receipts/vouchers
were presented by the prosecution. For instance, a cash voucher marked as Exhibit D, 32
showing the receipt of P10,000.00 for placement fee and duly signed by appellant, was
presented by the prosecution. Another receipt, identified as Exhibit E, 33 was issued and
signed by appellant on February 5, 1987 to acknowledge receipt of P4,000.00 from
Rogelio and Ramona Salado for "processing of documents for Oman." Still another
receipt dated March 10, 1987 and presented in evidence as Exhibit F, shows that
appellant received from Ernesto Alvarez P2,000.00 for "processing of documents for
Oman." 34
Apparently, the original copies of said receipts/vouchers were lost, hence only xerox
copies thereof were presented and which, under the circumstances, were admissible in
evidence. When the original writing has been lost or destroyed or cannot be produced in
court, upon proof of its execution and loss or destruction, or unavailability, its contents
may be proved by a copy or a recital of its contents in some authentic document, or by
the recollection of witnesses. 35
Even assuming arguendo that the xerox copies presented by the prosecution as
secondary evidence are not allowable in court, still the absence thereof does not warrant
the acquittal of appellant. In People vs. Comia, 36 where this particular issue was

involved, the Court held that the complainants' failure to ask for receipts for the fees
they paid to the accused therein, as well as their consequent failure to present receipts
before the trial court as proof of the said payments, is not fatal to their case. The
complainants duly proved by their respective testimonies that said accused was involved
in the entire recruitment process. Their testimonies in this regard, being clear and
positive, were declared sufficient to establish that factum probandum.
Indeed, the trial court was justified and correct in accepting the version of the
prosecution witnesses, their statements being positive and affirmative in nature. This is
more worthy of credit than the mere uncorroborated and self-serving denials of
appellant. The lame defense consisting of such bare denials by appellant cannot
overcome the evidence presented by the prosecution proving her guilt beyond
reasonable doubt. 37
The presence of documentary evidence notwithstanding, this case essentially involves
the credibility of witnesses which is best left to the judgment of the trial court, in the
absence of abuse of discretion therein. The findings of fact of a trial court, arrived at only
after a hearing and evaluation of what can usually be expected to be conflicting
testimonies of witnesses, certainly deserve respect by an appellate court. 38 Generally,
the findings of fact of the trial court on the matter of credibility of witnesses will not be
disturbed on appeal. 39
In a last-ditch effort to exculpate herself from conviction, appellant argues that there is
no proof of conspiracy between her and the Goce couple as to make her liable for illegal
recruitment. We do not agree. The evidence presented by the prosecution clearly
establish that appellant confabulated with the Goces in their plan to deceive the
complainants. Although said accused couple have not been tried and convicted,
nonetheless there is sufficient basis for appellant's conviction as discussed above.
In People vs. Sendon, 40 we held that the non-prosecution of another suspect therein
provided no ground for the appellant concerned to fault the decision of the trial court
convicting her. The prosecution of other persons, equally or more culpable than herein
appellant, may come later after their true identities and addresses shall have been
ascertained and said malefactors duly taken into custody. We see no reason why the
same doctrinal rule and course of procedure should not apply in this case.
WHEREFORE, the appealed judgment of the court a quo is hereby AFFIRMED in toto, with
costs against accused-appellant Nelly D. Agustin.
SO ORDERED.

G.R. No. 110524

July 29, 2002
DOUGLAS MILLARES and ROGELIO LAGDA, petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION, TRANS-GLOBAL MARITIME AGENCY,
INC. and ESSO INTERNATIONAL SHIPPING CO., LTD. respondents.
RESOLUTION
KAPUNAN, J.:
On March 14, 2000, the Court promulgated its decision in the above-entitled case, ruling
in favor of the petitioners. The dispositive portion reads, as follows:
WHEREFORE, premises considered, the assailed Decision, dated June 1, 1993, of
the National Labor Relations Commission is hereby REVERSED and SET ASIDE
and a new judgment is hereby rendered ordering the private respondents to:
(1) Reinstate petitioners Millares and Lagda to their former positions without loss
of seniority rights, and to pay full backwages computed from the time of illegal
dismissal to the time of actual reinstatement;
(2) Alternatively, if reinstatement is not possible, pay petitioners Millares and
Lagda separation pay equivalent to one month's salary for every year of service;
and,
(3) Jointly and severally pay petitioners One Hundred Percent (100%) of their total
credited contributions as provided under the Consecutive Enlistment Incentive
Plan.
SO ORDERED.1
A motion for reconsideration was consequently filed 2 by the private respondents to which
petitioners filed an Opposition thereto. 3
In a Minute Resolution dated June 28, 2000, the Court resolved to deny the motion for
reconsideration with finality.4
Subsequently, the Filipino Association for Mariners Employment, Inc. (FAME) filed a
Motion for Leave to Intervene and to Admit a Motion for Reconsideration in Intervention.
Private respondents, meanwhile, also filed a Motion for Leave to File a Second Motion for
Reconsideration of our decision.
In both motions, the private respondents and FAME respectively pray in the main that
the Court reconsider its ruling that "Filipino seafarers are considered regular employees
within the context of Article 280 of the Labor Code." They claim that the decision may
establish a precedent that will adversely affect the maritime industry.

The Court resolved to set the case for oral arguments to enable the parties to present
their sides.
To recall, the facts of the case are, as follows:
Petitioner Douglas Millares was employed by private respondent ESSO
International Shipping Company LTD. (Esso International, for brevity) through its
local manning agency, private respondent Trans-Global Maritime Agency, Inc.
(Trans-Global, for brevity) on November 16, 1968 as a machinist. In 1975, he was
promoted as Chief Engineer which position he occupied until he opted to retire in
1989. He was then receiving a monthly salary of US $1,939.00.
On June 13, 1989, petitioner Millares applied for a leave of absence for the period
July 9 to August 7, 1989. In a letter dated June 14, 1989, Michael J. Estaniel,
President of private respondent Trans-Global, approved the request for leave of
absence. On June 21, 1989, petitioner Millares wrote G.S. Hanly, Operations
Manager of Exxon International Co., (now Esso International) through Michael J.
Estaniel, informing him of his intention to avail of the optional retirement plan
under the Consecutive Enlistment Incentive Plan (CEIP) considering that he had
already rendered more than twenty (20) years of continuous service. On July 13,
1989 respondent Esso International, through W.J. Vrints, Employee Relations
Manager, denied petitioner Millares' request for optional retirement on the
following grounds, to wit: (1) he was employed on a contractual basis; (2) his
contract of enlistment (COE) did not provide for retirement before the age of sixty
(60) years; and (3) he did not comply with the requirement for claiming benefits
under the CEIP, i.e., to submit a written advice to the company of his intention to
terminate his employment within thirty (30) days from his last disembarkation
date.
On August 9, 1989, petitioner Millares requested for an extension of his leave of
absence from August 9 to 24, 1989. On August 19, 1989, Roy C. Palomar, Crewing
Manager, Ship Group A, Trans-global, wrote petitioner Millares advising him that
respondent Esso International "has corrected the deficiency in its manpower
requirement specifically in the Chief Engineer rank by promoting a First Assistant
Engineer to this position as a result of (his) previous leave of absence which
expired last August 8, 1989. The adjustment in said rank was required in order to
meet manpower schedules as a result of (his) inability."
On September 26, 1989, respondent Esso International, through H. Regenboog,
Personnel Administrator, advised petitioner Millares that in view of his absence
without leave, which is equivalent to abandonment of his position, he had been
dropped from the roster of crew members effective September 1, 1989.
On the other hand, petitioner Lagda was employed by private respondent Esso
International as wiper/oiler in June 1969. He was promoted as Chief Engineer in
1980, a position he continued to occupy until his last COE expired on April 10,
1989. He was then receiving a monthly salary of US$1,939.00.
On May 16, 1989, petitioner Lagda applied for a leave of absence from June 19,
1989 up to the whole month of August 1989. On June 14, 1989, respondent TransGlobal's President, Michael J. Estaniel, approved petitioner Lagda's leave of
absence from June 22, 1989 to July 20, 1989 and advised him to report for reassignment on July 21, 1989.
On June 26, 1989, petitioner Lagda wrote a letter to G.S. Stanley, Operations
Manager of respondent Esso International, through respondent Trans-Global's
President Michael J. Estaniel, informing him of his intention to avail of the optional
early retirement plan in view of his twenty (20) years continuous service in the
complaint.

On July 13, 1989, respondent Trans-global denied petitioner Lagda's request for
availment of the optional early retirement scheme on the same grounds upon
which petitioner Millares request was denied.
On August 3, 1989, he requested for an extension of his leave of absence up to
August 26, 1989 and the same was approved. However, on September 27, 1989,
respondent Esso International, through H. Regenboog, Personnel Administrator,
advised petitioner Lagda that in view of his "unavailability for contractual sea
service," he had been dropped from the roster of crew members effective
September 1, 1989.
On October 5, 1989, petitioners Millares and Lagda filed a complaint-affidavit,
docketed as POEA (M) 89-10-9671, for illegal dismissal and non-payment of
employee benefits against private respondents Esso International and TransGlobal, before the POEA.5
On July 17, 1991, the POEA rendered a decision dismissing the complaint for lack of
merit.
On appeal to the NLRC, the decision of the POEA was affirmed on June 1, 1993 with the
following disquisition:
The first issue must be decided in the negative. Complainants-appellants, as
seamen and overseas contract workers are not covered by the term "regular
employment" as defined under Article 280 of the Labor Code. The POEA, which is
tasked with protecting the rights of the Filipino workers for overseas employment
to fair and equitable recruitment and employment practices and to ensure their
welfare, prescribes a standard employment contract for seamen on board oceangoing vessels for a fixed period but in no case to exceed twelve (12) months (Part
1, Sec. C). This POEA policy appears to be in consonance with the international
maritime practice. Moreover, the Supreme Court in Brent School, Inc. vs. Zamora,
181 SCRA 702, had held that a fixed term is essential and natural appurtenance of
overseas employment contracts to which the concept of regular employment with
all that it implies is not applicable, Article 280 of the Labor Code notwithstanding.
There is, therefore, no reason to disturb the POEA Administrator's finding that
complainants-appellants were hired on a contractual basis and for a definite
period. Their employment is thus governed by the contracts they sign each time
they are re-hired and is terminated at the expiration of the contract period. 6
Undaunted, the petitioners elevated their case to this Court 7 and successfully obtained
the favorable action, which is now vehemently being assailed.
At the hearing on November 15, 2000, the Court defined the issues for resolution in this
case, namely:
I. ARE PETITIONERS REGULAR OR CONTRACTUAL EMPLOYEES WHOSE
EMPLOYMENTS ARE TERMINATED EVERYTIME THEIR CONTRACTS OF EMPLOYMENT
EXPIRE?
II. ASSUMING THAT PETITIONERS ARE REGULAR EMPLOYEES, WERE THEY
DISMISSED WITHOUT JUST CAUSE SO AS TO BE ENTITLED TO REINSTATEMENT AND
BACKWAGES, INCLUDING PAYMENT OF 100% OF THEIR TOTAL CREDITED
CONTRIBUTIONS TO THE CONSECUTIVE ENLISTMENT INCENTIVE PLAN (CEIP)?
III. DOES THE PROVISION OF THE POEA STANDARD CONTRACT FOR SEAFARERS ON
BOARD FOREIGN VESSELS (SEC. C., DURATION OF CONTRACT) PRECLUDE THE
ATTAINMENT BY SEAMEN OF THE STATUS OF REGULAR EMPLOYEES?

IV. DOES THE DECISION OF THE COURT IN G.R. NO. 110524 CONTRAVENE
INTERNATIONAL MARITIME LAW, ALLEGEDLY PART OF THE LAW OF THE LAND
UNDER SECTION 2, ARTICLE II OF THE CONSTITUTION?
V. DOES THE SAME DECISION OF THE COURT CONSTITUTE A DEPARTURE FROM ITS
RULING IN COYOCA VS. NLRC (G.R. NO. 113658, March 31, 1995)?8
In answer to the private respondents' Second Motion for Reconsideration and to FAME's
Motion for Reconsideration in Intervention, petitioners maintain that they are regular
employees as found by the Court in the March 14, 2000 Decision. Considering that
petitioners performed activities which are usually necessary or desirable in the usual
business or trade of private respondents, they should be considered as regular
employees pursuant to Article 280, Par. 1 of the Labor Code. 9 Other justifications for this
ruling include the fact that petitioners have rendered over twenty (20) years of service,
as admitted by the private respondents; 10 that they were recipients of Merit Pay which is
an express acknowledgment by the private respondents that petitioners are regular and
not just contractual employees;11 that petitioners were registered under the Social
Security System (SSS).
The petitioners further state that the case of Coyoca v. NLRC12 which the private
respondents invoke is not applicable to the case at bar as the factual milieu in that case
is not the same. Furthermore, private respondents' fear that our judicial pronouncement
will spell the death of the manning industry is far from real. Instead, with the valuable
contribution of the manning industry to our economy, these seafarers are supposed to
be considered as "Heroes of the Republic" whose rights must be protected. 13 Finally, the
first motion for reconsideration has already been denied with finality by this Court and it
is about time that the Court should write finis to this case.
The private respondents, on the other hand, contend that: (a) the ruling holding
petitioners as regular employees was not in accord with the decision in Coyoca v. NLRC,
243 SCRA 190; (b) Art. 280 is not applicable as what applies is the POEA Rules and
Regulations Governing Overseas Employment; (c) seafarers are not regular employees
based on international maritime practice; (d) grave consequences would result on the
future of seafarers and manning agencies if the ruling is not reconsidered; (e) there was
no dismissal committed; (f) a dismissed seafarer is not entitled to back wages and
reinstatement, that being not allowed under the POEA rules and the Migrant Workers Act;
and, (g) petitioners are not entitled to claim the total amount credited to their account
under the CEIP.14
Meanwhile, Intervenor Filipino Association of Mariners Employment (FAME) avers that our
decision, if not reconsidered, will have negative consequences in the employment of
Filipino Seafarers overseas which, in turn, might lead to the demise of the manning
industry in the Philippines. As intervenor FAME puts it:
xxx
7.1 Foreign principals will start looking for alternative sources for seafarers to man
their ships. AS reported by the BIMCO/ISF study, "there is an expectancy that
there will be an increasing demand for (and supply of) Chinese seafarers, with
some commentators suggesting that this may be a long-term alternative to the
Philippines." Moreover, "the political changes within the former Eastern Bloc have
made new sources of supply available to the international market." Intervenor's
recent survey among its members shows that 50 Philippine manning companies
had already lost some 6,300 slots to other Asian, East Europe and Chinese
competition for the last two years;
7.2 The Philippine stands to lose an annual foreign income estimated at U.S.
DOLLARS TWO HUNDRED SEVENTY FOUR MILLION FIVE HUNDRED FORTY NINE
THOUSAND (US$ 274,549,000.00) from the manning industry and another US
DOLLARS FOUR BILLION SIX HUNDRED FIFTY MILLION SEVEN HUNDRED SIX
THOUSAND (US$ 4,650,760,000.00) from the land-based sector if seafarers and
equally situated land-based contract workers will be declared regular employees;

7.3 Some 195,917 (as of 1998) deployed overseas Filipino seafarers will be
rendered jobless should we lose the market;
7.4 Some 360 manning agencies (as of 30 June 2000) whose principals may no
longer be doing business with them will close their shops;
7.5 The contribution to the Overseas Worker's Welfare Administration by the
sector, which is USD 25.00 per contract and translates to US DOLLARS FOUR
MILLION (US$ 4,000,000.00)annually, will be drastically reduced. This is not to
mention the processing fees paid to POEA, Philippine Regulatory Commission
(PRC), Department of Foreign Affairs (DFA) and Maritime Industry Authority
(MARINA) for the documentation of these seafarers;
7.6 Worst, some 195,917 (as of 1998) families will suffer socially and
economically, as their breadwinners will be rendered jobless; and
7.7 It will considerably slow down the government's program of employment
generation, considering that, as expected foreign employers will now avoid hiring
Filipino overseas contract workers as they will become regular employees with all
its concomitant effects.15
Significantly, the Office of the Solicitor General, in a departure from its original position
in this case, has now taken the opposite view. It has expressed its apprehension in
sustaining our decision and has called for a re-examination of our ruling. 16
Considering all the arguments presented by the private respondents, the Intervenor
FAME and the OSG, we agree that there is a need to reconsider our position with respect
to the status of seafarers which we considered as regular employees under Article 280 of
the Labor Code. We, therefore, partially grant the second motion for reconsideration.
In Brent School Inc. v. Zamora,17 the Supreme Court stated that Article 280 of the Labor
Code does not apply to overseas employment.
In the light of the foregoing description of the development of the provisions of the
Labor Code bearing on term or fixed-period employment that the question posed
in the opening paragraph of this opinion should now be addressed. Is it then the
legislative intention to outlaw stipulations in employment contracts laying down a
definite period therefor? Are such stipulations in essence contrary to public policy
and should not on this account be accorded legitimacy?
On the other hand, there is the gradual and progressive elimination of references
to term or fixed-period employment in the Labor Code, and the specific statement
of the rule that:
Regular and Casual Employment The provisions of written agreement to
the contrary notwithstanding and regardless of the oral agreement of the
parties, an employment shall be deemed to be regular where the employee
has been engaged to perform activities which are usually necessary or
desirable in the usual business or trade of the employer except where the
employment has been fixed for a specific project or undertaking the
completion or termination of which has been determined at the time of the
engagement of the employee or where the work or service to be employee
is seasonal in nature and the employment is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph; provided that, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which
he is employed and his employment shall continue while such actually
exists.
There is, on the other hand, the Civil Code, which has always recognized, and
continues to recognize, the validity and propriety of contracts and obligations with

a fixed or definite period, and imposes no restraints on the freedom of the parties
to fix the duration of a contract, whatever its object, be it specific, goods or
services, except the general admonition against stipulations contrary to law,
morals, good customs, public order or public policy. Under the Civil code,
therefore, and as a general proposition, fixed-term employment contracts are not
limited, as they are under the present Labor Code, to those by natural seasonal or
for specific projects with predetermined dates of completion; they also include
those to which the parties by free choice have assigned a specific date of
termination.
Some familiar examples may be cited of employment contract which may
be neither for seasonal work nor for specific projects, but to which a
fixed term is an essential and natural appurtenance: overseas
employment contracts, for one, to which, whatever the nature of the
engagement, the concept of regular employment with all that it implies
does not appear ever to have been applied. Article 280 of the Labor Code
notwithstanding also appointments to the positions of dean, assistant dean,
college secretary, principal, and other administrative offices in educational
institutions, which are by practice or tradition rotated among the faculty
members, and where fixed terms are a necessity without which no reasonable
rotation would be possible. Similarly, despite the provisions of Article 280, Policy
Instructions. No. 8 of the Minister of Labor implicitly recognize that certain
company officials may be elected for what would amount to fix periods, at the
expiration of which they would have to stand down, in providing that these
officials, xxx may lose their jobs as president, executive vice-president or vicepresident, etc. because the stockholders or the board of directors for one reason
or another did not reelect them.
There can of course be no quarrel with the proposition that where from the
circumstances it is apparent that periods have been imposed to preclude
acquisition of tenurial security by the employee, they should be struck down or
disregard as contrary to public policy, morals, etc. But where no such intent to
circumvent the law is shown, or stated otherwise, where the reason for the law
does not exists, e.g., where it is indeed the employee himself who insists upon a
period or where the nature of the engagement is such that, without being
seasonal or for a specific project, a definite date of termination is a sine qua non,
would an agreement fixing a period be essentially evil or illicit, therefore
anathema? Would such an agreement come within the scope of Article 280 which
admittedly was enacted "to prevent the circumvention of the right of the
employee to be secured in xxx his employment
As it is evident from even only the three examples already given that Article 280
of the Labor Code, under a narrow and literal interpretation, not only fails to
exhaust the gamut of employment contracts to which the lack of a fixed period
would be an anomaly, but would also appear to restrict, without reasonable
distinctions, the right of an employee to freely stipulate within his employer the
duration of his engagement, it logically follows that such a literal interpretation
should be eschewed or avoided. The law must be given a reasonable
interpretation, to preclude absurdity in its application. Outlawing the whole
concept of term employment and subverting to boot the principle of freedom of
contract to remedy the evil of employer's using it as a means to prevent their
employees from obtaining security of tenure is like cutting off the nose to spite the
face or, more relevantly, curing a headache by lopping of the head.
It is a salutary principle in statutory construction that there exists a valid
presumption that undesirable consequences were never intended by a
legislative measure, and that a construction of which the statute is fairly

susceptible is favored, which will avoid all objectionable, mischievous,

indefensible, wrongful, evil, and injurious consequences."
Nothing is better settled than that courts are not to give words a meaning
which would lead to absurd or unreasonable consequences. That is a
principle that goes back to In re Allen decided on October 27, 1902, where it
was held that a literal interpretation is to be rejected if it would be unjust or
lead to absurd results. That is a strong argument against its adoption. The
words of Justice Laurel are particularly apt. Thus: "the appellants would lead
to an absurdity is another argument for rejecting it."
xxx We have, here, then a case where the true intent of the law is clear that
calls for the application of the cardinal rule of statutory construction that
such intent of spirit must prevail over the letter thereof, for whatever is
within the spirit of a statute is within the statute, since adherence to the
letter would result in absurdity, injustice and contradictions and would
defeat the plain and vital purpose of the statute.
Accordingly, and since the entire purpose behind the development of
legislation culminating in the present Article 280 of the Labor code
clearly appears to have been, as already observed, to prevent
circumvention of the employee's right to be secure in his tenure, the
clause in said article indiscriminately and completely ruling out all
written or oral agreements conflicting with the concept of regular
employment as defined therein should be construed to refer to the
substantive evil that the Code itself has singled out; agreements entered
into precisely to circumvent security of tenure. It should have no
application to instances where a fixed period of employment was agreed
upon knowingly and voluntarily by the parties, without any force, duress
or improper pressure being brought to bear upon the employee and
absent any other circumstances vitiating his consent, or where it
satisfactorily appears that the employer and employee dealt with each
other on more or less equal terms with no moral dominance whatever
being exercised by the former over the latter. Unless thus limited in its
purview, the law would be made to apply to purposes other than those explicitly
stated by its framers; it thus becomes pointless and arbitrary, unjust in its effects
and apt to lead to absurd and unintended consequences.
Again, in Pablo Coyoca v. NLRC,18 the Court also held that a seafarer is not a regular
employee and is not entitled to separation pay. His employment is governed by the POEA
Standard Employment Contract for Filipino Seamen.
x x x. In this connection, it is important to note that neither does the POEA
standard employment contract for Filipino seamen provide for such benefits.
As a Filipino seaman, petitioner is governed by the Rules and
Regulations Governing Overseas Employment and the said Rules do not
provide for separation or termination pay. What is embodied in petitioner's
contract is the payment of compensation arising from permanent partial disability
during the period of employment. We find that private respondent complied with
the terms of contract when it paid petitioner P42,315.00 which, in our opinion, is a
reasonable amount, as compensation for his illness.
Lastly, petitioner claims that he eventually became a regular employee of private
respondent and thus falls within the purview of Articles 284 and 95 of the Labor
Code. In support of this contention, petitioner cites the case of Worth Shipping
Service, Inc., et al. v. NLRC, et al., wherein we held that the crew members of the

shipping company had attained regular status and thus, were entitled to
separation pay. However, the facts of said case differ from the present. In Worth,
we held that the principal and agent had "operational control and management"
over the MV Orient Carrier and thus, were the actual employers of their crew
members.
From the foregoing cases, it is clear that seafarers are considered contractual
employees. They can not be considered as regular employees under Article 280 of the
Labor Code. Their employment is governed by the contracts they sign everytime they
are rehired and their employment is terminated when the contract expires. Their
employment is contractually fixed for a certain period of time. They fall under the
exception of Article 280 whose employment has been fixed for a specific project or
undertaking the completion or termination of which has been determined at the time of
engagement of the employee or where the work or services to be performed is seasonal
in nature and the employment is for the duration of the season. 19 We need not depart
from the rulings of the Court in the two aforementioned cases which indeed constitute
stare decisis with respect to the employment status of seafarers.
Petitioners insist that they should be considered regular employees, since they have
rendered services which are usually necessary and desirable to the business of their
employer, and that they have rendered more than twenty(20) years of service. While this
may be true, the Brent case has, however, held that there are certain forms of
employment which also require the performance of usual and desirable functions and
which exceed one year but do not necessarily attain regular employment status under
Article 280.20 Overseas workers including seafarers fall under this type of employment
which are governed by the mutual agreements of the parties.
In this jurisdiction and as clearly stated in the Coyoca case, Filipino seamen are governed
by the Rules and Regulations of the POEA. The Standard Employment Contract governing
the employment of All Filipino seamen on Board Ocean-Going Vessels of the POEA,
particularly in Part I, Sec. C specifically provides that the contract of seamen shall be for
a fixed period. And in no case should the contract of seamen be longer than 12 months.
It reads:
Section C. Duration of Contract
The period of employment shall be for a fixed period but in no case to exceed 12
months and shall be stated in the Crew Contract. Any extension of the Contract
period shall be subject to the mutual consent of the parties.
Moreover, it is an accepted maritime industry practice that employment of seafarers are
for a fixed period only. Constrained by the nature of their employment which is quite
peculiar and unique in itself, it is for the mutual interest of both the seafarer and the
employer why the employment status must be contractual only or for a certain period of
time. Seafarers spend most of their time at sea and understandably, they can not stay
for a long and an indefinite period of time at sea. 21 Limited access to shore society
during the employment will have an adverse impact on the seafarer. The national,
cultural and lingual diversity among the crew during the COE is a reality that
necessitates the limitation of its period.22
Petitioners make much of the fact that they have been continually re-hired or their
contracts renewed before the contracts expired (which has admittedly been going on for
twenty (20) years). By such circumstance they claim to have acquired regular status with
all the rights and benefits appurtenant to it.
Such contention is untenable. Undeniably, this circumstance of continuous re-hiring was
dictated by practical considerations that experienced crew members are more preferred.
Petitioners were only given priority or preference because of their experience and
qualifications but this does not detract the fact that herein petitioners are contractual

employees. They can not be considered regular employees. We quote with favor the
explanation of the NLRC in this wise:
xxx The reference to "permanent" and "probationary" masters and employees in
these papers is a misnomer and does not alter the fact that the contracts for
enlistment between complainants-appellants and respondent-appellee Esso
International were for a definite periods of time, ranging from 8 to 12 months.
Although the use of the terms "permanent" and "probationary" is unfortunate,
what is really meant is "eligible for-re-hire". This is the only logical conclusion
possible because the parties cannot and should not violate POEA's requirement
that a contract of enlistment shall be for a limited period only; not exceeding
twelve (12)months.23
From all the foregoing, we hereby state that petitioners are not considered regular or
permanent employees under Article 280 of the Labor Code. Petitioners' employment
have automatically ceased upon the expiration of their contracts of enlistment (COE).
Since there was no dismissal to speak of, it follows that petitioners are not entitled to
reinstatement or payment of separation pay or backwages, as provided by law.
With respect to the benefits under the Consecutive Enlistment Incentive Plan (CEIP), we
hold that the petitioners are still entitled to receive 100% of the total amount credited to
him under the CEIP. Considering that we have declared that petitioners are contractual
employees, their compensation and benefits are covered by the contracts they signed
and the CEIP is part and parcel of the contract.
The CEIP was formulated to entice seamen to stay long in the company. As the name
implies, the program serves as an incentive for the employees to renew their contracts
with the same company for as long as their services were needed. For those who
remained loyal to them, they were duly rewarded with this additional remuneration
under the CEIP, if eligible. While this is an act of benevolence on the part of the
employer, it can not, however, be denied that this is part of the benefits accorded to the
employees for services rendered. Such right to the benefits is vested upon them upon
their eligibility to the program.
The CEIP provides that an employee becomes covered under the Plan when he
completes thirty-six (36) months or an equivalent of three (3) years of credited service
with respect to employment after June 30, 1973. 24 Upon eligibility, an amount shall be
credited to his account as it provides, among others:
III. Distribution of Benefits
A. Retirement, Death and Disability
When the employment of an employee terminates because of his retirement,
death or permanent and total disability, a percentage of the total amount credited
to his account will be distributed to him (or his eligible survivor(s) in accordance
with the following:
Reason for Termination

Percentage

a) Attainment of mandatory retirement 100%

age of 60.
b) Permanent and total disability, while 100%
under contract, that is not due to
accident or misconduct.
c) Permanent and total disability, while 100%
under contract, that is due to accident,
and not due to misconduct.
xxx

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

50%

48 "

75%

60 "

100%

When the employment of an employee is terminated due to his poor-performance,

misconduct, unavailability, etc., or if employee is not offered re-engagement for
similar reasons, no distribution of any portion of employee's account will ever be
made to him (or his eligible survivor[s]).
It must be recalled that on June 21, 1989, Millares wrote a letter to his employer
informing his intention to avail of the optional retirement plan under the CEIP considering
that he has rendered more than twenty (20) years of continuous service. Lagda, likewise,
manifested the same intention in a letter dated June 26, 1989. Private respondent,
however, denied their requests for benefits under the CEIP since: (1) the contract of
enlistment (COE) did not provide for retirement before 60 years of age; and that (2)
petitioners failed to submit a written notice of their intention to terminate their
employment within thirty (30) days from the last disembarkation date pursuant to the
provision on Voluntary Termination of the CEIP. Petitioners were eventually dropped from
the roster of crew members and on grounds of "abandonment" and "unavailability for
contractual sea service", respectively, they were disqualified from receiving any benefits
under the CEIP.25
In our March 14, 2000 Decision, we, however, found that petitioners Millares and Lagda
were not guilty of "abandonment" or "unavailability for contractual sea service," as we
have stated:
The absence of petitioners was justified by the fact that they secured the approval
of private respondents to take a leave of absence after the termination of their
last contracts of enlistment. Subsequently, petitioners sought for extensions of
their respective leaves of absence. Granting arguendo that their subsequent
requests for extensions were not approved, it cannot be said that petitioners were
unavailable or had abandoned their work when they failed to report back for
assignment as they were still questioning the denial of private respondents of
their desire to avail of the optional early retirement policy, which they believed in
good faith to exist.26
Neither can we consider petitioners guilty of poor performance or misconduct since they
were recipients of Merit Pay Awards for their exemplary performances in the company.

Anent the letters dated June 21, 1989 (for Millares) and June 26, 1989 (for Lagda) which
private respondent considered as belated written notices of termination, we find such
assertion specious. Notwithstanding, we could conveniently consider the petitioners
eligible under Section III-B of the CEIP (Voluntary Termination), but this would, however,
award them only a measly amount of benefits which to our mind, the petitioners do not
rightfully deserve under the facts and circumstances of the case. As the CEIP provides:
III. Distribution of Benefits
E. Distribution of Accounts
When an employee terminates under conditions that would qualify for a
distribution of more than one specified in A, B or C above, the largest single
amount, only, will be distributed.
Since petitioners' termination of employment under the CEIP do not fall under Section IIIA (Retirement, Death and Disability) or Section III-B (Voluntary Termination), nor could
they be they be considered under the second paragraph of Section III-C, as earlier
discussed; it follows that their termination falls under the first paragraph of Section III-C
for which they are entitled to 100% of the total amount credited to their accounts. The
private respondents can not now renege on their commitment under the CEIP to reward
deserving and loyal employees as the petitioners in this case.
In taking cognizance of private respondent's Second Motion for Reconsideration, the
Court hereby suspends the rules to make them comformable to law and justice and to
subserve an overriding public interest.
IN VIEW OF THE FOREGOING, the Court Resolved to Partially GRANT Private
Respondent's Second Motion for Reconsideration and Intervenor FAMES' Motion for
Reconsideration in Intervention. The Decision of the National Labor Relations
Commission dated June 1, 1993 is hereby REINSTATED with MODIFICATION. The
Private Respondents, Trans-Global Maritime Agency, Inc. and Esso International Shipping
Co., Ltd. are hereby jointly and severally ORDERED to pay petitioners One Hundred
Percent (100%) of their total credited contributions as provided under the Consecutive
Enlistment Incentive Plan(CEIP).
SO ORDERED.

G.R. No. 127195

August 25, 1999
MARSAMAN MANNING AGENCY, INC. and DIAMANTIDES MARITIME, INC.,
petitioners,
vs.
NATIONAL LABOR RELATIONS COMMISSION and WILFREDO T. CAJERAS,
respondents.
BELLOSILLO, J.:
MARSAMAN MANNING AGENCY, INC. (MARSAMAN) and its foreign principal DIAMANTIDES
MARITIME, INC. (DIAMANTIDES) assail the Decision of public respondent National Labor
Relations Commission dated 16 September 1996 as well as its Resolution dated 12
November 1996 affirming the Labor Arbiter's decision finding them guilty of illegal
dismissal and ordering them to pay respondent Wilfredo T. Cajeras salaries
corresponding to the unexpired portion of his employment contract, plus attorney's fees.
Private respondent Wilfredo T. Cajeras was hired by petitioner MARSAMAN, the local
manning agent of petitioner DIAMANTIDES, as Chief Cook Steward on the MV Prigipos,
owned and operated by DIAMANTIDES, for a contract period of ten (10) months with a
monthly salary of US$600.00, evidenced by a contract between the parties dated 15
June 1995. Cajeras started work on 8 August 1995 but less than two (2) months later, or
on 28 September 1995, he was repatriated to the Philippines allegedly by "mutual
consent."
On 17 November 1995 private respondent Cajeras filed a complaint for illegal dismissal
against petitioners with the NLRC National Capital Region Arbitration Branch alleging that
he was dismissed illegally, denying that his repatriation was by mutual consent, and
asking for his unpaid wages, overtime pay, damages, and attorney's fees. 1 Cajeras
alleged that he was assigned not only as Chief Cook Steward but also as assistant cook
and messman in addition to performing various inventory and requisition jobs. Because
of his additional assignments he began to feel sick just a little over a month on the job
constraining him to request for medical attention. He was refused at first by Capt.
Kouvakas Alekos, master of the MV Prigipos, who just ordered him to continue working.
However a day after the ship's arrival at the port of Rotterdam, Holland, on 26
September 1995 Capt. Alekos relented and had him examined at the Medical Center for
Seamen. However, the examining physician, Dr. Wden Hoed, neither apprised private
respondent about the diagnosis nor issued the requested medical certificate allegedly
because he himself would forward the results to private respondent's superiors. Upon
returning to the vessel, private respondent was unceremoniously ordered to prepare for
immediate repatriation the following day as he was said to be suffering from a disease of
unknown origin.1wphi1.nt
On 28 September 1995 he was handed his Seaman's Service Record Book with the
following entry: "Cause of discharge Mutual Consent." 2 Private respondent promptly
objected to the entry but was not able to do anything more as he was immediately
ushered to a waiting taxi which transported him to the Amsterdam Airport for the return
flight to Manila. After his arrival in Manila on 29 September 1995. Cajeras complained to
MARSAMAN but to no avail.3
MARSAMAN and DIAMANTIDES, on the other hand, denied the imputation of illegal
dismissal. They alleged that Cajeras approached Capt. Alekos on 26 September 1995
and informed the latter that he could not sleep at night because he felt something

crawling over his body. Furthermore, Cajeras reportedly declared that he could no longer
perform his duties and requested for repatriation. The following paragraph in the vessel's
Deck Log was allegedly entered by Capt. Alekos, to wit:
Cajeras approached me and he told me that he cannot sleep at night and that he
feels something crawling on his body and he declared that he can no longer
perform his duties and he must be repatriated. 4
Private respondent was then sent to the Medical Center for Seamen at Rotterdam where
he was examined by Dr. Wden Hoed whose diagnosis appeared in a Medical Report as
"paranoia" and "other mental problems." 5 Consequently, upon Dr. Hoed's
recommendation, Cajeras was repatriated to the Philippines on 28 September 1995.
On 29 January 1996 Labor Arbiter Ernesto S. Dinopol resolved the dispute in favor of
private respondent Cajeras ruling that the latter's discharge from the MV Prigipos
allegedly by "mutual consent" was not proved by convincing evidence. The entry made
by Capt. Alekos in the Deck Log was dismissed as of little probative value because it was
a mere unilateral act unsupported by any document showing mutual consent of Capt.
Alekos, as master of the MV Prigipos, and Cajeras to the premature termination of the
overseas employment contract as required by Sec. H of the Standard Employment
Contract Governing the Employment of all Filipino Seamen on Board Ocean-Going
Vessels. Dr. Hoed's diagnosis that private respondent was suffering from "paranoia" and
"other mental problems" was likewise dismissed as being of little evidentiary value
because it was not supported by evidence on how the paranoia was contracted, in what
stage it was, and how it affected respondent's functions as Chief Cook Steward which, on
the contrary, was even rated "Very Good" in respondent's Service Record Book. Thus, the
Labor Arbiter disposed of the case as follows:
WHEREFORE, judgment is hereby rendered declaring the repatriation and
dismissal of complaint Wilfredo T. Cajeras as illegal and ordering respondents
Marsaman Manning Agency, Inc. and Diamantides Maritime, Inc. to jointly and
severally pay complainant the sum of USD 5,100.00 or its peso equivalent at the
time of payment plus USD 510.00 as 10% attorney's fees it appearing that
complainant had to engage the service of counsel to protect his interest in the
prosecution of this case.
The claims for nonpayment of wages and overtime pay are dismissed for having
been withdrawn (Minutes, December 18, 1995). The claims for damages are
likewise dismissed for lack of merit, since no evidence was presented to show that
bad faith characterized the dismissal. 6
Petitioners appealed to the NLRC. 7 On 16 September 1996 the NLRC affirmed the
appealed findings and conclusions of the Labor Arbiter. 8 The NLRC subscribed to the view
that Cajeras' repatriation by alleged mutual consent was not proved by petitioners,
especially after noting that private respondent did not actually sign his Seaman's Service
Record Book to signify his assent to the repatriation as alleged by petitioners. The entry
made by Capt. Alekos in the Deck Log was not considered reliable proof that private
respondent agreed to his repatriation because no opportunity was given the latter to
contest the entry which was against his interest. Similarly, the Medical Report issued by
Dr. Hoed of Holland was dismissed as being of dubious value since it contained only a
sweeping statement of the supposed ailment of Cajeras without any elaboration on the
factual basis thereof.
Petitioners' motion for reconsideration was denied by the NLRC in its Resolution dated 12
November 1996.9 Hence, this petition contending that the NLRC committed grave abuse
of discretion: (a) in not according full faith and credit to the official entry by Capt. Alekos
in the vessel's Deck Log conformably with the rulings in Haverton Shipping Ltd. v. NLRC
10
and Wallem Maritime Services, Inc. v. NLRC;11 (b) in not appreciating the Medical

Report issued by Dr. Wden Hoed as conclusive evidence that respondent Cajeras was
suffering from paranoia and other mental problems; (c) in affirming the award of
attorney's fees despite the fact that Cajeras' claim for exemplary damages was denied
for lack of merit; and, (d) in ordering a monetary award beyond the maximum of three
(3) months' salary for every year of service set by RA 8042.
We deny the petition. In the Contract of Employment 12 entered into with private
respondent, petitioners convenanted strict and faithful compliance with the terms and
conditions of the Standard Employment Contract approved by the POEA/DOLE 13 which
provides:
1. The employment of the seaman shall cease upon expiration of the contract
period indicated in the Crew Contract unless the Master and the Seaman, by
mutual consent, in writing agree to an early termination . . . . (emphasis our).
Clearly, under the foregoing, the employment of a Filipino seaman may be terminated
prior to the expiration of the stipulated period provided that the master and the seaman
(a) mutually consent thereto and (b) reduce their consent in writing.
In the instant case, petitioners do not deny the fact that they have fallen short of the
requirement. No document exists whereby Capt. Alekos and private respondent reduced
to writing their alleged "mutual consent" to the termination of their employment
contract. Instead, petitioners presented the vessel's Deck Log wherein an entry
unilaterally made by Capt. Alekos purported to show that private respondent himself
asked for his repatriation. However, the NLRC correctly dismissed its evidentiary value.
For one thing, it is a unilateral act which is vehemently denied by private respondent.
Secondly, the entry in no way satisfies the requirement of a bilateral documentation to
prove early termination of an overseas employment contract by mutual consent required
by the Standard Employment Contract. Hence, since the latter sets the minimum terms
and conditions of employment for the protection of Filipino seamen subject only to the
adoption of better terms and conditions over and above the minimum standards,14 the
NLRC could not be accused of grave abuse of discretion in not accepting any thing less.
However petitioners contend that the entry should be considered prima facie evidence
that respondent himself requested his repatriation conformably with the rulings in
Haverton Shipping Ltd. v. NLRC 15 and Abacast Shipping and Management Agency, Inc. v.
NLRC.16 Indeed, Haverton says that a vessel's log book is prima facie evidence of the
facts stated therein as they are official entries made by a person in the performance of a
duty required by law. However, this jurisprudential principle does not apply to win the
case for petitioners. In Wallem Maritime Services, Inc. v. NLRC 17 the Haverton ruling was
not given unqualified application because the log book presented therein was a mere
typewritten collation of excerpts from what could be the log book. 18 The Court reasoned
that since the log book was the only piece of evidence presented to prove just cause for
the termination of respondent therein, the log book had to be duly identified and
authenticated lest an injustice would result from a blind adoption of its contents which
were but prima facie evidence of the incidents stated therein.
In the instant case, the disputed entry in the Deck Log was neither authenticated nor
supported by credible evidence. Although petitioners claim that Cajeras signed his
Seaman's Service Record Book to signify his conformity to the repatriation, the NLRC
found the allegation to be actually untrue since no signature of private respondent
appeared in the Record Book.
Neither could the "Medical Report" prepared by Dr. Hoed be considered corroborative
and conclusive evidence that private respondent was suffering from "paranoia" and
"other mental problems," supposedly just causes for his repatriation. Firstly, absolutely
no evidence, not even an allegation, was offered to enlighten the NLRC or this Court as
to Dr. Hoed's qualifications to diagnose mental illnesses. It is a matter of judicial notice

that there are various specializations in medical science and that a general practitioner
is not competent to diagnose any and all kinds of illnesses and diseases. Hence, the
findings of doctors who are not proven experts are not binding on this Court. 19 Secondly,
the Medical Report prepared by Dr. Hoed contained only a general statement that private
respondent was suffering from "paranoia" and "other mental problems" without
providing the details on how the diagnosis was arrived at or in what stage the illness
was. If Dr. Hoed indeed competently examined private respondent then he would have
been able to discuss at length the circumstances and precedents of his diagnosis.
Petitioners cannot rely on the presumption of regularity in the performance of official
duties to make the Medical Report acceptable because the presumption applies only to
public officers from the highest to the lowest in the service of the Government,
departments, bureaus, offices, and/or its political subdivisions, 20 which Dr. Wden Hoed
was not shown to be. Furthermore, neither did petitioners prove that private respondent
was incompetent or continuously incapacitated for the duties for which he was employed
by reason of his alleged mental state. On the contrary his ability as Chief Cook Steward,
up to the very moment of his repatriation, was rated "Very Good" in his Seaman's
Service Record Book as correctly observed by public respondent.
Considering all the foregoing we cannot ascribe grave abuse of discretion on the part of
the NLRC in ruling that petitioners failed to prove just cause for the termination of
private respondent's overseas employment. Grave abuse of discretion is committed only
when the judgment is rendered in a capricious, whimsical, arbitrary or despotic manner,
which is not true in the present case. 21
With respect to attorney's fees, suffice it to say that in actions for recovery of wages or
where an employee was forced to litigate and thus incurred expenses to protect his
rights and interests, a maximum award of ten percent (10%) of the monetary award by
way of attorney's fees is legally and morally justifiable under Art. 111 of the Labor
Code,22 Sec. 8, Rule VIII, Book III of its Implementing Rules, 23 and par. 7, Art. 2208 24 of the
Civil Code.25 The case of Albenson Enterprises Corporation v. Court of Appeals26 cited by
petitioners in arguing against the award of attorney's fees is clearly not applicable, being
a civil action for damages which deals with only one of the eleven (11) instances when
attorney's fees could be recovered under Art. 2208 of the Civil Code.
Lastly, on the amount of salaries due private respondent, the rule has always been that
an illegally dismissed worker whose employment is for a fixed period is entitled to
payment of his salaries corresponding to the unexpired portion of his employment. 27
However on 15 July 1995, RA 8042 otherwise known as the "Migrant Workers and
Overseas Filipinos Act of 1995" took effect, Sec. 10 of which provides:
Sec. 10. In case of termination of overseas employment without just, valid or
authorized cause as defined by law or contract, the worker shall be entitled to the
full reimbursement of his placement fee with interest at twelve percent (12%) per
annum, plus his salaries for the unexpired portion of the employment contract or
for three (3) months for every year of the unexpired term whichever is less
(emphasis ours).
The Labor Arbiter, rationalizing that the aforesaid law did not apply since it became
effective only one (1) month after respondent's overseas employment contract was
entered into on 15 June 1995, simply awarded private respondent his salaries
corresponding to the unexpired portion of his employment contract, i.e., for 8.6 months.
The NLRC affirmed the award and the Office of the Solicitor General (OSG) fully agreed.
But petitioners now insist that Sec. 10, RA 8042 is applicable because although private
respondent's contract of employment was entered into before the law became effective
his alleged cause of action, i.e., his repatriation on 28 September 1995 without just, valid
or authorized cause, occurred when the law was already in effect. Petitioners' purpose in
so arguing is to invoke the law in justifying a lesser monetary award to private

respondent, i.e., salaries for three (3) months only pursuant to the last portion of Sec. 10
as opposed to the salaries for 8.6 months awarded by the Labor Arbiter and affirmed by
the NLRC.
We agree with petitioners that Sec. 10, RA 8042, applies in the case of private
respondent and to all overseas contract workers dismissed on or after its effectivity on
15 July 1995 in the same way that Sec. 34, 28 RA 6715,29 is made applicable to locally
employed workers dismissed on or after 21 March 1989. 30 However, we cannot subscribe
to the view that private respondent is entitled to three (3) months' salary only. A plain
reading of Sec. 10 clearly reveals that the choice of which amount to award an illegally
dismissed overseas contract worker, i.e., whether his salaries for the unexpired portion
of his employment contract or three (3) months' salary for every year of the unexpired
term, whichever is less, comes into play only when the employment contract concerned
has a term of at least one (1) year or more. This is evident from the words "for every
year of the unexpired term" which follows the words "salaries . . . for three months." To
follow petitioners' thinking that private respondent is entitled to three (3) months salary
only simply because it is the lesser amount is to completely disregard and overlook some
words used in the statute while giving effect to some. This is contrary to the wellestablished rule in legal hermeneutics that in interpreting a statute, care should be taken
that every part or word thereof be given effect 31 since the law-making body is presumed
to know the meaning of the words employed in the statue and to have used them
advisedly.32 Ut res magis valeat quam pereat.33
WHEREFORE, the questioned Decision and Resolution dated 16 September 1996 and 12
November 1996, respectively, of public respondent National Labor Relations Commission
are AFFIRMED. Petitioners MARSAMAN MANNING AGENCY, INC., and DIAMANTIDES
MARITIME, INC., are ordered, jointly and severally, to pay private respondent WILFREDO
T. CAJERAS his salaries for the unexpired portion of his employment contract or
USD$5,100.00, reimburse the latter's placement fee with twelve percent (12%) interest
per annum conformably with Sec. 10 of RA 8042, as well as attorney's fees of ten
percent (10%) of the total monetary award. Costs against petitioners.1wphi1.nt
SO ORDERED.

G.R. No. 167614

ANTONIO M. SERRANO, - versus GALLANT MARITIME SERVICES,
INC. and MARLOW NAVIGATION
CO., INC.,
DECISION
AUSTRIA-MARTINEZ, J.:
For decades, the toil of solitary migrants has helped lift entire families and
communities out of poverty. Their earnings have built houses, provided health
care, equipped schools and planted the seeds of businesses. They have woven
together the world by transmitting ideas and knowledge from country to country.
They have provided the dynamic human link between cultures, societies and
economies. Yet, only recently have we begun to understand not only how
much international migration impacts development, but how smart
public policies can magnify this effect.
United Nations Secretary-General Ban Ki-Moon
Global Forum on Migration and Development
Brussels, July 10, 200728[1]

28

For Antonio Serrano (petitioner), a Filipino seafarer, the last clause in the 5th paragraph of
Section 10, Republic Act (R.A.) No. 8042,29[2] to wit:
Sec. 10. Money Claims. - x x x In case of termination of overseas
employment without just, valid or authorized cause as defined by law or contract,
the workers shall be entitled to the full reimbursement of his placement fee with
interest of twelve percent (12%) per annum, plus his salaries for the unexpired
portion of his employment contract or for three (3) months for every year of
the unexpired term, whichever is less.
x x x x (Emphasis and underscoring supplied)
does not magnify the contributions of overseas Filipino workers (OFWs) to national development,
but exacerbates the hardships borne by them by unduly limiting their entitlement in case of
illegal dismissal to their lump-sum salary either for the unexpired portion of their employment
contract or for three months for every year of the unexpired term, whichever is less (subject
clause). Petitioner claims that the last clause violates the OFWs' constitutional rights in that it
impairs the terms of their contract, deprives them of equal protection and denies them due
process.
By way of Petition for Review under Rule 45 of the Rules of Court, petitioner assails the
December 8, 2004 Decision30[3] and April 1, 2005 Resolution31[4] of the Court of Appeals (CA),
which applied the subject clause, entreating this Court to declare the subject clause
unconstitutional.
Petitioner was hired by Gallant Maritime Services, Inc. and Marlow Navigation Co., Ltd.
(respondents) under a Philippine Overseas Employment Administration (POEA)-approved
Contract of Employment with the following terms and conditions:
Duration of contract
12 months
Position
Chief Officer
Basic monthly salary
US$1,400.00
Hours of work
48.0 hours per week
Overtime
US$700.00 per month
Vacation leave with pay
7.00 days per month32[5]
On March 19, 1998, the date of his departure, petitioner was constrained to accept a
downgraded employment contract for the position of Second Officer with a monthly salary of
US$1,000.00, upon the assurance and representation of respondents that he would be made
Chief Officer by the end of April 1998.33[6]
Respondents did not deliver on their promise to make petitioner Chief Officer.34[7] Hence,
petitioner refused to stay on as Second Officer and was repatriated to the Philippines on May 26,
1998.35[8]
Petitioner's employment contract was for a period of 12 months or from March 19, 1998
up to March 19, 1999, but at the time of his repatriation on May 26, 1998, he had served only two
(2) months and seven (7) days of his contract, leaving an unexpired portion of nine (9) months
and twenty-three (23) days.

29
30
31
32
33
34
35

Petitioner filed with the Labor Arbiter (LA) a Complaint36[9] against respondents for
constructive dismissal and for payment of his money claims in the total amount of US$26,442.73,
broken down as follows:
May 27/31, 1998 (5 days) incl. Leave pay
June 01/30, 1998
July 01/31, 1998
August 01/31, 1998
Sept. 01/30, 1998
Oct. 01/31, 1998
Nov. 01/30, 1998
Dec. 01/31, 1998
Jan. 01/31, 1999
Feb. 01/28, 1999
Mar. 1/19, 1999 (19 days) incl. leave pay

Amount adjusted to chief mate's salary

(March 19/31, 1998 to April 1/30, 1998)
+
TOTAL CLAIM

US$ 413.90
2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
2,590.00
1,640.00
------------------------------------------------------------------------------25,382.23
1,060.5037[10]
--------------------------------------------------------------------------------------------US$ 26,442.7338[11]

as well as moral and exemplary damages and attorney's fees.

The LA rendered a Decision dated July 15, 1999, declaring the dismissal of petitioner illegal
and awarding him monetary benefits, to wit:
WHEREFORE, premises considered, judgment is hereby rendered declaring
that the dismissal of the complainant (petitioner) by the respondents in the aboveentitled case was illegal and the respondents are hereby ordered to pay the
complainant [petitioner], jointly and severally, in Philippine Currency, based on the
rate of exchange prevailing at the time of payment, the amount of EIGHT
THOUSAND SEVEN HUNDRED SEVENTY U.S. DOLLARS (US $8,770.00),
representing the complainants salary for three (3) months of the
unexpired portion of the aforesaid contract of employment.
The respondents are likewise ordered to pay the complainant [petitioner],
jointly and severally, in Philippine Currency, based on the rate of exchange
prevailing at the time of payment, the amount of FORTY FIVE U.S. DOLLARS (US$
45.00),39[12] representing the complainants claim for a salary differential. In
addition, the respondents are hereby ordered to pay the complainant, jointly and
severally, in Philippine Currency, at the exchange rate prevailing at the time of
payment, the complainants (petitioner's) claim for attorneys fees equivalent to ten
percent (10%) of the total amount awarded to the aforesaid employee under this
Decision.
The claims of the complainant for moral and exemplary damages are
hereby DISMISSED for lack of merit.
All other claims are hereby DISMISSED.

36
37
38
39

SO ORDERED.40[13] (Emphasis supplied)

In awarding petitioner a lump-sum salary of US$8,770.00, the LA based his computation
on the salary period of three months only -- rather than the entire unexpired portion of nine
months and 23 days of petitioner's employment contract - applying the subject clause. However,
the LA applied the salary rate of US$2,590.00, consisting of petitioner's [b]asic salary,
US$1,400.00/month + US$700.00/month, fixed overtime pay, + US$490.00/month, vacation
leave pay = US$2,590.00/compensation per month.41[14]
Respondents appealed42[15] to the National Labor Relations Commission (NLRC) to
question the finding of the LA that petitioner was illegally dismissed.
Petitioner also appealed43[16] to the NLRC on the sole issue that the LA erred in not
applying the ruling of the Court in Triple Integrated Services, Inc. v. National Labor Relations
Commission44[17] that in case of illegal dismissal, OFWs are entitled to their salaries for the
unexpired portion of their contracts.45[18]
In a Decision dated June 15, 2000, the NLRC modified the LA Decision, to wit:
WHEREFORE, the Decision dated 15 July 1999 is MODIFIED. Respondents
are hereby ordered to pay complainant, jointly and severally, in Philippine currency,
at the prevailing rate of exchange at the time of payment the following:
1. Three (3) months salary
$1,400 x 3
2. Salary differential
US$4,245.00
3. 10% Attorneys fees
TOTAL

US$4,200.00
45.00
424.50
US$4,669.50

The other findings are affirmed.

SO ORDERED.46[19]
The NLRC corrected the LA's computation of the lump-sum salary awarded to petitioner by
reducing the applicable salary rate from US$2,590.00 to US$1,400.00 because R.A. No. 8042
does not provide for the award of overtime pay, which should be proven to have been actually
performed, and for vacation leave pay.47[20]
Petitioner filed a Motion for Partial Reconsideration, but this time he questioned the
constitutionality of the subject clause.48[21] The NLRC denied the motion.49[22]

40
41
42
43
44
45
46
47
48
49

Petitioner filed a Petition for Certiorari50[23] with the CA, reiterating the constitutional
challenge against the subject clause.51[24] After initially dismissing the petition on a technicality,
the CA eventually gave due course to it, as directed by this Court in its Resolution dated August 7,
2003 which granted the petition for certiorari, docketed as G.R. No. 151833, filed by petitioner.
In a Decision dated December 8, 2004, the CA affirmed the NLRC ruling on the reduction
of the applicable salary rate; however, the CA skirted the constitutional issue raised by
petitioner.52[25]
His Motion for Reconsideration53[26] having been denied by the CA,54[27] petitioner
brings his cause to this Court on the following grounds:
I
The Court of Appeals and the labor tribunals have decided the case in a way
not in accord with applicable decision of the Supreme Court involving similar issue
of granting unto the migrant worker back wages equal to the unexpired portion of
his contract of employment instead of limiting it to three (3) months
II
In the alternative that the Court of Appeals and the Labor Tribunals were
merely applying their interpretation of Section 10 of Republic Act No. 8042, it is
submitted that the Court of Appeals gravely erred in law when it failed to discharge
its judicial duty to decide questions of substance not theretofore determined by the
Honorable Supreme Court, particularly, the constitutional issues raised by the
petitioner on the constitutionality of said law, which unreasonably, unfairly and
arbitrarily limits payment of the award for back wages of overseas workers to three
(3) months.
III
Even without considering the constitutional limitations [of] Sec. 10 of
Republic Act No. 8042, the Court of Appeals gravely erred in law in excluding from
petitioners award the overtime pay and vacation pay provided in his contract since
under the contract they form part of his salary.55[28]
On February 26, 2008, petitioner wrote the Court to withdraw his petition as he is already
old and sickly, and he intends to make use of the monetary award for his medical treatment and
medication.56[29] Required to comment, counsel for petitioner filed a motion, urging the court to
allow partial execution of the undisputed monetary award and, at the same time, praying that the
constitutional question be resolved.57[30]
Considering that the parties have filed their respective memoranda, the Court now takes
up the full merit of the petition mindful of the extreme importance of the constitutional question
raised therein.
On the first and second issues
The unanimous finding of the LA, NLRC and CA that the dismissal of petitioner was illegal
is not disputed. Likewise not disputed is the salary differential of US$45.00 awarded to petitioner

50
51
52
53
54
55
56
57

in all three fora. What remains disputed is only the computation of the lump-sum salary to be
awarded to petitioner by reason of his illegal dismissal.
Applying the subject clause, the NLRC and the CA computed the lump-sum salary of
petitioner at the monthly rate of US$1,400.00 covering the period of three months out of the
unexpired portion of nine months and 23 days of his employment contract or a total of
US$4,200.00.
Impugning the constitutionality of the subject clause, petitioner contends that, in addition
to the US$4,200.00 awarded by the NLRC and the CA, he is entitled to US$21,182.23 more or a
total of US$25,382.23, equivalent to his salaries for the entire nine months and 23 days left of his
employment contract, computed at the monthly rate of US$2,590.00.58[31]
The Arguments of Petitioner
Petitioner contends that the subject clause is unconstitutional because it unduly impairs
the freedom of OFWs to negotiate for and stipulate in their overseas employment contracts a
determinate employment period and a fixed salary package.59[32] It also impinges on the equal
protection clause, for it treats OFWs differently from local Filipino workers (local workers) by
putting a cap on the amount of lump-sum salary to which OFWs are entitled in case of illegal
dismissal, while setting no limit to the same monetary award for local workers when their
dismissal is declared illegal; that the disparate treatment is not reasonable as there is no
substantial distinction between the two groups;60[33] and that it defeats Section 18,61[34] Article
II of the Constitution which guarantees the protection of the rights and welfare of all Filipino
workers, whether deployed locally or overseas.62[35]
Moreover, petitioner argues that the decisions of the CA and the labor tribunals are not in
line with existing jurisprudence on the issue of money claims of illegally dismissed OFWs. Though
there are conflicting rulings on this, petitioner urges the Court to sort them out for the guidance of
affected OFWs.63[36]
Petitioner further underscores that the insertion of the subject clause into R.A. No. 8042
serves no other purpose but to benefit local placement agencies. He marks the statement made
by the Solicitor General in his Memorandum, viz.:
Often, placement agencies, their liability being solidary, shoulder the
payment of money claims in the event that jurisdiction over the foreign employer is
not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations
are unnecessarily penalized for the acts of the foreign employer. To protect them
and to promote their continued helpful contribution in deploying Filipino
migrant workers, liability for money claims was reduced under Section
10 of R.A. No. 8042. 64[37] (Emphasis supplied)
Petitioner argues that in mitigating the solidary liability of placement agencies, the subject
clause sacrifices the well-being of OFWs. Not only that, the provision makes foreign employers
better off than local employers because in cases involving the illegal dismissal of employees,

58
59
60
61
62
63
64

foreign employers are liable for salaries covering a maximum of only three months of the
unexpired employment contract while local employers are liable for the full lump-sum salaries of
their employees. As petitioner puts it:
In terms of practical application, the local employers are not limited to the
amount of backwages they have to give their employees they have illegally
dismissed, following well-entrenched and unequivocal jurisprudence on the matter.
On the other hand, foreign employers will only be limited to giving the illegally
dismissed migrant workers the maximum of three (3) months unpaid salaries
notwithstanding the unexpired term of the contract that can be more than three (3)
months.65[38]
Lastly, petitioner claims that the subject clause violates the due process clause, for it
deprives him of the salaries and other emoluments he is entitled to under his fixed-period
employment contract.66[39]
The Arguments of Respondents
In their Comment and Memorandum, respondents contend that the constitutional issue
should not be entertained, for this was belatedly interposed by petitioner in his appeal before the
CA, and not at the earliest opportunity, which was when he filed an appeal before the NLRC.67[40]
The Arguments of the Solicitor General
The Solicitor General (OSG)68[41] points out that as R.A. No. 8042 took effect on July 15,
1995, its provisions could not have impaired petitioner's 1998 employment contract. Rather, R.A.
No. 8042 having preceded petitioner's contract, the provisions thereof are deemed part of the
minimum terms of petitioner's employment, especially on the matter of money claims, as this
was not stipulated upon by the parties.69[42]
Moreover, the OSG emphasizes that OFWs and local workers differ in terms of the nature
of their employment, such that their rights to monetary benefits must necessarily be treated
differently. The OSG enumerates the essential elements that distinguish OFWs from local workers:
first, while local workers perform their jobs within Philippine territory, OFWs perform their jobs for
foreign employers, over whom it is difficult for our courts to acquire jurisdiction, or against whom
it is almost impossible to enforce judgment; and second, as held in Coyoca v. National Labor
Relations Commission70[43] and Millares v. National Labor Relations Commission,71[44] OFWs are
contractual employees who can never acquire regular employment status, unlike local workers
who are or can become regular employees. Hence, the OSG posits that there are rights and
privileges exclusive to local workers, but not available to OFWs; that these peculiarities make for
a reasonable and valid basis for the differentiated treatment under the subject clause of the
money claims of OFWs who are illegally dismissed. Thus, the provision does not violate the equal
protection clause nor Section 18, Article II of the Constitution.72[45]
Lastly, the OSG defends the rationale behind the subject clause as a police power
measure adopted to mitigate the solidary liability of placement agencies for this redounds to the
benefit of the migrant workers whose welfare the government seeks to promote. The survival of

65
66
67
68
69
70
71
72

legitimate placement agencies helps [assure] the government that migrant workers are properly
deployed and are employed under decent and humane conditions.73[46]
The Court's Ruling
The Court sustains petitioner on the first and second issues.
When the Court is called upon to exercise its power of judicial review of the acts of its coequals, such as the Congress, it does so only when these conditions obtain: (1) that there is an
actual case or controversy involving a conflict of rights susceptible of judicial determination; 74[47]
(2) that the constitutional question is raised by a proper party75[48] and at the earliest
opportunity;76[49] and (3) that the constitutional question is the very lis mota of the case,77[50]
otherwise the Court will dismiss the case or decide the same on some other ground.78[51]
Without a doubt, there exists in this case an actual controversy directly involving petitioner
who is personally aggrieved that the labor tribunals and the CA computed his monetary award
based on the salary period of three months only as provided under the subject clause.
The constitutional challenge is also timely. It should be borne in mind that the requirement
that a constitutional issue be raised at the earliest opportunity entails the interposition of the
issue in the pleadings before a competent court, such that, if the issue is not raised in the
pleadings before that competent court, it cannot be considered at the trial and, if not considered
in the trial, it cannot be considered on appeal.79[52] Records disclose that the issue on the
constitutionality of the subject clause was first raised, not in petitioner's appeal with the NLRC, but
in his Motion for Partial Reconsideration with said labor tribunal,80[53] and reiterated in his Petition
for Certiorari before the CA.81[54] Nonetheless, the issue is deemed seasonably raised because it
is not the NLRC but the CA which has the competence to resolve the constitutional issue. The
NLRC is a labor tribunal that merely performs a quasi-judicial function its function in the present
case is limited to determining questions of fact to which the legislative policy of R.A. No. 8042 is
to be applied and to resolving such questions in accordance with the standards laid down by the
law itself;82[55] thus, its foremost function is to administer and enforce R.A. No. 8042, and not to
inquire into the validity of its provisions. The CA, on the other hand, is vested with the power of
judicial review or the power to declare unconstitutional a law or a provision thereof, such as the
subject clause.83[56] Petitioner's interposition of the constitutional issue before the CA was
undoubtedly seasonable. The CA was therefore remiss in failing to take up the issue in its
decision.
The third condition that the constitutional issue be critical to the resolution of the case
likewise obtains because the monetary claim of petitioner to his lump-sum salary for the entire
unexpired portion of his 12-month employment contract, and not just for a period of three
months, strikes at the very core of the subject clause.
Thus, the stage is all set for the determination of the constitutionality of the subject clause.
Does the subject clause violate Section 10,

73
74
75
76
77
78
79
80
81
82
83

Article III of the Constitution on non-impairment

of contracts?
The answer is in the negative.
Petitioner's claim that the subject clause unduly interferes with the stipulations in his
contract on the term of his employment and the fixed salary package he will receive 84[57] is not
tenable.
Section 10, Article III of the Constitution provides:
No law impairing the obligation of contracts shall be passed.
The prohibition is aligned with the general principle that laws newly enacted have only a
prospective operation,85[58] and cannot affect acts or contracts already perfected; 86[59]
however, as to laws already in existence, their provisions are read into contracts and deemed a
part thereof.87[60] Thus, the non-impairment clause under Section 10, Article II is limited in
application to laws about to be enacted that would in any way derogate from existing acts or
contracts by enlarging, abridging or in any manner changing the intention of the parties thereto.
As aptly observed by the OSG, the enactment of R.A. No. 8042 in 1995 preceded the
execution of the employment contract between petitioner and respondents in 1998. Hence, it
cannot be argued that R.A. No. 8042, particularly the subject clause, impaired the employment
contract of the parties. Rather, when the parties executed their 1998 employment contract, they
were deemed to have incorporated into it all the provisions of R.A. No. 8042.
But even if the Court were to disregard the timeline, the subject clause may not be
declared unconstitutional on the ground that it impinges on the impairment clause, for the law
was enacted in the exercise of the police power of the State to regulate a business, profession or
calling, particularly the recruitment and deployment of OFWs, with the noble end in view of
ensuring respect for the dignity and well-being of OFWs wherever they may be employed. 88[61]
Police power legislations adopted by the State to promote the health, morals, peace, education,
good order, safety, and general welfare of the people are generally applicable not only to future
contracts but even to those already in existence, for all private contracts must yield to the
superior and legitimate measures taken by the State to promote public welfare.89[62]
Does the subject clause violate Section 1,
Article III of the Constitution, and Section 18,
Article II and Section 3, Article XIII on labor
as a protected sector?
The answer is in the affirmative.
Section 1, Article III of the Constitution guarantees:
No person shall be deprived of life, liberty, or property without due process
of law nor shall any person be denied the equal protection of the law.

84
85
86
87
88
89

Section 18,90[63] Article II and Section 3,91[64] Article XIII accord all members of the labor
sector, without distinction as to place of deployment, full protection of their rights and welfare.
To Filipino workers, the rights guaranteed under the foregoing constitutional provisions
translate to economic security and parity: all monetary benefits should be equally enjoyed by
workers of similar category, while all monetary obligations should be borne by them in equal
degree; none should be denied the protection of the laws which is enjoyed by, or spared the
burden imposed on, others in like circumstances.92[65]
Such rights are not absolute but subject to the inherent power of Congress to incorporate,
when it sees fit, a system of classification into its legislation; however, to be valid, the
classification must comply with these requirements: 1) it is based on substantial distinctions; 2) it
is germane to the purposes of the law; 3) it is not limited to existing conditions only; and 4) it
applies equally to all members of the class.93[66]
There are three levels of scrutiny at which the Court reviews the constitutionality of a
classification embodied in a law: a) the deferential or rational basis scrutiny in which the
challenged classification needs only be shown to be rationally related to serving a legitimate state
interest;94[67] b) the middle-tier or intermediate scrutiny in which the government must show
that the challenged classification serves an important state interest and that the
classification is at least substantially related to serving that interest; 95[68] and c) strict
judicial scrutiny96[69] in which a legislative classification which impermissibly interferes with the
exercise of a fundamental right97[70] or operates to the peculiar disadvantage of a suspect
class98[71] is presumed unconstitutional, and the burden is upon the government to prove that
the classification is necessary to achieve a compelling state interest and that it is the least
restrictive means to protect such interest.99[72]
Under American jurisprudence, strict judicial scrutiny is triggered by suspect
classifications100[73] based on race101[74] or gender102[75] but not when the classification is
drawn along income categories.103[76]
It is different in the Philippine setting. In Central Bank (now Bangko Sentral ng Pilipinas)
Employee Association, Inc. v. Bangko Sentral ng Pilipinas,104[77] the constitutionality of a
provision in the charter of the Bangko Sentral ng Pilipinas (BSP), a government financial
institution (GFI), was challenged for maintaining its rank-and-file employees under the Salary
Standardization Law (SSL), even when the rank-and-file employees of other GFIs had been
exempted from the SSL by their respective charters. Finding that the disputed provision contained
a suspect classification based on salary grade, the Court deliberately employed the standard of
strict judicial scrutiny in its review of the constitutionality of said provision. More significantly, it
was in this case that the Court revealed the broad outlines of its judicial philosophy, to wit:

90
91
92
93
94
95
96
97
98
99
100
101
102
103
104

Congress retains its wide discretion in providing for a valid classification, and
its policies should be accorded recognition and respect by the courts of justice
except when they run afoul of the Constitution. The deference stops where the
classification violates a fundamental right, or prejudices persons accorded
special protection by the Constitution. When these violations arise, this Court
must discharge its primary role as the vanguard of constitutional guaranties, and
require a stricter and more exacting adherence to constitutional limitations.
Rational basis should not suffice.
Admittedly, the view that prejudice to persons accorded special
protection by the Constitution requires a stricter judicial scrutiny finds
no support in American or English jurisprudence. Nevertheless, these
foreign decisions and authorities are not per se controlling in this
jurisdiction. At best, they are persuasive and have been used to support many of
our decisions. We should not place undue and fawning reliance upon them and
regard them as indispensable mental crutches without which we cannot come to
our own decisions through the employment of our own endowments. We live in a
different ambience and must decide our own problems in the light of our own
interests and needs, and of our qualities and even idiosyncrasies as a people, and
always with our own concept of law and justice. Our laws must be construed in
accordance with the intention of our own lawmakers and such intent may be
deduced from the language of each law and the context of other local legislation
related thereto. More importantly, they must be construed to serve our own public
interest which is the be-all and the end-all of all our laws. And it need not be
stressed that our public interest is distinct and different from others.
xxxx
Further, the quest for a better and more equal world calls for the use of
equal protection as a tool of effective judicial intervention.
Equality is one ideal which cries out for bold attention and action in the
Constitution. The Preamble proclaims equality as an ideal precisely in protest
against crushing inequities in Philippine society. The command to promote social
justice in Article II, Section 10, in all phases of national development, further
explicitated in Article XIII, are clear commands to the State to take affirmative
action in the direction of greater equality. x x x [T]here is thus in the Philippine
Constitution no lack of doctrinal support for a more vigorous state effort towards
achieving a reasonable measure of equality.
Our present Constitution has gone further in guaranteeing vital
social and economic rights to marginalized groups of society, including
labor. Under the policy of social justice, the law bends over backward to
accommodate the interests of the working class on the humane
justification that those with less privilege in life should have more in law.
And the obligation to afford protection to labor is incumbent not only on
the legislative and executive branches but also on the judiciary to
translate this pledge into a living reality. Social justice calls for the
humanization of laws and the equalization of social and economic forces
by the State so that justice in its rational and objectively secular
conception may at least be approximated.
xxxx
Under most circumstances, the Court will exercise judicial restraint in
deciding questions of constitutionality, recognizing the broad discretion given to
Congress in exercising its legislative power. Judicial scrutiny would be based on the

rational basis test, and the legislative discretion would be given deferential
treatment.
But if the challenge to the statute is premised on the denial of a
fundamental right, or the perpetuation of prejudice against persons
favored by the Constitution with special protection, judicial scrutiny
ought to be more strict. A weak and watered down view would call for the
abdication of this Courts solemn duty to strike down any law repugnant to the
Constitution and the rights it enshrines. This is true whether the actor committing
the unconstitutional act is a private person or the government itself or one of its
instrumentalities. Oppressive acts will be struck down regardless of the character
or nature of the actor.
xxxx
In the case at bar, the challenged proviso operates on the basis of the
salary grade or officer-employee status. It is akin to a distinction based on
economic class and status, with the higher grades as recipients of a
benefit specifically withheld from the lower grades. Officers of the BSP now
receive higher compensation packages that are competitive with the industry,
while the poorer, low-salaried employees are limited to the rates prescribed by the
SSL. The implications are quite disturbing: BSP rank-and-file employees are paid
the strictly regimented rates of the SSL while employees higher in rank possessing higher and better education and opportunities for career advancement
- are given higher compensation packages to entice them to stay. Considering
that majority, if not all, the rank-and-file employees consist of people
whose status and rank in life are less and limited, especially in terms of
job marketability, it is they - and not the officers - who have the real
economic and financial need for the adjustment . This is in accord with the
policy of the Constitution "to free the people from poverty, provide adequate social
services, extend to them a decent standard of living, and improve the quality of life
for all. Any act of Congress that runs counter to this constitutional
desideratum deserves strict scrutiny by this Court before it can pass
muster. (Emphasis supplied)
Imbued with the same sense of obligation to afford protection to labor, the Court in the
present case also employs the standard of strict judicial scrutiny, for it perceives in the subject
clause a suspect classification prejudicial to OFWs.
Upon cursory reading, the subject clause appears facially neutral, for it applies to all OFWs.
However, a closer examination reveals that the subject clause has a discriminatory intent against,
and an invidious impact on, OFWs at two levels:
First, OFWs with employment contracts of less than one year vis--vis OFWs
with employment contracts of one year or more;
Second, among OFWs with employment contracts of more than one year;
and
Third, OFWs vis--vis local workers with fixed-period employment;
OFWs with employment contracts of less than
one year vis--vis OFWs with employment
contracts of one year or more

As pointed out by petitioner,105[78] it was in Marsaman Manning Agency, Inc. v. National

Labor Relations Commission106[79] (Second Division, 1999) that the Court laid down the following
rules on the application of the periods prescribed under Section 10(5) of R.A. No. 804, to wit:
A plain reading of Sec. 10 clearly reveals that the choice of which
amount to award an illegally dismissed overseas contract worker, i.e.,
whether his salaries for the unexpired portion of his employment
contract or three (3) months salary for every year of the unexpired term,
whichever is less, comes into play only when the employment contract
concerned has a term of at least one (1) year or more. This is evident
from the words for every year of the unexpired term which follows the
words salaries x x x for three months. To follow petitioners thinking that
private respondent is entitled to three (3) months salary only simply because it is
the lesser amount is to completely disregard and overlook some words used in the
statute while giving effect to some. This is contrary to the well-established rule in
legal hermeneutics that in interpreting a statute, care should be taken that every
part or word thereof be given effect since the law-making body is presumed to
know the meaning of the words employed in the statue and to have used them
advisedly. Ut res magis valeat quam pereat.107[80] (Emphasis supplied)
In Marsaman, the OFW involved was illegally dismissed two months into his 10-month contract,
but was awarded his salaries for the remaining 8 months and 6 days of his contract.
Prior to Marsaman, however, there were two cases in which the Court made conflicting
rulings on Section 10(5). One was Asian Center for Career and Employment System and Services
v. National Labor Relations Commission (Second Division, October 1998),108[81] which involved
an OFW who was awarded a two-year employment contract, but was dismissed after working for
one year and two months. The LA declared his dismissal illegal and awarded him SR13,600.00 as
lump-sum salary covering eight months, the unexpired portion of his contract. On appeal, the
Court reduced the award to SR3,600.00 equivalent to his three months salary, this being the
lesser value, to wit:
Under Section 10 of R.A. No. 8042, a worker dismissed from overseas
employment without just, valid or authorized cause is entitled to his salary for the
unexpired portion of his employment contract or for three (3) months for every
year of the unexpired term, whichever is less.
In the case at bar, the unexpired portion of private respondents
employment contract is eight (8) months. Private respondent should therefore be
paid his basic salary corresponding to three (3) months or a total of SR3,600.109[82]
Another was Triple-Eight Integrated Services, Inc. v. National Labor Relations Commission
(Third Division, December 1998),110[83] which involved an OFW (therein respondent Erlinda
Osdana) who was originally granted a 12-month contract, which was deemed renewed for
another 12 months. After serving for one year and seven-and-a-half months, respondent Osdana
was illegally dismissed, and the Court awarded her salaries for the entire unexpired portion of
four and one-half months of her contract.
The Marsaman interpretation of Section 10(5) has since been adopted in the following
cases:

105
106
107
108
109
110

Case Title

111
112
113
114
115
116
117
118
119
120
121
122

Contract Period of Unexpired

Period
Service
Period

Period Applied
in
the
Computation of
the Monetary
Award

Skippers
v. 6 months 2 months
Maguad111[84]

4 months

4 months

Bahia Shipping 9 months 8 months

v.
Reynaldo
Chua 112[85]

4 months

4 months

Centennial
9 months 4 months
Transmarine v.
dela
Cruz
l113[86]

5 months

5 months

Talidano
v. 12
114
Falcon [87]
months

3 months

9 months

3 months

Univan v.
CA 115[88]

12
months

3 months

9 months

3 months

Oriental v.
CA 116[89]

12
months

more than 10 months

2 months

3 months

PCL
v. 12
NLRC117[90]
months

more than more or less 9 3 months

2 months months

Olarte
v. 12
Nayona118[91] months

21 days

11
months 3 months
and 9 days

JSS v.
Ferrer119[92]

16 days

11
months 3 months
and 24 days

12
months

Pentagon
v. 12
120
Adelantar [9 months
3]

9 months 2 months and 2 months and

and
7 23 days
23 days
days

Phil. Employ v. 12
Paramio,
months
et al.121[94]

10 months 2 months

Flourish
Maritime
Almanzor
122
[95]

26 days

2 years
v.

Unexpired
portion

23
months 6 months or 3
and 4 days
months
for
each year of
contract

Athenna
1 year, 10 1 month
Manpower v. months
Villanos 123[96]
and
28
days

1
year,
9 6 months or 3
months
and months
for
28 days
each year of
contract

As the foregoing matrix readily shows, the subject clause classifies OFWs into two
categories. The first category includes OFWs with fixed-period employment contracts of less than
one year; in case of illegal dismissal, they are entitled to their salaries for the entire unexpired
portion of their contract. The second category consists of OFWs with fixed-period employment
contracts of one year or more; in case of illegal dismissal, they are entitled to monetary award
equivalent to only 3 months of the unexpired portion of their contracts.
The disparity in the treatment of these two groups cannot be discounted. In Skippers, the
respondent OFW worked for only 2 months out of his 6-month contract, but was awarded his
salaries for the remaining 4 months. In contrast, the respondent OFWs in Oriental and PCL who
had also worked for about 2 months out of their 12-month contracts were awarded their salaries
for only 3 months of the unexpired portion of their contracts. Even the OFWs involved in Talidano
and Univan who had worked for a longer period of 3 months out of their 12-month contracts
before being illegally dismissed were awarded their salaries for only 3 months.
To illustrate the disparity even more vividly, the Court assumes a hypothetical OFW-A with
an employment contract of 10 months at a monthly salary rate of US$1,000.00 and a
hypothetical OFW-B with an employment contract of 15 months with the same monthly salary
rate of US$1,000.00. Both commenced work on the same day and under the same employer,
and were illegally dismissed after one month of work. Under the subject clause, OFW-A will be
entitled to US$9,000.00, equivalent to his salaries for the remaining 9 months of his contract,
whereas OFW-B will be entitled to only US$3,000.00, equivalent to his salaries for 3 months of the
unexpired portion of his contract, instead of US$14,000.00 for the unexpired portion of 14 months
of his contract, as the US$3,000.00 is the lesser amount.
The disparity becomes more aggravating when the Court takes into account jurisprudence
that, prior to the effectivity of R.A. No. 8042 on July 14, 1995, 124[97] illegally dismissed
OFWs, no matter how long the period of their employment contracts, were entitled to their
salaries for the entire unexpired portions of their contracts. The matrix below speaks for itself:

Case Title

Contract
Period

Period of Unexpired
Service
Period

Period Applied in
the Computation
of the Monetary
Award

ATCI v. CA,
et al.125[98]

2 years

2 months

22 months

22 months

Phil.
2 years
Integrated v.
NLRC126[99]

7 days

23 months 23 months
and 23 days 23 days

JGB
v. 2 years
127
NLC [100]

9 months

15 months

123
124
125
126
127

15 months

and

Agoy
v. 2 years
128
NLRC [101]

2 months

22 months

22 months

EDI v. NLRC, 2 years

et al.129[102]

5 months

19 months

19 months

Barros
v. 12 months
NLRC, et al.130
[103]

4 months

8 months

8 months

Philippine
12 months
Transmarine
v.
Carilla131[104]

6 months 5
months 5 months and 18
and
22 and 18 days days
days

It is plain that prior to R.A. No. 8042, all OFWs, regardless of contract periods or the
unexpired portions thereof, were treated alike in terms of the computation of their monetary
benefits in case of illegal dismissal. Their claims were subjected to a uniform rule of computation:
their basic salaries multiplied by the entire unexpired portion of their employment contracts.
The enactment of the subject clause in R.A. No. 8042 introduced a differentiated rule of
computation of the money claims of illegally dismissed OFWs based on their employment
periods, in the process singling out one category whose contracts have an unexpired portion of
one year or more and subjecting them to the peculiar disadvantage of having their monetary
awards limited to their salaries for 3 months or for the unexpired portion thereof, whichever is
less, but all the while sparing the other category from such prejudice, simply because the latter's
unexpired contracts fall short of one year.
Among OFWs With Employment
Contracts of More Than One Year
Upon closer examination of the terminology employed in the subject clause, the Court
now has misgivings on the accuracy of the Marsaman interpretation.
The Court notes that the subject clause or for three (3) months for every year of the
unexpired term, whichever is less contains the qualifying phrases every year and unexpired term.
By its ordinary meaning, the word term means a limited or definite extent of time. 132[105]
Corollarily, that every year is but part of an unexpired term is significant in many ways: first, the
unexpired term must be at least one year, for if it were any shorter, there would be no occasion
for such unexpired term to be measured by every year; and second, the original term must be
more than one year, for otherwise, whatever would be the unexpired term thereof will not reach
even a year. Consequently, the more decisive factor in the determination of when the subject
clause for three (3) months for every year of the unexpired term, whichever is less shall apply is
not the length of the original contract period as held in Marsaman,133[106] but the length of the
unexpired portion of the contract period -- the subject clause applies in cases when the unexpired
portion of the contract period is at least one year, which arithmetically requires that the original
contract period be more than one year.
Viewed in that light, the subject clause creates a sub-layer of discrimination among OFWs
whose contract periods are for more than one year: those who are illegally dismissed with less
than one year left in their contracts shall be entitled to their salaries for the entire unexpired

128
129
130
131
132
133

portion thereof, while those who are illegally dismissed with one year or more remaining in their
contracts shall be covered by the subject clause, and their monetary benefits limited to their
salaries for three months only.
To concretely illustrate the application of the foregoing interpretation of the subject clause,
the Court assumes hypothetical OFW-C and OFW-D, who each have a 24-month contract at a
salary rate of US$1,000.00 per month. OFW-C is illegally dismissed on the 12th month, and OFWD, on the 13th month. Considering that there is at least 12 months remaining in the contract
period of OFW-C, the subject clause applies to the computation of the latter's monetary benefits.
Thus, OFW-C will be entitled, not to US$12,000,00 or the latter's total salaries for the 12 months
unexpired portion of the contract, but to the lesser amount of US$3,000.00 or the latter's salaries
for 3 months out of the 12-month unexpired term of the contract. On the other hand, OFW-D is
spared from the effects of the subject clause, for there are only 11 months left in the latter's
contract period. Thus, OFW-D will be entitled to US$11,000.00, which is equivalent to his/her total
salaries for the entire 11-month unexpired portion.
OFWs vis--vis Local Workers
With Fixed-Period Employment
As discussed earlier, prior to R.A. No. 8042, a uniform system of computation of the
monetary awards of illegally dismissed OFWs was in place. This uniform system was applicable
even to local workers with fixed-term employment.134[107]
The earliest rule prescribing a uniform system of computation was actually Article 299 of
the Code of Commerce (1888),135[108] to wit:
Article 299. If the contracts between the merchants and their shop
clerks and employees should have been made of a fixed period, none of
the contracting parties, without the consent of the other, may withdraw
from the fulfillment of said contract until the termination of the period
agreed upon.
Persons violating this clause shall be subject to indemnify the loss and
damage suffered, with the exception of the provisions contained in the following
articles.
In Reyes v. The Compaia Maritima,136[109] the Court applied the foregoing provision to
determine the liability of a shipping company for the illegal discharge of its managers prior to the
expiration of their fixed-term employment. The Court therein held the shipping company liable for
the salaries of its managers for the remainder of their fixed-term employment.
There is a more specific rule as far as seafarers are concerned: Article 605 of the Code of
Commerce which provides:
Article 605. If the contracts of the captain and members of the crew with the
agent should be for a definite period or voyage, they cannot be discharged until the
fulfillment of their contracts, except for reasons of insubordination in serious
matters, robbery, theft, habitual drunkenness, and damage caused to the vessel or
to its cargo by malice or manifest or proven negligence.
Article 605 was applied to Madrigal Shipping Company, Inc. v. Ogilvie,137[110] in

134
135
136
137

which the Court held the shipping company liable for the salaries and subsistence allowance of its
illegally dismissed employees for the entire unexpired portion of their employment contracts.
While Article 605 has remained good law up to the present,138[111] Article 299 of the Code
of Commerce was replaced by Art. 1586 of the Civil Code of 1889, to wit:
Article 1586. Field hands, mechanics, artisans, and other laborers hired
for a certain time and for a certain work cannot leave or be dismissed without
sufficient cause, before the fulfillment of the contract. (Emphasis supplied.)
Citing Manresa, the Court in Lemoine v. Alkan139[112] read the disjunctive "or" in Article
1586 as a conjunctive "and" so as to apply the provision to local workers who are employed for a
time certain although for no particular skill. This interpretation of Article 1586 was reiterated in
Garcia Palomar v. Hotel de France Company.140[113] And in both Lemoine and Palomar, the
Court adopted the general principle that in actions for wrongful discharge founded on Article
1586, local workers are entitled to recover damages to the extent of the amount stipulated to be
paid to them by the terms of their contract. On the computation of the amount of such damages,
the Court in Aldaz v. Gay141[114] held:
The doctrine is well-established in American jurisprudence, and nothing has
been brought to our attention to the contrary under Spanish jurisprudence, that
when an employee is wrongfully discharged it is his duty to seek other employment
of the same kind in the same community, for the purpose of reducing the damages
resulting from such wrongful discharge. However, while this is the general rule, the
burden of showing that he failed to make an effort to secure other employment of a
like nature, and that other employment of a like nature was obtainable, is upon the
defendant. When an employee is wrongfully discharged under a contract
of employment his prima facie damage is the amount which he would be
entitled to had he continued in such employment until the termination of
the period. (Howard vs. Daly, 61 N. Y., 362; Allen vs. Whitlark, 99 Mich., 492;
Farrell vs. School District No. 2, 98 Mich., 43.)142[115] (Emphasis supplied)
On August 30, 1950, the New Civil Code took effect with new provisions on fixed-term
employment: Section 2 (Obligations with a Period), Chapter 3, Title I, and Sections 2 (Contract of
Labor) and 3 (Contract for a Piece of Work), Chapter 3, Title VIII, Book IV.143[116] Much like Article
1586 of the Civil Code of 1889, the new provisions of the Civil Code do not expressly provide for
the remedies available to a fixed-term worker who is illegally discharged. However, it is noted that
in Mackay Radio & Telegraph Co., Inc. v. Rich,144[117] the Court carried over the principles on the
payment of damages underlying Article 1586 of the Civil Code of 1889 and applied the same to a
case involving the illegal discharge of a local worker whose fixed-period employment contract
was entered into in 1952, when the new Civil Code was already in effect.145[118]
More significantly, the same principles were applied to cases involving overseas Filipino
workers whose fixed-term employment contracts were illegally terminated, such as in First Asian
Trans & Shipping Agency, Inc. v. Ople,146[119] involving seafarers who were illegally discharged. In
Teknika Skills and Trade Services, Inc. v. National Labor Relations Commission,147[120] an OFW
who was illegally dismissed prior to the expiration of her fixed-period employment contract as a
baby sitter, was awarded salaries corresponding to the unexpired portion of her contract. The

138
139
140
141
142
143
144
145
146
147

Court arrived at the same ruling in Anderson v. National Labor Relations Commission, 148[121]
which involved a foreman hired in 1988 in Saudi Arabia for a fixed term of two years, but who was
illegally dismissed after only nine months on the job -- the Court awarded him salaries
corresponding to 15 months, the unexpired portion of his contract. In Asia World Recruitment,
Inc. v. National Labor Relations Commission,149[122] a Filipino working as a security officer in
1989 in Angola was awarded his salaries for the remaining period of his 12-month contract after
he was wrongfully discharged. Finally, in Vinta Maritime Co., Inc. v. National Labor Relations
Commission,150[123] an OFW whose 12-month contract was illegally cut short in the second
month was declared entitled to his salaries for the remaining 10 months of his contract.
In sum, prior to R.A. No. 8042, OFWs and local workers with fixed-term employment who
were illegally discharged were treated alike in terms of the computation of their money claims:
they were uniformly entitled to their salaries for the entire unexpired portions of their contracts.
But with the enactment of R.A. No. 8042, specifically the adoption of the subject clause, illegally
dismissed OFWs with an unexpired portion of one year or more in their employment contract
have since been differently treated in that their money claims are subject to a 3-month cap,
whereas no such limitation is imposed on local workers with fixed-term employment.
The Court concludes that the subject clause contains a suspect classification in
that, in the computation of the monetary benefits of fixed-term employees who are
illegally discharged, it imposes a 3-month cap on the claim of OFWs with an
unexpired portion of one year or more in their contracts, but none on the claims of
other OFWs or local workers with fixed-term employment. The subject clause singles
out one classification of OFWs and burdens it with a peculiar disadvantage.
There being a suspect classification involving a vulnerable sector protected by the
Constitution, the Court now subjects the classification to a strict judicial scrutiny, and determines
whether it serves a compelling state interest through the least restrictive means.
What constitutes compelling state interest is measured by the scale of rights and powers
arrayed in the Constitution and calibrated by history.151[124] It is akin to the paramount interest of
the state152[125] for which some individual liberties must give way, such as the public interest in
safeguarding health or maintaining medical standards,153[126] or in maintaining access to
information on matters of public concern.154[127]
In the present case, the Court dug deep into the records but found no compelling state
interest that the subject clause may possibly serve.
The OSG defends the subject clause as a police power measure designed to protect the
employment of Filipino seafarers overseas x x x. By limiting the liability to three months [sic],
Filipino seafarers have better chance of getting hired by foreign employers. The limitation also
protects the interest of local placement agencies, which otherwise may be made to shoulder
millions of pesos in termination pay.155[128]
The OSG explained further:
Often, placement agencies, their liability being solidary, shoulder the
payment of money claims in the event that jurisdiction over the foreign employer is

148
149
150
151
152
153
154
155

not acquired by the court or if the foreign employer reneges on its obligation.
Hence, placement agencies that are in good faith and which fulfill their obligations
are unnecessarily penalized for the acts of the foreign employer. To protect them
and to promote their continued helpful contribution in deploying Filipino
migrant workers, liability for money are reduced under Section 10 of RA
8042.
This measure redounds to the benefit of the migrant workers whose welfare
the government seeks to promote. The survival of legitimate placement agencies
helps [assure] the government that migrant workers are properly deployed and are
employed under decent and humane conditions.156[129] (Emphasis supplied)
However, nowhere in the Comment or Memorandum does the OSG cite the source of its
perception of the state interest sought to be served by the subject clause.
The OSG locates the purpose of R.A. No. 8042 in the speech of Rep. Bonifacio Gallego in
sponsorship of House Bill No. 14314 (HB 14314), from which the law originated; 157[130] but the
speech makes no reference to the underlying reason for the adoption of the subject clause. That
is only natural for none of the 29 provisions in HB 14314 resembles the subject clause.
On the other hand, Senate Bill No. 2077 (SB 2077) contains a provision on money claims,
to wit:
Sec. 10. Money Claims. - Notwithstanding any provision of law to the
contrary, the Labor Arbiters of the National Labor Relations Commission (NLRC)
shall have the original and exclusive jurisdiction to hear and decide, within ninety
(90) calendar days after the filing of the complaint, the claims arising out of an
employer-employee relationship or by virtue of the complaint, the claim arising out
of an employer-employee relationship or by virtue of any law or contract involving
Filipino workers for overseas employment including claims for actual, moral,
exemplary and other forms of damages.
The liability of the principal and the recruitment/placement agency or any
and all claims under this Section shall be joint and several.
Any compromise/amicable settlement or voluntary agreement on any
money claims exclusive of damages under this Section shall not be less than fifty
percent (50%) of such money claims: Provided, That any installment payments, if
applicable, to satisfy any such compromise or voluntary settlement shall not be
more than two (2) months. Any compromise/voluntary agreement in violation of
this paragraph shall be null and void.
Non-compliance with the mandatory period for resolutions of cases provided
under this Section shall subject the responsible officials to any or all of the following
penalties:
(1) The salary of any such official who fails to render his decision or
resolution within the prescribed period shall be, or caused to be,
withheld until the said official complies therewith;
(2) Suspension for not more than ninety (90) days; or
(3) Dismissal from the service with disqualification to hold any
appointive public office for five (5) years.

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157

Provided, however, That the penalties herein provided shall be without

prejudice to any liability which any such official may have incurred under other
existing laws or rules and regulations as a consequence of violating the provisions
of this paragraph.
But significantly, Section 10 of SB 2077 does not provide for any rule on the computation of
money claims.
A rule on the computation of money claims containing the subject clause was inserted and
eventually adopted as the 5th paragraph of Section 10 of R.A. No. 8042. The Court examined the
rationale of the subject clause in the transcripts of the Bicameral Conference Committee
(Conference Committee) Meetings on the Magna Carta on OCWs (Disagreeing Provisions of
Senate Bill No. 2077 and House Bill No. 14314). However, the Court finds no discernible state
interest, let alone a compelling one, that is sought to be protected or advanced by the adoption of
the subject clause.
In fine, the Government has failed to discharge its burden of proving the existence of a
compelling state interest that would justify the perpetuation of the discrimination against OFWs
under the subject clause.
Assuming that, as advanced by the OSG, the purpose of the subject clause is to protect
the employment of OFWs by mitigating the solidary liability of placement agencies, such callous
and cavalier rationale will have to be rejected. There can never be a justification for any form of
government action that alleviates the burden of one sector, but imposes the same burden on
another sector, especially when the favored sector is composed of private businesses such as
placement agencies, while the disadvantaged sector is composed of OFWs whose protection no
less than the Constitution commands. The idea that private business interest can be elevated to
the level of a compelling state interest is odious.
Moreover, even if the purpose of the subject clause is to lessen the solidary liability of
placement agencies vis-a-vis their foreign principals, there are mechanisms already in place that
can be employed to achieve that purpose without infringing on the constitutional rights of OFWs.
The POEA Rules and Regulations Governing the Recruitment and Employment of LandBased Overseas Workers, dated February 4, 2002, imposes administrative disciplinary measures
on erring foreign employers who default on their contractual obligations to migrant workers
and/or their Philippine agents. These disciplinary measures range from temporary disqualification
to preventive suspension. The POEA Rules and Regulations Governing the Recruitment and
Employment of Seafarers, dated May 23, 2003, contains similar administrative disciplinary
measures against erring foreign employers.
Resort to these administrative measures is undoubtedly the less restrictive means of
aiding local placement agencies in enforcing the solidary liability of their foreign principals.
Thus, the subject clause in the 5th paragraph of Section 10 of R.A. No. 8042 is violative of
the right of petitioner and other OFWs to equal protection.
Further, there would be certain misgivings if one is to approach the declaration of the
unconstitutionality of the subject clause from the lone perspective that the clause directly violates
state policy on labor under Section 3,158[131] Article XIII of the Constitution.
While all the provisions of the 1987 Constitution are presumed self-executing,,159[132] there
are some which this Court has declared not judicially enforceable, Article XIII being one,160

158
159
160

[133] particularly Section 3 thereof, the nature of which, this Court, in Agabon v. National Labor
Relations Commission,161[134] has described to be not self-actuating:
Thus, the constitutional mandates of protection to labor and security of
tenure may be deemed as self-executing in the sense that these are automatically
acknowledged and observed without need for any enabling legislation. However, to
declare that the constitutional provisions are enough to guarantee the full exercise
of the rights embodied therein, and the realization of ideals therein expressed,
would be impractical, if not unrealistic. The espousal of such view presents the
dangerous tendency of being overbroad and exaggerated. The guarantees of "full
protection to labor" and "security of tenure", when examined in isolation, are
facially unqualified, and the broadest interpretation possible suggests a blanket
shield in favor of labor against any form of removal regardless of circumstance.
This interpretation implies an unimpeachable right to continued employment-a
utopian notion, doubtless-but still hardly within the contemplation of the framers.
Subsequent legislation is still needed to define the parameters of these guaranteed
rights to ensure the protection and promotion, not only the rights of the labor
sector, but of the employers' as well. Without specific and pertinent legislation,
judicial bodies will be at a loss, formulating their own conclusion to approximate at
least the aims of the Constitution.
Ultimately, therefore, Section 3 of Article XIII cannot, on its own,
be a source of a positive enforceable right to stave off the dismissal of an
employee for just cause owing to the failure to serve proper notice or hearing. As
manifested by several framers of the 1987 Constitution, the provisions on social
justice require legislative enactments for their enforceability. 162[135] (Emphasis
added)
Thus, Section 3, Article XIII cannot be treated as a principal source of direct enforceable
rights, for the violation of which the questioned clause may be declared unconstitutional. It may
unwittingly risk opening the floodgates of litigation to every worker or union over every
conceivable violation of so broad a concept as social justice for labor.
It must be stressed that Section 3, Article XIII does not directly bestow on the working
class any actual enforceable right, but merely clothes it with the status of a sector for whom
the Constitution urges protection through executive or legislative action and judicial
recognition. Its utility is best limited to being an impetus not just for the executive and
legislative departments, but for the judiciary as well, to protect the welfare of the working
class. And it was in fact consistent with that constitutional agenda that the Court in Central
Bank (now Bangko Sentral ng Pilipinas) Employee Association, Inc. v. Bangko Sentral ng
Pilipinas, penned by then Associate Justice now Chief Justice Reynato S. Puno, formulated the
judicial precept that when the challenge to a statute is premised on the perpetuation of
prejudice against persons favored by the Constitution with special protection -- such as the
working class or a section thereof -- the Court may recognize the existence of a suspect
classification and subject the same to strict judicial scrutiny.
The view that the concepts of suspect classification and strict judicial scrutiny formulated
in Central Bank Employee Association exaggerate the significance of Section 3, Article XIII is a
groundless apprehension. Central Bank applied Article XIII in conjunction with the equal
protection clause. Article XIII, by itself, without the application of the equal protection clause, has
no life or force of its own as elucidated in Agabon.

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162

Along the same line of reasoning, the Court further holds that the subject clause violates
petitioner's right to substantive due process, for it deprives him of property, consisting of
monetary benefits, without any existing valid governmental purpose.163[136]
The argument of the Solicitor General, that the actual purpose of the subject clause of
limiting the entitlement of OFWs to their three-month salary in case of illegal dismissal, is to give
them a better chance of getting hired by foreign employers. This is plain speculation. As earlier
discussed, there is nothing in the text of the law or the records of the deliberations leading to its
enactment or the pleadings of respondent that would indicate that there is an existing
governmental purpose for the subject clause, or even just a pretext of one.
The subject clause does not state or imply any definitive governmental purpose; and it is
for that precise reason that the clause violates not just petitioner's right to equal protection, but
also her right to substantive due process under Section 1,164[137] Article III of the Constitution.
The subject clause being unconstitutional, petitioner is entitled to his salaries for the entire
unexpired period of nine months and 23 days of his employment contract, pursuant to law and
jurisprudence prior to the enactment of R.A. No. 8042.
On the Third Issue
Petitioner contends that his overtime and leave pay should form part of the salary basis in
the computation of his monetary award, because these are fixed benefits that have been
stipulated into his contract.
Petitioner is mistaken.
The word salaries in Section 10(5) does not include overtime and leave pay. For seafarers
like petitioner, DOLE Department Order No. 33, series 1996, provides a Standard Employment
Contract of Seafarers, in which salary is understood as the basic wage, exclusive of overtime,
leave pay and other bonuses; whereas overtime pay is compensation for all work performed in
excess of the regular eight hours, and holiday pay is compensation for any work performed on
designated rest days and holidays.
By the foregoing definition alone, there is no basis for the automatic inclusion of overtime
and holiday pay in the computation of petitioner's monetary award, unless there is evidence that
he performed work during those periods. As the Court held in Centennial Transmarine, Inc. v.
Dela Cruz,165[138]
However, the payment of overtime pay and leave pay should be disallowed
in light of our ruling in Cagampan v. National Labor Relations Commission, to wit:
The rendition of overtime work and the submission of
sufficient proof that said was actually performed are conditions to be
satisfied before a seaman could be entitled to overtime pay which
should be computed on the basis of 30% of the basic monthly salary.
In short, the contract provision guarantees the right to overtime pay
but the entitlement to such benefit must first be established.
In the same vein, the claim for the day's leave pay for the
unexpired portion of the contract is unwarranted since the same is
given during the actual service of the seamen.

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165

WHEREFORE, the Court GRANTS the Petition. The subject clause or for three months for
every year of the unexpired term, whichever is less in the 5th paragraph of Section 10 of Republic
Act No. 8042 is DECLARED UNCONSTITUTIONAL; and the December 8, 2004 Decision and
April 1, 2005 Resolution of the Court of Appeals are MODIFIED to the effect that petitioner is
AWARDED his salaries for the entire unexpired portion of his employment contract consisting of
nine months and 23 days computed at the rate of US$1,400.00 per month.
No costs.
SO ORDERED.

G.R. No. 145587

October 26, 2007
EDI-STAFFBUILDERS INTERNATIONAL, INC., petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ELEAZAR S. GRAN, respondents.
DECISION

VELASCO, JR., J.:

The Case
This Petition for Review on Certiorari1 seeks to set aside the October 18, 2000 Decision 2
of the Court of Appeals (CA) in CA-G.R. SP No. 56120 which affirmed the January 15,
1999 Decision3 and September 30, 1999 Resolution4 rendered by the National Labor
Relations Commission (NLRC) (Third Division) in POEA ADJ (L) 94-06-2194, ordering
Expertise Search International (ESI), EDI-Staffbuilders International, Inc. (EDI), and Omar
Ahmed Ali Bin Bechr Est. (OAB) jointly and severally to pay Eleazar S. Gran (Gran) the
amount of USD 16,150.00 as unpaid salaries.
The Facts
Petitioner EDI is a corporation engaged in recruitment and placement of Overseas
Filipino Workers (OFWs).5 ESI is another recruitment agency which collaborated with EDI
to process the documentation and deployment of private respondent to Saudi Arabia.
Private respondent Gran was an OFW recruited by EDI, and deployed by ESI to work for
OAB, in Riyadh, Kingdom of Saudi Arabia. 6
It appears that OAB asked EDI through its October 3, 1993 letter for curricula vitae of
qualified applicants for the position of "Computer Specialist." 7 In a facsimile transmission
dated November 29, 1993, OAB informed EDI that, from the applicants' curricula vitae
submitted to it for evaluation, it selected Gran for the position of "Computer Specialist."
The faxed letter also stated that if Gran agrees to the terms and conditions of
employment contained in it, one of which was a monthly salary of SR (Saudi Riyal)
2,250.00 (USD 600.00), EDI may arrange for Gran's immediate dispatch. 8
After accepting OAB's offer of employment, Gran signed an employment contract 9 that
granted him a monthly salary of USD 850.00 for a period of two years. Gran was then
deployed to Riyadh, Kingdom of Saudi Arabia on February 7, 1994.
Upon arrival in Riyadh, Gran questioned the discrepancy in his monthly salaryhis
employment contract stated USD 850.00; while his Philippine Overseas Employment
Agency (POEA) Information Sheet indicated USD 600.00 only. However, through the
assistance of the EDI office in Riyadh, OAB agreed to pay Gran USD 850.00 a month. 10
After Gran had been working for about five months for OAB, his employment was
terminated through OAB's July 9, 1994 letter, 11 on the following grounds:
1. Non-compliance to contract requirements by the recruitment agency primarily
on your salary and contract duration.
2. Non-compliance to pre-qualification requirements by the recruitment agency[,]
vide OAB letter ref. F-5751-93, dated October 3, 1993. 12
3. Insubordination or disobedience to Top Management Order and/or instructions
(non-submittal of daily activity reports despite several instructions).
On July 11, 1994, Gran received from OAB the total amount of SR 2,948.00 representing
his final pay, and on the same day, he executed a Declaration 13 releasing OAB from any
financial obligation or otherwise, towards him.
After his arrival in the Philippines, Gran instituted a complaint, on July 21, 1994, against
ESI/EDI, OAB, Country Bankers Insurance Corporation, and Western Guaranty Corporation
with the NLRC, National Capital Region, Quezon City, which was docketed as POEA ADJ
(L) 94-06-2194 for underpayment of wages/salaries and illegal dismissal.
The Ruling of the Labor Arbiter

In his February 10, 1998 Decision, 14 Labor Arbiter Manuel R. Caday, to whom Gran's case
was assigned, ruled that there was neither underpayment nor illegal dismissal.
The Labor Arbiter reasoned that there was no underpayment of salaries since according
to the POEA-Overseas Contract Worker (OCW) Information Sheet, Gran's monthly salary
was USD 600.00, and in his Confirmation of Appointment as Computer Specialist, his
monthly basic salary was fixed at SR 2,500.00, which was equivalent to USD 600.00.
Arbiter Caday also cited the Declaration executed by Gran, to justify that Gran had no
claim for unpaid salaries or wages against OAB.
With regard to the issue of illegal dismissal, the Labor Arbiter found that Gran failed to
refute EDI's allegations; namely, (1) that Gran did not submit a single activity report of
his daily activity as dictated by company policy; (2) that he was not qualified for the job
as computer specialist due to his insufficient knowledge in programming and lack of
knowledge in ACAD system; (3) that Gran refused to follow management's instruction for
him to gain more knowledge of the job to prove his worth as computer specialist; (4) that
Gran's employment contract had never been substituted; (5) and that Gran was paid a
monthly salary of USD 850.00, and USD 350.00 monthly as food allowance.
Accordingly, the Labor Arbiter decided that Gran was validly dismissed from his work due
to insubordination, disobedience, and his failure to submit daily activity reports.
Thus, on February 10, 1998, Arbiter Caday dismissed Gran's complaint for lack of merit.
Dissatisfied, Gran filed an Appeal 15 on April 6, 1998 with the NLRC, Third Division.
However, it appears from the records that Gran failed to furnish EDI with a copy of his
Appeal Memorandum.
The Ruling of the NLRC
The NLRC held that EDI's seemingly harmless transfer of Gran's contract to ESI is
actually "reprocessing," which is a prohibited transaction under Article 34 (b) of the
Labor Code. This scheme constituted misrepresentation through the conspiracy between
EDI and ESI in misleading Gran and even POEA of the actual terms and conditions of the
OFW's employment. In addition, it was found that Gran did not commit any act that
constituted a legal ground for dismissal. The alleged non-compliance with contractual
stipulations relating to Gran's salary and contract duration, and the absence of prequalification requirements cannot be attributed to Gran but to EDI, which dealt directly
with OAB. In addition, the charge of insubordination was not substantiated, and Gran was
not even afforded the required notice and investigation on his alleged offenses.
Thus, the NLRC reversed the Labor Arbiter's Decision and rendered a new one, the
dispositive portion of which reads:
WHEREFORE, the assailed decision is SET ASIDE. Respondents Expertise Search
International, Inc., EDI Staffbuilders Int'l., Inc. and Omar Ahmed Ali Bin Bechr Est.
(OAB) are hereby ordered jointly and severally liable to pay the complainant
Eleazar Gran the Philippine peso equivalent at the time of actual payment of
SIXTEEN THOUSAND ONE HUNDRED FIFTY US DOLLARS (US$16,150.00)
representing his salaries for the unexpired portion of his contract.
SO ORDERED.16
Gran then filed a Motion for Execution of Judgment 17 on March 29, 1999 with the NLRC
and petitioner receiving a copy of this motion on the same date. 18

To prevent the execution, petitioner filed an Opposition 19 to Gran's motion arguing that
the Writ of Execution cannot issue because it was not notified of the appellate
proceedings before the NLRC and was not given a copy of the memorandum of appeal
nor any opportunity to participate in the appeal.
Seeing that the NLRC did not act on Gran's motion after EDI had filed its Opposition,
petitioner filed, on August 26, 1999, a Motion for Reconsideration of the NLRC Decision
after receiving a copy of the Decision on August 16, 1999. 20
The NLRC then issued a Resolution 21 denying petitioner's Motion for Reconsideration,
ratiocinating that the issues and arguments raised in the motion "had already been
amply discussed, considered, and ruled upon" in the Decision, and that there was "no
cogent reason or patent or palpable error that warrant any disturbance thereof."
Unconvinced of the NLRC's reasoning, EDI filed a Petition for Certiorari before the CA.
Petitioner claimed in its petition that the NLRC committed grave abuse of discretion in
giving due course to the appeal despite Gran's failure to perfect the appeal.
The Ruling of the Court of Appeals
The CA subsequently ruled on the procedural and substantive issues of EDI's petition.
On the procedural issue, the appellate court held that "Gran's failure to furnish a copy of
his appeal memorandum [to EDI was] a mere formal lapse, an excusable neglect and not
a jurisdictional defect which would justify the dismissal of his appeal." 22 The court also
held that petitioner EDI failed to prove that private respondent was terminated for a
valid cause and in accordance with due process; and that Gran's Declaration releasing
OAB from any monetary obligation had no force and effect. The appellate court
ratiocinated that EDI had the burden of proving Gran's incompetence; however, other
than the termination letter, no evidence was presented to show how and why Gran was
considered to be incompetent. The court held that since the law requires the recruitment
agencies to subject OFWs to trade tests before deployment, Gran must have been
competent and qualified; otherwise, he would not have been hired and deployed abroad.
As for the charge of insubordination and disobedience due to Gran's failure to submit a
"Daily Activity Report," the appellate court found that EDI failed to show that the
submission of the "Daily Activity Report" was a part of Gran's duty or the company's
policy. The court also held that even if Gran was guilty of insubordination, he should have
just been suspended or reprimanded, but not dismissed.
The CA also held that Gran was not afforded due process, given that OAB did not abide
by the twin notice requirement. The court found that Gran was terminated on the same
day he received the termination letter, without having been apprised of the bases of his
dismissal or afforded an opportunity to explain his side.
Finally, the CA held that the Declaration signed by Gran did not bar him from demanding
benefits to which he was entitled. The appellate court found that the Declaration was in
the form of a quitclaim, and as such is frowned upon as contrary to public policy
especially where the monetary consideration given in the Declaration was very much
less than what he was legally entitled tohis backwages amounting to USD 16,150.00.
As a result of these findings, on October 18, 2000, the appellate court denied the
petition to set aside the NLRC Decision.
Hence, this instant petition is before the Court.
The Issues

Petitioner raises the following issues for our consideration:

I. WHETHER THE FAILURE OF GRAN TO FURNISH A COPY OF HIS APPEAL
MEMORANDUM TO PETITIONER EDI WOULD CONSTITUTE A JURISDICTIONAL
DEFECT AND A DEPRIVATION OF PETITIONER EDI'S RIGHT TO DUE PROCESS AS
WOULD JUSTIFY THE DISMISSAL OF GRAN'S APPEAL.
II. WHETHER PETITIONER EDI HAS ESTABLISHED BY WAY OF SUBSTANTIAL
EVIDENCE THAT GRAN'S TERMINATION WAS JUSTIFIABLE BY REASON OF
INCOMPETENCE. COROLLARY HERETO, WHETHER THE PRIETO VS. NLRC RULING,
AS APPLIED BY THE COURT OF APPEALS, IS APPLICABLE IN THE INSTANT CASE.
III. WHETHER PETITIONER HAS ESTABLISHED BY WAY OF SUBSTANTIAL EVIDENCE
THAT GRAN'S TERMINATION WAS JUSTIFIABLE BY REASON OF INSUBORDINATION
AND DISOBEDIENCE.
IV. WHETHER GRAN WAS AFFORDED DUE PROCESS PRIOR TO TERMINATION.
V. WHETHER GRAN IS ENTITLED TO BACKWAGES FOR THE UNEXPIRED PORTION OF
HIS CONTRACT.23
The Court's Ruling
The petition lacks merit except with respect to Gran's failure to furnish EDI with his
Appeal Memorandum filed with the NLRC.
First Issue: NLRC's Duty is to Require Respondent to Provide Petitioner a Copy
of the Appeal
Petitioner EDI claims that Gran's failure to furnish it a copy of the Appeal Memorandum
constitutes a jurisdictional defect and a deprivation of due process that would warrant a
rejection of the appeal.
This position is devoid of merit.
In a catena of cases, it was ruled that failure of appellant to furnish a copy of the
appeal to the adverse party is not fatal to the appeal.
In Estrada v. National Labor Relations Commission,24 this Court set aside the order of the
NLRC which dismissed an appeal on the sole ground that the appellant did not furnish
the appellee a memorandum of appeal contrary to the requirements of Article 223 of the
New Labor Code and Section 9, Rule XIII of its Implementing Rules and Regulations.
Also, in J.D. Magpayo Customs Brokerage Corp. v. NLRC, the order of dismissal of an
appeal to the NLRC based on the ground that "there is no showing whatsoever that a
copy of the appeal was served by the appellant on the appellee"25 was annulled. The
Court ratiocinated as follows:
The failure to give a copy of the appeal to the adverse party was a mere formal
lapse, an excusable neglect. Time and again We have acted on petitions to review
decisions of the Court of Appeals even in the absence of proof of service of a copy
thereof to the Court of Appeals as required by Section 1 of Rule 45, Rules of Court.
We act on the petitions and simply require the petitioners to comply with
the rule.26 (Emphasis supplied.)
The J.D. Magpayo ruling was reiterated in Carnation Philippines Employees Labor UnionFFW v. National Labor Relations Commission, 27 Pagdonsalan v. NLRC,28 and in Sunrise
Manning Agency, Inc. v. NLRC.29
Thus, the doctrine that evolved from these cases is that failure to furnish the adverse
party with a copy of the appeal is treated only as a formal lapse, an excusable neglect,
and hence, not a jurisdictional defect. Accordingly, in such a situation, the appeal should
not be dismissed; however, it should not be given due course either. As enunciated in
J.D. Magpayo, the duty that is imposed on the NLRC, in such a case, is to require

the appellant to comply with the rule that the opposing party should be
provided with a copy of the appeal memorandum.
While Gran's failure to furnish EDI with a copy of the Appeal Memorandum is excusable,
the abject failure of the NLRC to order Gran to furnish EDI with the Appeal Memorandum
constitutes grave abuse of discretion.
The records reveal that the NLRC discovered that Gran failed to furnish EDI a copy of the
Appeal Memorandum. The NLRC then ordered Gran to present proof of service. In
compliance with the order, Gran submitted a copy of Camp Crame Post Office's list of
mail/parcels sent on April 7, 1998. 30 The post office's list shows that private respondent
Gran sent two pieces of mail on the same date: one addressed to a certain Dan O. de
Guzman of Legaspi Village, Makati; and the other appears to be addressed to Neil B.
Garcia (or Gran),31 of Ermita, Manilaboth of whom are not connected with petitioner.
This mailing list, however, is not a conclusive proof that EDI indeed received a copy of
the Appeal Memorandum.
Sec. 5 of the NLRC Rules of Procedure (1990) provides for the proof and completeness of
service in proceedings before the NLRC:
Section 5.32 Proof and completeness of service.The return is prima facie proof of
the facts indicated therein. Service by registered mail is complete upon
receipt by the addressee or his agent; but if the addressee fails to claim his
mail from the post office within five (5) days from the date of first notice of the
postmaster, service shall take effect after such time. (Emphasis supplied.)
Hence, if the service is done through registered mail, it is only deemed complete when
the addressee or his agent received the mail or after five (5) days from the date of first
notice of the postmaster. However, the NLRC Rules do not state what would constitute
proper proof of service.
Sec. 13, Rule 13 of the Rules of Court, provides for proofs of service:
Section 13. Proof of service.Proof of personal service shall consist of a written
admission of the party served or the official return of the server, or the affidavit of
the party serving, containing a full statement of the date, place and manner of
service. If the service is by ordinary mail, proof thereof shall consist of an affidavit
of the person mailing of facts showing compliance with section 7 of this Rule. If
service is made by registered mail, proof shall be made by such affidavit
and registry receipt issued by the mailing office. The registry return card
shall be filed immediately upon its receipt by the sender, or in lieu
thereof the unclaimed letter together with the certified or sworn copy of
the notice given by the postmaster to the addressee (emphasis supplied).
Based on the foregoing provision, it is obvious that the list submitted by Gran is not
conclusive proof that he had served a copy of his appeal memorandum to EDI, nor is it
conclusive proof that EDI received its copy of the Appeal Memorandum. He should have
submitted an affidavit proving that he mailed the Appeal Memorandum together with the
registry receipt issued by the post office; afterwards, Gran should have immediately filed
the registry return card.
Hence, after seeing that Gran failed to attach the proof of service, the NLRC should not
have simply accepted the post office's list of mail and parcels sent; but it should have
required Gran to properly furnish the opposing parties with copies of his
Appeal Memorandum as prescribed in J.D. Magpayo and the other cases. The
NLRC should not have proceeded with the adjudication of the case, as this constitutes
grave abuse of discretion.

The glaring failure of NLRC to ensure that Gran should have furnished petitioner EDI a
copy of the Appeal Memorandum before rendering judgment reversing the dismissal of
Gran's complaint constitutes an evasion of the pertinent NLRC Rules and established
jurisprudence. Worse, this failure deprived EDI of procedural due process guaranteed by
the Constitution which can serve as basis for the nullification of proceedings in the
appeal before the NLRC. One can only surmise the shock and dismay that OAB, EDI, and
ESI experienced when they thought that the dismissal of Gran's complaint became final,
only to receive a copy of Gran's Motion for Execution of Judgment which also informed
them that Gran had obtained a favorable NLRC Decision. This is not level playing field
and absolutely unfair and discriminatory against the employer and the job recruiters.
The rights of the employers to procedural due process cannot be cavalierly disregarded
for they too have rights assured under the Constitution.
However, instead of annulling the dispositions of the NLRC and remanding the case for
further proceedings we will resolve the petition based on the records before us to avoid a
protracted litigation.33
The second and third issues have a common matterwhether there was just cause for
Gran's dismissalhence, they will be discussed jointly.
Second and Third Issues: Whether Gran's dismissal is justifiable by reason of
incompetence, insubordination, and disobedience
In cases involving OFWs, the rights and obligations among and between the OFW, the
local recruiter/agent, and the foreign employer/principal are governed by the
employment contract. A contract freely entered into is considered law between the
parties; and hence, should be respected. In formulating the contract, the parties may
establish such stipulations, clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs, public order, or public
policy.34
In the present case, the employment contract signed by Gran specifically states that
Saudi Labor Laws will govern matters not provided for in the contract (e.g. specific
causes for termination, termination procedures, etc.). Being the law intended by the
parties (lex loci intentiones) to apply to the contract, Saudi Labor Laws should govern all
matters relating to the termination of the employment of Gran.
In international law, the party who wants to have a foreign law applied to a dispute or
case has the burden of proving the foreign law. The foreign law is treated as a question
of fact to be properly pleaded and proved as the judge or labor arbiter cannot take
judicial notice of a foreign law. He is presumed to know only domestic or forum law. 35
Unfortunately for petitioner, it did not prove the pertinent Saudi laws on the matter;
thus, the International Law doctrine of presumed-identity approach or processual
presumption comes into play.36 Where a foreign law is not pleaded or, even if pleaded, is
not proved, the presumption is that foreign law is the same as ours. 37 Thus, we apply
Philippine labor laws in determining the issues presented before us.
Petitioner EDI claims that it had proven that Gran was legally dismissed due to
incompetence and insubordination or disobedience.
This claim has no merit.
In illegal dismissal cases, it has been established by Philippine law and jurisprudence
that the employer should prove that the dismissal of employees or personnel is legal and
just.
Section 33 of Article 277 of the Labor Code 38 states that:
ART. 277. MISCELLANEOUS PROVISIONS39

(b) Subject to the constitutional right of workers to security of tenure and their
right to be protected against dismissal except for a just and authorized cause and
without prejudice to the requirement of notice under Article 283 of this Code, the
employer shall furnish the worker whose employment is sought to be terminated a
written notice containing a statement of the causes for termination and shall
afford the latter ample opportunity to be heard and to defend himself with the
assistance of his representative if he so desires in accordance with company rules
and regulations promulgated pursuant to guidelines set by the Department of
Labor and Employment. Any decision taken by the employer shall be without
prejudice to the right of the workers to contest the validity or legality of his
dismissal by filing a complaint with the regional branch of the National Labor
Relations Commission. The burden of proving that the termination was for a
valid or authorized cause shall rest on the employer. x x x
In many cases, it has been held that in termination disputes or illegal dismissal cases,
the employer has the burden of proving that the dismissal is for just and valid causes;
and failure to do so would necessarily mean that the dismissal was not justified and
therefore illegal.40 Taking into account the character of the charges and the penalty
meted to an employee, the employer is bound to adduce clear, accurate, consistent, and
convincing evidence to prove that the dismissal is valid and legal. 41 This is consistent
with the principle of security of tenure as guaranteed by the Constitution and reinforced
by Article 277 (b) of the Labor Code of the Philippines. 42
In the instant case, petitioner claims that private respondent Gran was validly dismissed
for just cause, due to incompetence and insubordination or disobedience. To prove its
allegations, EDI submitted two letters as evidence. The first is the July 9, 1994
termination letter,43 addressed to Gran, from Andrea E. Nicolaou, Managing Director of
OAB. The second is an unsigned April 11, 1995 letter 44 from OAB addressed to EDI and
ESI, which outlined the reasons why OAB had terminated Gran's employment.
Petitioner claims that Gran was incompetent for the Computer Specialist position
because he had "insufficient knowledge in programming and zero knowledge of [the]
ACAD system."45 Petitioner also claims that Gran was justifiably dismissed due to
insubordination or disobedience because he continually failed to submit the required
"Daily Activity Reports."46 However, other than the abovementioned letters, no other
evidence was presented to show how and why Gran was considered incompetent,
insubordinate, or disobedient. Petitioner EDI had clearly failed to overcome the burden of
proving that Gran was validly dismissed.
Petitioner's imputation of incompetence on private respondent due to his "insufficient
knowledge in programming and zero knowledge of the ACAD system" based only on the
above mentioned letters, without any other evidence, cannot be given credence.
An allegation of incompetence should have a factual foundation. Incompetence may be
shown by weighing it against a standard, benchmark, or criterion. However, EDI failed to
establish any such bases to show how petitioner found Gran incompetent.
In addition, the elements that must concur for the charge of insubordination or willful
disobedience to prosper were not present.
In Micro Sales Operation Network v. NLRC, we held that:
For willful disobedience to be a valid cause for dismissal, the following twin
elements must concur: (1) the employee's assailed conduct must have been
willful, that is, characterized by a wrongful and perverse attitude; and (2) the
order violated must have been reasonable, lawful, made known to the employee
and must pertain to the duties which he had been engaged to discharge. 47

EDI failed to discharge the burden of proving Gran's insubordination or willful

disobedience. As indicated by the second requirement provided for in Micro Sales
Operation Network, in order to justify willful disobedience, we must determine whether
the order violated by the employee is reasonable, lawful, made known to the employee,
and pertains to the duties which he had been engaged to discharge. In the case at bar,
petitioner failed to show that the order of the company which was violatedthe
submission of "Daily Activity Reports"was part of Gran's duties as a Computer
Specialist. Before the Labor Arbiter, EDI should have provided a copy of the company
policy, Gran's job description, or any other document that would show that the "Daily
Activity Reports" were required for submission by the employees, more particularly by a
Computer Specialist.
Even though EDI and/or ESI were merely the local employment or recruitment agencies
and not the foreign employer, they should have adduced additional evidence to
convincingly show that Gran's employment was validly and legally terminated. The
burden devolves not only upon the foreign-based employer but also on the employment
or recruitment agency for the latter is not only an agent of the former, but is also
solidarily liable with the foreign principal for any claims or liabilities arising from the
dismissal of the worker.48
Thus, petitioner failed to prove that Gran was justifiably dismissed due to
incompetence, insubordination, or willful disobedience.
Petitioner also raised the issue that Prieto v. NLRC,49 as used by the CA in its Decision, is
not applicable to the present case.
In Prieto, this Court ruled that "[i]t is presumed that before their deployment, the
petitioners were subjected to trade tests required by law to be conducted by the
recruiting agency to insure employment of only technically qualified workers for the
foreign principal."50 The CA, using the ruling in the said case, ruled that Gran must have
passed the test; otherwise, he would not have been hired. Therefore, EDI was at fault
when it deployed Gran who was allegedly "incompetent" for the job.
According to petitioner, the Prieto ruling is not applicable because in the case at hand,
Gran misrepresented himself in his curriculum vitae as a Computer Specialist; thus, he
was not qualified for the job for which he was hired.
We disagree.
The CA is correct in applying Prieto. The purpose of the required trade test is to weed out
incompetent applicants from the pool of available workers. It is supposed to reveal
applicants with false educational backgrounds, and expose bogus qualifications. Since
EDI deployed Gran to Riyadh, it can be presumed that Gran had passed the required
trade test and that Gran is qualified for the job. Even if there was no objective trade test
done by EDI, it was still EDI's responsibility to subject Gran to a trade test; and its failure
to do so only weakened its position but should not in any way prejudice Gran. In any
case, the issue is rendered moot and academic because Gran's incompetency is
unproved.

Fourth Issue: Gran was not Afforded Due Process

As discussed earlier, in the absence of proof of Saudi laws, Philippine Labor laws and
regulations shall govern the relationship between Gran and EDI. Thus, our laws and rules
on the requisites of due process relating to termination of employment shall apply.

Petitioner EDI claims that private respondent Gran was afforded due process, since he
was allowed to work and improve his capabilities for five months prior to his
termination.51 EDI also claims that the requirements of due process, as enunciated in
Santos, Jr. v. NLRC,52 and Malaya Shipping Services, Inc. v. NLRC,53 cited by the CA in its
Decision, were properly observed in the present case.
This position is untenable.
In Agabon v. NLRC,54 this Court held that:
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the
employer must give the employee two written notices and a hearing or
opportunity to be heard if requested by the employee before terminating the
employment: a notice specifying the grounds for which dismissal is sought a
hearing or an opportunity to be heard and after hearing or opportunity to be
heard, a notice of the decision to dismiss; and (2) if the dismissal is based on
authorized causes under Articles 283 and 284, the employer must give the
employee and the Department of Labor and Employment written notices 30 days
prior to the effectivity of his separation.
Under the twin notice requirement, the employees must be given two (2) notices before
their employment could be terminated: (1) a first notice to apprise the employees of
their fault, and (2) a second notice to communicate to the employees that their
employment is being terminated. In between the first and second notice, the employees
should be given a hearing or opportunity to defend themselves personally or by counsel
of their choice.55
A careful examination of the records revealed that, indeed, OAB's manner of dismissing
Gran fell short of the two notice requirement. While it furnished Gran the written notice
informing him of his dismissal, it failed to furnish Gran the written notice apprising him of
the charges against him, as prescribed by the Labor Code. 56 Consequently, he was
denied the opportunity to respond to said notice. In addition, OAB did not schedule a
hearing or conference with Gran to defend himself and adduce evidence in support of his
defenses. Moreover, the July 9, 1994 termination letter was effective on the same day.
This shows that OAB had already condemned Gran to dismissal, even before Gran was
furnished the termination letter. It should also be pointed out that OAB failed to give
Gran the chance to be heard and to defend himself with the assistance of a
representative in accordance with Article 277 of the Labor Code. Clearly, there was no
intention to provide Gran with due process. Summing up, Gran was notified and his
employment arbitrarily terminated on the same day, through the same letter, and for
unjustified grounds. Obviously, Gran was not afforded due process.
Pursuant to the doctrine laid down in Agabon,57 an employer is liable to pay nominal
damages as indemnity for violating the employee's right to statutory due process. Since
OAB was in breach of the due process requirements under the Labor Code and its
regulations, OAB, ESI, and EDI, jointly and solidarily, are liable to Gran in the amount of
PhP 30,000.00 as indemnity.
Fifth and Last Issue: Gran is Entitled to Backwages
We reiterate the rule that with regard to employees hired for a fixed period of
employment, in cases arising before the effectivity of R.A. No. 8042 58 (Migrant Workers
and Overseas Filipinos Act) on August 25, 1995, that when the contract is for a fixed
term and the employees are dismissed without just cause, they are entitled to the
payment of their salaries corresponding to the unexpired portion of their contract. 59 On
the other hand, for cases arising after the effectivity of R.A. No. 8042, when the
termination of employment is without just, valid or authorized cause as defined by law or

contract, the worker shall be entitled to the full reimbursement of his placement fee with
interest of twelve percent (12%) per annum, plus his salaries for the unexpired portion of
his employment contract or for three (3) months for every year of the unexpired term
whichever is less.60
In the present case, the employment contract provides that the employment contract
shall be valid for a period of two (2) years from the date the employee starts to work
with the employer.61 Gran arrived in Riyadh, Saudi Arabia and started to work on
February 7, 1994;62 hence, his employment contract is until February 7, 1996. Since he
was illegally dismissed on July 9, 1994, before the effectivity of R.A. No. 8042, he is
therefore entitled to backwages corresponding to the unexpired portion of his contract,
which was equivalent to USD 16,150.
Petitioner EDI questions the legality of the award of backwages and mainly relies on the
Declaration which is claimed to have been freely and voluntarily executed by Gran. The
relevant portions of the Declaration are as follows:
I, ELEAZAR GRAN (COMPUTER SPECIALIST) AFTER RECEIVING MY FINAL
SETTLEMENT ON THIS DATE THE AMOUNT OF:
S.R. 2,948.00 (SAUDI RIYALS TWO THOUSAND NINE
HUNDRED FORTY EIGHT ONLY)
REPRESENTING COMPLETE PAYMENT (COMPENSATION) FOR THE SERVICES I
RENDERED TO OAB ESTABLISHMENT.
I HEREBY DECLARE THAT OAB EST. HAS NO FINANCIAL OBLIGATION IN MY FAVOUR
AFTER RECEIVING THE ABOVE MENTIONED AMOUNT IN CASH.
I STATE FURTHER THAT OAB EST. HAS NO OBLIGATION TOWARDS ME IN WHATEVER
FORM.
I ATTEST TO THE TRUTHFULNESS OF THIS STATEMENT BY AFFIXING MY SIGNATURE
VOLUNTARILY.
SIGNED.
ELEAZAR GRAN
Courts must undertake a meticulous and rigorous review of quitclaims or waivers, more
particularly those executed by employees. This requirement was clearly articulated by
Chief Justice Artemio V. Panganiban in Land and Housing Development Corporation v.
Esquillo:
Quitclaims, releases and other waivers of benefits granted by laws or contracts in
favor of workers should be strictly scrutinized to protect the weak and the
disadvantaged. The waivers should be carefully examined, in regard not
only to the words and terms used, but also the factual circumstances
under which they have been executed.63 (Emphasis supplied.)
This Court had also outlined in Land and Housing Development Corporation, citing
Periquet v. NLRC,64 the parameters for valid compromise agreements, waivers, and
quitclaims:
Not all waivers and quitclaims are invalid as against public policy. If the agreement
was voluntarily entered into and represents a reasonable settlement, it is binding
on the parties and may not later be disowned simply because of a change of mind.
It is only where there is clear proof that the waiver was wangled from an
unsuspecting or gullible person, or the terms of settlement are unconscionable on
its face, that the law will step in to annul the questionable transaction. But where
it is shown that the person making the waiver did so voluntarily, with full
understanding of what he was doing, and the consideration for the
quitclaim is credible and reasonable, the transaction must be recognized as a
valid and binding undertaking. (Emphasis supplied.)

Is the waiver and quitclaim labeled a Declaration valid? It is not.

The Court finds the waiver and quitclaim null and void for the following reasons:
1. The salary paid to Gran upon his termination, in the amount of SR 2,948.00, is
unreasonably low. As correctly pointed out by the court a quo, the payment of SR
2,948.00 is even lower than his monthly salary of SR 3,190.00 (USD 850.00). In addition,
it is also very much less than the USD 16,150.00 which is the amount Gran is legally
entitled to get from petitioner EDI as backwages.
2. The Declaration reveals that the payment of SR 2,948.00 is actually the payment for
Gran's salary for the services he rendered to OAB as Computer Specialist. If the
Declaration is a quitclaim, then the consideration should be much much more than the
monthly salary of SR 3,190.00 (USD 850.00)although possibly less than the estimated
Gran's salaries for the remaining duration of his contract and other benefits as employee
of OAB. A quitclaim will understandably be lower than the sum total of the amounts and
benefits that can possibly be awarded to employees or to be earned for the remainder of
the contract period since it is a compromise where the employees will have to forfeit a
certain portion of the amounts they are claiming in exchange for the early payment of a
compromise amount. The court may however step in when such amount is
unconscionably low or unreasonable although the employee voluntarily agreed to it. In
the case of the Declaration, the amount is unreasonably small compared to the future
wages of Gran.
3. The factual circumstances surrounding the execution of the Declaration would show
that Gran did not voluntarily and freely execute the document. Consider the following
chronology of events:
a. On July 9, 1994, Gran received a copy of his letter of termination;
b. On July 10, 1994, Gran was instructed to depart Saudi Arabia and required to
pay his plane ticket;65
c. On July 11, 1994, he signed the Declaration;
d. On July 12, 1994, Gran departed from Riyadh, Saudi Arabia; and
e. On July 21, 1994, Gran filed the Complaint before the NLRC.
The foregoing events readily reveal that Gran was "forced" to sign the Declaration and
constrained to receive the amount of SR 2,948.00 even if it was against his willsince he
was told on July 10, 1994 to leave Riyadh on July 12, 1994. He had no other choice but to
sign the Declaration as he needed the amount of SR 2,948.00 for the payment of his
ticket. He could have entertained some apprehensions as to the status of his stay or
safety in Saudi Arabia if he would not sign the quitclaim.
4. The court a quo is correct in its finding that the Declaration is a contract of adhesion
which should be construed against the employer, OAB. An adhesion contract is contrary
to public policy as it leaves the weaker partythe employeein a "take-it-or-leave-it"
situation. Certainly, the employer is being unjust to the employee as there is no
meaningful choice on the part of the employee while the terms are unreasonably
favorable to the employer.66
Thus, the Declaration purporting to be a quitclaim and waiver is unenforceable under
Philippine laws in the absence of proof of the applicable law of Saudi Arabia.
In order to prevent disputes on the validity and enforceability of quitclaims and waivers
of employees under Philippine laws, said agreements should contain the following:
1. A fixed amount as full and final compromise settlement;
2. The benefits of the employees if possible with the corresponding amounts, which the
employees are giving up in consideration of the fixed compromise amount;

3. A statement that the employer has clearly explained to the employee in English,
Filipino, or in the dialect known to the employeesthat by signing the waiver or
quitclaim, they are forfeiting or relinquishing their right to receive the benefits which are
due them under the law; and
4. A statement that the employees signed and executed the document voluntarily, and
had fully understood the contents of the document and that their consent was freely
given without any threat, violence, duress, intimidation, or undue influence exerted on
their person.
It is advisable that the stipulations be made in English and Tagalog or in the dialect
known to the employee. There should be two (2) witnesses to the execution of the
quitclaim who must also sign the quitclaim. The document should be subscribed and
sworn to under oath preferably before any administering official of the Department of
Labor and Employment or its regional office, the Bureau of Labor Relations, the NLRC or
a labor attach in a foreign country. Such official shall assist the parties regarding the
execution of the quitclaim and waiver. 67 This compromise settlement becomes final and
binding under Article 227 of the Labor Code which provides that:
[A]ny compromise settlement voluntarily agreed upon with the assistance of the
Bureau of Labor Relations or the regional office of the DOLE, shall be final and
binding upon the parties and the NLRC or any court "shall not assume jurisdiction
over issues involved therein except in case of non-compliance thereof or if there is
prima facie evidence that the settlement was obtained through fraud,
misrepresentation, or coercion.
It is made clear that the foregoing rules on quitclaim or waiver shall apply only to labor
contracts of OFWs in the absence of proof of the laws of the foreign country agreed upon
to govern said contracts. Otherwise, the foreign laws shall apply.
WHEREFORE, the petition is DENIED. The October 18, 2000 Decision in CA-G.R. SP No.
56120 of the Court of Appeals affirming the January 15, 1999 Decision and September
30, 1999 Resolution of the NLRC
is AFFIRMED with the MODIFICATION that petitioner EDI-Staffbuilders International,
Inc. shall pay the amount of PhP 30,000.00 to respondent Gran as nominal damages for
non-compliance with statutory due process.
No costs.
SO ORDERED
G.R. No. 161757
SUNACE INTERNATIONAL
MANAGEMENT SERVICES, INC.
COMMISSION

- versus - NATIONAL LABOR RELATIONS

DECISION
CARPIO MORALES, J.:
Petitioner, Sunace International Management Services (Sunace), a corporation
duly organized and existing under the laws of the Philippines, deployed to Taiwan Divina
A. Montehermozo (Divina) as a domestic helper under a 12-month contract effective
February 1, 1997.[1] The deployment was with the assistance of a Taiwanese broker,
Edmund Wang, President of Jet Crown International Co., Ltd.

After her 12-month contract expired on February 1, 1998, Divina continued

working for her Taiwanese employer, Hang Rui Xiong, for two more years, after which she
returned to the Philippines on February 4, 2000.
Shortly after her return or on February 14, 2000, Divina filed a complaint[2] before
the National Labor Relations Commission (NLRC) against Sunace, one Adelaide Perez, the
Taiwanese broker, and the employer-foreign principal alleging that she was jailed for
three months and that she was underpaid.
The following day or on February 15, 2000, Labor Arbitration Associate Regina T.
Gavin issued Summons[3] to the Manager of Sunace, furnishing it with a copy of Divinas
complaint and directing it to appear for mandatory conference on February 28, 2000.
The scheduled mandatory conference was reset. It appears to have been
concluded, however.
On April 6, 2000, Divina filed her Position Paper[4] claiming that under her original
one-year contract and the 2-year extended contract which was with the knowledge and
consent of Sunace, the following amounts representing income tax and savings were
deducted:
Year

Deduction for
Income Tax

Deduction for Savings

1997
1998
1999

NT10,450.00
NT9,500.00
NT13,300.00

NT23,100.00
NT36,000.00
NT36,000.00;[5]

and while the amounts deducted in 1997 were refunded to her, those deducted in 1998
and 1999 were not. On even date, Sunace, by its Proprietor/General Manager Maria Luisa
Olarte, filed its Verified Answer and Position Paper,[6] claiming as follows, quoted
verbatim:
COMPLAINANT IS NOT ENTITLED
FOR THE REFUND OF HER 24 MONTHS
SAVINGS
3. Complainant could not anymore claim nor entitled for the refund of her 24
months savings as she already took back her saving already last year and
the employer did not deduct any money from her salary, in accordance with
a Fascimile Message from the respondent SUNACEs employer, Jet Crown
International Co. Ltd., a xerographic copy of which is herewith attached as
ANNEX 2 hereof;
COMPLAINANT IS NOT ENTITLED
TO REFUND OF HER 14 MONTHS TAX
AND PAYMENT OF ATTORNEYS FEES
4. There is no basis for the grant of tax refund to the complainant as the she
finished her one year contract and hence, was not illegally dismissed by
her employer. She could only lay claim over the tax refund or much more
be awarded of damages such as attorneys fees as said reliefs are available
only when the dismissal of a migrant worker is without just valid or lawful
cause as defined by law or contract.

The rationales behind the award of tax refund and payment of attorneys fees is
not to enrich the complainant but to compensate him for actual injury
suffered. Complainant did not suffer injury, hence, does not deserve to be
compensated for whatever kind of damages.
Hence, the complainant has NO cause of action against respondent SUNACE for
monetary claims, considering that she has been totally paid of all the
monetary benefits due her under her Employment Contract to her full
satisfaction.
6.
Furthermore, the tax deducted from her salary is in compliance
with the Taiwanese law, which respondent SUNACE has no control and
complainant has to obey and this Honorable Office has no
authority/jurisdiction to intervene because the power to tax is a sovereign
power which the Taiwanese Government is supreme in its own territory.
The sovereign power of taxation of a state is recognized under
international law and among sovereign states.
7. That respondent SUNACE respectfully reserves the right to file supplemental
Verified Answer and/or Position Paper to substantiate its prayer for the
dismissal of the above case against the herein respondent. AND BY WAY OF
x x x x (Emphasis and underscoring supplied)
Reacting to Divinas Position Paper, Sunace filed on April 25, 2000 an . . . ANSWER TO
COMPLAINANTS POSITION PAPER[7] alleging that Divinas 2-year extension of her contract was
without its knowledge and consent, hence, it had no liability attaching to any claim
arising therefrom, and Divina in fact executed a Waiver/Quitclaim and Release of
Responsibility and an Affidavit of Desistance, copy of each document was annexed to
said . . . ANSWER TO COMPLAINANTS POSITION PAPER.
To Sunaces . . . ANSWER TO COMPLAINANTS POSITION PAPER, Divina filed a 2-page reply,[8]
without, however, refuting Sunaces disclaimer of knowledge of the extension of her
contract and without saying anything about the Release, Waiver and Quitclaim and
Affidavit of Desistance.
The Labor Arbiter, rejected Sunaces claim that the extension of Divinas contract for two
more years was without its knowledge and consent in this wise:
We reject Sunaces submission that it should not be held
responsible for the amount withheld because her contract was
extended for 2 more years without its knowledge and consent
because as Annex B[9] shows, Sunace and Edmund Wang have not
stopped communicating with each other and yet the matter of the
contracts extension and Sunaces alleged non-consent thereto has not
been categorically established.
What Sunace should have done was to write to POEA about
the extension and its objection thereto, copy furnished the
complainant herself, her foreign employer, Hang Rui Xiong and the
Taiwanese broker, Edmund Wang.
And because it did not, it is presumed to have consented to
the extension and should be liable for anything that resulted
thereform (sic).[10] (Underscoring supplied)

The Labor Arbiter rejected too Sunaces argument that it is not liable on account of
Divinas execution of a Waiver and Quitclaim and an Affidavit of Desistance. Observed the
Labor Arbiter:
Should the parties arrive at any agreement as to the whole or any
part of the dispute, the same shall be reduced to writing and signed by the
parties and their respective counsel (sic), if any, before the Labor Arbiter.
The settlement shall be approved by the Labor Arbiter after being
satisfied that it was voluntarily entered into by the parties and after having
explained to them the terms and consequences thereof.
A compromise agreement entered into by the parties not in the
presence of the Labor Arbiter before whom the case is pending shall be
approved by him, if after confronting the parties, particularly the
complainants, he is satisfied that they understand the terms and conditions
of the settlement and that it was entered into freely voluntarily (sic) by
them and the agreement is not contrary to law, morals, and public policy.
And because no consideration is indicated in the documents, we
strike them down as contrary to law, morals, and public policy.[11]
He accordingly decided in favor of Divina, by decision of October 9, 2000,[12] the
dispositive portion of which reads:
Wherefore, judgment is hereby rendered ordering respondents
SUNACE INTERNATIONAL SERVICES and its owner ADELAIDA PERGE, both in
their personal capacities and as agent of Hang Rui Xiong/Edmund Wang to
jointly and severally pay complainant DIVINA A. MONTEHERMOZO the sum
of NT91,950.00 in its peso equivalent at the date of payment, as refund for
the amounts which she is hereby adjudged entitled to as earlier discussed
plus 10% thereof as attorneys fees since compelled to litigate, complainant
had to engage the services of counsel.
SO ORDERED.[13] (Underescoring supplied)
On appeal of Sunace, the NLRC, by Resolution of April 30, 2002,[14] affirmed the
Labor Arbiters decision.
Via petition for certiorari,[15] Sunace elevated the case to the Court of Appeals
which dismissed it outright by Resolution of November 12, 2002,[16] the full text of
which reads:
The petition for certiorari faces outright dismissal.
The petition failed to allege facts constitutive of grave abuse of
discretion on the part of the public respondent amounting to lack of
jurisdiction when the NLRC affirmed the Labor Arbiters finding that
petitioner Sunace International Management Services impliedly consented
to the extension of the contract of private respondent Divina A.
Montehermozo. It is undisputed that petitioner was continually
communicating with private respondents foreign employer (sic). As agent of
the foreign principal, petitioner cannot profess ignorance of such extension
as obviously, the act of the principal extending complainant (sic)
employment contract necessarily bound it. Grave abuse of discretion
is not present in the case at bar.

ACCORDINGLY, the petition is hereby DENIED DUE COURSE and

DISMISSED.[17]
SO ORDERED.
(Emphasis on words in capital letters in the original; emphasis on
words in small letters and underscoring supplied)
Its Motion for Reconsideration having been denied by the appellate court by Resolution
of January 14, 2004,[18] Sunace filed the present petition for review on certiorari.
The Court of Appeals affirmed the Labor Arbiter and NLRCs finding that Sunace
knew of and impliedly consented to the extension of Divinas 2-year contract. It went on
to state that It is undisputed that [Sunace] was continually communicating with [Divinas]
foreign employer. It thus concluded that [a]s agent of the foreign principal, petitioner
cannot profess ignorance of such extension as obviously, the act of the principal
extending complainant (sic) employment contract necessarily bound it.
Contrary to the Court of Appeals finding, the alleged continuous communication
was with the Taiwanese broker Wang, not with the foreign employer Xiong.
The February 21, 2000 telefax message from the Taiwanese broker to Sunace, the
only basis of a finding of continuous communication, reads verbatim:
xxxx
Regarding to Divina, she did not say anything about her
saving in police station. As we contact with her employer, she
took back her saving already last years. And they did not
deduct any money from her salary. Or she will call back her
employer to check it again. If her employer said yes! we will
get it back for her.
Thank you and best regards.
(sgd.)
Edmund Wang
President[19]
The finding of the Court of Appeals solely on the basis of the above-quoted
telefax message, that Sunace continually communicated with the foreign principal (sic)
and therefore was aware of and had consented to the execution of the extension of the
contract is misplaced. The message does not provide evidence that Sunace was privy to
the new contract executed after the expiration on February 1, 1998 of the original
contract. That Sunace and the Taiwanese broker communicated regarding Divinas
allegedly withheld savings does not necessarily mean that Sunace ratified the extension
of the contract. As Sunace points out in its Reply[20] filed before the Court of Appeals,
As can be seen from that letter communication, it was just an
information given to the petitioner that the private respondent had
t[aken] already her savings from her foreign employer and that no
deduction was made on her salary. It contains nothing about the
extension or the petitioners consent thereto.[21]
Parenthetically, since the telefax message is dated February 21, 2000, it is safe to
assume that it was sent to enlighten Sunace who had been directed, by Summons issued

on February 15, 2000, to appear on February 28, 2000 for a mandatory conference
following Divinas filing of the complaint on February 14, 2000.
Respecting the Court of Appeals following dictum:
As agent of its foreign principal, [Sunace] cannot profess ignorance of
such an extension as obviously, the act of its principal extending [Divinas]
employment contract necessarily bound it,[22]
it too is a misapplication, a misapplication of the theory of imputed knowledge.
The theory of imputed knowledge ascribes the knowledge of the agent, Sunace, to the
principal, employer Xiong, not the other way around.[23] The knowledge of the
principal-foreign employer cannot, therefore, be imputed to its agent Sunace.
There being no substantial proof that Sunace knew of and consented to be bound
under the 2-year employment contract extension, it cannot be said to be privy thereto.
As such, it and its owner cannot be held solidarily liable for any of Divinas claims arising
from the 2-year employment extension. As the New Civil Code provides,
Contracts take effect only between the parties, their assigns,
and heirs, except in case where the rights and obligations arising
from the contract are not transmissible by their nature, or by
stipulation or by provision of law.[24]
Furthermore, as Sunace correctly points out, there was an implied revocation of its
agency relationship with its foreign principal when, after the termination of the original
employment contract, the foreign principal directly negotiated with Divina and entered
into a new and separate employment contract in Taiwan. Article 1924 of the New Civil
Code reading
The agency is revoked if the principal directly manages the business
entrusted to the agent, dealing directly with third persons.
thus applies.
In light of the foregoing discussions, consideration of the validity of the Waiver and
Affidavit of Desistance which Divina executed in favor of Sunace is rendered
unnecessary.
WHEREFORE, the petition is GRANTED. The challenged resolutions of the Court
of Appeals are hereby REVERSED and SET ASIDE. The complaint of respondent Divina
A. Montehermozo against petitioner is DISMISSED.
SO ORDERED.

G.R. No. 162419

July 10, 2007

PAUL V. SANTIAGO, petitioner,

vs.
CF SHARP CREW MANAGEMENT, INC., respondent.
DECISION
TINGA, J.:
At the heart of this case involving a contract between a seafarer, on one hand, and the
manning agent and the foreign principal, on the other, is this erstwhile unsettled legal
quandary: whether the seafarer, who was prevented from leaving the port of Manila and
refused deployment without valid reason but whose POEA-approved employment
contract provides that the employer-employee relationship shall commence only upon
the seafarers actual departure from the port in the point of hire, is entitled to relief?
This treats of the petition for review filed by Paul V. Santiago (petitioner) assailing the
Decision and Resolution of the Court of Appeals dated 16 October 2003 and 19 February
2004, respectively, in CA-G.R. SP No. 68404.1
Petitioner had been working as a seafarer for Smith Bell Management, Inc. (respondent)
for about five (5) years.2 On 3 February 1998, petitioner signed a new contract of
employment with respondent, with the duration of nine (9) months. He was assured of a
monthly salary of US$515.00, overtime pay and other benefits. The following day or on 4
February 1998, the contract was approved by the Philippine Overseas Employment
Administration (POEA). Petitioner was to be deployed on board the "MSV Seaspread"
which was scheduled to leave the port of Manila for Canada on 13 February 1998.
A week before the scheduled date of departure, Capt. Pacifico Fernandez, respondents
Vice President, sent a facsimile message to the captain of "MSV Seaspread," which
reads:
I received a phone call today from the wife of Paul Santiago in Masbate asking me
not to send her husband to MSV Seaspread anymore. Other callers who did not
reveal their identity gave me some feedbacks that Paul Santiago this time if
allowed to depart will jump ship in Canada like his brother Christopher Santiago,
O/S who jumped ship from the C.S. Nexus in Kita-kyushu, Japan last December,
1997.
We do not want this to happen again and have the vessel penalized like the C.S.
Nexus in Japan.
Forewarned is forearmed like his brother when his brother when he was applying
he behaved like a Saint but in his heart he was a serpent. If you agree with me
then we will send his replacement.
Kindly advise.3
To this message the captain of "MSV Seaspread" replied:
Many thanks for your advice concerning P. Santiago, A/B. Please cancel plans for
him to return to Seaspread.4
On 9 February 1998, petitioner was thus told that he would not be leaving for Canada
anymore, but he was reassured that he might be considered for deployment at some
future date.

Petitioner filed a complaint for illegal dismissal, damages, and attorney's fees against
respondent and its foreign principal, Cable and Wireless (Marine) Ltd. 5 The case was
raffled to Labor Arbiter Teresita Castillon-Lora, who ruled that the employment contract
remained valid but had not commenced since petitioner was not deployed. According to
her, respondent violated the rules and regulations governing overseas employment
when it did not deploy petitioner, causing petitioner to suffer actual damages
representing lost salary income for nine (9) months and fixed overtime fee, all
amounting to US$7, 209.00.
The labor arbiter held respondent liable. The dispositive portion of her Decision dated 29
January 1999 reads:
WHEREFORE, premises considered, respondent is hereby Ordered to pay
complainant actual damages in the amount of US$7,209.00 plus 10% attorney's
fees, payable in Philippine peso at the rate of exchange prevailing at the time of
payment.
All the other claims are hereby DISMISSED for lack of merit.
SO ORDERED.6
On appeal by respondent, the National Labor Relations Commission (NLRC) ruled that
there is no employer-employee relationship between petitioner and respondent because
under the Standard Terms and Conditions Governing the Employment of Filipino
Seafarers on Board Ocean Going Vessels (POEA Standard Contract), the employment
contract shall commence upon actual departure of the seafarer from the airport or
seaport at the point of hire and with a POEA-approved contract. In the absence of an
employer-employee relationship between the parties, the claims for illegal dismissal,
actual damages, and attorneys fees should be dismissed. 7 On the other hand, the NLRC
found respondents decision not to deploy petitioner to be a valid exercise of its
management prerogative.8 The NLRC disposed of the appeal in this wise:
WHEREFORE, in the light of the foregoing, the assailed Decision dated January 29,
1999 is hereby AFFIRMED in so far as other claims are concerned and with
MODIFICATION by VACATING the award of actual damages and attorneys fees as
well as excluding Pacifico Fernandez as party respondent.
SO ORDERED.9
Petitioner moved for the reconsideration of the NLRCs Decision but his motion was
denied for lack of merit.10 He elevated the case to the Court of Appeals through a
petition for certiorari.
In its Decision11 dated 16 October 2003, the Court of Appeals noted that there is an
ambiguity in the NLRCs Decision when it affirmed with modification the labor arbiters
Decision, because by the very modification introduced by the Commission (vacating the
award of actual damages and attorneys fees), there is nothing more left in the labor
arbiters Decision to affirm.12
According to the appellate court, petitioner is not entitled to actual damages because
damages are not recoverable by a worker who was not deployed by his agency within
the period prescribed in the POEA Rules. 13 It agreed with the NLRCs finding that
petitioners non-deployment was a valid exercise of respondents management
prerogative.14 It added that since petitioner had not departed from the Port of Manila, no
employer-employee relationship between the parties arose and any claim for damages
against the so-called employer could have no leg to stand on. 15
Petitioners subsequent motion for reconsideration was denied on 19 February 2004. 16
The present petition is anchored on two grounds, to wit:
A. The Honorable Court of Appeals committed a serious error of law when it
ignored [S]ection 10 of Republic Act [R.A.] No. 8042 otherwise known as the
Migrant Workers Act of 1995 as well as Section 29 of the Standard Terms and

Conditions Governing the Employment of Filipino Seafarers On-Board Ocean-Going

Vessels (which is deemed incorporated under the petitioners POEA approved
Employment Contract) that the claims or disputes of the Overseas Filipino Worker
by virtue of a contract fall within the jurisdiction of the Labor Arbiter of the NLRC.
B. The Honorable Court of Appeals committed a serious error when it disregarded
the required quantum of proof in labor cases, which is substantial evidence, thus a
total departure from established jurisprudence on the matter. 17
Petitioner maintains that respondent violated the Migrant Workers Act and the POEA
Rules when it failed to deploy him within thirty (30) calendar days without a valid reason.
In doing so, it had unilaterally and arbitrarily prevented the consummation of the POEAapproved contract. Since it prevented his deployment without valid basis, said
deployment being a condition to the consummation of the POEA contract, the contract is
deemed consummated, and therefore he should be awarded actual damages, consisting
of the stipulated salary and fixed overtime pay. 18 Petitioner adds that since the contract
is deemed consummated, he should be considered an employee for all intents and
purposes, and thus the labor arbiter and/or the NLRC has jurisdiction to take cognizance
of his claims.19
Petitioner additionally claims that he should be considered a regular employee, having
worked for five (5) years on board the same vessel owned by the same principal and
manned by the same local agent. He argues that respondents act of not deploying him
was a scheme designed to prevent him from attaining the status of a regular employee. 20
Petitioner submits that respondent had no valid and sufficient cause to abandon the
employment contract, as it merely relied upon alleged phone calls from his wife and
other unnamed callers in arriving at the conclusion that he would jump ship like his
brother. He points out that his wife had executed an affidavit 21 strongly denying having
called respondent, and that the other alleged callers did not even disclose their identities
to respondent.22 Thus, it was error for the Court of Appeals to adopt the unfounded
conclusion of the NLRC, as the same was not based on substantial evidence. 23
On the other hand, respondent argues that the Labor Arbiter has no jurisdiction to award
petitioners monetary claims. His employment with respondent did not commence
because his deployment was withheld for a valid reason. Consequently, the labor arbiter
and/or the NLRC cannot entertain adjudication of petitioners case much less award
damages to him. The controversy involves a breach of contractual obligations and as
such is cognizable by civil courts. 24 On another matter, respondent claims that the
second issue posed by petitioner involves a recalibration of facts which is outside the
jurisdiction of this Court.25
There is some merit in the petition.
There is no question that the parties entered into an employment contract on 3 February
1998, whereby petitioner was contracted by respondent to render services on board
"MSV Seaspread" for the consideration of US$515.00 per month for nine (9) months, plus
overtime pay. However, respondent failed to deploy petitioner from the port of Manila to
Canada. Considering that petitioner was not able to depart from the airport or seaport in
the point of hire, the employment contract did not commence, and no employeremployee relationship was created between the parties. 26
However, a distinction must be made between the perfection of the employment
contract and the commencement of the employer-employee relationship. The perfection
of the contract, which in this case coincided with the date of execution thereof, occurred
when petitioner and respondent agreed on the object and the cause, as well as the rest
of the terms and conditions therein. The commencement of the employer-employee
relationship, as earlier discussed, would have taken place had petitioner been actually
deployed from the point of hire. Thus, even before the start of any employer-employee

relationship, contemporaneous with the perfection of the employment contract was the
birth of certain rights and obligations, the breach of which may give rise to a cause of
action against the erring party. Thus, if the reverse had happened, that is the seafarer
failed or refused to be deployed as agreed upon, he would be liable for damages.
Moreover, while the POEA Standard Contract must be recognized and respected, neither
the manning agent nor the employer can simply prevent a seafarer from being deployed
without a valid reason.
Respondents act of preventing petitioner from departing the port of Manila and boarding
"MSV Seaspread" constitutes a breach of contract, giving rise to petitioners cause of
action. Respondent unilaterally and unreasonably reneged on its obligation to deploy
petitioner and must therefore answer for the actual damages he suffered.
We take exception to the Court of Appeals conclusion that damages are not recoverable
by a worker who was not deployed by his agency. The fact that the POEA Rules 27 are
silent as to the payment of damages to the affected seafarer does not mean that the
seafarer is precluded from claiming the same. The sanctions provided for nondeployment do not end with the suspension or cancellation of license or fine and the
return of all documents at no cost to the worker. They do not forfend a seafarer from
instituting an action for damages against the employer or agency which has failed to
deploy him.
The POEA Rules only provide sanctions which the POEA can impose on erring agencies. It
does not provide for damages and money claims recoverable by aggrieved employees
because it is not the POEA, but the NLRC, which has jurisdiction over such matters.
Despite the absence of an employer-employee relationship between petitioner and
respondent, the Court rules that the NLRC has jurisdiction over petitioners complaint.
The jurisdiction of labor arbiters is not limited to claims arising from employer-employee
relationships. Section 10 of R.A. No. 8042 (Migrant Workers Act), provides that:
Sec. 10. Money Claims. Notwithstanding any provision of law to the contrary, the
Labor Arbiters of the National Labor Relations Commission (NLRC) shall have the
original and exclusive jurisdiction to hear and decide, within ninety (90) calendar
days after the filing of the complaint, the claims arising out of an employeremployee relationship or by virtue of any law or contract involving Filipino workers
for overseas deployment including claims for actual, moral, exemplary and other
forms of damages. x x x [Emphasis supplied]
Since the present petition involves the employment contract entered into by petitioner
for overseas employment, his claims are cognizable by the labor arbiters of the NLRC.
Article 2199 of the Civil Code provides that one is entitled to an adequate compensation
only for such pecuniary loss suffered by him as he has duly proved. Respondent is thus
liable to pay petitioner actual damages in the form of the loss of nine (9) months worth
of salary as provided in the contract. He is not, however, entitled to overtime pay. While
the contract indicated a fixed overtime pay, it is not a guarantee that he would receive
said amount regardless of whether or not he rendered overtime work. Even though
petitioner was "prevented without valid reason from rendering regular much less
overtime service,"28 the fact remains that there is no certainty that petitioner will
perform overtime work had he been allowed to board the vessel. The amount of
US$286.00 stipulated in the contract will be paid only if and when the employee
rendered overtime work. This has been the tenor of our rulings in the case of StoltNielsen Marine Services (Phils.), Inc. v. National Labor Relations Commission 29 where we
discussed the matter in this light:

The contract provision means that the fixed overtime pay of 30% would be the
basis for computing the overtime pay if and when overtime work would be
rendered. Simply stated, the rendition of overtime work and the submission of
sufficient proof that said work was actually performed are conditions to be
satisfied before a seaman could be entitled to overtime pay which should be
computed on the basis of 30% of the basic monthly salary. In short, the contract
provision guarantees the right to overtime pay but the entitlement to such benefit
must first be established. Realistically speaking, a seaman, by the very nature of
his job, stays on board a ship or vessel beyond the regular eight-hour work
schedule. For the employer to give him overtime pay for the extra hours when he
might be sleeping or attending to his personal chores or even just lulling away his
time would be extremely unfair and unreasonable. 30
The Court also holds that petitioner is entitled to attorneys fees in the concept of
damages and expenses of litigation. Attorney's fees are recoverable when the
defendant's act or omission has compelled the plaintiff to incur expenses to protect his
interest.31 We note that respondents basis for not deploying petitioner is the belief that
he will jump ship just like his brother, a mere suspicion that is based on alleged phone
calls of several persons whose identities were not even confirmed. Time and again, this
Court has upheld management prerogatives so long as they are exercised in good faith
for the advancement of the employers interest and not for the purpose of defeating or
circumventing the rights of the employees under special laws or under valid
agreements.32 Respondents failure to deploy petitioner is unfounded and unreasonable,
forcing petitioner to institute the suit below. The award of attorneys fees is thus
warranted.
However, moral damages cannot be awarded in this case. While respondents failure to
deploy petitioner seems baseless and unreasonable, we cannot qualify such action as
being tainted with bad faith, or done deliberately to defeat petitioners rights, as to
justify the award of moral damages. At most, respondent was being overzealous in
protecting its interest when it became too hasty in making its conclusion that petitioner
will jump ship like his brother.
We likewise do not see respondents failure to deploy petitioner as an act designed to
prevent the latter from attaining the status of a regular employee. Even if petitioner was
able to depart the port of Manila, he still cannot be considered a regular employee,
regardless of his previous contracts of employment with respondent. In Millares v.
National Labor Relations Commission,33 the Court ruled that seafarers are considered
contractual employees and cannot be considered as regular employees under the Labor
Code. Their employment is governed by the contracts they sign every time they are
rehired and their employment is terminated when the contract expires. The exigencies of
their work necessitates that they be employed on a contractual basis. 34
WHEREFORE, petition is GRANTED IN PART. The Decision dated 16 October 2003 and the
Resolution dated 19 February 2004 of the Court of Appeals are REVERSED and SET
ASIDE. The Decision of Labor Arbiter Teresita D. Castillon-Lora dated 29 January 1999 is
REINSTATED with the MODIFICATION that respondent CF Sharp Crew Management, Inc. is
ordered to pay actual or compensatory damages in the amount of US$4,635.00
representing salary for nine (9) months as stated in the contract, and attorneys fees at
the reasonable rate of 10% of the recoverable amount.
SO ORDERED.

G.R. No. 114337 September 29, 1995

NITTO ENTERPRISES, petitioner,
vs.
NATIONAL LABOR RELATIONS COMMISSION and ROBERTO CAPILI, respondents.
KAPUNAN, J.:
This petition for certiorari under Rule 65 of the Rules of Court seeking to annul the
decision 1 rendered by public respondent National Labor Relations Commission, which
reversed the decision of the Labor Arbiter.
Briefly, the facts of the case are as follows:
Petitioner Nitto Enterprises, a company engaged in the sale of glass and aluminum
products, hired Roberto Capili sometime in May 1990 as an apprentice machinist, molder
and core maker as evidenced by an apprenticeship agreement 2 for a period of six (6)
months from May 28, 1990 to November 28, 1990 with a daily wage rate of P66.75 which
was 75% of the applicable minimum wage.
At around 1:00 p.m. of August 2, 1990, Roberto Capili who was handling a piece of glass
which he was working on, accidentally hit and injured the leg of an office secretary who
was treated at a nearby hospital.
Later that same day, after office hours, private respondent entered a workshop within
the office premises which was not his work station. There, he operated one of the power
press machines without authority and in the process injured his left thumb. Petitioner
spent the amount of P1,023.04 to cover the medication of private respondent.
The following day, Roberto Capili was asked to resign in a letter 3 which reads:
August 2,
1990
Wala siyang tanggap ng utos mula sa superbisor at wala siyang experiensa
kung papaano gamitin and "TOOL" sa pagbuhat ng salamin, sarili niyang

desisyon ang paggamit ng tool at may disgrasya at nadamay pa ang isang

sekretarya ng kompanya.
Sa araw ding ito limang (5) minute ang nakakalipas mula alas-singko ng
hapon siya ay pumasok sa shop na hindi naman sakop ng kanyang trabaho.
Pinakialaman at kinalikot ang makina at nadisgrasya niya ang kanyang
sariling kamay.
Nakagastos ang kompanya ng mga sumusunod:
Emergency
and
doctor
fee
P715.00
Medecines (sic) and others 317.04
Bibigyan siya ng kompanya ng Siyam na araw na libreng sahod hanggang
matanggal ang tahi ng kanyang kamay.
Tatanggapin niya ang sahod niyang anim na araw, mula ika-30 ng Hulyo at
ika-4 ng Agosto, 1990.
Ang kompanya ang magbabayad ng lahat ng gastos pagtanggal ng tahi ng
kanyang kamay, pagkatapos ng siyam na araw mula ika-2 ng Agosto.
Sa lahat ng nakasulat sa itaas, hinihingi ng kompanya ang kanyang
resignasyon, kasama ng kanyang comfirmasyon at pag-ayon na ang lahat
sa itaas ay totoo.
Naiintindihan ko ang lahat ng nakasulat sa itaas, at ang lahat ng ito ay
aking pagkakasala sa hindi pagsunod sa alintuntunin ng kompanya.
(Sgd.)
Roberto
Capili
Roberto Capili
On August 3, 1990 private respondent executed a Quitclaim and Release in favor of
petitioner for and in consideration of the sum of P1,912.79. 4
Three days after, or on August 6, 1990, private respondent formally filed before the NLRC
Arbitration Branch, National Capital Region a complaint for illegal dismissal and payment
of other monetary benefits.
On October 9, 1991, the Labor Arbiter rendered his decision finding the termination of
private respondent as valid and dismissing the money claim for lack of merit. The
dispositive portion of the ruling reads:
WHEREFORE, premises considered, the termination is valid and for cause,
and the money claims dismissed for lack of merit.
The respondent however is ordered to pay the complainant the amount of
P500.00 as financial assistance.
SO ORDERED. 5
Labor Arbiter Patricio P. Libo-on gave two reasons for ruling that the dismissal of Roberto
Capilian was valid. First, private respondent who was hired as an apprentice violated the
terms of their agreement when he acted with gross negligence resulting in the injury not
only to himself but also to his fellow worker. Second, private respondent had shown that
"he does not have the proper attitude in employment particularly the handling of
machines without authority and proper training. 6
On July 26, 1993, the National Labor Relations Commission issued an order reversing the
decision of the Labor Arbiter, the dispositive portion of which reads:
WHEREFORE, the appealed decision is hereby set aside. The respondent is
hereby directed to reinstate complainant to his work last performed with
backwages computed from the time his wages were withheld up to the time
he is actually reinstated. The Arbiter of origin is hereby directed to further
hear complainant's money claims and to dispose them on the basis of law
and evidence obtaining.
SO ORDERED. 7

The NLRC declared that private respondent was a regular employee of

petitioner by ruling thus:
As correctly pointed out by the complainant, we cannot understand how an
apprenticeship agreement filed with the Department of Labor only on June
7, 1990 could be validly used by the Labor Arbiter as basis to conclude that
the complainant was hired by respondent as a plain "apprentice" on May
28, 1990. Clearly, therefore, the complainant was respondent's regular
employee under Article 280 of the Labor Code, as early as May 28,1990,
who thus enjoyed the security of tenure guaranteed in Section 3, Article XIII
of our 1987 Constitution.
The complainant being for illegal dismissal (among others) it then behooves
upon respondent, pursuant to Art. 227(b) and as ruled in Edwin Gesulgon
vs. NLRC, et al. (G.R. No. 90349, March 5, 1993, 3rd Div., Feliciano, J.) to
prove that the dismissal of complainant was for a valid cause. Absent such
proof, we cannot but rule that the complainant was illegally dismissed. 8
On January 28, 1994, Labor Arbiter Libo-on called for a conference at which only private
respondent's representative was present.
On April 22, 1994, a Writ of Execution was issued, which reads:
NOW, THEREFORE, finding merit in [private respondent's] Motion for
Issuance of the Writ, you are hereby commanded to proceed to the
premises of [petitioner] Nitto Enterprises and Jovy Foster located at No. l 74
Araneta Avenue, Portero, Malabon, Metro Manila or at any other places
where their properties are located and effect the reinstatement of herein
[private respondent] to his work last performed or at the option of the
respondent by payroll reinstatement.
You are also to collect the amount of P122,690.85 representing his
backwages as called for in the dispositive portion, and turn over such
amount to this Office for proper disposition.
Petitioner filed a motion for reconsideration but the same was denied.
Hence, the instant petition for certiorari.
The issues raised before us are the following:
I
WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE
OF DISCRETION IN HOLDING THAT PRIVATE RESPONDENT WAS NOT AN
APPRENTICE.
II
WHETHER OR NOT PUBLIC RESPONDENT NLRC COMMITTED GRAVE ABUSE
OF DISCRETION IN HOLDING THAT PETITIONER HAD NOT ADEQUATELY
PROVEN THE EXISTENCE OF A VALID CAUSE IN TERMINATING THE SERVICE
OF PRIVATE RESPONDENT.
We find no merit in the petition.
Petitioner assails the NLRC's finding that private respondent Roberto Capili cannot plainly
be considered an apprentice since no apprenticeship program had yet been filed and
approved at the time the agreement was executed.
Petitioner further insists that the mere signing of the apprenticeship agreement already
established an employer-apprentice relationship.
Petitioner's argument is erroneous.
The law is clear on this matter. Article 61 of the Labor Code provides:
Contents of apprenticeship agreement. Apprenticeship agreements,
including the main rates of apprentices, shall conform to the rules issued by

the Minister of Labor and Employment. The period of apprenticeship shall

not exceed six months. Apprenticeship agreements providing for wage rates
below the legal minimum wage, which in no case shall start below 75% per
cent of the applicable minimum wage, may be entered into only in
accordance with apprenticeship program duly approved by the Minister of
Labor and Employment. The Ministry shall develop standard model
programs of apprenticeship. (emphasis supplied)
In the case at bench, the apprenticeship agreement between petitioner and private
respondent was executed on May 28, 1990 allegedly employing the latter as an
apprentice in the trade of "care maker/molder." On the same date, an apprenticeship
program was prepared by petitioner and submitted to the Department of Labor and
Employment. However, the apprenticeship Agreement was filed only on June 7, 1990.
Notwithstanding the absence of approval by the Department of Labor and Employment,
the apprenticeship agreement was enforced the day it was signed.
Based on the evidence before us, petitioner did not comply with the requirements of the
law. It is mandated that apprenticeship agreements entered into by the employer and
apprentice shall be entered only in accordance with the apprenticeship program duly
approved by the Minister of Labor and Employment.
Prior approval by the Department of Labor and Employment of the proposed
apprenticeship program is, therefore, a condition sine quo non before an apprenticeship
agreement can be validly entered into.
The act of filing the proposed apprenticeship program with the Department of Labor and
Employment is a preliminary step towards its final approval and does not
instantaneously give rise to an employer-apprentice relationship.
Article 57 of the Labor Code provides that the State aims to "establish a national
apprenticeship program through the participation of employers, workers and government
and non-government agencies" and "to establish apprenticeship standards for the
protection of apprentices." To translate such objectives into existence, prior approval of
the DOLE to any apprenticeship program has to be secured as a condition sine qua non
before any such apprenticeship agreement can be fully enforced. The role of the DOLE in
apprenticeship programs and agreements cannot be debased.
Hence, since the apprenticeship agreement between petitioner and private respondent
has no force and effect in the absence of a valid apprenticeship program duly approved
by the DOLE, private respondent's assertion that he was hired not as an apprentice but
as a delivery boy ("kargador" or "pahinante") deserves credence. He should rightly be
considered as a regular employee of petitioner as defined by Article 280 of the Labor
Code:
Art. 280. Regular and Casual Employment. The provisions of written
agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered a regular employee with respect to the activity in which

he is employed and his employment shall continue while such activity

exists. (Emphasis supplied)
and pursuant to the constitutional mandate to "protect the rights of workers and
promote their welfare." 9
Petitioner further argues that, there is a valid cause for the dismissal of private
respondent.
There is an abundance of cases wherein the Court ruled that the twin requirements of
due process, substantive and procedural, must be complied with, before valid dismissal
exists. 10 Without which, the dismissal becomes void.
The twin requirements of notice and hearing constitute the essential elements of due
process. This simply means that the employer shall afford the worker ample opportunity
to be heard and to defend himself with the assistance of his representative, if he so
desires.
Ample opportunity connotes every kind of assistance that management must accord the
employee to enable him to prepare adequately for his defense including legal
representation. 11
As held in the case of Pepsi-Cola Bottling Co., Inc. v. NLRC:

12

The law requires that the employer must furnish the worker sought to be
dismissed with two (2) written notices before termination of employee can
be legally effected: (1) notice which apprises the employee of the particular
acts or omissions for which his dismissal is sought; and (2) the subsequent
notice which informs the employee of the employer's decision to dismiss
him (Sec. 13, BP 130; Sec. 2-6 Rule XIV, Book V, Rules and Regulations
Implementing the Labor Code as amended). Failure to comply with the
requirements taints the dismissal with illegality. This procedure is
mandatory, in the absence of which, any judgment reached by
management is void and in existent (Tingson, Jr. vs. NLRC, 185 SCRA 498
[1990]; National Service Corp. vs. NLRC, 168 SCRA 122; Ruffy vs. NLRC. 182
SCRA 365 [1990]).
The fact is private respondent filed a case of illegal dismissal with the Labor Arbiter only
three days after he was made to sign a Quitclaim, a clear indication that such resignation
was not voluntary and deliberate.
Private respondent averred that he was actually employed by petitioner as a delivery
boy ("kargador" or "pahinante").
He further asserted that petitioner "strong-armed" him into signing the aforementioned
resignation letter and quitclaim without explaining to him the contents thereof. Petitioner
made it clear to him that anyway, he did not have a choice. 13
Petitioner cannot disguise the summary dismissal of private respondent by orchestrating
the latter's alleged resignation and subsequent execution of a Quitclaim and Release. A
judicious examination of both events belies any spontaneity on private respondent's
part.
WHEREFORE, finding no abuse of discretion committed by public respondent National
Labor Relations Commission, the appealed decision is hereby AFFIRMED.
SO ORDERED.

G.R. No. 122917 July 12, 1999

MARITES BERNARDO, ,
vs.
NATIONAL LABOR RELATIONS COMMISSION and FAR EAST BANK AND TRUST
COMPANY, respondents.
PANGANIBAN, J.:
The Magna Carta for Disabled Persons mandates that qualified disabled persons be
granted the same terms and conditions of employment as qualified able-bodied
employees. Once they have attained the status of regular workers, they should be
accorded all the benefits granted by law, notwithstanding written or verbal contracts to
the contrary. This treatments is rooted not merely on charity or accomodation, but on
justice for all.
The Case

Challenged in the Petition for Certiorari 1 before us is the June 20, 1995 Decision 2 of the
National Labor Relations Commission (NLRC), 3 which affirmed the August, 22 1994 ruling
of Labor Arbiter Cornelio L. Linsangan. The labor arbiter's Decision disposed as follows: 4
WHEREFORE, judgment is hereby rendered dismissing the above-mentioned
complaint for lack of merit.
Also assailed is the August 4, 1995 Resolution
Reconsideration.

of the NLRC, which denied the Motion for

The Facts
The facts were summarized by the NLRC in this wise: 6
Complainants numbering 43 (p. 176, Records) are deaf-mutes who were
hired on various periods from 1988 to 1993 by respondent Far East Bank
and Trust Co. as Money Sorters and Counters through a uniformly worded
agreement called "Employment Contract for Handicapped Workers". (pp. 68
& 69, Records) The full text of said agreement is quoted below:
EMPLOYMENT CONTRACT FOR
HANDICAPPED WORKERS
This Contract, entered into by and between:
FAR EAST BANK AND TRUST COMPANY, a universal banking
corporation duly organized and existing under and by virtue of
the laws of the Philippines, with business address at FEBTC
Building, Muralla, Intramuros, Manila, represented herein by its
Assistant Vice President, MR. FLORENDO G. MARANAN,
(hereinafter referred to as the "BANK");
-and, years old, of legal age, , and
residing at (hereinafter referred to as the ("EMPLOYEE").
WITNESSETH : That
WHEREAS, the BANK, cognizant of its social responsibility,
realizes that there is a need to provide disabled and
handicapped persons gainful employment and opportunities to
realize their potentials, uplift their socio-economic well being
and welfare and make them productive, self-reliant and useful
citizens to enable them to fully integrate in the mainstream of
society;
WHEREAS, there are certain positions in the BANK which may
be filled-up by disabled and handicapped persons, particularly
deaf-mutes, and the BANK ha[s] been approached by some
civic-minded citizens and authorized government agencies
[regarding] the possibility of hiring handicapped workers for
these positions;
WHEREAS, the EMPLOYEE is one of those handicapped workers
who [were] recommended for possible employment with the
BANK;
NOW, THEREFORE, for and in consideration of the foregoing
premises and in compliance with Article 80 of the Labor Code
of the Philippines as amended, the BANK and the EMPLOYEE
have entered into this Employment Contract as follows:
1. The BANK agrees to employ and train the EMPLOYEE, and
the EMPLOYEE agrees to diligently and faithfully work with the
BANK, as Money Sorter and Counter.
2. The EMPLOYEE shall perform among others, the following
duties and responsibilities:
i. Sort out bills according to color;

ii. Count each denomination per

hundred, either manually or with the
aid of a counting machine;
iii. Wrap and label bills per hundred;
iv. Put the wrapped bills into
bundles; and
v. Submit bundled bills to the bank
teller for verification.
3. The EMPLOYEE shall undergo a training period of one (1)
month, after which the BANK shall determine whether or not
he/she should be allowed to finish the remaining term of this
Contract.
4. The EMPLOYEE shall be entitled to an initial compensation of
P118.00 per day, subject to adjustment in the sole judgment of
the BANK, payable every 15th and end of the
month.1wphi1.nt
5. The regular work schedule of the EMPLOYEE shall be five (5)
days per week, from Mondays thru Fridays, at eight (8) hours a
day. The EMPLOYEE may be required to perform overtime work
as circumstance may warrant, for which overtime work he/she
[shall] be paid an additional compensation of 125% of his daily
rate if performed during ordinary days and 130% if performed
during Saturday or [a] rest day.
6. The EMPLOYEE shall likewise be entitled to the following
benefits:
i. Proportionate 13th month pay
based on his basic daily wage.
ii. Five (5) days incentive leave.
iii. SSS premium payment.
7. The EMPLOYEE binds himself/herself to abide [by] and
comply with all the BANK Rules and Regulations and Policies,
and to conduct himself/herself in a manner expected of all
employees of the BANK.
8. The EMPLOYEE acknowledges the fact that he/she had been
employed under a special employment program of the BANK,
for which reason the standard hiring requirements of the BANK
were not applied in his/her case. Consequently, the EMPLOYEE
acknowledges and accepts the fact that the terms and
conditions of the employment generally observed by the BANK
with respect to the BANK's regular employee are not applicable
to the EMPLOYEE, and that therefore, the terms and conditions
of the EMPLOYEE's employment with the BANK shall be
governed solely and exclusively by this Contract and by the
applicable rules and regulations that the Department of Labor
and Employment may issue in connection with the
employment of disabled and handicapped workers. More
specifically, the EMPLOYEE hereby acknowledges that the
provisions of Book Six of the Labor Code of the Philippines as
amended, particularly on regulation of employment and
separation pay are not applicable to him/her.
9. The Employment Contract shall be for a period of six (6)
months or from to unless earlier terminated by the
BANK for any just or reasonable cause. Any continuation or
extension of this Contract shall be in writing and therefore this
Contract will automatically expire at the end of its terms unless
renewed in writing by the BANK.

IN WITNESS WHEREOF, the parties, have hereunto affixed their

signature[s] this day of , at Intramuros,
Manila, Philippines.
In 1988, two (2) deaf-mutes were hired under this Agreement; in 1989
another two (2); in 1990, nineteen (19); in 1991 six (6); in 1992, six (6) and
in 1993, twenty-one (21). Their employment[s] were renewed every six
months such that by the time this case arose, there were fifty-six (56) deafmutes who were employed by respondent under the said employment
agreement. The last one was Thelma Malindoy who was employed in 1992
and whose contract expired on July 1993.
Disclaiming that complainants were regular employees, respondent Far East
Bank and Trust Company maintained that complainants who are a special
class of workers the hearing impaired employees were hired temporarily
under [a] special employment arrangement which was a result of overtures
made by some civic and political personalities to the respondent Bank; that
complainant[s] were hired due to "pakiusap" which must be considered in
the light of the context career and working environment which is to
maintain and strengthen a corps of professionals trained and qualified
officers and regular employees who are baccalaureate degree holders from
excellent schools which is an unbending policy in the hiring of regular
employees; that in addition to this, training continues so that the regular
employee grows in the corporate ladder; that the idea of hiring
handicapped workers was acceptable to them only on a special
arrangement basis; that it was adopted the special program to help tide
over a group of workers such as deaf-mutes like the complainants who
could do manual work for the respondent Bank; that the task of counting
and sorting of bills which was being performed by tellers could be assigned
to deaf-mutes that the counting and sorting of money are tellering works
which were always logically and naturally part and parcel of the tellers'
normal functions; that from the beginning there have been no separate
items in the respondent Bank plantilla for sortes or counters; that the tellers
themselves already did the sorting and counting chore as a regular feature
and integral part of their duties (p. 97, Records); that through the
"pakiusap" of Arturo Borjal, the tellers were relieved of this task of counting
and sorting bills in favor of deaf-mutes without creating new positions as
there is no position either in the respondent or in any other bank in the
Philippines which deals with purely counting and sorting of bills in banking
operations.
Petitioners specified when each of them was hired and dimissed, viz:
NAME OF PETITIONER
WORKPLACE Date Hired
1. MARITES BERNARDO
2. ELVIRA GO DIAMANTE
3. REBECCA E. DAVID
4. DAVID P. PASCUAL
5. RAQUEL ESTILLER
6. ALBERT HALLARE
7. EDMUND M. CORTEZ
8. JOSELITO O. AGDON
9. GEORGE P. LIGUTAN JR.
10. CELSO M. YAZAR
11. ALEX G. CORPUZ

Intramuros
Intramuros
Intramuros
Bel-Air
Intramuros
West
Bel-Air
Intramuros
Intramuros
Intramuros
Intramuros

12-Nov-90
24-Jan-90
16-Apr-90
15-Oct-88
2-Jul-92
4-Jan-91
15-Jan-91
5-Nov-90
6-Sep-89
8-Feb-93
15-Feb-93

Date
Dismissed
17-Nov-93
11-Jan-94
23-Oct-93
21-Nov-94
4-Jan-94
9-Jan-94
3-Dec-93
17-Nov-93
19-Jan-94
8-Aug-93
15-Aug-93

12. RONALD M. DELFIN

Intramuros
22-Feb-93
22-Aug-93
13. ROWENA M. TABAQUERO
Intramuros
22-Feb-93
22-Aug-93
14. CORAZON C. DELOS REYES
Intramuros
8-Feb-93
8-Aug-93
15. ROBERT G. NOORA
Intramuros
15-Feb-93
15-Aug-93
16. MILAGROS O. LEQUIGAN
Intramuros
1-Feb-93
1-Aug-93
17. ADRIANA F. TATLONGHARI
Intramuros
22-Jan-93
22-Jul-93
18. IKE CABUNDUCOS
Intramuros
24-Feb-93
24-Aug-93
19. COCOY NOBELLO
Intramuros
22-Feb-93
22-Aug-93
20. DORENDA CATIMBUHAN
Intramuros
15-Feb-93
15-Aug-93
21. ROBERT MARCELO
West
31 JUL 93 8
1-Aug-93
22. LILIBETH Q. MARMOLEJO
West
15-Jun-90
21-Nov-93
23. JOSE E. SALES
West
6-Aug-92
12-Oct-93
24. ISABEL MAMAUAG
West
8-May-92
10-Nov-93
25. VIOLETA G. MONTES
Intramuros
2-Feb-90
15-Jan-94
26. ALBINO TECSON
Intramuros
7-Nov-91
10-Nov-93
27. MELODY B. GRUELA
West
28-Oct-91
3-Nov-93
28. BERNADETH D. AGERO
West
19-Dec-90
27-Dec-93
29. CYNTHIA DE VERA
Bel-Air
26-Jun-90
3-Dec-93
30. LANI R. CORTEZ
Bel-Air
15-Oct-88
10-Dec-93
31. MARIA ISABEL B.CONCEPCION West
6-Sep-90
6-Feb-94
32. DINDO VALERIO
Intramuros
30-May-93
30-Nov-93
33. ZENAIDA MATA
Intramuros
10-Feb-93
10-Aug-93
34. ARIEL DEL PILAR
Intramuros
24-Feb-93
24-Aug-93
35. MARGARET CECILIA CANOZA
Intramuros
27-Jul-90
4-Feb-94
36. THELMA SEBASTIAN
Intramuros
12-Nov-90
17-Nov-93
37. MA. JEANETTE CERVANTES
West
6-Jun-92
7-Dec-93
38. JEANNIE RAMIL
Intramuros
23-Apr-90
12-Oct-93
39. ROZAIDA PASCUAL
Bel-Air
20-Apr-89
29-Oct-93
40. PINKY BALOLOA
West
3-Jun-91
2-Dec-93
41. ELIZABETH VENTURA
West
12-Mar-90
FEB 94 [sic]
42. GRACE S. PARDO
West
4-Apr-90
13-Mar-94
43. RICO TIMOSA
Intramuros
28-Apr-93
28-Oct-93
As earlier noted, the labor arbiter and, on appeal, the NLRC ruled against herein
petitioners. Hence, this recourse to this Court. 9
The Ruling of the NLRC
In affirming the ruling of the labor arbiter that herein petitioners could not be deemed
regular employees under Article 280 of the Labor Code, as amended, Respondent
Commission ratiocinated as follows:
We agree that Art. 280 is not controlling herein. We give due credence to
the conclusion that complainants were hired as an accommodation to [the]
recommendation of civic oriented personalities whose employment[s] were
covered by . . . Employment Contract[s] with special provisions on duration
of contract as specified under Art. 80. Hence, as correctly held by the Labor
Arbiter a quo, the terms of the contract shall be the law between the
parties. 10
The NLRC also declared that the Magna Carta for Disabled Persons was not applicable,
"considering the prevailing circumstances/milieu of the case."

Issues
In their Memorandum, petitioners cite the following grounds in support of their cause:
I. The Honorable Commission committed grave abuse of discretion in
holding that the petitioners money sorters and counters working in a
bank were not regular employees.
II. The Honorable Commission committed grave abuse of discretion in
holding that the employment contracts signed and renewed by the
petitioners which provide for a period of six (6) months were valid.
III. The Honorable Commission committed grave abuse of discretion in not
applying the provisions of the Magna Carta for the Disabled (Republic Act
No. 7277), on proscription against discrimination against disabled persons.
11

In the main, the Court will resolve whether petitioners have become regular employees.
This Court's Ruling
The petition is meritorious. However, only the employees, who worked for more than six
months and whose contracts were renewed are deemed regular. Hence, their dismissal
from employement was illegal.
Preliminary Matter:
Propriety of Certiorari
Respondent Far East Bank and Trust Company argues that a review of the findings of
facts of the NLRC is not allowed in a petition for certiorari. Specifically, it maintains that
the Court cannot pass upon the findings of public respondent that petitioners were not
regular employees.
True, the Court, as a rule, does not review the factual findings of public respondents in a
certiorari proceeding. In resolving whether the petitioners have become regular
employees, we shall not change the facts found by the public respondent. Our task is
merely to determine whether the NLRC committed grave abuse of discretion in applying
the law to the established facts, as above-quoted from the assailed Decision.
Main Issue
Are Petitioners Regular Employee?
Petitioners maintain that they should be considered regular employees, because their
task as money sorters and counters was necessary and desirable to the business of
respondent bank. They further allege that their contracts served merely to preclude the
application of Article 280 and to bar them from becoming regular employees.
Private respondent, on the other hand, submits that petitioners were hired only as
"special workers and should not in any way be considered as part of the regular
complement of the Bank." 12 Rather, they were "special" workers under Article 80 of the
Labor Code. Private respondent contends that it never solicited the services of
petitioners, whose employment was merely an "accommodation" in response to the
requests of government officials and civic-minded citizens. They were told from the start,
"with the assistance of government representatives," that they could not become regular
employees because there were no plantilla positions for "money sorters," whose task
used to be performed by tellers. Their contracts were renewed several times, not
because of need "but merely for humanitarian reasons." Respondent submits that "as of
the present, the "special position" that was created for the petitioners no longer exist[s]
in private respondent [bank], after the latter had decided not to renew anymore their
special employment contracts."
At the outset, let it be known that this Court appreciates the nobility of private
respondent's effort to provide employment to physically impaired individuals and to

make them more productive members of society. However, we cannot allow it to elude
the legal consequences of that effort, simply because it now deems their employment
irrelevant. The facts, viewed in light of the Labor Code and the Magna Carta for Disabled
Persons, indubitably show that the petitioners, except sixteen of them, should be
deemed regular employees. As such, they have acquired legal rights that this Court is
duty-bound to protect and uphold, not as a matter of compassion but as a consequence
of law and justice.
The uniform employment contracts of the petitioners stipulated that they shall be
trained for a period of one month, after which the employer shall determine whether or
not they should be allowed to finish the 6-month term of the contract. Furthermore, the
employer may terminate the contract at any time for a just and reasonable cause. Unless
renewed in writing by the employer, the contract shall automatically expire at the end of
the term.1wphi1.nt
According to private respondent, the employment contracts were prepared in
accordance with Article 80 of the Labor code, which provides;
Art. 80. Employment agreement. Any employer who employs
handicapped workers shall enter into an employment agreement with them,
which agreement shall include:
(a) The names and addresses of the handicapped workers to
be employed;
(b) The rate to be paid the handicapped workers which shall be
not less than seventy five (75%) per cent of the applicable
legal minimum wage;
(c) The duration of employment period; and
(d) The work to be performed by handicapped workers.
The employment agreement shall be subject to inspection by the Secretary
of Labor or his duly authorized representatives.
The stipulations in the employment contracts indubitably conform with the aforecited
provision. Succeeding events and the enactment of RA No. 7277 (the Magna Carta for
Disabled Persons), 13 however, justify the application of Article 280 of the Labor Code
.
Respondent bank entered into the aforesaid contract with a total of 56 handicapped
workers and renewed the contracts of 37 of them. In fact, two of them worked from 1988
to 1993. Verily, the renewal of the contracts of the handicapped workers and the hiring
of others lead to the conclusion that their tasks were beneficial and necessary to the
bank. More important, these facts show that they were qualified to perform the
responsibilities of their positions. In other words, their disability did not render them
unqualified or unfit for the tasks assigned to them.
In this light, the Magna Carta for Disabled Persons mandates that a qualified disabled
employee should be given the same terms and conditions of employment as a qualified
able-bodied person. Section 5 of the Magna Carta provides:
Sec. 5. Equal Opportunity for Employment. No disabled person shall be
denied access to opportunities for suitable employment. A qualified
disabled employee shall be subject to the same terms and conditions of
employment and the same compensation, privileges, benefits, fringe
benefits, incentives or allowances as a qualified able bodied person.
The fact that the employees were qualified disabled persons necessarily removes the
employment contracts from the ambit of Article 80. Since the Magna Carta accords them
the rights of qualified able-bodied persons, they are thus covered by Article 280 of the
Labor Code, which provides:

Art. 280. Regular and Casual Employment. The provisions of written

agreement to the contrary notwithstanding and regardless of the oral
agreement of the parties, an employment shall be deemed to be regular
where the employee has been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of the
employer, except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the
work or services to be performed is seasonal in nature and the employment
is for the duration of the season.
An employment shall be deemed to be casual if it is not covered by the
preceding paragraph: Provided, That, any employee who has rendered at
least one year of service, whether such service is continuous or broken,
shall be considered as regular employee with respect to the activity in
which he is employed and his employment shall continue while such activity
exists.
The test of whether an employee is regular was laid down in De Leon v. NLRC,
this Court held:

14

in which

The primary standard, therefore, of determining regular employment is the

reasonable connection between the particular activity performed by the
employee in relation to the usual trade or business of the employer. The
test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by
considering the nature of the work performed and its relation to the scheme
of the particular business or trade in its entirety. Also if the employee has
been performing the job for at least one year, even if the performance is
not continuous and merely intermittent, the law deems repeated and
continuing need for its performance as sufficient evidence of the necessity
if not indispensibility of that activity to the business. Hence, the
employment is considered regular, but only with respect to such activity,
and while such activity exist.
Without a doubt, the task of counting and sorting bills is necessary and desirable to the
business of respondent bank. With the exception of sixteen of them, petitioners
performed these tasks for more than six months. Thus, the following twenty-seven
petitioners should be deemed regular employees: Marites Bernardo, Elvira Go Diamante,
Rebecca E. David, David P. Pascual, Raquel Estiller, Albert Hallare, Edmund M. Cortez,
Joselito O. Agdon, George P. Ligutan Jr., Lilibeth Q. Marmolejo, Jose E. Sales, Isabel
Mamauag, Violeta G. Montes, Albino Tecson, Melody V. Gruela, Bernadeth D. Agero,
Cynthia de Vera, Lani R. Cortez, Ma. Isabel B. Concepcion, Margaret Cecilia Canoza,
Thelma Sebastian, Ma. Jeanette Cervantes, Jeannie Ramil, Rozaida Pascual, Pinky
Baloloa, Elizabeth Ventura and Grace S. Pardo.
As held by the Court, "Articles 280 and 281 of the Labor Code put an end to the
pernicious practice of making permanent casuals of our lowly employees by the simple
expedient of extending to them probationary appointments, ad infinitum." 15 The
contract signed by petitioners is akin to a probationary employment, during which the
bank determined the employees' fitness for the job. When the bank renewed the
contract after the lapse of the six-month probationary period, the employees thereby
became regular employees. 16 No employer is allowed to determine indefinitely the
fitness of its employees.
As regular employees, the twenty-seven petitioners are entitled to security of tenure;
that is, their services may be terminated only for a just or authorized cause. Because
respondent failed to show such cause, 17 these twenty-seven petitioners are deemed

illegally dismissed and therefore entitled to back wages and reinstatement without loss
of seniority rights and other privileges. 18 Considering the allegation of respondent that
the job of money sorting is no longer available because it has been assigned back to the
tellers to whom it originally belonged, 18 petitioners are hereby awarded separation pay
in lieu of reinstatement. 20
Because the other sixteen worked only for six months, they are not deemed regular
employees and hence not entitled to the same benefits.
Applicability of the Brent Ruling
Respondent bank, citing Brent School v. Zamora 21 in which the Court upheld the validity
of an employment contract with a fixed term, argues that the parties entered into the
contract on equal footing. It adds that the petitioners had in fact an advantage, because
they were backed by then DSWD Secretary Mita Pardo de Tavera and Representative
Arturo Borjal.
We are not persuaded. The term limit in the contract was premised on the fact that the
petitioners were disabled, and that the bank had to determine their fitness for the
position. Indeed, its validity is based on Article 80 of the Labor Code. But as noted
earlier, petitioners proved themselves to be qualified disabled persons who, under the
Magna Carta for Disabled Persons, are entitled to terms and conditions of employment
enjoyed by qualified able-bodied individuals; hence, Article 80 does not apply because
petitioners are qualified for their positions. The validation of the limit imposed on their
contracts, imposed by reason of their disability, was a glaring instance of the very
mischief sought to be addressed by the new law.
Moreover, it must be emphasized that a contract of employment is impressed with public
interest. 22 Provisions of applicable statutes are deemed written into the contract, and
the "parties are not at liberty to insulate themselves and their relationships from the
impact of labor laws and regulations by simply contracting with each other." 23 Clearly,
the agreement of the parties regarding the period of employment cannot prevail over
the provisions of the Magna Carta for Disabled Persons, which mandate that petitioners
must be treated as qualified able-bodied employees.
Respondent's reason for terminating the employment of petitioners is instructive.
Because the Bangko Sentral ng Pilipinas (BSP) required that cash in the bank be turned
over to the BSP during business hours from 8:00 a.m. to 5:00 p.m., respondent resorted
to nighttime sorting and counting of money. Thus, it reasons that this task "could not be
done by deaf mutes because of their physical limitations as it is very risky for them to
travel at night." 24 We find no basis for this argument. Travelling at night involves risks to
handicapped and able-bodied persons alike. This excuse cannot justify the termination of
their employment.
Other Grounds Cited by Respondent
Respondent argues that petitioners were merely "accommodated" employees. This fact
does not change the nature of their employment. As earlier noted, an employee is
regular because of the nature of work and the length of service, not because of the
mode or even the reason for hiring them.
Equally unavailing are private respondent's arguments that it did not go out of its way to
recruit petitioners, and that its plantilla did not contain their positions. In L. T. Datu v.
NLRC, 25 the Court held that "the determination of whether employment is casual or
regular does not depend on the will or word of the employer, and the procedure of
hiring . . . but on the nature of the activities performed by the employee, and to some
extent, the length of performance and its continued existence."
Private respondent argues that the petitioners were informed from the start that they
could not become regular employees. In fact, the bank adds, they agreed with the

stipulation in the contract regarding this point. Still, we are not persuaded. The wellsettled rule is that the character of employment is determined not by stipulations in the
contract, but by the nature of the work performed. 26 Otherwise, no employee can
become regular by the simple expedient of incorporating this condition in the contract of
employment.
In this light, we iterate our ruling in Romares v. NLRC:

27

Art. 280 was emplaced in our statute books to prevent the circumvention of
the employee's right to be secure in his tenure by indiscriminately and
completely ruling out all written and oral agreements inconsistent with the
concept of regular employment defined therein. Where an employee has
been engaged to perform activities which are usually necessary or desirable
in the usual business of the employer, such employee is deemed a regular
employee and is entitled to security of tenure notwithstanding the contrary
provisions of his contract of employment.
xxx xxx xxx
At this juncture, the leading case of Brent School, Inc. v. Zamora proves
instructive. As reaffirmed in subsequent cases, this Court has upheld the
legality of fixed-term employment. It ruled that the decisive determinant in
"term employment" should not be the activities that the employee is called
upon to perform but the day certain agreed upon the parties for the
commencement and termination of their employment relationship. But this
Court went on to say that where from the circumstances it is apparent that
the periods have been imposed to preclude acquisition of tenurial security
by the employee, they should be struck down or disregarded as contrary to
public policy and morals.
In rendering this Decision, the Court emphasizes not only the constitutional bias in favor
of the working class, but also the concern of the State for the plight of the disabled. The
noble objectives of Magna Carta for Disabled Persons are not based merely on charity or
accommodation, but on justice and the equal treatment of qualified persons, disabled or
not. In the present case, the handicap of petitioners (deaf-mutes) is not a hindrance to
their work. The eloquent proof of this statement is the repeated renewal of their
employment contracts. Why then should they be dismissed, simply because they are
physically impaired? The Court believes, that, after showing their fitness for the work
assigned to them, they should be treated and granted the same rights like any other
regular employees.
In this light, we note the Office of the Solicitor General's prayer joining the petitioners'
cause. 28
WHEREFORE, premises considered, the Petition is hereby GRANTED. The June 20, 1995
Decision and the August 4, 1995 Resolution of the NLRC are REVERSED and SET ASIDE.
Respondent Far East Bank and Trust Company is hereby ORDERED to pay back wages
and separation pay to each of the following twenty-seven (27) petitioners, namely,
Marites Bernardo, Elvira Go Diamante, Rebecca E. David, David P. Pascual, Raquel
Estiller, Albert Hallare, Edmund M. Cortez, Joselito O. Agdon, George P. Ligutan Jr., Liliberh
Q. Marmolejo, Jose E. Sales, Isabel Mamauag, Violeta G. Montes, Albino Tecson, Melody V.
Gruela, Bernadeth D. Agero, Cynthia de Vera, Lani R. Cortez, Ma. Isabel B. Concepcion,
Margaret Cecilia Canoza, Thelma Sebastian, Ma. Jeanette Cervantes, Jeannie Ramil,
Rozaida Pascual, Pinky Baloloa, Elizabeth Ventura and Grace S. Pardo. The NLRC is
hereby directed to compute the exact amount due each of said employees, pursuant to
existing laws and regulations, within fifteen days from the finality of this Decision. No
costs.
SO ORDERED.