TERMINATION OF EMPLOYMENT FULL TEXT CASES

Contents
IV Termination of Employment............................................................................. 3
Employer-Employee Relationship...............................................................................3
Four-fold test........................................................................................................... 3
Royale Homes v. Alcantara, G.R. No. 195190, July 28, 2014................................3
Legend Hotel v. Realuyo, G.R. No. 153511, July 18, 2012..................................11
See Tan v. Lagrama, G.R. No. 151228, August 15, 2002....................................18
Kinds of employment................................................................................................ 25
Probationary.......................................................................................................... 25
GMA Network v. Pabriga, G.R. No. 176419, November 27, 2013........................25
Art. 281, Labor Code.......................................................................................... 35
Book VI, Rule I, Sec. 6, Implementing Rules (Labor Code)..................................35
Carvajal v. Luzon Development Bank, G.R. No. 186169, August 1, 2012...........36
San Miguel v. Del Rosario, G.R. Nos. 168194 & 168603, December 13, 2005....42
Regular.................................................................................................................. 49
Art. 280, Labor Code.......................................................................................... 49
Book VI, Rule I, Sec. 5, a, Implementing Rules (Labor Code)..............................49
MacArthur Malicdem v. Marulas, G.R. No. 204406, February 26, 2014..............50
FVR Skills v. Seva, G.R. No. 200857, October 22, 2014......................................56
Project employment.............................................................................................. 63
Omni Hauling v. Bon, G.R. No. 199388, September 3, 2014...............................63
Asos v. PNCC, G.R. No. 192394, July 3, 2013......................................................67
See GMA Network v. Pabriga, G.R. No. 176419, November 27, 2013.................77
See MacArthur Malicdem v. Marulas, G.R. No. 204406, February 26, 2014.......77
Seasonal................................................................................................................ 77
Art. 280, Labor Code.......................................................................................... 77
Universal Robina v. Acibo, G.R. No. 186439, January 15, 2014..........................77
Gapayao v. Fulo, G.R. No. 193493, June 13, 2013..............................................84
Casual................................................................................................................... 91
Art. 280, Labor Code.......................................................................................... 91
Book VI, Rule I, Sec. 5, b, Implementing Rules (Labor Code)..............................91
See Tan v. Lagrama, G.R. No. 151228, August 15, 2002....................................91

Fixed-term............................................................................................................. 92
Fuji Television v. Espiritu, G.R. No. 204944-45, December 3, 2014....................92
See GMA Network v. Pabriga, G.R. No. 176419, November 27, 2013...............117
See Universal Robina v. Acibo, G.R. No. 186439, January 15, 2014..................117
Colegio del Santisimo v. Rojo, G.R. No. 170388, September 4, 2013...............117
Job contracting.................................................................................................... 124
Articles 106 to 109, Labor Code.......................................................................124
Department Order No. 18-A.............................................................................125
Department Circular No. 01-12........................................................................140
Alilin v. Petron, G.R. No. 177592, June 9, 2014.................................................141
First Philippine Industrial v. Calimbas, G.R. No. 179256, July 10, 2013.............149
Aviado v. Procter and Gamble, G.R. No. 160506, June 6, 2011.........................157
Dismissal from employment...................................................................................170
Just Causes.......................................................................................................... 170
Arts. 282, 264, 263, 248, Labor Code...............................................................170
Imasen Phil. v. Alcon, G.R. No. 194884, October 22, 2014...............................174
Realda v. New Age, G.R. No. 192190, April 25, 2012........................................179
International School v. I.S. Alliance, G.R. No. 167286, February 5, 2014..........186
School of the Holy Spirit v. Taguiam, G.R. No. 165565, July 14, 2008...............204
Fernandez v. Newfield Staff, G.R. No. 201979, July 10, 2013............................207
Sanden Aircon v. Rosales, G.R. No. 169260, March 23, 2011...........................213
Lhuillier v. Velayo, G.R. No. 198620, November 12, 2014................................221
Aliling v. Feliciano, G.R. No. 185829, April 25, 2012.........................................229
Reyes-Rayel v. Phil. Luen, G.R. No. 174893, July 11, 2012...............................245
Authorized Causes............................................................................................... 254
Due Process......................................................................................................... 254
Twin-notice requirement................................................................................... 254
Hearing; meaning of opportunity to be heard..................................................254
Reliefs for Illegal Dismissal..................................................................................... 254
Reinstatement..................................................................................................... 254
Pending appeal................................................................................................. 254
Separation Pay in lieu of Reinstatement...........................................................254
Backwages.......................................................................................................... 254
Computation.................................................................................................... 254

Limited Backwages.......................................................................................... 254

Preventive Suspension........................................................................................... 254
Constructive Dismissal........................................................................................... 254

IV Termination of Employment
Employer-Employee Relationship
Four-fold test
Royale Homes v. Alcantara, G.R. No. 195190, July 28, 2014
G.R. No. 195190

July 28, 2014

ROYALE
HOMES
MARKETING
CORPORATION, Petitioner,
vs.
FIDEL P. ALCANTARA [deceased], substituted by his heirs, Respondent.
DECISION
DEL CASTILLO, J.:
Not every form of control that a hiring party imposes on the hired party is indicative of employeeemployer relationship. Rules and regulations that merely serve as guidelines towards the
achievement of a mutually desired result without dictating the means and methods of accomplishing
it do not establish employer-employee relationship.
1

This Petition for Review on Certiorari assails the June 23, 2010 Decision of the Court of Appeals
(CA) in CA-G.R. SP No. 109998 which (i) reversed and set aside the February 23, 2009 Decision of
the National Labor Relations Commission (NLRC), (ii) ordered petitioner Royale Homes Marketing
Corporation (Royale Homes) to pay respondent Fidel P. Alcantara (Alcantara) backwages and
separation pay, and (iii) remanded the case to the Labor Arbiter for the proper determination and
computation of said monetary awards.
2

Also assailed in this Petition isthe January 18, 2011 Resolution of the CA denying Royale Homes
Motion for Reconsideration, as well as its Supplemental thereto.
5

Factual Antecedents
In 1994, Royale Homes, a corporation engaged in marketing real estates, appointed Alcantara asits
Marketing Director for a fixed period of one year. His work consisted mainly of marketing Royale
Homes realestate inventories on an exclusive basis. Royale Homes reappointed him for several
consecutive years, the last of which covered the period January 1 to December 31, 2003 where he
held the position of Division 5 Vice-President-Sales.
8

Proceedings before the Labor Arbiter

On December 17, 2003, Alcantara filed a Complaint for Illegal Dismissal against Royale Homes and
its President Matilde Robles, Executive Vice-President for Administration and Finance Ma. Melinda
Bernardino, and Executive Vice- President for Sales Carmina Sotto. Alcantara alleged that he is a
regular employee of Royale Homes since he is performing tasks that are necessary and desirable to
its business; that in 2003 the company gave him P1.2 million for the services he rendered to it; that
in the first week of November 2003, however, the executive officers of Royale Homes told him that
they were wondering why he still had the gall to come to office and sit at his table; and that the
actsof the executive officers of Royale Homes amounted to his dismissal from work without any valid
or just cause and in gross disregard of the proper procedure for dismissing employees. Thus, he
alsoimpleaded the corporate officers who, he averred, effected his dismissal in bad faith and in an
oppressive manner.
9

10

Alcantara prayed to be reinstated tohis former position without loss of seniority rights and other
privileges, as well as to be paid backwages, moral and exemplary damages, and attorneys fees. He
further sought that the ownership of the Mitsubishi Adventure with Plate No. WHD-945 be transferred
to his name.
Royale Homes, on the other hand, vehemently denied that Alcantara is its employee. It argued that
the appointment paper of Alcantara isclear that it engaged his services as an independent sales
contractorfor a fixed term of one year only. He never received any salary, 13th month pay, overtime
pay or holiday pay from Royale Homes as hewas paid purely on commission basis. In addition,
Royale Homes had no control on how Alcantara would accomplish his tasks and responsibilities as
he was free to solicit sales at any time and by any manner which he may deem appropriateand
necessary. He is even free to recruit his own sales personnel to assist him in pursuance of his sales
target.
According to Royale Homes, Alcantara decided to leave the company after his wife, who was once
connectedwith it as a sales agent, had formed a brokerage company that directly competed with its
business, and even recruited some of its sales agents. Although this was against the exclusivity
clause of the contract, Royale Homes still offered to accept Alcantaras wife back so she could
continue to engage in real estate brokerage, albeit exclusively for Royale Homes. In a special
management committee meeting on October 8,2003, however, Alcantara announced publicly and
openly that he would leave the company by the end of October 2003 and that he would no longer
finish the unexpired term of his contract. He has decided to join his wifeand pursue their own
brokerage business. Royale Homes accepted Alcantaras decision. It then threw a despedidaparty in
his honor and, subsequently, appointed a new independent contractor. Two months after
herelinquished his post, however, Alcantara appeared in Royale Homes and submitted a letter
claiming that he was illegally dismissed.
Ruling of the Labor Arbiter
On September 7, 2005,the Labor Arbiter rendered a Decision holding that Alcantara is an employee
of Royale Homes with a fixed-term employment period from January 1 to December 31, 2003 and
that the pre-termination of his contract was against the law.Hence, Alcantara is entitled to an amount
which he may have earned on the average for the unexpired portion of the contract. With regard to
the impleaded corporate officers, the Labor Arbiter absolved them from any liability.
11

The dispositive portion of the Labor Arbiters Decision reads:

WHEREFORE, premises considered, judgment is hereby rendered ordering the respondent Royale
Homes Marketing Corp. to pay the complainant the total amount of TWO HUNDRED SEVENTY

SEVEN THOUSAND PESOS (P277,000.00) representing his compensation/commission for the

unexpired term of his contract.
All other claims are dismissed for lack of merit.
SO ORDERED.

12

Both parties appealed the Labor Arbiters Decision to the NLRC. Royale Homes claimed that the
Labor Arbiter grievously erred inruling that there exists an employer-employee relationship between
the parties. It insisted that the contract between them expressly statesthat Alcantara is an
independent contractor and not an ordinary employee. Ithad no control over the means and methods
by which he performed his work. RoyaleHomes likewise assailed the award of P277,000.00 for lack
of basis as it did not pre-terminate the contract. It was Alcantara who chose not to finish the contract.
Alcantara, for his part, argued that the Labor Arbiter erred in ruling that his employment was for a
fixed-term and that he is not entitled to backwages, reinstatement, unpaid commissions, and
damages.
Ruling of the National LaborRelations Commission
On February 23, 2009, the NLRC rendered its Decision, ruling that Alcantara is not an employee
but a mere independent contractor of Royale Homes. It based its ruling mainly on the contract which
does not require Alcantara to observe regular working hours. He was also free to adopt the selling
methods he deemed most effective and can even recruit sales agents to assist him in marketing the
inventories of Royale Homes. The NLRC also considered the fact that Alcantara was not receiving
monthly salary, but was being paid on commission basis as stipulated in the contract. Being an
independent contractor, the NLRC concluded that Alcantaras Complaint iscognizable by the regular
courts.
13

The falloof the NLRC Decision reads:

WHEREFORE, premises considered, the Decision of Labor Arbiter Dolores Peralta-Beley dated
September 5, 2005 is REVERSED and SET ASIDE and a NEW ONE rendered dismissing the
complaint for lack of jurisdiction.
SO ORDERED.

14

Alcantara moved for reconsideration. In a Resolution dated May 29, 2009, however, the NLRC
denied his motion.
15

16

Alcantara thus filed a Petition for Certiorari with the CA imputing grave abuse of discretion on the
partof the NLRC in ruling that he is not an employee of Royale Homes and that it is the regular
courts which have jurisdiction over the issue of whether the pre-termination of the contract is valid.
17

Ruling of the Court of Appeals

On June 23, 2010, the CA promulgated its Decision granting Alcantaras Petition and reversing the
NLRCs Decision. Applying the four-fold and economic reality tests, it held thatAlcantara is an
employee of Royale Homes. Royale Homes exercised some degree of control over Alcantara since
his job, as observed by the CA, is subject to company rules, regulations, and periodic evaluations.
He was also bound by the company code of ethics. Moreover, the exclusivity clause of the contract
18

has made Alcantara economically dependent on Royale Homes, supporting the theory that he is
anemployee of said company.
The CA further held that Alcantaras termination from employment was without any valid or just
cause, and it was carried out in violation of his right to procedural due process. Thus, the CA ruled
that he isentitled to backwages and separation pay, in lieu of reinstatement. Considering,however,
that the CA was not satisfied with the proofadduced to establish the amount of Alcantaras annual
salary, it remanded the caseto the Labor Arbiter to determine the same and the monetary award he
is entitled to. With regard to the corporate officers, the CA absolved them from any liability for want of
clear proof that they assented to the patently unlawful acts or that they are guilty of bad faith orgross
negligence. Thus:
WHEREFORE, in view of the foregoing, the instant PETITION is GRANTED. The assailed decision
of the National Labor Relations Commission in NLRC NCR CASE NO. 00-12-14311-03 NLRC CA
NO. 046104-05 dated February 23, 2009 as well as the Resolution dated May 29, 2009 are hereby
SET ASIDE and a new one is entered ordering the respondent company to pay petitioner
backwages which shall be computed from the time of his illegal termination in October 2003 up to
the finality of this decision, plus separation pay equivalent to one month salary for every year of
service. This case is REMANDED to the Labor Arbiter for the proper determination and computation
of back wages, separation pay and other monetary benefits that petitioner is entitled to.
SO ORDERED.

19

Royale Homes filed a Motion for Reconsideration and a Supplemental Motion for
Reconsideration. In a Resolution dated January 18, 2011, however, the CA denied said motions.
20

21

22

Issues
Hence, this Petition where Royale Homes submits before this Court the following issues for
resolution:
A.
WHETHER THE COURT OF APPEALS HAS DECIDED THE INSTANT CASE NOT IN
ACCORD WITH LAW AND APPLICABLE DECISIONS OF THE SUPREME COURT WHEN
IT REVERSED THE RULING OF THE NLRC DISMISSING THE COMPLAINT OF
RESPONDENT FOR LACK OF JURISDICTION AND CONSEQUENTLY, IN FINDING THAT
RESPONDENT WAS ILLEGALLY DISMISSED[.]
B.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN
DISREGARDING THE EN BANCRULING OF THIS HONORABLE COURT IN THE CASEOF
TONGKO VS. MANULIFE, AND IN BRUSHING ASIDE THE APPLICABLE RULINGS OF
SONZA VS. ABS CBN AND CONSULTA V. CA[.]
C.
WHETHER THE COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN
DENYING THE MOTION FOR RECONSIDERATION OF PETITIONER AND IN REFUSING
TO CORRECT ITSELF[.]
23

Royale Homes contends that its contract with Alcantara is clear and unambiguous it engaged his
services as an independent contractor. This can be readily seen from the contract stating that no
employer-employee relationship exists between the parties; that Alcantara was free to solicit sales at
any time and by any manner he may deem appropriate; that he may recruit sales personnel to assist
him in marketing Royale Homes inventories; and, thathis remunerations are dependent on his sales
performance.
Royale Homes likewise argues that the CA grievously erred in ruling that it exercised control over
Alcantara based on a shallow ground that his performance is subject to company rules and
regulations, code of ethics, periodic evaluation, and exclusivity clause of contract. RoyaleHomes
maintains that it is expected to exercise some degree of control over its independent contractors,but
that does not automatically result in the existence ofemployer-employee relationship. For control to
be consideredas a proof tending to establish employer-employee relationship, the same mustpertain
to the means and method of performing the work; not on the relationship of the independent
contractors among themselves or their persons or their source of living.
Royale Homes further asserts that it neither hired nor wielded the power to dismiss Alcantara. It was
Alcantara who openly and publicly declared that he was pre-terminating his fixed-term contract.
The pivotal issue to be resolved in this case is whether Alcantara was an independent contractor or
anemployee of Royale Homes.
Our Ruling
The Petition is impressed with merit.
The determination of whether a party who renders services to another is an employee or an
independent contractor involves an evaluation of factual matters which, ordinarily, is not within the
province of this Court. In view of the conflicting findings of the tribunals below, however, this Court is
constrained to go over the factual matters involved in this case.
24

The juridical relationship of the parties based on their written contract

The primary evidence of the nature of the parties relationship in this case is the written contract that
they signed and executed in pursuanceof their mutual agreement. While the existence of employeremployee relationship is a matter of law, the characterization made by the parties in their contract as
to the nature of their juridical relationship cannot be simply ignored, particularly in this case where
the parties written contractunequivocally states their intention at the time they entered into it. In
Tongko v. The Manufacturers LifeInsurance Co. (Phils.), Inc., it was held that:
25

To be sure, the Agreements legal characterization of the nature of the relationship cannot be
conclusive and binding on the courts; x x x the characterization of the juridical relationship the
Agreement embodied is a matter of law that is for the courts to determine. At the same time, though,
the characterization the parties gave to their relationship in the Agreement cannot simply be brushed
aside because it embodiestheir intent at the time they entered the Agreement, and they were
governed by this understanding throughout their relationship. At the very least, the provision on the
absence of employer- employee relationship between the parties can be an aid in considering the
Agreement and its implementation, and in appreciating the other evidence on record.
26

In this case, the contract, duly signed and not disputed by the parties, conspicuously provides that
"no employer-employee relationship exists between" Royale Homes and Alcantara, as well as his
27

sales agents. It is clear that they did not want to be bound by employer-employee relationship atthe
time ofthe signing of the contract. Thus:
January 24, 2003
MR. FIDEL P. ALCANTARA
13 Rancho I
Marikina City
Dear Mr. Alcantara,
This will confirm yourappointment as Division 5 VICE[-]PRESIDENTSALES of ROYALE HOMES
MARKETING CORPORATION effective January 1, 2003 to December 31, 2003.
Your appointment entails marketing our real estate inventories on an EXCLUSIVE BASIS under such
price, terms and condition to be provided to you from time to time.
As such, you can solicit sales at any time and by any manner which you deem appropriate and
necessary to market our real estate inventories subject to rules, regulations and code of ethics
promulgated by the company. Further, you are free to recruit sales personnel/agents to assist you in
marketing of our inventories provided that your personnel/agents shall first attend the required
seminars and briefing to be conducted by us from time to time for the purpose of familiarizing them
of terms and conditionsof sale, the natureof property sold, etc., attendance of which shall be a
condition precedent for their accreditation by us.
That as such Division 5 VICE[-]PRESIDENT-SALES you shall be entitled to:
1. Commission override of 0.5% for all option sales beginning January 1, 2003
booked by your sales agents.
2. Budget allocation depending on your divisions sale performance as per our
budget guidelines.
3. Sales incentive and other forms of company support which may be granted from
time to time. It is understood, however, that no employer-employee relationship
exists between us, that of your sales personnel/agents, and that you shall hold our
company x x x, its officers and directors, free and harmless from any and all claims of
liability and damages arising from and/or incident to the marketing of our real estate
inventories.
We reserve, however, our right to terminate this agreement in case of violation of any company rules
and regulations, policies and code of ethics upon notice for justifiable reason.
Your performance shall be subject toperiodic evaluation based on factors which shall be determined
by the management.
If you are amenable to the foregoing terms and conditions, please indicate your conformity by
signing on the space provided below and return [to] us a duplicate copy of this letter, duly
accomplished, to constitute as our agreement on the matter.(Emphasis ours)

Since "the terms of the contract are clear and leave no doubt upon the intention of the contracting
parties, the literal meaning of itsstipulations should control." No construction is even needed asthey
already expressly state their intention. Also, this Court adopts the observation of the NLRC that it is
rather strange on the part of Alcantara, an educated man and a veteran sales broker who claimed to
be receiving P1.2 million as his annual salary, not to have contested the portion of the contract
expressly indicating that he is not an employee of Royale Homes if their true intention were
otherwise.
28

The juridical relationship of the parties based on Control Test

In determining the existence of an employer-employee relationship, this Court has generally relied
on the four-fold test, to wit: (1) the selection and engagement of the employee; (2) the payment of
wages; (3) the power of dismissal; and (4) the employers power to control the employee with
respect to the means and methods by which the work is to be accomplished. Among the four, the
most determinative factor in ascertaining the existence of employer-employee relationship is the
"right of control test". "It is deemed to be such an important factor that the other requisites may
even be disregarded." This holds true where the issues to be resolved iswhether a person who
performs work for another is the latters employee or is an independent contractor, as in this case.
For where the person for whom the services are performed reserves the right to control not only the
end to beachieved, but also the means by which such end is reached, employer-employee
relationship is deemed to exist.
29

30

31

32

33

In concluding that Alcantara is an employee of RoyaleHomes, the CA ratiocinated that since the
performance of his tasks is subject to company rules, regulations, code of ethics, and periodic
evaluation, the element of control is present.
The Court disagrees.
Not every form of control is indicative of employer-employee relationship. A person who performs
work for another and is subjected to its rules, regulations, and code of ethics does not necessarily
become an employee. As long as the level of control does not interfere with the means and
methods of accomplishing the assigned tasks, the rules imposed by the hiring party on the hired
party do not amount to the labor law concept of control that is indicative of employer-employee
relationship. In Insular Life Assurance Co., Ltd. v. National Labor Relations Commission it was
pronounced that:
1wphi1

34

35

Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employeremployee
relationship unlike the second, which address both the result and the means used to achieve it. x x
x
36

In this case, the Court agrees with Royale Homes that the rules, regulations, code of ethics, and
periodic evaluation alluded to byAlcantara do not involve control over the means and methods by
which he was to performhis job. Understandably, Royale Homes has to fix the price, impose
requirements on prospective buyers, and lay down the terms and conditionsof the sale, including the
mode of payment, which the independent contractors must follow. It is also necessary for Royale
Homes to allocateits inventories among its independent contractors, determine who has priority in
selling the same, grant commission or allowance based on predetermined criteria, and regularly
monitor the result of their marketing and sales efforts. But tothe mind of this Court, these do not
pertain to the means and methods of how Alcantara was to perform and accomplish his task of

soliciting sales. They do not dictate upon him the details of how he would solicit sales or the manner
as to how he would transact business with prospective clients. In Tongko, this Court held that
guidelines or rules and regulations that do notpertain to the means or methodsto be employed in
attaining the result are not indicative of control as understood inlabor law. Thus:
From jurisprudence, an important lesson that the first Insular Lifecase teaches us is that a
commitment to abide by the rules and regulations of an insurance company does not ipso factomake
the insurance agent an employee. Neither do guidelines somehow restrictive of the insurance
agents conduct necessarily indicate "control" as this term is defined in jurisprudence. Guidelines
indicative of labor law "control," as the first Insular Lifecase tells us, should not merely relate to the
mutually desirable result intended by the contractual relationship; they must have the nature of
dictating the means or methods to beemployed in attaining the result, or of fixing the methodology
and of binding or restricting the party hired to the use of these means.In fact, results-wise, the
principal can impose production quotas and can determine how many agents, with specific
territories, ought to be employed to achieve the companys objectives. These are management
policy decisions that the labor law element of control cannot reach. Our ruling in these respects in
the first Insular Lifecase was practically reiterated in Carungcong. Thus, as will be shown more fully
below, Manulifes codes of conduct, all of which do not intrude into the insurance agents means and
manner of conducting their sales and only control them as to the desired results and Insurance Code
norms, cannot be used as basis for a finding that the labor law concept of control existed between
Manulife and Tongko. (Emphases in the original)
37

As the party claiming the existence of employer-employee relationship, it behoved upon Alcantara to
prove the elements thereof, particularly Royale Homes power of control over the means and
methods of accomplishing the work. He, however, failed to cite specificrules, regulations or codes of
ethics that supposedly imposed control on his means and methods of soliciting sales and dealing
with prospective clients. On the other hand, this case is replete with instances that negate the
element of control and the existence of employer-employee relationship. Notably, Alcantara was not
required to observe definite working hours. Except for soliciting sales, RoyaleHomes did not assign
other tasks to him. He had full control over the means and methods of accomplishing his tasks as he
can "solicit sales at any time and by any manner which [he may] deem appropriate and necessary."
He performed his tasks on his own account free from the control and direction of Royale Homes in
all matters connected therewith, except as to the results thereof.
38

39

40

Neither does the repeated hiring of Alcantara prove the existence of employer-employee
relationship. As discussed above, the absence of control over the means and methodsdisproves
employer-employee relationship. The continuous rehiring of Alcantara simply signifies the renewal of
his contract with Royale Homes, and highlights his satisfactory services warranting the renewal of
such contract. Nor does the exclusivity clause of contract establish the existence of the labor law
concept of control. In Consulta v. Court of Appeals, it was held that exclusivity of contract does not
necessarily result in employer-employee relationship, viz:
41

42

x x x However, the fact that the appointment required Consulta to solicit business exclusively for
Pamana did not mean that Pamana exercised control over the means and methods of Consultas
work as the term control is understood in labor jurisprudence. Neither did it make Consulta an
employee of Pamana. Pamana did not prohibit Consulta from engaging in any other business, or
from being connected with any other company, for aslong as the business [of the] company did not
compete with Pamanas business.
43

The same scenario obtains in this case. Alcantara was not prohibited from engaging in any other
business as long as he does not sell projects of Royale Homes competitors. He can engage in
selling various other products or engage in unrelated businesses.

Payment of Wages
The element of payment of wages is also absent in thiscase. As provided in the contract, Alcantaras
remunerations consist only of commission override of 0.5%, budget allocation, sales incentive and
other forms of company support. There is no proof that he received fixed monthly salary. No payslip
or payroll was ever presented and there is no proof that Royale Homes deducted from his supposed
salary withholding tax or that it registered him with the Social Security System, Philippine Health
Insurance Corporation, or Pag-Ibig Fund. In fact, his Complaint merely states a ballpark figure of his
alleged salary of P100,000.00, more or less. All of these indicate an independent contractual
relationship. Besides, if Alcantara indeed consideredhimself an employee of Royale Homes, then
he, an experienced and professional broker, would have complained that he was being denied
statutorily mandated benefits. But for nine consecutive years, he kept mum about it, signifying that
he has agreed, consented, and accepted the fact that he is not entitled tothose employee benefits
because he is an independent contractor.
44

This Court is, therefore,convinced that Alcantara is not an employee of Royale Homes, but a mere
independent contractor. The NLRC is, therefore, correct in concluding that the Labor Arbiter has no
jurisdiction over the case and that the same is cognizable by the regular courts.
WHEREFORE, the instant Petition is hereby GRANTED. The June 23, 2010 Decision of the Court of
Appeals in CA-G.R. SP No. 109998 is REVERSED and SET ASIDE. The February 23, 2009
Decision of the National Labor Relations Commission is REINSTATED and AFFIRMED. SO
ORDERED.
MARIANO
Associate Justice

C.

DEL

CASTILLO

Legend Hotel v. Realuyo, G.R. No. 153511, July 18, 2012

G.R. No. 153511

July 18, 2012

LEGEND HOTEL (MANILA), owned by TITANIUM CORPORATION, and/or,

NELSON NAPUD, in his capacity as the President of Petitioner
Corporation, Petitioner,
vs.
HERNANI S. REALUYO, also known as JOEY ROA, Respondent.
DECISION
BERSAMIN, J.:
This labor case for illegal dismissal involves a pianist employed to perform in the
restaurant of a hotel. On August 9, 1999, respondent, whose stage name was Joey
R. Roa, filed a complaint for alleged unfair labor practice, constructive illegal
dismissal, and the underpayment/nonpayment of his premium pay for holidays,
separation pay, service incentive leave pay, and 13111 month pay. He prayed for
attorney's fees, moral damages off P100,000.00 and exemplary damages for
P100,000.00.1

Respondent averred that he had worked as a pianist at the Legend Hotels Tanglaw
Restaurant from September 1992 with an initial rate of P400.00/night that was
given to him after each nights performance; that his rate had increased to
P750.00/night; and that during his employment, he could not choose the time of
performance, which had been fixed from 7:00 pm to 10:00 pm for three to six
times/week. He added that the Legend Hotels restaurant manager had required
him to conform with the venues motif; that he had been subjected to the rules on
employees representation checks and chits, a privilege granted to other
employees; that on July 9, 1999, the management had notified him that as a costcutting measure his services as a pianist would no longer be required effective July
30, 1999; that he disputed the excuse, insisting that Legend Hotel had been
lucratively operating as of the filing of his complaint; and that the loss of his
employment made him bring his complaint. 2
In its defense, petitioner denied the existence of an employer-employee relationship
with respondent, insisting that he had been only a talent engaged to provide live
music at Legend Hotels Madison Coffee Shop for three hours/day on two days each
week; and stated that the economic crisis that had hit the country constrained
management to dispense with his services.
On December 29, 1999, the Labor Arbiter (LA) dismissed the complaint for lack of
merit upon finding that the parties had no employer-employee relationship. 3 The LA
explained thusly:
xxx
On the pivotal issue of whether or not there existed an employer-employee
relationship between the parties, our finding is in the negative. The finding finds
support in the service contract dated September 1, 1992 xxx.
xxx
Even if we grant the initial non-existence of the service contract, as complainant
suggests in his reply (third paragraph, page 4), the picture would not change
because of the admission by complainant in his letter dated October 8, 1996 (Annex
"C") that what he was receiving was talent fee and not salary.
This is reinforced by the undisputed fact that complainant received his talent fee
nightly, unlike the regular employees of the hotel who are paid by monthly xxx.
xxx
And thus, absent the power to control with respect to the means and methods by
which his work was to be accomplished, there is no employer-employee relationship
between the parties xxx.
xxx
WHEREFORE, this case must be, as it is hereby, DISMISSED for lack of merit.
SO ORDERED.4

Respondent appealed, but the National Labor Relations Commission (NLRC) affirmed
the LA on May 31, 2001.5
Respondent assailed the decision of the NLRC in the Court of Appeals (CA) on
certiorari.
On February 11, 2002, the CA set aside the decision of the NLRC, 6 holding:
xxx
Applying the above-enumerated elements of the employee-employer relationship in
this case, the question to be asked is, are those elements present in this case?
The answer to this question is in the affirmative.
xxx
Well settled is the rule that of the four (4) elements of employer-employee
relationship, it is the power of control that is more decisive.
In this regard, public respondent failed to take into consideration that in petitioners
line of work, he was supervised and controlled by respondents restaurant manager
who at certain times would require him to perform only tagalog songs or music, or
wear barong tagalog to conform with Filipiniana motif of the place and the time of
his performance is fixed by the respondents from 7:00 pm to 10:00 pm, three to six
times a week. Petitioner could not choose the time of his performance. xxx.
As to the status of petitioner, he is considered a regular employee of private
respondents since the job of the petitioner was in furtherance of the restaurant
business of respondent hotel. Granting that petitioner was initially a contractual
employee, by the sheer length of service he had rendered for private respondents,
he had been converted into a regular employee xxx.
xxx
xxx In other words, the dismissal was due to retrenchment in order to avoid or
minimize business losses, which is recognized by law under Article 283 of the Labor
Code, xxx.
xxx
WHEREFORE, foregoing premises considered, this petition is GRANTED. xxx. 7
Issues
In this appeal, petitioner contends that the CA erred:
I. XXX WHEN IT RULED THAT THERE IS THE EXISTENCE OF EMPLOYER-EMPLOYEE
RELATIONSHIP BETWEEN THE PETITIONER HOTEL AND RESPONDENT ROA.
II. XXX IN FINDING THAT ROA IS A REGULAR EMPLOYEE AND THAT THE TERMINATION
OF HIS SERVICES WAS ILLEGAL. THE CA LIKEWISE ERRED WHEN IT DECLARED THE
REINSTATEMENT OF ROA TO HIS FORMER POSITION OR BE GIVEN A SEPARATION PAY
EQUIVALENT TO ONE MONTH FOR EVERY YEAR OF SERVICE FROM SEPTEMBER 1999

UNTIL JULY 30, 1999 CONSIDERING

RELATIONSHIP BETWEEN THE PARTIES.

THE

ABSENCE

OF

AN

EMPLOYMENT

III. XXX WHEN IT DECLARED THAT ROA IS ENTITLED TO BACKWAGES, SERVICE

INCENTIVE LEAVE AND OTHER BENEFITS CONSIDERING THAT THERE IS NO
EMPLOYER EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES.
IV. XXX WHEN IT NULLIFIED THE DECISION DATED MAY 31, 2001 IN NLRC NCR CA
NO. 023404-2000 OF THE NLRC AS WELL AS ITS RESOLUTION DATED JUNE 29, 2001
IN FAVOR OF HEREIN PETITIONER HOTEL WHEN HEREIN RESPONDENT ROA FAILED
TO SHOW PROOF THAT THE NLRC AND THE LABOR ARBITER HAVE COMMITTED
GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION IN THEIR RESPECTIVE
DECISIONS.
V. XXX WHEN IT OVERLOOKED THE FACT THAT THE PETITION WHICH ROA FILED IS
IMPROPER SINCE IT RAISED QUESTIONS OF FACT.
VI. XXX WHEN IT GAVE DUE COURSE TO THE PETITION FILED BY ROA WHEN IT IS
CLEARLY IMPROPER AND SHOULD HAVE BEEN DISMISSED OUTRIGHT CONSIDERING
THAT A PETITION FOR CERTIORARI UNDER RULE 65 IS LIMITED ONLY TO QUESTIONS
OR ISSUES OF GRAVE ABUSE OF DISCRETION OR LACK OF JURISDICTION
COMMITTED BY THE NLRC OR THE LABOR ARBITER, WHICH ISSUES ARE NOT
PRESENT IN THE CASE AT BAR.
The assigned errors are divided into the procedural issue of whether or not the
petition for certiorari filed in the CA was the proper recourse; and into two
substantive issues, namely: (a) whether or not respondent was an employee of
petitioner; and (b) if respondent was petitioners employee, whether he was validly
terminated.
Ruling
The appeal fails.
Procedural Issue:
Certiorari was a proper recourse
Petitioner contends that respondents petition for certiorari was improper as a
remedy against the NLRC due to its raising mainly questions of fact and because it
did not demonstrate that the NLRC was guilty of grave abuse of discretion.
The contention is unwarranted. There is no longer any doubt that a petition for
certiorari brought to assail the decision of the NLRC may raise factual issues, and
the CA may then review the decision of the NLRC and pass upon such factual issues
in the process.8 The power of the CA to review factual issues in the exercise of its
original jurisdiction to issue writs of certiorari is based on Section 9 of Batas
Pambansa Blg. 129, which pertinently provides that the CA "shall have the power to
try cases and conduct hearings, receive evidence and perform any and all acts
necessary to resolve factual issues raised in cases falling within its original and

appellate jurisdiction, including the power to grant and conduct new trials or further
proceedings."
Substantive Issue No. 1:
Employer-employee relationship existed between the parties
We next ascertain if the CA correctly found that an employer-employee relationship
existed between the parties.
The issue of whether or not an employer-employee relationship existed between
petitioner and respondent is essentially a question of fact. 9 The factors that
determine the issue include who has the power to select the employee, who pays
the employees wages, who has the power to dismiss the employee, and who
exercises control of the methods and results by which the work of the employee is
accomplished.10 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,11 a finding that the relationship exists must
nonetheless rest on substantial evidence, which is that amount of relevant evidence
that a reasonable mind might accept as adequate to justify a conclusion. 12
Generally, the Court does not review factual questions, primarily because the Court
is not a trier of facts. However, where, like here, 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, it becomes proper for the Court, in the exercise of its
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. 13
A review of the circumstances reveals that respondent was, indeed, petitioners
employee. He was undeniably employed as a pianist in petitioners Madison Coffee
Shop/Tanglaw Restaurant from September 1992 until his services were terminated
on July 9, 1999.
First of all, petitioner actually wielded the power of selection at the time it entered
into the service contract dated September 1, 1992 with respondent. This is true,
notwithstanding petitioners insistence that respondent had only offered his services
to provide live music at petitioners Tanglaw Restaurant, and despite petitioners
position that what had really transpired was a negotiation of his rate and time of
availability. The power of selection was firmly evidenced by, among others, the
express written recommendation dated January 12, 1998 by Christine Velazco,
petitioners restaurant manager, for the increase of his remuneration. 14
Petitioner could not seek refuge behind the service contract entered into with
respondent. It is the law that defines and governs an employment relationship,
whose terms are not restricted to those fixed in the written contract, for other
factors, like the nature of the work the employee has been called upon to perform,
are also considered. The law affords protection to an employee, and does not
countenance any attempt to subvert its spirit and intent. Any stipulation in writing
can be ignored when the employer utilizes the stipulation to deprive the employee
of his security of tenure. The inequality that characterizes employer-employee

relations generally tips the scales in favor of the employer, such that the employee
is often scarcely provided real and better options. 15
Secondly, petitioner argues that whatever remuneration was given to respondent
were only his talent fees that were not included in the definition of wage under the
Labor Code; and that such talent fees were but the consideration for the service
contract entered into between them.
The argument is baseless.
Respondent was paid P400.00 per three hours of performance from 7:00 pm to
10:00 pm, three to six nights a week. Such rate of remuneration was later increased
to P750.00 upon restaurant manager Velazcos recommendation. There is no
denying that the remuneration denominated as talent fees was fixed on the basis of
his talent and skill and the quality of the music he played during the hours of
performance each night, taking into account the prevailing rate for similar talents in
the entertainment industry.16
Respondents remuneration, albeit denominated as talent fees, was still considered
as included in the term wage in the sense and context of the Labor Code, regardless
of how petitioner chose to designate the remuneration. Anent this, Article 97(f) of
the Labor Code clearly states:
xxx wage paid to any employee shall mean the remuneration or earnings, however
designated, capable of being expressed in terms of money, whether fixed or
ascertained on a time, task, piece, or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered, and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee.
Clearly, respondent received compensation for the services he rendered as a pianist
in petitioners hotel. Petitioner cannot use the service contract to rid itself of the
consequences of its employment of respondent. There is no denying that whatever
amounts he received for his performance, howsoever designated by petitioner, were
his wages.
It is notable that under the Rules Implementing the Labor Code and as held in Tan v.
Lagrama,17 every employer is required to pay his employees by means of a payroll,
which should show in each case, among others, the employees rate of pay,
deductions made from such pay, and the amounts actually paid to the employee.
Yet, petitioner did not present the payroll of its employees to bolster its insistence of
respondent not being its employee.
That respondent worked for less than eight hours/day was of no consequence and
did not detract from the CAs finding on the existence of the employer-employee
relationship. In providing that the " normal hours of work of any employee shall not
exceed eight (8) hours a day," Article 83 of the Labor Code only set a maximum of

number of hours as "normal hours of work" but did not prohibit work of less than
eight hours.
Thirdly, the power of the employer to control the work of the employee is
considered the most significant determinant of the existence of an employeremployee relationship.18 This is the so-called control test, and is premised on
whether the person for whom the services are performed reserves the right to
control both the end achieved and the manner and means used to achieve that
end.19
Petitioner submits that it did not exercise the power of control over respondent and
cites the following to buttress its submission, namely: (a) respondent could beg off
from his nightly performances in the restaurant for other engagements; (b) he had
the sole prerogative to play and perform any musical arrangements that he wished;
(c) although petitioner, through its manager, required him to play at certain times a
particular music or song, the music, songs, or arrangements, including the beat or
tempo, were under his discretion, control and direction; (d) the requirement for him
to wear barong Tagalog to conform with the Filipiniana motif of the venue whenever
he performed was by no means evidence of control; (e) petitioner could not require
him to do any other work in the restaurant or to play the piano in any other places,
areas, or establishments, whether or not owned or operated by petitioner, during
the three hour period from 7:00 pm to 10:00 pm, three to six times a week; and (f)
respondent could not be required to sing, dance or play another musical instrument.
A review of the records shows, however, that respondent performed his work as a
pianist under petitioners supervision and control. Specifically, petitioners control of
both the end achieved and the manner and means used to achieve that end was
demonstrated by the following, to wit:
a. He could not choose the time of his performance, which petitioners had fixed
from 7:00 pm to 10:00 pm, three to six times a week;
b. He could not choose the place of his performance;
c. The restaurants manager required him at certain times to perform only Tagalog
songs or music, or to wear barong Tagalog to conform to the Filipiniana motif; and
d. He was subjected to the rules on employees representation check and chits, a
privilege granted to other employees.
Relevantly, it is worth remembering that the employer need not actually supervise
the performance of duties by the employee, for it sufficed that the employer has the
right to wield that power.
Lastly, petitioner claims that it had no power to dismiss respondent due to his not
being even subject to its Code of Discipline, and that the power to terminate the
working relationship was mutually vested in the parties, in that either party might
terminate at will, with or without cause.
The claim is contrary to the records. Indeed, the memorandum informing
respondent of the discontinuance of his service because of the present business or

financial condition of petitioner20 showed that the latter had the power to dismiss
him from employment.21
Substantive Issue No. 2:
Validity of the Termination
Having established that respondent was an employee whom petitioner terminated
to prevent losses, the conclusion that his termination was by reason of
retrenchment due to an authorized cause under the Labor Code is inevitable.
Retrenchment is one of the authorized causes for the dismissal of employees
recognized by the Labor Code. It is a management prerogative resorted to by
employers to avoid or to minimize business losses. On this matter, Article 283 of the
Labor Code states:
Article 283. Closure of establishment and reduction of personnel. The employer
may also terminate the employment of any employee due to the installation of
labor-saving devices, redundancy, retrenchment to prevent losses or the closing or
cessation of operation of the establishment or undertaking unless the closing is for
the purpose of circumventing the provisions of this Title, by serving a written notice
on the workers and the Ministry of Labor and Employment at least one (1) month
before the intended date thereof. xxx. In case of retrenchment to prevent losses and
in cases of closures or cessation of operations of establishment or undertaking not
due to serious business losses or financial reverses, the separation pay shall be
equivalent to one (1) month pay or at least one-half (1/2) month pay for every year
of service, whichever is higher. A fraction of at least six (6) months shall be
considered one (1) whole year.
The Court has laid down the following standards that an employer should meet to
justify retrenchment and to foil abuse, namely:
(a) The expected losses should be substantial and not merely de minimis in extent;
(b) The substantial losses apprehended must be reasonably imminent;
(c) The retrenchment must be reasonably necessary and likely to effectively prevent
the expected losses; and
(d) The alleged losses, if already incurred, and the expected imminent losses sought
to be forestalled must be proved by sufficient and convincing evidence. 22
Anent the last standard of sufficient and convincing evidence, it ought to be pointed
out that a less exacting standard of proof would render too easy the abuse of
retrenchment as a ground for termination of services of employees. 23
Was the retrenchment of respondent valid?
In termination cases, the burden of proving that the dismissal was for a valid or
authorized cause rests upon the employer. Here, petitioner did not submit evidence
of the losses to its business operations and the economic havoc it would thereby
imminently sustain. It only claimed that respondents termination was due to its

"present business/financial condition." This bare statement fell short of the norm to
show a valid retrenchment. Hence, we hold that there was no valid cause for the
retrenchment of respondent.
Indeed, not every loss incurred or expected to be incurred by an employer can
justify retrenchment.1wphi1 The employer must prove, among others, that the
losses are substantial and that the retrenchment is reasonably necessary to avert
such losses. Thus, by its failure to present sufficient and convincing evidence to
prove that retrenchment was necessary, respondents termination due to
retrenchment is not allowed.
The Court realizes that the lapse of time since the retrenchment might have
rendered respondent's reinstatement to his former job no longer feasible. If that
should be true, then petitioner should instead pay to him separation pay at the rate
of one. month pay for every year of service computed from September 1992 (when
he commenced to work for the petitioners) until the finality of this decision, and full
backwages from the time his compensation was withheld until the finality of this
decision.
WHEREFORE, we DENY the petition for review on certiorari, and AFFIRM the decision
of the Court of Appeals promulgated on February 11, 2002, subject to the
modification that should reinstatement be no longer feasible, petitioner shall pay to
respondent separation pay of one month for every year of service computed from
September 1992 until the finality of this decision, and full backwages from the time
his compensation was withheld until the finality of this decision.
Costs of suit to be paid by the petitioners.
SO ORDERED.

See Tan v. Lagrama, G.R. No. 151228, August 15, 2002

G.R. No. 151228

August 15, 2002

ROLANDO
vs.
LEOVIGILDO
LAGRAMA
APPEALS, respondents.

Y.
and

TAN, petitioner,
THE

HONORABLE

COURT

OF

MENDOZA, J.:
This is a petition for review on certiorari of the decision, 1 dated May 31, 2001, and
the resolution,2 dated November 27, 2001, of the Court of Appeals in C.A.-G.R. SP.
No. 63160, annulling the resolutions of the National Labor Relations Commission
(NLRC) and reinstating the ruling of the Labor Arbiter which found petitioner
Rolando Tan guilty of illegally dismissing private respondent Leovigildo Lagrama and
ordering him to pay the latter the amount of P136,849.99 by way of separation pay,
backwages, and damages.

The following are the facts.

Petitioner Rolando Tan is the president of Supreme Theater Corporation and the
general manager of Crown and Empire Theaters in Butuan City. Private respondent
Leovigildo Lagrama is a painter, making ad billboards and murals for the motion
pictures shown at the Empress, Supreme, and Crown Theaters for more than 10
years, from September 1, 1988 to October 17, 1998.
On October 17, 1998, private respondent Lagrama was summoned by Tan and
upbraided: "Nangihi na naman ka sulod sa imong drawinganan." ("You again
urinated inside your work area.") When Lagrama asked what Tan was saying, Tan
told him, "Ayaw daghang estorya. Dili ko gusto nga mo-drawing ka pa. Guikan
karon, wala nay drawing. Gawas." ("Don't say anything further. I don't want you to
draw anymore. From now on, no more drawing. Get out.")
Lagrama denied the charge against him. He claimed that he was not the only one
who entered the drawing area and that, even if the charge was true, it was a minor
infraction to warrant his dismissal. However, everytime he spoke, Tan shouted
"Gawas" ("Get out"), leaving him with no other choice but to leave the premises.
Lagrama filed a complaint with the Sub-Regional Arbitration Branch No. X of the
National Labor Relations Commission (NLRC) in Butuan City. He alleged that he had
been illegally dismissed and sought reinvestigation and payment of 13th month
pay, service incentive leave pay, salary differential, and damages.
Petitioner Tan denied that Lagrama was his employee. He asserted that Lagrama
was an independent contractor who did his work according to his methods, while he
(petitioner) was only interested in the result thereof. He cited the admission of
Lagrama during the conferences before the Labor Arbiter that he was paid on a
fixed piece-work basis, i.e., that he was paid for every painting turned out as ad
billboard or mural for the pictures shown in the three theaters, on the basis of a "no
mural/billboard drawn, no pay" policy. He submitted the affidavits of other cinema
owners, an amusement park owner, and those supervising the construction of a
church to prove that the services of Lagrama were contracted by them. He denied
having dismissed Lagrama and alleged that it was the latter who refused to paint for
him after he was scolded for his habits.
As no amicable settlement had been reached, Labor Arbiter Rogelio P. Legaspi
directed the parties to file their position papers. On June 17, 1999, he rendered a
decision, the dispositive portion of which reads:
WHEREFORE, premises considered judgment is hereby ordered:
1. Declaring complainant's [Lagrama's] dismissal illegal and
2. Ordering respondents [Tan] to pay complainant the following:
A. Separation Pay

B.
Backwages (from 17 October 1998 to 17

P 59,000.00
47,200.00

June 1999)
C. 13th month pay (3 years)

17,700.00

D. Service Incentive Leave Pay (3 years)

2, 949.99

E. Damages

10,000.00

TOTAL

[P136,849.99]

Complainant's other claims are dismissed for lack of merit. 3

Petitioner Rolando Tan appealed to the NLRC Fifth Division, Cagayan de Oro City,
which, on June 30, 2000, rendered a decision 4 finding Lagrama to be an
independent contractor, and for this reason reversing the decision of the Labor
Arbiter.
Respondent Lagrama filed a motion for reconsideration, but it was denied for lack of
merit by the NLRC in a resolution of September 29, 2000. He then filed a petition for
certiorari under Rule 65 before the Court of Appeals.
The Court of Appeals found that petitioner exercised control over Lagrama's work by
dictating the time when Lagrama should submit his billboards and murals and
setting rules on the use of the work area and rest room. Although it found that
Lagrama did work for other cinema owners, the appeals court held it to be a mere
sideline insufficient to prove that he was not an employee of Tan. The appeals court
also found no evidence of any intention on the part of Lagrama to leave his job or
sever his employment relationship with Tan. Accordingly, on May 31, 2001, the
Court of Appeals rendered a decision, the dispositive portion of which reads:
IN THE LIGHT OF ALL THE FOREGOING, the Petition is hereby GRANTED. The
Resolutions of the Public Respondent issued on June 30, 2000 and September 29,
2000 are ANNULLED. The Decision of the Honorable Labor Arbiter Rogelio P. Legaspi
on June 17, 1999 is hereby REINSTATED.
Petitioner moved for a reconsideration, but the Court of Appeals found no reason to
reverse its decision and so denied his motion for lack of merit. 5 Hence, this petition
for review on certiorari based on the following assignments of errors:
I. With all due respect, the decision of respondent Court of Appeals in CA-G.R. SP
NO. 63160 is bereft of any finding that Public Respondent NLRC, 5th Division, had no
jurisdiction or exceeded it or otherwise gravely abused its discretion in its
Resolution of 30 June 2000 in NLRC CA-NO. M-004950-99.
II. With all due respect, respondent Court of Appeals, absent any positive finding on
its part that the Resolution of 30 June 2000 of the NLRC is not supported by
substantial evidence, is without authority to substitute its conclusion for that of said
NLRC.

III. With all due respect, respondent Court of Appeals' discourse on "freelance artists
and painters" in the decision in question is misplaced or has no factual or legal basis
in the record.
IV. With all due respect, respondent Court of Appeals' opening statement in its
decision as to "employment," "monthly salary of P1,475.00" and "work schedule
from Monday to Saturday, from 8:00 o'clock in the morning up to 5:00 o'clock in the
afternoon" as "facts" is not supported by the evidence on record.
V. With all due respect, the case of Lambo, et al., v. NLRC, et al., 317 SCRA 420 [G.R.
No. 111042 October 26, 1999] relied upon by respondent Court of Appeals is not
applicable to the peculiar circumstances of this case. 6
The issues raised boil down to whether or not an employer-employee relationship
existed between petitioner and private respondent, and whether petitioner is guilty
of illegally dismissing private respondent. We find the answers to these issues to be
in the affirmative.
I.
In determining whether there is an employer-employee relationship, we have
applied a "four-fold test," to wit: (1) whether the alleged employer has the power of
selection and engagement of employees; (2) whether he has control of the
employee with respect to the means and methods by which work is to be
accomplished; (3) whether he has the power to dismiss; and (4) whether the
employee was paid wages.7 These elements of the employer-employee relationship
are present in this case.
First. The existence in this case of the first element is undisputed. It was petitioner
who engaged the services of Lagrama without the intervention of a third party. It is
the existence of the second element, the power of control, that requires discussion
here.
Of the four elements of the employer-employee relationship, the "control test" is the
most important. Compared to an employee, an independent contractor is one who
carries on a distinct and independent business and undertakes to perform the job,
work, or service on its own account and under its own responsibility according to its
own manner and method, free from the control and direction of the principal in all
matters connected with the performance of the work except as to the results
thereof.8 Hence, while an independent contractor enjoys independence and freedom
from the control and supervision of his principal, an employee is subject to the
employer's power to control the means and methods by which the employee's work
is to be performed and accomplished.
In the case at bar, albeit petitioner Tan claims that private respondent Lagrama was
an independent contractor and never his employee, the evidence shows that the
latter performed his work as painter under the supervision and control of petitioner.
Lagrama worked in a designated work area inside the Crown Theater of petitioner,
for the use of which petitioner prescribed rules. The rules included the observance
of cleanliness and hygiene and a prohibition against urinating in the work area and

any place other than the toilet or the rest rooms. 9 Petitioner's control over
Lagrama's work extended not only to the use of the work area, but also to the result
of Lagrama's work, and the manner and means by which the work was to be
accomplished.
Moreover, it would appear that petitioner not only provided the workplace, but
supplied as well the materials used for the paintings, because he admitted that he
paid Lagrama only for the latter's services. 10
Private respondent Lagrama claimed that he worked daily, from 8 o'clock in the
morning to 5 o'clock in the afternoon. Petitioner disputed this allegation and
maintained that he paid Lagrama P1,475.00 per week for the murals for the three
theaters which the latter usually finished in 3 to 4 days in one week. 11 Even
assuming this to be true, the fact that Lagrama worked for at least 3 to 4 days a
week proves regularity in his employment by petitioner.
Second. That petitioner had the right to hire and fire was admitted by him in his
position paper submitted to the NLRC, the pertinent portions of which stated:
Complainant did not know how to use the available comfort rooms or toilets in and
about his work premises. He was urinating right at the place where he was
working when it was so easy for him, as everybody else did and had he only wanted
to, to go to the comfort rooms. But no, the complainant had to make a virtual urinal
out of his work place! The place then stunk to high heavens, naturally, to the
consternation of respondents and everyone who could smell the malodor.
...
Given such circumstances, the respondents had every right, nay all the compelling
reason, to fire him from his painting job upon discovery and his admission of such
acts. Nonetheless, though thoroughly scolded, he was not fired. It was he who
stopped to paint for respondents.12
By stating that he had the right to fire Lagrama, petitioner in effect acknowledged
Lagrama to be his employee. For the right to hire and fire is another important
element of the employer-employee relationship. 13 Indeed, the fact that, as petitioner
himself said, he waited for Lagrama to report for work but the latter simply stopped
reporting for work reinforces the conviction that Lagrama was indeed an employee
of petitioner. For only an employee can nurture such an expectancy, the frustration
of which, unless satisfactorily explained, can bring about some disciplinary action on
the part of the employer.
Third. Payment of wages is one of the four factors to be considered in determining
the existence of employer-employee relation. Wages are defined as "remuneration
or earnings, however designated, capable of being expressed in terms of money,
whether fixed or ascertained on a time, task, piece, or commission basis, or other
method of calculating the same, which is payable by an employer to an employee
under a written or unwritten contract of employment for work done or to be done, or
for services rendered or to be rendered." 14 That Lagrama worked for Tan on a fixed
piece-work basis is of no moment. Payment by result is a method of compensation

and does not define the essence of the relation. 15 It is a method of computing
compensation, not a basis for determining the existence or absence of employeremployee relationship. One may be paid on the basis of results or time expended on
the work, and may or may not acquire an employment status, depending on
whether the elements of an employer-employee relationship are present or not. 16
The Rules Implementing the Labor Code require every employer to pay his
employees by means of payroll.17 The payroll should show among other things, the
employee's rate of pay, deductions made, and the amount actually paid to the
employee. In the case at bar, petitioner did not present the payroll to support his
claim that Lagrama was not his employee, raising speculations whether his failure
to do so proves that its presentation would be adverse to his case. 18
The primary standard for 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. 19 In this case, there is such a
connection between the job of Lagrama painting billboards and murals and the
business of petitioner. To let the people know what movie was to be shown in a
movie theater requires billboards. Petitioner in fact admits that the billboards are
important to his business.20
The fact that Lagrama was not reported as an employee to the SSS is not conclusive
on the question of whether he was an employee of petitioner. 21 Otherwise, an
employer would be rewarded for his failure or even neglect to perform his
obligation.22
Neither does the fact that Lagrama painted for other persons affect or alter his
employment relationship with petitioner. That he did so only during weekends has
not been denied by petitioner. On the other hand, Samuel Villalba, for whom
Lagrama had rendered service, admitted in a sworn statement that he was told by
Lagrama that the latter worked for petitioner.23
Lagrama had been employed by petitioner since 1988. Under the law, therefore, he
is deemed a regular employee and is thus entitled to security of tenure, as provided
in Art. 279 of Labor Code:
ART. 279. Security of Tenure. In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.
This Court has held that if the employee has been performing the job for at least
one year, even if not continuously but intermittently, the repeated and continuing
need for its performance is sufficient evidence of the necessity, if not
indispensability, of that activity to the business of his employer. Hence, the

employment is also considered regular, although with respect only to such activity,
and while such activity exists.24
It is claimed that Lagrama abandoned his work. There is no evidence to show this.
Abandonment requires two elements: (1) the failure to report for work or absence
without valid or justifiable reason, and (2) a clear intention to sever the employeremployee relationship, with the second element as the more determinative factor
and being manifested by some overt acts. 25 Mere absence is not sufficient. What is
more, the burden is on the employer to show a deliberate and unjustified refusal on
the part of the employee to resume his employment without any intention of
returning.26 In the case at bar, the Court of Appeals correctly ruled:
Neither do we agree that Petitioner abandoned his job. In order for abandonment to
be a just and valid ground for dismissal, the employer must show, by clear proof,
the intention of the employee to abandon his job. . . .
In the present recourse, the Private Respondent has not established clear proof of
the intention of the Petitioner to abandon his job or to sever the employment
relationship between him and the Private Respondent. On the contrary, it was
Private Respondent who told Petitioner that he did not want the latter to draw for
him and thereafter refused to give him work to do or any mural or billboard to paint
or draw on.
More, after the repeated refusal of the Private Respondent to give Petitioner murals
or billboards to work on, the Petitioner filed, with the Sub-Regional Arbitration
Branch No. X of the National Labor Relations Commission, a Complaint for "Illegal
Dismissal and Money Claims." Such act has, as the Supreme Court declared, negate
any intention to sever employment relationship. . . . 27
II.
The second issue is whether private respondent Lagrama was illegally dismissed. To
begin, the employer has the burden of proving the lawfulness of his employee's
dismissal.28 The validity of the charge must be clearly established in a manner
consistent with due process. The Implementing Rules of the Labor Code 29 provide
that no worker shall be dismissed except for a just or authorized cause provided by
law and after due process. This provision has two aspects: (1) the legality of the act
of dismissal, that is, dismissal under the grounds provided for under Article 282 of
the Labor Code and (2) the legality in the manner of dismissal. The illegality of the
act of dismissal constitutes discharge without just cause, while illegality in the
manner of dismissal is dismissal without due process. 30
In this case, by his refusal to give Lagrama work to do and ordering Lagrama to get
out of his sight as the latter tried to explain his side, petitioner made it plain that
Lagrama was dismissed. Urinating in a work place other than the one designated for
the purpose by the employer constitutes violation of reasonable regulations
intended to promote a healthy environment under Art. 282(1) of the Labor Code for
purposes of terminating employment, but the same must be shown by evidence.

Here there is no evidence that Lagrama did urinate in a place other than a rest room
in the premises of his work.
Instead of ordering his reinstatement as provided in Art. 279 of the Labor Code, the
Labor Arbiter found that the relationship between the employer and the employee
has been so strained that the latter's reinstatement would no longer serve any
purpose. The parties do not dispute this finding. Hence, the grant of separation pay
in lieu of reinstatement is appropriate. This is of course in addition to the payment
of backwages which, in accordance with the ruling in Bustamante v. NLRC,31 should
be computed from the time of Lagrama's dismissal up to the time of the finality of
this decision, without any deduction or qualification.
The Bureau of Working Conditions32 classifies workers paid by results into two
groups, namely; (1) those whose time and performance is supervised by the
employer, and (2) those whose time and performance is unsupervised by the
employer. The first involves an element of control and supervision over the manner
the work is to be performed, while the second does not. If a piece worker is
supervised, there is an employer-employee relationship, as in this case. However,
such an employee is not entitled to service incentive leave pay since, as pointed out
inMakati Haberdashery v. NLRC33 and Mark Roche International v. NLRC, 34 he is paid
a fixed amount for work done, regardless of the time he spent in accomplishing
such work.
WHEREFORE, based on the foregoing, the petition is DENIED for lack of showing
that the Court of Appeals committed any reversible error. The decision of the Court
of Appeals, reversing the decision of the National Labor Relations Commission and
reinstating
the
decision
of
the
Labor
Arbiter,
is AFFIRMED with
the MODIFICATIONthat the backwages and other benefits awarded to private
respondent Leovigildo Lagrama should be computed from the time of his dismissal
up to the time of the finality of this decision, without any deduction and
qualification. However, the service incentive leave pay awarded to him is DELETED.
SO ORDERED.
Bellosillo, Quisumbing, and Corona, JJ., concur.

Kinds of employment
Probationary
GMA Network v. Pabriga, G.R. No. 176419, November 27, 2013
G.R. No. 176419

November 27, 2013

GMA
NETWORK,
INC., Petitioner,
vs.
CARLOS P. PABRIGA, GEOFFREY F. ARIAS, KIRBY N. CAMPO, ARNOLD L. LAGAHIT, and
ARMANDO A. CATUBIG, Respondents.

DECISION
LEONARDO-DE CASTRO, J.:
This is a Petition for Review on Certiorari filed by petitioner GMA Network Inc. assailing the
Decision of the Court of Appeals dated September 8, 2006 and the subsequent Resolution dated
January 22 2007 denying reconsideration in CA-G.R. SP No. 73652.
1

The Court of Appeals summarized the facts of the case as follows:

On July 19 1999 due to the miserable working conditions private respondents were forced to file a
complaint against petitioner before the National Labor Relations Commission Regional Arbitration
Branch No. VII Cebu City assailing their respective employment circumstances as follows:
NAME

DATE HIRED

POSITION

Carlos Pabriga

2 May 1997

Television Technicians

Geoffrey Arias

2 May 1997

Television Technicians

Kirby Campo

1 Dec. 1993

Television Technicians

Arnold Laganit

11 Feb. 1996

Television Technicians

Armand Catubig

2 March 1997

Television Technicians

Private respondents were engaged by petitioner to perform the following activities, to wit:
1) Manning of Technical Operations Center:
(a) Responsible for the airing of local commercials; and
(b) Logging/monitoring of national commercials (satellite)
2) Acting as Transmitter/VTR men:
(a) Prepare tapes for local airing;
(b) Actual airing of commercials;
(c) Plugging of station promo;
(d) Logging of transmitter reading; and
(e) In case of power failure, start up generator set to resume program;
3) Acting as Maintenance staff;
(a) Checking of equipment;
(b) Warming up of generator;

(c) Filling of oil, fuel, and water in radiator; and

4) Acting as Cameramen
On 4 August 1999, petitioner received a notice of hearing of the complaint. The following day,
petitioners Engineering Manager, Roy Villacastin, confronted the private respondents about the said
complaint.
On 9 August 1999, private respondents were summoned to the office of petitioners Area Manager,
Mrs. Susan Alio, and they were made to explain why they filed the complaint. The next day, private
respondents were barred from entering and reporting for work without any notice stating the reasons
therefor.
On 13 August 1999, private respondents, through their counsel, wrote a letter to Mrs. Susan Alio
requesting that they be recalled back to work.
On 23 August 1999, a reply letter from Mr. Bienvenido Bustria, petitioners head of Personnel and
Labor Relations Division, admitted the non-payment of benefits but did not mention the request of
private respondents to be allowed to return to work.
On 15 September 1999, private respondents sent another letter to Mr. Bustria reiterating their
request to work but the same was totally ignored. On 8 October 1999, private respondents filed an
amended complaint raising the following additional issues: 1) Unfair Labor Practice; 2) Illegal
dismissal; and 3) Damages and Attorneys fees.
On 23 September 1999, a mandatory conference was set to amicably settle the dispute between the
parties, however, the same proved to be futile. As a result, both of them were directed to file their
respective position papers.
On 10 November 1999, private respondents filed their position paper and on 2 March 2000, they
received a copy of petitioners position paper. The following day, the Labor Arbiter issued an order
considering the case submitted for decision.
3

In his Decision dated August 24, 2000, the Labor Arbiter dismissed the complaint of respondents for
illegal dismissal and unfair labor practice, but held petitioner liable for 13th month pay. The
dispositive portion of the Labor Arbiters Decision reads:
WHEREFORE, the foregoing premises considered, judgment is hereby rendered dismissing the
complaints for illegal dismissal and unfair labor practice.
Respondents are, however, directed to pay the following complainants their proportionate 13th
month pay, to wit:
1. Kirby Campo

P 7,716.04

2. Arnold Lagahit

7,925.98

3. Armand Catubig

4,233.68

4. Carlos Pabriga

4,388.19

5. Geoffrey Arias

4,562.01

P28,826.14
10% Attorneys fees

2,882.61

GRAND TOTAL

P31,708.75

All other claims are, hereby, dismissed for failure to substantiate the same.

Respondents appealed to the National Labor Relations Commission (NLRC). The NLRC reversed
the Decision of the Labor Arbiter, and held thus:
WHEREFORE, we make the following findings:
a) All complainants are regular employees with respect to the particular activity to which they were
assigned, until it ceased to exist. As such, they are entitled to payment of separation pay computed
at one (1) month salary for every year of service;
b) They are not entitled to overtime pay and holiday pay; and
c) They are entitled to 13th month pay, night shift differential and service incentive leave pay.
For purposes of accurate computation, the entire records are REMANDED to the Regional
Arbitration Branch of origin which is hereby directed to require from respondent the production of
additional documents where necessary.
Respondent is also assessed the attorneys fees of ten percent (10%) of all the above awards.

Petitioner elevated the case to the Court of Appeals via a Petition for Certiorari. On September 8,
2006, the appellate court rendered its Decision denying the petition for lack of merit.
Petitioner filed the present Petition for Review on Certiorari, based on the following grounds:
I.
THE COURT OF APPEALS GRAVELY ERRED FINDING RESPONDENTS ARE REGULAR
EMPLOYEES OF THE PETITIONER AND ARE NOT PROJECT EMPLOYEES.
II.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING SEPARATION PAY TO
RESPONDENTS ABSENT A FINDING THAT RESPONDENTS WERE ILLEGALLY
DISMISSED.
III.
THE COURT OF APPEALS GRAVELY ERRED IN AWARDING NIGHT SHIFT
DIFFERENTIAL PAY CONSIDERING THE ABSENCE OF EVIDENCE WHICH WOULD
ENTITLE THEM TO SUCH AN AWARD.
IV.

THE COURT OF APPEALS GRAVELY ERRED IN AWARDING ATTORNEYS FEES TO

RESPONDENTS.
6

The parties having extensively elaborated on their positions in their respective memoranda, we
proceed to dispose of the issues raised.
Five Classifications of Employment
At the outset, we should note that the nature of the employment is determined by law, regardless of
any contract expressing otherwise. The supremacy of the law over the nomenclature of the contract
and the stipulations contained therein is to bring to life the policy enshrined in the Constitution to
afford full protection to labor. Labor contracts, being imbued with public interest, are placed on a
higher plane than ordinary contracts and are subject to the police power of the State.
7

Respondents claim that they are regular employees of petitioner GMA Network, Inc. The latter, on
the other hand, interchangeably characterize respondents employment as project and fixed
period/fixed term employment. There is thus the need to clarify the foregoing terms.
The terms regular employment and project employment are taken from Article 280 of the Labor
Code, which also speaks of casual and seasonal employment:
ARTICLE 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 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 actually exist.
A fifth classification, that of a fixed term employment, is not expressly mentioned in the Labor Code.
Nevertheless, this Court ruled in Brent School, Inc. v. Zamora, that such a contract, which specifies
that employment will last only for a definite period, is not per se illegal or against public policy.
8

Whether respondents are regular or project employees

Pursuant to the above-quoted Article 280 of the Labor Code, employees performing activities which
are usually necessary or desirable in the employers usual business or trade can either be regular,
project or seasonal employees, while, as a general rule, those performing activities not usually
necessary or desirable in the employers usual business or trade are casual employees. The reason
for this distinction may not be readily comprehensible to those who have not carefully studied these
provisions: only employers who constantly need the specified tasks to be performed can be
justifiably charged to uphold the constitutionally protected security of tenure of the corresponding
workers. The consequence of the distinction is found in Article 279 of the Labor Code, which
provides:

ARTICLE 279. Security of tenure. In cases of regular employment, the employer shall not
terminate the services of an employee except for a just cause or when authorized by this Title. An
employee who is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of allowances, and to his
other benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement.
On the other hand, the activities of project employees may or may not be usually necessary or
desirable in the usual business or trade of the employer, as we have discussed in ALU-TUCP v.
National Labor Relations Commission, and recently reiterated in Leyte Geothermal Power
Progressive Employees Union-ALU-TUCP v. Philippine National Oil Company-Energy Development
Corporation. In said cases, we clarified the term "project" in the test for determining whether an
employee is a regular or project employee:
9

10

It is evidently important to become clear about the meaning and scope of the term "project" in the
present context. The "project" for the carrying out of which "project employees" are hired would
ordinarily have some relationship to the usual business of the employer. Exceptionally, the "project"
undertaking might not have an ordinary or normal relationship to the usual business of the employer.
In this latter case, the determination of the scope and parameters of the "project" becomes fairly
easy. It is unusual (but still conceivable) for a company to undertake a project which has absolutely
no relationship to the usual business of the company; thus, for instance, it would be an unusual
steel-making company which would undertake the breeding and production of fish or the cultivation
of vegetables. From the viewpoint, however, of the legal characterization problem here presented to
the Court, there should be no difficulty in designating the employees who are retained or hired for
the purpose of undertaking fish culture or the production of vegetables as "project employees," as
distinguished from ordinary or "regular employees," so long as the duration and scope of the project
were determined or specified at the time of engagement of the "project employees." For, as is
evident from the provisions of Article 280 of the Labor Code, quoted earlier, the principal test for
determining whether particular employees are properly characterized as "project employees" as
distinguished from "regular employees," is whether or not the "project employees" were assigned to
carry out a "specific project or undertaking," the duration (and scope) of which were specified at the
time the employees were engaged for that project.
In the realm of business and industry, we note that "project" could refer to one or the other of at least
two (2) distinguishable types of activities. Firstly, a project could refer to a particular job or
undertaking that is within the regular or usual business of the employer company, but which is
distinct and separate, and identifiable as such, from the other undertakings of the company. Such job
or undertaking begins and ends at determined or determinable times. The typical example of this
first type of project is a particular construction job or project of a construction company. A
construction company ordinarily carries out two or more [distinct] identifiable construction projects:
e.g., a twenty-five-storey hotel in Makati; a residential condominium building in Baguio City; and a
domestic air terminal in Iloilo City. Employees who are hired for the carrying out of one of these
separate projects, the scope and duration of which has been determined and made known to the
employees at the time of employment, are properly treated as "project employees," and their
services may be lawfully terminated at completion of the project.
The term "project" could also refer to, secondly, a particular job or undertaking that is not within the
regular business of the corporation. Such a job or undertaking must also be identifiably separate and
distinct from the ordinary or regular business operations of the employer. The job or undertaking also
begins and ends at determined or determinable times. x x x. (Emphases supplied, citation omitted.)
11

Thus, in order to safeguard the rights of workers against the arbitrary use of the word "project" to
prevent employees from attaining the status of regular employees, employers claiming that their
workers are project employees should not only prove that the duration and scope of the employment
was specified at the time they were engaged, but also that there was indeed a project. As discussed
above, the project could either be (1) a particular job or undertaking that is within the regular or usual
business of the employer company, but which is distinct and separate, and identifiable as such, from
the other undertakings of the company; or (2) a particular job or undertaking that is not within the
regular business of the corporation. As it was with regard to the distinction between a regular and
casual employee, the purpose of this requirement is to delineate whether or not the employer is in
constant need of the services of the specified employee. If the particular job or undertaking is within
the regular or usual business of the employer company and it is not identifiably distinct or separate
from the other undertakings of the company, there is clearly a constant necessity for the
performance of the task in question, and therefore said job or undertaking should not be considered
a project.
Brief examples of what may or may not be considered identifiably distinct from the business of the
employer are in order. In Philippine Long Distance Telephone Company v. Ylagan, this Court held
that accounting duties were not shown as distinct, separate and identifiable from the usual
undertakings of therein petitioner PLDT. Although essentially a telephone company, PLDT maintains
its own accounting department to which respondent was assigned. This was one of the reasons why
the Court held that respondent in said case was not a project employee. On the other hand, in San
Miguel Corporation v. National Labor Relations Commission, respondent was hired to repair
furnaces, which are needed by San Miguel Corporation to manufacture glass, an integral component
of its packaging and manufacturing business. The Court, finding that respondent is a project
employee, explained that San Miguel Corporation is not engaged in the business of repairing
furnaces. Although the activity was necessary to enable petitioner to continue manufacturing glass,
the necessity for such repairs arose only when a particular furnace reached the end of its life or
operating cycle. Respondent therein was therefore considered a project employee.
12

13

In the case at bar, as discussed in the statement of facts, respondents were assigned to the
following tasks:
1) Manning of Technical Operations Center:
(a) Responsible for the airing of local commercials; and
(b) Logging/monitoring of national commercials (satellite)
2) Acting as Transmitter/VTR men:
(a) Prepare tapes for local airing;
(b) Actual airing of commercials;
(c) Plugging of station promo;
(d) Logging of transmitter reading; and
(e) In case of power failure, start up generator set to resume program;
3) Acting as Maintenance staff;

(a) Checking of equipment;

(b) Warming up of generator;
(c) Filling of oil, fuel, and water in radiator; and
4) Acting as Cameramen

14

These jobs and undertakings are clearly within the regular or usual business of the employer
company and are not identifiably distinct or separate from the other undertakings of the company.
There is no denying that the manning of the operations center to air commercials, acting as
transmitter/VTR men, maintaining the equipment, and acting as cameramen are not undertakings
separate or distinct from the business of a broadcasting company.
Petitioners allegation that respondents were merely substitutes or what they call pinch-hitters (which
means that they were employed to take the place of regular employees of petitioner who were
absent or on leave) does not change the fact that their jobs cannot be considered projects within the
purview of the law. Every industry, even public offices, has to deal with securing substitutes for
employees who are absent or on leave. Such tasks, whether performed by the usual employee or by
a substitute, cannot be considered separate and distinct from the other undertakings of the
company. While it is managements prerogative to device a method to deal with this issue, such
prerogative is not absolute and is limited to systems wherein employees are not ingeniously and
methodically deprived of their constitutionally protected right to security of tenure. We are not
convinced that a big corporation such as petitioner cannot device a system wherein a sufficient
number of technicians can be hired with a regular status who can take over when their colleagues
are absent or on leave, especially when it appears from the records that petitioner hires so-called
pinch-hitters regularly every month.
In affirming the Decision of the NLRC, the Court of Appeals furthermore noted that if respondents
were indeed project employees, petitioner should have reported the completion of its projects and
the dismissal of respondents in its finished projects:
There is another reason why we should rule in favor of private respondents. Nowhere in the records
is there any showing that petitioner reported the completion of its projects and the dismissal of
private respondents in its finished projects to the nearest Public Employment Office as per Policy
Instruction No. 20 of the Department of Labor and Employment [DOLE]. Jurisprudence abounds
with the consistent rule that the failure of an employer to report to the nearest Public Employment
Office the termination of its workers services everytime a project or a phase thereof is completed
indicates that said workers are not project employees.
15

In the extant case, petitioner should have filed as many reports of termination as there were projects
actually finished if private respondents were indeed project employees, considering that the latter
were hired and again rehired from 1996 up to 1999. Its failure to submit reports of termination cannot
but sufficiently convince us further that private respondents are truly regular employees. Important to
note is the fact that private respondents had rendered more than one (1) year of service at the time
of their dismissal which overturns petitioners allegations that private respondents were hired for a
specific or fixed undertaking for a limited period of time. (Citations omitted.)
16

We are not unaware of the decisions of the Court in Philippine Long Distance Telephone Company v.
Ylagan and ABS-CBN Broadcasting Corporation v. Nazareno which held that the employers failure
to report the termination of employees upon project completion to the DOLE Regional Office having
jurisdiction over the workplace within the period prescribed militates against the employers claim of
17

18

project employment, even outside the construction industry. We have also previously stated in
another case that the Court should not allow circumvention of labor laws in industries not falling
within the ambit of Policy Instruction No. 20/Department Order No. 19, thereby allowing the
prevention of acquisition of tenurial security by project employees who have already gained the
status of regular employees by the employers conduct.
19

While it may not be proper to revisit such past pronouncements in this case, we nonetheless find
that petitioners theory of project employment fails the principal test of demonstrating that the alleged
project employee was assigned to carry out a specific project or undertaking, the duration and scope
of which were specified at the time the employee is engaged for the project.
20

The Court of Appeals also ruled that even if it is assumed that respondents are project employees,
they would nevertheless have attained regular employment status because of their continuous
rehiring:
Be that as it may, a project employee may also attain the status of a regular employee if there is a
continuous rehiring of project employees after the stoppage of a project; and the activities performed
are usual [and] customary to the business or trade of the employer. The Supreme Court ruled that a
project employee or a member of a work pool may acquire the status of a regular employee when
the following concur:
1) There is a continuous rehiring of project employees even after cessation of a project; and
2) The tasks performed by the alleged project employee are vital, necessary and
indispensable to the usual business or trade of the employer.
The circumstances set forth by law and the jurisprudence is present in this case. In fine, even if
private respondents are to be considered as project employees, they attained regular employment
status, just the same. (Citation omitted.)
21

Anent this issue of attainment of regular status due to continuous rehiring, petitioner advert to the
fixed period allegedly designated in employment contracts and reflected in vouchers. Petitioner cites
our pronouncements in Brent, St. Theresas School of Novaliches Foundation v. National Labor
Relations Commission, and Fabela v. San Miguel Corporation, and argues that respondents were
fully aware and freely entered into agreements to undertake a particular activity for a specific length
of time. Petitioner apparently confuses project employment from fixed term employment. The
discussions cited by petitioner in Brent, St. Theresas and Fabela all refer to fixed term employment,
which is subject to a different set of requirements.
22

23

24

Whether the requisites of a valid fixed term employment are met

As stated above, petitioner interchangeably characterizes respondents service as project and fixed
term employment. These types of employment, however, are not the same. While the former
requires a project as restrictively defined above, the duration of a fixed-term employment agreed
upon by the parties may be any day certain, which is understood to be "that which must necessarily
come although it may not be known when." The decisive determinant in fixed-term employment is
not the activity that the employee is called upon to perform but the day certain agreed upon by the
parties for the commencement and termination of the employment relationship.
25

26

Cognizant of the possibility of abuse in the utilization of fixed-term employment contracts, we

emphasized in Brent 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 as
contrary to public policy or morals. We thus laid down indications or criteria under which "term
employment" cannot be said to be in circumvention of the law on security of tenure, namely:
27

1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties
without any force, duress, or improper pressure being brought to bear upon the employee
and absent any other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on more
or less equal terms with no moral dominance exercised by the former or the latter. (Citation
omitted.)
28

These indications, which must be read together, make the Brent doctrine applicable only in a few
special cases wherein the employer and employee are on more or less in equal footing in entering
into the contract. The reason for this is evident: when a prospective employee, on account of special
skills or market forces, is in a position to make demands upon the prospective employer, such
prospective employee needs less protection than the ordinary worker. Lesser limitations on the
parties freedom of contract are thus required for the protection of the employee. These indications
were applied in Pure Foods Corporation v. National Labor Relations Commission, where we
discussed the patent inequality between the employer and employees therein:
29

[I]t could not be supposed that private respondents and all other so-called "casual" workers of [the
petitioner] KNOWINGLY and VOLUNTARILY agreed to the 5-month employment contract. Cannery
workers are never on equal terms with their employers. Almost always, they agree to any terms of an
employment contract just to get employed considering that it is difficult to find work given their
ordinary qualifications. Their freedom to contract is empty and hollow because theirs is the freedom
to starve if they refuse to work as casual or contractual workers. Indeed, to the unemployed, security
of tenure has no value. It could not then be said that petitioner and private respondents "dealt with
each other on more or less equal terms with no moral dominance whatever being exercised by the
former over the latter.
To recall, it is doctrinally entrenched that in illegal dismissal cases, the employer has the burden of
proving with clear, accurate, consistent, and convincing evidence that the dismissal was valid. It is
therefore the employer which must satisfactorily show that it was not in a dominant position of
advantage in dealing with its prospective employee. Thus, in Philips Semiconductors (Phils.), Inc. v.
Fadriquela, this Court rejected the employers insistence on the application of the Brent doctrine
when the sole justification of the fixed terms is to respond to temporary albeit frequent need of such
workers:
30

31

We reject the petitioners submission that it resorted to hiring employees for fixed terms to augment
or supplement its regular employment "for the duration of peak loads" during short-term surges to
respond to cyclical demands; hence, it may hire and retire workers on fixed terms, ad infinitum,
depending upon the needs of its customers, domestic and international. Under the petitioner's
submission, any worker hired by it for fixed terms of months or years can never attain regular
employment status. x x x.
Similarly, in the case at bar, we find it unjustifiable to allow petitioner to hire and rehire workers on
fixed terms, ad infinitum, depending upon its needs, never attaining regular employment status. To
recall, respondents were repeatedly rehired in several fixed term contracts from 1996 to 1999. To
prove the alleged contracts, petitioner presented cash disbursement vouchers signed by
respondents, stating that they were merely hired as pinch-hitters. It is apparent that respondents
were in no position to refuse to sign these vouchers, as such refusal would entail not getting paid for

their services. Plainly, respondents as "pinch-hitters" cannot be considered to be in equal footing as

petitioner corporation in the negotiation of their employment contract.
In sum, we affirm the findings of the NLRC and the Court of Appeals that respondents are regular
employees of petitioner. As regular employees, they are entitled to security of tenure and therefore
their services may be terminated only for just or authorized causes. Since petitioner failed to prove
any just or authorized cause for their termination, we are constrained to affirm the findings of the
NLRC and the Court of Appeals that they were illegally dismissed.
1wphi1

Separation Pay, Night Shift Differential and Attorneys Fees

Petitioner admits that respondents were not given separation pay and night shift differential.
Petitioner, however, claims that respondents were not illegally dismissed and were therefore not
entitled to separation pay. As regards night shift differential, petitioner claims that its admission in its
August 23, 1999 letter as to the nonpayment thereof is qualified by its allegation that respondents
are not entitled thereto. Petitioner points out that respondents failed to specify the period when such
benefits are due, and did not present additional evidence before the NLRC and the Court of
Appeals.
32

In light, however, of our ruling that respondents were illegally dismissed, we affirm the findings of the
NLRC and the Court of Appeals that respondents are entitled to separation pay in lieu of
reinstatement. We quote with approval the discussion of the Court of Appeals:
However, since petitioner refused to accept private respondents back to work, reinstatement is no
longer practicable. Allowing private respondents to return to their work might only subject them to
further embarrassment, humiliation, or even harassment.
Thus, in lieu of reinstatement, the grant of separation pay equivalent to one (1) month pay for every
year of service is proper which public respondent actually did. Where the relationship between
private respondents and petitioner has been severely strained by reason of their respective
imputations of accusations against each other, to order reinstatement would no longer serve any
purpose. In such situation, payment of separation pay instead of reinstatement is in order. (Citations
omitted.)
33

As regards night shift differential, the Labor Code provides that every employee shall be paid not
less than ten percent (10%) of his regular wage for each hour of work performed between ten oclock
in the evening and six oclock in the morning. As employees of petitioner, respondents are entitled
to the payment of this benefit in accordance with the number of hours they worked from 10:00 p.m.
to 6:00 a.m., if any. In the Decision of the NLRC affirmed by the Court of Appeals, the records were
remanded to the Regional Arbitration Branch of origin for the computation of the night shift
differential and the separation pay. The Regional Arbitration Branch of origin was likewise directed to
require herein petitioner to produce additional documents where necessary. Therefore, while we are
affirming that respondents are entitled to night shift differential in accordance with the number of
hours they worked from 10:00 p.m. to 6:00 a.m., it is the Regional Arbitration Branch of origin which
should determine the computation thereof for each of the respondents, and award no night shift
differential to those of them who never worked from 10:00 p.m. to 6:00 a.m.
34

It is also worthwhile to note that in the NLRC Decision, it was herein petitioner GMA Network, Inc.
(respondent therein) which was tasked to produce additional documents necessary for the
computation of the night shift differential. This is in accordance with our ruling in Dansart Security
Force & Allied Services Company v. Bagoy, where we held that it is entirely within the employer's
35

power to present such employment records that should necessarily be in their possession, and that
failure to present such evidence must be taken against them.
Petitioner, however, is correct that the award of attorney's fees is contrary to jurisprudence. In De las
Santos v. Jebsen Maritime Inc., we held:
36

Likewise legally correct is the deletion of the award of attorney's fees, the NLRC having failed to
explain petitioner's entitlement thereto. As a matter of sound policy, an award of attorney's fees
remains the exception rather than the rule. It must be stressed, as aptly observed by the appellate
court, that it is necessary for the trial court, the NLRC in this case, to make express findings of facts
and law that would bring the case within the exception. In fine, the factual, legal or equitable
justification for the award must be set forth in the text of the decision. The matter of attorney's fees
cannot be touched once and only in the fallo of the decision, else, the award should be thrown out
for being speculative and conjectural. In the absence of a stipulation, attorney's fees are ordinarily
not recoverable; otherwise a premium shall be placed on the right to litigate. They are not awarded
every time a party wins a suit. (Citations omitted.)
In the case at bar, the factual basis for the award of attorney's fees was not discussed in the text of
NLRC Decision. We are therefore constrained to delete the same.
WHEREFORE the Decision of the Court of Appeals dated September 8, 2006 and the subsequent
Resolution denying reconsideration dated January 22, 2007 in CA-G.R. SP No. 73652, are hereby
AFFIRMED with the MODIFICATION that the award of attorney's fees in the affirmed Decision of the
National Labor Relations Commission is hereby DELETED.
SO ORDERED.
TERESITA
Associate Justice

J.

LEONARDO-DE

CASTRO

Art. 281, Labor Code

Article 281. Probationary employment. Probationary employment shall not exceed six (6) months
from the date the employee started working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been engaged on a probationary
basis may be terminated for a just cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the employee at the time of
his engagement. An employee who is allowed to work after a probationary period shall be
considered a regular employee.

Book VI, Rule I, Sec. 6, Implementing Rules (Labor Code)

SECTION 6. Probationary employment. (a) Where the work for which an employee
has been engaged is learnable or apprenticeable in accordance with the standards
prescribed by the Department of Labor, the probationary employment period of the
employee shall be limited to the authorized learnership or apprenticeship period,
whichever is applicable.

(b) Where the work is neither learnable nor apprenticeable, the probationary
employment period shall not exceed six (6) months reckoned from the date the
employee actually started working.
(c) The services of an employee who has been engaged on probationary basis may
be terminated only for a just cause or when authorized by existing laws, or when he
fails to qualify as a regular employee in accordance with reasonable standards
prescribed by the employer.
(d) In all cases involving employees engaged on probationary basis, the employer
shall make known to the employee the standards under which he will qualify as a
regular employee at the time of his engagement.

Carvajal v. Luzon Development Bank, G.R. No. 186169, August 1, 2012

G.R. No. 186169

August 1, 2012

MYLENE
CARVAJAL, Petitioner,
vs.
LUZON DEVELOPMENT BANK AND/OR OSCAR Z. RAMIREZ, Respondents.
DECISION
PEREZ, J.:
In this Petition for Review on Certiorari, petitioner Mylene Carvajal assails the Decision 1 of the Court
of Appeals, Second Division, dated 20 August 2008 which dismissed her complaint for illegal
dismissal. The Court or Appeals reversed and set aside the Resolution 2 of the National Labor
Relations Commission (NLRC) affirming with modification the Labor Arbiters Decision 3 finding
petitioners dismissal as illegal and ordering reinstatement or payment of backwages and attorneys
fees.
The facts are as follows:
Petitioner Mylene Carvajal was employed as a trainee-teller by respondent Luzon Development
Bank (Bank) on 28 October 2003 under a six-month probationary employment contract, with a
monthly salary of P5,175.00. Respondent Oscar Ramirez is the President and Chief Executive
Officer of the Bank.
On 10 December 2003, the Bank sent petitioner a Memorandum 4 directing her to explain in writing
why she should not be subjected to disciplinary action for "chronic tardiness" on November 3, 5, 6,
14, 18, 20, 21 and 28 2003 or for a total of eight (8) times. Petitioner apologized in writing and
explained that she was in the process of making adjustments regarding her work and house
chores.5 She was thus reprimanded in writing and reminded of her status as a probationary
employee.6 Still, on 6 January 2004, a second Memorandum was sent to petitioner directing her to
explain why she should not be suspended for "chronic tardiness" on 13 occasions or on December
2, 3, 4, 5, 8, 10, 11, 12, 15, 16, 18, 22, and 23 2003. On 7 January 2004, petitioner submitted her
written explanation and manifested her acceptance of the consequences of her actions. 7 On 12
January 2004, petitioner was informed, through a Memorandum, 8 of her suspension for three (3)

working days without pay effective 21 January 2004. Finally, in a Memorandum dated 22 January
2004, petitioners suspension was lifted but in the same breath, her employment was terminated
effective 23 January 2004.9
Hence, petitioners filing of the Complaint for illegal dismissal before the Labor Arbiter. Petitioner
alleged, in her position paper, that the following were the reasons for her termination: 1) she is not
an effective frontliner; 2) she has mistakenly cleared a check; 3) tardiness; 4) absenteeism; and 5)
shortage.10
In their position paper, respondents averred that petitioner was terminated as a probationary
employee on three grounds, namely: 1) chronic tardiness; 2) unauthorized absence; and 3) failure to
perform satisfactorily as a probationary employee. Respondents explained that petitioner was a
chronic violator of the banks rules and regulations on tardiness and absenteeism. Aside from her
numerous tardiness, petitioner was absent without leave for 2 days. She also cleared a check which
later turned out to be a bounced check. Finally, petitioner garnered only a rating of 2.17, with 4 being
the highest and 1 the lowest, in her performance evaluation.
On 9 June 2005, the Labor Arbiter ruled that petitioner was illegally dismissed. Respondents were
held solidarily liable for payment of money claims. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is rendered declaring that complainant as
probationary employee was illegally dismissed. Respondents are ordered to immediately reinstate
complainant to her former position, without loss of any seniority rights and other monetary benefits.
However, if reinstatement is no longer feasible due to strained relationship between the parties,
respondents are further ordered to pay complainant, jointly and severally the amount of P20,070.38,
representing full backwages of complainant from the time of her illegal dismissal up to the end of her
probationary contract of employment with respondent bank. Plus, 10% of the monetary award as
attorneys fee.11
The Labor Arbiter found that petitioner was dismissed without due process because "she was not
afforded the notice in writing informing her of what respondent (the Bank) would like to bring out to
her for the latter to answer in writing." The Labor Arbiter also did not consider "unsatisfactory
performance" as a valid ground to shorten the six-month contract of petitioner with the Bank. 12
The decision of the Labor Arbiter was partially appealed to the NLRC by petitioner. Petitioner
contended that she should be considered a regular employee and that the computation by the Labor
Arbiter of backwages up to the end of her probationary contract is without basis. In its Comment,
respondent argued against the illegality of petitioners dismissal and their joint and solidary liability to
pay complainants monetary claims. On 31 May 2006, the NLRC affirmed with modification the Labor
Arbiters Decision and ordered for petitioners reinstatement, to wit:
WHEREFORE, premises considered, the assailed decision is hereby affirmed with MODIFICATION
ordering the respondents to reinstate the complainant to her former position, without loss of any
seniority rights and other monetary benefits and to pay her full backwages from the date of her
dismissal to the date of her reinstatement, actual or in payroll.
All other aspects of the assailed decision stands.13
Respondents filed a motion for reconsideration but the NLRC denied the same in a
Resolution14 dated 20 July 2006.

In a petition for certiorari filed by respondents, the Court of Appeals rendered the 20 August 2008
Decision reversing the NLRC ruling, thus:
IN VIEW OF ALL THE FOREGOING, the instant petition is GRANTED. The assailed NLRC
Resolution in NLRC CA No. 046866-05 dated May 31, 2006 which affirmed with modification the
Decision of the Labor Arbiter in NLRC Case No. RAB IV-2-18910-04-L dated June 9, 2005 is hereby
REVERSED and SET ASIDE. All monetary liabilities decreed in the Labor Arbiters Decision against
petitioners are hereby SET ASIDE. The Complaint for illegal dismissal, money claims and damages
is ORDERED DISMISSED.15
The Court of Appeals found that petitioner is not entitled to backwages because she was rightfully
dismissed for failure to meet the employment standards.
The motion for reconsideration filed by petitioner was likewise dismissed.
Petitioner elevated the case to this Court via petition for review on certiorari, raising the following
errors allegedly committed by the Court of Appeals:
THE HON. COURT OF APPEALS COMMITTED ERRORS IN LAW IN DECIDING THE ISSUE ON
PETITIONERS VALIDITY OF DISMISSAL DESPITE SUCH ISSUE HAD LONG BECOME FINAL
AND EXECUTORY FOR FAILURE OF PRIVATE RESPONDENT LUZON DEVELOPMENT BANK
TO APPEAL THE DECISION OF THE LABOR ARBITER FINDING PETITIONERS DISMISSAL
ILLEGAL.
THE HON. COURT OF APPEALS COMMITTED ERROR IN LAW IN DECIDING ISSUES WHICH
WERE NOT RAISED BEFORE THE NLRC ON APPEAL.16
Petitioner harps on the finality of the Labor Arbiters ruling on illegal dismissal and questions the
judgment of the Court of Appeals in discussing and upholding the validity of her dismissal.
Indeed, respondents did not assail the ruling of the Labor Arbiter. It was in fact petitioner who
partially appealed the Labor Arbiters computation of backwages. Provided with the opportunity,
respondents assailed the Labor Arbiters Decision in their Comment to the Partial
Appeal. Upon affirmance of the Labor Arbiters Decision by the NLRC, respondent filed a petition for
certiorari with the Court of Appeals insisting on the validity of the dismissal.
Petitioner seeks to limit the issues to her employment status and backwages, her basis being that
the illegality of her dismissal has already been finally determined by the Labor Arbiter.
We disagree. As We noted, the facts show that the illegality of petitioners dismissal was an issue
that was squarely before the NLRC. When the NLRC decision was reversed by the Court of Appeals,
from which the issue was elevated to us, we had a situation where "the findings of facts are
conflicting." Thus, we find applicable the rule that while generally, only questions of law can be
raised in a petition for review on certiorari under Rule 45 of the Rules of Court, the rule admits of
certain exceptions, namely: (1) when the findings are grounded entirely on speculations, surmises,
or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when
there is a grave abuse of discretion; (4) when the judgment is based on misappreciation of facts; (5)
when the findings of fact are conflicting; (6) when in making its findings, the same are contrary to the
admissions of both appellant and appellee; (7) when the findings are contrary to those of the trial
court; (8) when the findings are conclusions without citation of specific evidence on which they are

based; (9) when the facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent; and (10) when the findings of fact are premised on the
supposed absence of evidence and contradicted by the evidence on record. 17
The petition comes within the purview of exception (5) and by analogy, exception (7). Hence, the
Court resolves to scour the records of this case.
Truly, it is axiomatic that an appeal, once accepted by this Court, throws the entire case open to
review, and that this Court has the authority to review matters not specifically raised or assigned as
error by the parties, if their consideration is necessary in arriving at a just resolution of the case. 18
Petitioner premised her appeal on Article 279 of the Labor Code which provides:
Art. 279. Security of Tenure In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or other
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement.
Petitioner maintained that she became a regular employee by virtue of Book VI, Rule 1, Section 6(d)
of the Implementing Rules of the Labor Code which states:
(d) In all cases of probationary employment, the employer shall make known to the employee the
standards under which he will qualify as a regular employee at the time of his engagement. Where
no standards are made known to the employee at that time, he shall be deemed a regular employee.
It is beyond dispute that petitioner was hired as a probationary employee. Whether her employment
status ripened into a regular one is the point of contention.
Under the very provision cited by petitioner, we cannot, by any hermeneutics, see petitioners
employment status as regular. At the time of her engagement and as mandated by law, petitioner
was informed in writing of the standards necessary to qualify her as a regular employee. Her
appointment letter19 reads:
Dear Ms. Carvajal:
We are pleased to confirm your appointment as follows:
Position
:
TraineeAssignment :
Main
Status
:
Probationary
Effectivity
:
October
Remuneration : P5,175.00 (262)

(6
28,

Teller
Branch
months)
2003

Possible extension of this contract will depend on the job requirements of the Bank and your
overall performance. Performance review will be conducted before possible renewal can
take effect.

The Bank reserves the right to immediately terminate this contract in the event of a below
satisfactory performance, serious disregard of company rules and policies and other reasons
critical to its interests.
Kindly sign below if the above conditions are acceptable. We look forward to a performance
commensurate to your presented capabilities.
Very truly yours,
[sgd]
Oscar
Vice President

S.

Ramirez

CONFORME:
[sgd]
Mylene T. Carvajal [Emphasis Supplied]
Petitioner knew, at the time of her engagement, that she must comply with the standards set forth by
respondent and perform satisfactorily in order to attain regular status. She was apprised of her
functions and duties as a trainee-teller. Respondent released to petitioner its evaluation 20 of her
performance. Petitioner was found wanting. Even the NLRC upheld petitioners probationary status,
thus:
During the time that the complainant was dismissed by respondents, she was holding the position of
a trainee-teller on probationary status. Thus, with the Labor Arbiters finding of illegal dismissal,
which the respondent left unchallenged, the complainant is entitled to be reinstated to resume the
functions of a trainee-teller, no more no less. Reinstatement is not synonymous with regularization.
The determination of whether the complainant can qualify to become one of respondent banks
regular employees is still within the well recognized managements prerogative. 21 [Emphasis
Supplied]
A probationary employee, like a regular employee, enjoys security of tenure. However, in cases of
probationary employment, aside from just or authorized causes of termination, an additional ground
is provided under Article 281 of the Labor Code, i.e., the probationary employee may also be
terminated for failure to qualify as a regular employee in accordance with reasonable standards
made known by the employer to the employee at the time of the engagement. Thus, the services of
an employee who has been engaged on probationary basis may be terminated for any of the
following: (1) a just or (2) an authorized cause and (3) when he fails to qualify as a regular employee
in accordance with reasonable standards prescribed by the employer.22
It is evident that the primary cause of respondents dismissal from her probationary employment was
her "chronic tardiness." At the very start of her employment, petitioner already exhibited poor
working habits. Even during her first month on the job, she already incurred eight (8) tardiness. In a
Memorandum dated 11 December 2003, petitioner was warned that her tardiness might affect her
opportunity to become a permanent or regular employee. And petitioner did not provide a
satisfactory explanation for the cause of her tardiness.
Punctuality is a reasonable standard imposed on every employee, whether in government or private
sector. As a matter of fact, habitual tardiness is a serious offense that may very well constitute gross
or habitual neglect of duty, a just cause to dismiss a regular employee. Assuming that petitioner was

not apprised of the standards concomitant to her job, it is but common sense that she must abide by
the work hours imposed by the bank. As we have aptly stated in Aberdeen Court, Inc. v. Agustin,
Jr.,23 the rule on reasonable standards made known to the employee prior to engagement should not
be used to exculpate a probationary employee who acts in a manner contrary to basic knowledge
and common sense, in regard to which there is no need to spell out a policy or standard to be met.
Respondent also cited other infractions such as unauthorized leaves of absence, mistake in clearing
of a check, and underperformance. All of these infractions were not refuted by petitioner. The Labor
Arbiter failed to discuss the veracity of these grounds. It focused on unsatisfactory performance and
concluded that such is not a sufficient ground to terminate the probationary employment. The Labor
Arbiter relied on its own misappreciation of facts for a finding that, resultingly, is contradicted by the
evidence on record.
More importantly, satisfactory performance is and should be one of the basic standards for
regularization. Naturally, before an employer hires an employee, the former can require the
employee, upon his engagement, to undergo a trial period during which the employer determines his
fitness to qualify for regular employment based on reasonable standards made known to him at the
time of engagement. This is the concept of probationary employment which is intended to afford the
employer an opportunity to observe the fitness of a probationary employee while at work, and to
ascertain whether he will become an efficient and productive employee. While the employer
observes the fitness, propriety and efficiency of a probationer to ascertain whether he is qualified for
permanent employment, the probationer, on the other hand, seeks to prove to the satisfaction of the
employer that he has the qualifications to meet the reasonable standards for permanent
employment.24
Moreover, in the letter of appointment, respondents reserved the right to "immediately terminate this
contract in the event of a below satisfactory performance, serious disregard of company rules and
policies and other reasons critical to its interests."
In finding for illegal dismissal, the Labor Arbiter held that the dismissal was without due process. We
hold otherwise. As elucidated by this Court in Philippine Daily Inquirer, Inc. v. Magtibay, Jr.: 25
1wphi1

Unlike under the first ground for the valid termination of probationary employment which is for just
cause, the second ground failure to qualify in accordance with the standards prescribed by employer
does not require notice and hearing. Due process of law for this second ground consists of making
the reasonable standards expected of the employee during his probationary period known to him at
the time of his probationary employment. By the very nature of a probationary employment, the
employee knows from the very start that he will be under close observation and his performance of
his assigned duties and functions would be under continuous scrutiny by his superiors. It is in
apprising him of the standards against which his performance shall be continuously assessed where
due process regarding the second ground lies, and not in notice and hearing as in the case of the
first ground.26
As we have underscored, respondent complied with the basic requirements of due process as
defined in Magtibay, Jr. Petitioner had more than sufficient knowledge of the standards her job
entails. Respondent had not been remiss in reminding petitioner, through memoranda, of the
standards that should be observed in aspiring for regularization.
Petitioner was even notified in two (2) memoranda regarding the banks displeasure over her chronic
tardiness. Every memorandum directed petitioner to explain in writing why she should not be
subjected to disciplinary action. Each time, petitioner acknowledged her fault and assured the bank
that she would, in her daily schedules, make adjustments to make amends. This certainly is

compliance with due process. Taken together with her low performance rating and other infractions,
petitioner was called by the head of Human Resources who discussed with her the reasons for the
discontinuance of her probationary appointment before she was formally served the termination
letter on that very same day. There was, in this case, full accordance to petitioner of the opportunity
to be heard.
In sum, petitioner was validly dismissed from probationary employment before the expiration of her
6-montb probationary employment contract. If the termination is for cause, it may be done anytime
during the probation; the employer docs not have to wait until the probation period is over.27
With a valid reason for petitioner's dismissal coupled with the proper observance of due process, the
claim for back wages must necessarily fail.
In view of the foregoing, we find no reason to disturb the findings and conclusions of the Court of
Appeals.
WHEREFORE, the petition is DENIED.

San Miguel v. Del Rosario, G.R. Nos. 168194 & 168603, December 13, 2005
G.R. Nos. 168194 & 168603 December 13, 2005
SAN
MIGUEL
vs.
CAROLINE C. DEL ROSARIO, Respondent.

CORPORATION, Petitioner,

DECISION
YNARES-SANTIAGO, J.:
The instant consolidated petitions for review seek to set aside the (1) January 7, 2005 Decision of
the Third Division of the Court of Appeals in CA-G.R. SP No. 83725, 1 affirming the December 30,
2003 Resolution2 of the National Labor Relations Commission (NLRC) in NLRC NCR CA No.
036413-03, and holding that respondent Caroline C. Del Rosario, was a regular employee of
petitioner San Miguel Corporation whose dismissal was valid but ineffectual for non-compliance with
the requirement of one month notice in termination due to redundancy; and the (2) February 23,
2005 Decision of the First Division of the Court of Appeals in CA-G.R. SP No. 84081, 3 which
reinstated the Labor Arbiters June 16, 2003 Judgment 4 finding that respondent is an illegally
dismissed regular employee of petitioner. Likewise questioned are the June 16, 2005 5 and May 13,
20056 Resolutions of the Court of Appeals which denied petitioners motions for reconsideration.
The facts show that on April 17, 2000, respondent was employed by petitioner as key account
specialist. On March 9, 2001, petitioner informed respondent that her probationary employment will
be severed at the close of the business hours of March 12, 2001. 7 On March 13, 2001, respondent
was refused entry to petitioners premises.

On June 24, 2002, respondent filed a complaint against petitioner for illegal dismissal and
underpayment/non-payment of monetary benefits. Respondent alleged that petitioner feigned an
excess in manpower because after her dismissal, it hired new recruits, namely, Jerome Sanchez and
Marilou Marfil and re-employed two of her batch mates, Rosendo To and Ruel Rocha. 8
On the other hand, petitioner claimed that respondent was a probationary employee whose services
were terminated as a result of the excess manpower that could no longer be accommodated by the
company. Respondent was allegedly employed on April 17, 2000 9 as a temporary reliever of Patrick
Senen, an account specialist, who met an accident. Anticipating an increase in sales volume,
petitioner hired respondent as an account specialist on a probationary status effective September 4,
2000 and was assigned at petitioners Greater Manila Area-Key Accounts Group (GMA-KAG) Beer
Sales Group. However, petitioners expected business growth did not materialize, hence, it
reorganized the GMA-KAG, and created the Centralized Key Accounts Group. This restructuring led
to an initial excess of 49 regular employees, who were redeployed to other positions, including the
one occupied by respondent. Her employment was thus terminated effective March 12, 2001. 10
On June 16, 2003, the Labor Arbiter rendered a decision declaring respondent a regular employee
because her employment exceeded six months and holding that she was illegally dismissed as there
was no authorized cause to terminate her employment. The Arbiter further ruled that petitioners
failure to rebut respondents claim that it hired additional employees after she was dismissed belie
the companys alleged redundancy. The dispositive portion thereof, reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring the dismissal of
complainant as illegal and ordering her reinstatement with full backwages, moral and exemplary
damages of P50,000.00 plus 10% attorneys fees, computed thus:
Backwages:
2003-6-16
2001-3-17 = P9,000.00 x 27 mos. = P243,000.00
2-2-29
Holiday Pay:
P9,000.00/26 days = P346.15/day
=P346.15 x 20 days = P6,923.00
Service Incentive Leave
P346.15 x 10 days = 3,461.50
13th Month Pay
P9,000.00 x 27 mos./12 = P20,250.00
P273,634.00
SO ORDERED.11

On appeal by petitioner to the NLRC, the latter modified the decision of the Labor Arbiter holding that
respondent is a regular employee whose termination from employment was valid but ineffectual for
petitioners failure to comply with the 30-day notice to the employee and the Department of Labor
and Employment (DOLE), thus
WHEREFORE, premises considered, Respondents appeal is partly GRANTED. The portion of the
Labor Arbiters assailed Decision in the above-entitled case, finding Complainants dismissal illegal
and ordering her reinstatement, is SET ASIDE. It is hereby declared that Complainants dismissal
from employment is valid but ineffectual.
Respondent San Miguel Corporation is hereby ordered to pay Complainant separation pay
equivalent to her one-month pay per year of service reckoned from her first day of employment
therewith on April 17, 2000 up to the date of this Resolution. Complainants award for full backwages
shall be accordingly adjusted to cover the period from the time she was ineffectually dismissed on
March 13, 2001 up to the date of this Resolution. As of October 17, 2003 Complainants award for
separation pay and full backwages already amount to P36,000.00 and P311,192.31, respectively.
Complainants award for unpaid service incentive leave pay and 13th month pay shall be reduced to
P1,514.42 and P7,875.00, respectively. Her award for attorneys fees shall likewise be accordingly
adjusted to ten percent (10%) of her total monetary award.
Complainants award for holiday pay and moral and exemplary damages is (sic) hereby deleted.
SO ORDERED.12
In a resolution dated February 20, 2004, 13 the NLRC denied the motions for reconsideration filed by
both parties. Thereafter, petitioner and respondent filed separate petitions with the Court of Appeals.
In CA-G.R. SP No. 84081, the First Division of the Court of Appeals granted the respondents
petition and reinstated with modification the Labor Arbiters decision finding her to be an illegally
dismissed regular employee, but deleted the award for holiday pay for lack of basis. The appellate
court noted that petitioner gave no satisfactory explanation for the hiring of employees after
respondents termination and the absence of company criteria in determining who among the
employees will be dismissed. The decretal portion thereof, provides:
WHEREFORE, the petition is GRANTED. Accordingly, the assailed NLRC resolutions, dated
December 30, 2003 and February 20, 2004, are hereby REVERSED and SET ASIDE. The June 16,
2003 Decision of the Labor Arbiter is hereby REINSTATED with some MODIFICATION and should
read as follows:
WHEREFORE, judgment is hereby rendered declaring the dismissal as illegal and ordering her
reinstatement with full backwages, moral and exemplary damages of P50,000.00 plus 10%
attorneys fees, computed thus:
Backwages:
2003-6-16
2001-3-17 = P 9,000.00 x 27 months = P 243,000.00
2-2-29

Service Incentive Leave

P 346.15 x 10 days = P 3,461.50
13th month Pay
P 9,000.00 x 27 mos./12 = P 20,250.00
P 266,711.00
SO ORDERED.14
In CA-G.R. SP No. 83725, the Third Division of the Court of Appeals dismissed the companys
petition and affirmed the decision of the NLRC, as follows:
WHEREFORE, in consideration of the foregoing, the instant petition is perforce dismissed.
Accordingly, the public respondent NLRCs assailed resolutions dated 30 December 2003 and 20
February 2004 are hereby affirmed.
SO ORDERED.15
Hence, petitioner instituted these two separate petitions for review praying that the questioned
decisions and resolutions of the Court of Appeals in CA-G.R. SP No. 84081 and CA-G.R. SP No.
83725 be set aside and that respondents complaint be dismissed. In a resolution dated August 8,
2005,16 the Court consolidated the petitions.
The issues for resolution are: (1) whether or not respondent is a regular employee of petitioner; and
(2) whether or not respondent was illegally dismissed; and (3) if so, whether or not respondent is
entitled to any monetary benefit.
The settled rule is that factual findings of quasi-judicial bodies like the NLRC, particularly when they
coincide with those of the Labor Arbiter are accorded respect and even finality. 17 This applies with
more vigor to the factual issue of respondents employment status, because the Labor Arbiter, the
NLRC and the two Divisions of the Court of Appeals consistently held that respondent is a regular
employee of petitioner company. Indeed, the records show that their findings are supported by
substantial evidence.
In termination cases, like the present controversy, the burden of proving the circumstances that
would justify the employees dismissal rests with the employer. 18 The best proof that petitioner should
have presented to prove the probationary status of respondent is her employment contract. None,
having been presented, the continuous employment of respondent as an account specialist for
almost 11 months, from April 17, 2000 to March 12, 2001, means that she was a regular employee
and not a temporary reliever or a probationary employee. The 2 Payroll Authorities 19 offered by
petitioner showing that respondent was hired as a replacement, and later, as a probationary
employee do not constitute substantial evidence. As correctly found by the NLRC, none of these
documents bear the conformity of respondent, and are therefore, self-serving.
And while it is true that by way of exception, the period of probationary employment may exceed six
months when the parties so agree, such as when the same is established by company policy, or
when it is required by the nature of the work,20 none of these exceptional circumstance were proven

in the present case. Hence, respondent whose employment exceeded six months is undoubtedly a
regular employee of petitioner.
Moreover, even assuming that the employment of respondent from April 7, 2000 to September 3,
2000, is only temporary, and that the reckoning period of her probationary employment is September
4, 2000,21 she should still be declared a regular employee because by the time she was dismissed
on March 12, 2001, her alleged probationary employment already exceeded six months, i.e., six
months and eight days to be precise. Thus, inCebu Royal Plant v. Deputy Minister of Labor,22 a
worker was found to be a regular employee notwithstanding the presentation by the employer of a
Payroll Authority indicating that said employee was hired on probation, since it was shown that he
was terminated four days after the 6th month of his purported probationary employment.
Neither will petitioners belated claim before the Court of Appeals that respondent became a
probationary employee starting October 1, 2000, 23 work against respondent. As earlier stated, the
payroll authorities indicating that respondents probationary status became effective as of such date
are of scant evidentiary value since it does not show the conformity of respondent. At any rate, in the
interpretation of employment contracts, whether oral or written, all doubts must be resolved in favor
of labor.24 Hence, the contract of employment in the instant case, which appears to be an oral
agreement since no written form was presented by petitioner, should be construed as one vesting
respondent with a regular status and security of tenure.
Having ruled that respondent is a regular employee, her termination from employment must be for a
just or authorized cause, otherwise, her dismissal would be illegal. Petitioner tried to justify the
dismissal of respondent under the authorized cause of redundancy. It thus argued in the alternative
that even assuming that respondent qualified for regular employment, her services still had to be
terminated because there are no more regular positions in the company. Undoubtedly, petitioner is
invoking a redundancy which allegedly resulted in the termination not only of the trainees,
probationers but also of some of its regular employees.
Redundancy, for purposes of the Labor Code, exists where the services of an employee are in
excess of what is reasonably demanded by the actual requirements of the enterprise. Succinctly put,
a position is redundant where it is superfluous, and superfluity of a position or positions may be the
outcome of a number of factors, such as overhiring of workers, decreased volume of business, or
dropping of a particular product line or service activity previously manufactured or undertaken by the
enterprise.25
In Asufrin, Jr. v. San Miguel Corporation,26 it was held that the determination that the employees
services are no longer necessary or sustainable and, therefore, properly terminable is an exercise of
business judgment of the employer. The wisdom or soundness of this judgment is not subject to
discretionary review of the Labor Arbiter and the NLRC, provided there is no violation of law and no
showing that it was prompted by an arbitrary or malicious act. In other words, it is not enough for a
company to merely declare that it has become overmanned. It must produce adequate proof of such
redundancy to justify the dismissal of the affected employees.
In Panlilio v. NLRC,27 it was held that the following evidence may be proffered to substantiate
redundancy, to wit:
the new staffing pattern, feasibility studies/proposal, on the viability of the newly created positions,
job description and the approval by the management of the restructuring.
In the case at bar, petitioner presented an affidavit of its Sales Manager and a memorandum of the
company both to the effect that there is a need to redeploy its regular employees and terminate the

employment of temporary employees, in view of an excess in manpower. These documents,

however, do not satisfy the requirement of substantial evidence that a reasonable mind might accept
as adequate to support a conclusion. 28 For one, the other signatories to the memorandum were not
even identified. For another, the said memorandum and affidavit are self-serving. These documents
could have gained greater weight had petitioner presented its old and new staffing pattern, the newly
created and abolished positions and the documents showing the target business, as well as the
proof showing the failure to attain the same.
Moreover, the lingering doubt as to the existence of redundancy or of petitioners so called
"restructuring, realignment or reorganization" which resulted in the dismissal of not only probationary
employees but also ofregular employees,29 is highlighted by the non-presentation by petitioner of
the required notice to the DOLE and to the separated employees. 30 If there was indeed a valid
redundancy effected by petitioner, these notices and the proof of payment of separation pay to the
dismissed regular employees should have been offered to establish that there was excess
manpower in petitioners GMA-KAG caused by a decline in the sales volume.
In balancing the interest between labor and capital, the prudent recourse in termination cases is to
safeguard the prized security of tenure of employees and to require employers to present the best
evidence obtainable, especially so because in most cases, the documents or proof needed to
resolve the validity of the termination, are in the possession of employers. A contrary ruling would
encourage employers to prevent the regularization of an employee by simply invoking a feigned or
unsubstantiated redundancy program.
Granting that petitioner was able to substantiate the validity of its reorganization or restructuring, it
nevertheless, failed to effect a fair and reasonable criterion in dismissing respondent. The criteria in
implementing a redundancy are: (a) less preferred status, e.g. temporary employee; (b) efficiency;
and (c) seniority.31
In dismissing respondent, petitioner averred that in choosing the employee to be retained and to be
placed in the limited available positions, it had to give priority to the regular employees, over
petitioner who is only a probationary employee. This is clear from the termination letter to
respondent, viz:
There were recent developments and initiatives from Management which have direct implications to
the organization of GMA Sales, to wit:
1. The expected business growth for the year 2000 did not materialize despite the augmentation of
our Sales manpower, reconfiguration, and promotional initiatives undertaken during the year;
2. There is a need to re-align other SMBD Sales units in order to further enhance synergy in the
sales and distribution of SMC products;
3. The realignment of these units will result to excess manpower specifically in GMA Sales.
Considering thatthese employees are regular, Management will be constrained to redeploy them to
other areas within GMA Sales;
4. The existing temporary employees will have to be separated in order to give way to the
aforesaid redeployment.
In view of this Management direction, we regret to inform you that your probationary employment
with the Company will be severed at the close of business hours of March 12, 2001.

....32
It is evident from the foregoing that the criterion allegedly used by petitioner in reorganizing its sales
unit was the employment status of the employee. However, in the implementation thereof, petitioner
erroneously classified respondent as a probationary employee, resulting in the dismissal of the latter.
The instant case is no different from Asufrin, Jr. v. San Miguel Corporation, where the Court refused
to give credence to the redundancy invoked by the employer inasmuch as the company adopted no
criterion in dismissing the employee. Verily, the absence of criteria and the erroneous
implementation of the criterion selected, both render invalid the redundancy because both have the
ultimate effect of illegally dismissing an employee.
What further militated against the alleged redundancy advanced by petitioner is their failure to refute
respondents assertion that after her dismissal, it hired new recruits and re-employed two of her
batch mates. Other than the lame excuse that it is respondent who has the burden of proving the
same, it presented no proof to fortify its denial. Again, petitioner has in its possession the documents
that would disprove the fact of hiring new employees, but instead of presenting evidence to belie
respondents contentions, it refrained from doing so and conveniently passed the burden to
respondent.
In sum, the Court finds that petitioner was not able to discharge the burden of proving that the
dismissal of respondent was valid.
Article 279 of the Labor Code, provides:
ARTICLE 279. Security of tenure. In cases of regular employment, the employer shall not terminate
the services of an employee except for a just cause or when authorized by this Title. An employee
who is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights
and other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation was withheld
from him up to the time of his actual reinstatement. (Emphasis, supplied)
Considering that respondent was illegally dismissed, she is entitled not only to reinstatement but
also to payment of full backwages, computed from the time her compensation was actually withheld
from her on March 13, 2001, up to her actual reinstatement. As a regular employee of petitioner from
the date of her employment on April 17, 2000, she is likewise entitled to other benefits, i.e., service
incentive leave pay and 13th month pay computed from such date also up to her actual
reinstatement.
Respondent is not, however, entitled to holiday pay because the records reveal that she is a monthly
paid regular employee. Under Section 2, Rule IV, Book III of the Omnibus Rules Implementing the
Labor Code, employees who are uniformly paid by the month, irrespective of the number of working
days therein, shall be presumed to be paid for all the days in the month whether worked or not.
Hence, the Court of Appeals correctly deleted said award. 33
Anent attorneys fees, we held in San Miguel Corporation v. Aballa, et al.,34 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 of 10% of the total monetary award by way of attorneys
fees is justifiable under Article 111 of the Labor Code, 35 Section 8, Rule VIII, Book III of its
Implementing Rules,36 and paragraph 7, Article 2208 of the Civil Code. 37 The award of attorneys fees
is proper and there need not be any showing that the employer acted maliciously or in bad faith
when it withheld the wages. There need only be a showing that the lawful wages were not paid
accordingly, as in the instant controversy.

Finally, the Court cannot sustain the award of moral and exemplary damages in favor of respondent.
Moral and exemplary damages cannot be justified solely upon the premise that the employer
dismissed his employee without cause or due process. The termination must be attended with bad
faith, or fraud, or was oppressive to labor or done in a manner contrary to morals, good customs or
public policy and, of course, that social humiliation, wounded feelings, or grave anxiety resulted
therefrom. Similarly, exemplary damages are recoverable only when the dismissal was effected in a
wanton, oppressive or malevolent manner. To merit the award of these damages, additional facts
must be pleaded and proved.38 In the present case, respondent did not proffer substantial evidence
that would overcome the legal presumption of good faith on the part of petitioner. The award of moral
and exemplary damages should therefore be deleted.
WHEREFORE, the petitions are DENIED. The January 7, 2005 Decision and the June 16, 2005
Resolution of the Court of Appeals in CA-G.R. No. SP No. 83725 which affirmed the December 30,
2003 Resolution of the NLRC in NLRC NCR CA No. 036413-03 declaring that the dismissal of
respondent Caroline C. Del Rosario, a regular employee of petitioner, was valid but ineffectual; and
the February 23, 2005 Decision and the May 13, 2005 Resolution and of the Court of Appeals in CAG.R. No. SP No. 84081 which reinstated with modification the June 16, 2003 Decision of the Labor
Arbiter in NLRC-NCR-00-04495-2002, holding that respondent is an illegally dismissed regular
employee of petitioner, are AFFIRMED with MODIFICATIONS.
As MODIFIED, the employment status of respondent is declared regular, and her dismissal from
employment, illegal. Petitioner is ordered to immediately reinstate respondent as a regular
employee to her previous position, unless such position no longer exists, in which case she shall be
given a substantially equivalent position, without loss of seniority rights. Petitioner is further ordered
to pay respondent backwages, computed from the time her compensation was actually withheld on
March 13, 2001, up to her actual reinstatement, plus service incentive leave, 13th month pay and
attorneys fees equivalent to 10% of the total monetary award. For this purpose, the case is
ordered REMANDED to the Labor Arbiter for the computation of the amounts due respondent.
SO ORDERED.

Regular
Art. 280, Labor Code
Article 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
service 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.

Book VI, Rule I, Sec. 5, a, Implementing Rules (Labor Code)

SECTION 5. Regular and casual employment. (a) The provisions of written
agreements to the contrary notwithstanding and regardless of the oral agreements
of the parties, an employment shall be considered to be regular employment for
purposes of Book VI of the Labor Code where the employee has been engaged to
perform activities which are usually necessary or desirable in the usual business or
trade of the employer except where the employment has been fixed for a specific
project or undertaking the completion or termination of which has been determined
at the time of the engagement of the employee or where the work or service to be
performed is seasonal in nature and the employment is for the duration of the
season.
(b) Employment shall be deemed as casual in nature 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 not, 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.
(c) An employee who is allowed to work after a probationary period shall be
considered a regular employee.

MacArthur Malicdem v. Marulas, G.R. No. 204406, February 26, 2014

G.R. No. 204406

February 26, 2014

MACARTHUR
MALICDEM
and
HERMENIGILDO
FLORES, Petitioners,
vs.
MARULAS INDUSTRIAL CORPORATION and MIKE MANCILLA, Respondents.
DECISION
MENDOZA, J.:
This petition for review on certiorari1 under Rule 45 of the Rules of Court filed by
Macarthur Malicdem (Malicdem) and Hermenigildo Flores (Flores) assails the July 18,
2012 Decision2 and the November 12, 2012 Resolution 3 of the Court of Appeals (CA)
in CA-G.R. SP No. 1244 70, dismissing their petition for certiorari under Rule 65 in an
action for illegal dismissal.
The Facts:
A complaint4 for illegal dismissal, separation pay, money claims, moral and
exemplary damages, and attorney's fees was filed by petitioners Malicdem and
Flores against respondents Marulas Industrial Corporation (Marulas) and Mike

Mancilla (Mancilla), who were engaged in the business of manufacturing sacks

intended for local and export markets.
Malicdem and Flores were first hired by Marulas as extruder operators in 2006, as
shown by their employment contracts. They were responsible for the bagging of
filament yarn, the quality of pp yarn package and the cleanliness of the work place
area. Their employment contracts were for a period of one (1) year. Every year
thereafter, they would sign a Resignation/Quitclaim in favor of Marulas a day after
their contracts ended, and then sign another contract for one (1) year. Until one
day, on December 16, 2010, Flores was told not to report for work anymore after
being asked to sign a paper by Marulas' HR Head to the effect that he
acknowledged the completion of his contractual status. On February 1, 2011,
Malicdem was also terminated after signing a similar document. Thus, both claimed
to have been illegally dismissed.
Marulas countered that their contracts showed that they were fixed-term employees
for a specific undertaking which was to work on a particular order of a customer for
a specific period. Their severance from employment was due to the expiration of
their contracts.
On February 7, 2011, Malicdem and Flores lodged a complaint against Marulas and
Mancilla for illegal dismissal.
On July 13, 2011, the Labor Arbiter (LA) rendered a decision 5 in favor of the
respondents, finding no illegal dismissal. He ruled that Malicdem and Flores were
not terminated and that their employment naturally ceased when their contracts
expired. The LA, however, ordered Marulas to pay Malicdem and Flores their
respective wage differentials, to wit:
WHEREFORE, the complaints for illegal dismissal are dismissed for lack of merit.
Respondent Marulas Industrial Corporation is, however, ordered to pay
complainants wage differential in the following amounts:
1.

Macarthur Malicdem

P20,111.26

2/2/07 6/13/08 = None

6/14/08 8/27/08 = 2.47 mos.
P377 362 = P15
x 26 days x 2.47 mos. =

963.30

8/28/08 6/30/10 = 22.06 mos.

P382 P362 = P20
x 26 days x 22.06 mos. =

11,471.20

7/1/10 2/2/11 = 7.03 mos.

P404 P362 = P42
x 26 days x 7.03 mos. =

7,676.76

20,111.26
; and
2.

Herminigildo Flores

P18,440.50

2/2/08 6/13/08 = 4.36 mos. None

6/14/08 8/27/08 =

963.30

8/28/08 6/30/10 =

11,471.20

7/1/10 12/16/10 = 5.50 mos.

P404 x P362 = P42
x 26 days x 5.50 mos. =

6,006.00

18,440.50
All other claims are dismissed for lack of merit.
SO ORDERED.6
Malicdem and Flores appealed to the NLRC which partially granted their appeal with
the award of payment of 13th month pay, service incentive leave and holiday pay
for three (3) years. The dispositive portion of its December 19, 2011
Decision7 reads:
WHEREFORE, the appeal is GRANTED IN PART. The Decision of Labor Arbiter
Raymund M. Celino, dated July 13, 2011, is MODIFIED. In addition to the award of
salary differentials, complainants should also be awarded 13th month pay, service
incentive leave and holiday pay for three years.
SO ORDERED.8
Still, petitioners filed a motion for reconsideration, but it was denied by the NLRC on
February 29, 2011.

Aggrieved, Malicdem and Flores filed a petition for certiorari under Rule 65 with the
CA.
On July 18, 2012, the CA denied the petition, 9 finding no grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the NLRC. It ruled that the
issue of whether or not the petitioners were project employees or regular
employees was factual in nature and, thus, not within the ambit of a petition for
certiorari. Moreover, it accorded respect and due consideration to the factual
findings of the NLRC, affirming those of the LA, as they were supported by
substantial evidence.
On the substantive issue, the CA explained that "the repeated and successive
rehiring of project employees do not qualify them as regular employees, as length of
service is not the controlling determinant of the employment tenure of a project
employee, but whether the employment has been fixed for a specific project or
undertaking, its completion has been determined at the time of the engagement of
the employee."10
Corollarily, considering that there was no illegal dismissal, the CA ruled that
payment of backwages, separation pay, damages, and attorney's fees had no
factual and legal bases. Hence, they could not be awarded to the petitioners.
Aggrieved, Malicdem and Flores filed a motion for reconsideration, but their pleas
were denied in the CA Resolution, dated November 12, 2012.
The Petition
Malicdem and Flores now come before this Court by way of a petition for review on
certiorari under Rule 45 of the Rules of Court praying for the reversal of the CA
decision anchored on the principal argument that the appellate court erred in
affirming the NLRC decision that there was no illegal dismissal because the
petitioners contracts of employment with the respondents simply expired. They
claim that their continuous rehiring paved the way for their regularization and, for
said reason, they could not be terminated from their jobs without just cause.
In their Comment,11 the respondents averred that the petitioners failed to show that
the CA erred in affirming the NLRC decision. They posit that the petitioners were
contractual employees and their rehiring did not amount to regularization. The CA
cited William Uy Construction Corp. v. Trinidad, 12 where it was held that the repeated
and successive rehiring of project employees did not qualify them as regular
employees, as length of service was not the controlling determinant of the
employment tenure of a project employee, but whether the employment had been
fixed for a specific project or undertaking, its completion had been determined at
the time of the engagement of the employee. The respondents add that for said
reason, the petitioners were not entitled to full backwages, separation pay, moral
and exemplary damages, and attorneys fees.
Now, the question is whether or not the CA erred in not finding any grave abuse of
discretion amounting to lack or excess of jurisdiction on the part of the NLRC.

The Courts Ruling:

The Court grants the petition.
The petitioners have convincingly shown that they should be considered regular
employees and, as such, entitled to full backwages and other entitlements.
A reading of the 2008 employment contracts, 13 denominated as "Project
Employment Agreement," reveals that there was a stipulated probationary period of
six (6) months from its commencement. It was provided therein that in the event
that they would be able to comply with the companys standards and criteria within
such period, they shall be reclassified as project employees with respect to the
remaining period of the effectivity of the contract. Specifically, paragraph 3(b) of
the agreement reads:
The SECOND PARTY hereby acknowledges, agrees and understands that the nature
of his/her employment is probationary and on a project-basis. The SECOND PARTY
further acknowledges, agrees and understands that within the effectivity of this
Contract, his/her job performance will be evaluated in accordance with the
standards and criteria explained and disclosed to him/her prior to signing of this
Contract. In the event that the SECOND PARTY is able to comply with the said
standards and criteria within the probationary period of six month/s from
commencement of this Contract, he/she shall be reclassified as a project employee
of (o)f the FIRST PARTY with respect to the remaining period of the effectivity of this
Contract.
Under Article 281 of the Labor Code, however, "an employee who is allowed to work
after a probationary period shall be considered a regular employee." When an
employer renews a contract of employment after the lapse of the six-month
probationary period, the employee thereby becomes a regular employee. No
employer is allowed to determine indefinitely the fitness of its employees. 14 While
length of time is not the controlling test for project employment, it is vital in
determining if the employee was hired for a specific undertaking or tasked to
perform functions vital, necessary and indispensable to the usual business of trade
of the employer.15 Thus, in the earlier case of Maraguinot, Jr. v. NLRC, 16 it was ruled
that a project or work pool employee, who has been: (1) continuously, as opposed
to intermittently, rehired by the same employer for the same tasks or nature of
tasks; and (2) those tasks are vital, necessary and indispensable to the usual
business or trade of the employer, must be deemed a regular employee. Thus:
x x x. Lest it be misunderstood, this ruling does not mean that simply because an
employee is a project or work pool employee even outside the construction
industry, he is deemed, ipso jure, a regular employee. All that we hold today is that
once a project or work pool employee has been: (1) continuously, as opposed to
intermittently, re-hired by the same employer for the same tasks or nature of tasks;
and (2) these tasks are vital, necessary and indispensable to the usual business or
trade of the employer, then the employee must be deemed a regular employee,
pursuant to Article 280 of the Labor Code and jurisprudence. To rule otherwise
would allow circumvention of labor laws in industries not falling within the ambit of

Policy Instruction No. 20/Department Order No. 19, hence allowing the prevention of
acquisition of tenurial security by project or work pool employees who have already
gained the status of regular employees by the employer's conduct.1wphi1
The test to determine whether employment is regular or not is the reasonable
connection between the particular activity performed by the employee in relation to
the usual business or trade of the employer. If the employee has been performing
the job for at least one year, even if the performance is not continuous or merely
intermittent, the law deems the repeated and continuing need for its performance
as sufficient evidence of the necessity, if not indispensability of that activity to the
business.17
Guided by the foregoing, the Court is of the considered view that there was clearly a
deliberate intent to prevent the regularization of the petitioners.
To begin with, there is no actual project. The only stipulations in the contracts were
the dates of their effectivity, the duties and responsibilities of the petitioners as
extruder operators, the rights and obligations of the parties, and the petitioners
compensation and allowances. As there was no specific project or undertaking to
speak of, the respondents cannot invoke the exception in Article 280 of the Labor
Code.18 This is a clear attempt to frustrate the regularization of the petitioners and
to circumvent the law.
Next, granting that they were project employees, the petitioners could only be
considered as regular employees as the two factors enumerated in Maraguinot, Jr.,
are present in this case. It is undisputed that the petitioners were continuously
rehired by the same employer for the same position as extruder operators. As such,
they were responsible for the operation of machines that produced the sacks.
Hence, their work was vital, necessary and indispensable to the usual business or
trade of the employer.
In D.M. Consunji, Inc. v. Estelito Jamin 19 and Liganza v. RBL Shipyard
Corporation,20 the Court reiterated the ruling that an employment ceases to be
coterminous with specific projects when the employee is continuously rehired due to
the demands of the employers business and re-engaged for many more projects
without interruption.
The respondents cannot use the alleged expiration of the employment contracts of
the petitioners as a shield of their illegal acts. The project employment contracts
that the petitioners were made to sign every year since the start of their
employment were only a stratagem to violate their security of tenure in the
company. As restated in Poseidon Fishing v. NLRC, 21 "if from the circumstances it is
apparent that periods have been imposed to preclude acquisition of tenurial
security by the employee, they should be disregarded for being contrary to public
policy."
The respondents invocation of William Uy Construction Corp. v. Trinidad 22 is
misplaced because it is applicable only in cases involving the tenure of project
employees in the construction industry. It is widely known that in the construction

industry, a project employee's work depends on the availability of projects,

necessarily the duration of his employment. 23 It is not permanent but coterminous
with the work to which he is assigned.24 It would be extremely burdensome for the
employer, who depends on the availability of projects, to carry him as a permanent
employee and pay him wages even if there are no projects for him to work on. 25 The
rationale behind this is that once the project is completed it would be unjust to
require the employer to maintain these employees in their payroll. To do so would
make the employee a privileged retainer who collects payment from his employer
for work not done. This is extremely unfair to the employers and amounts to labor
coddling at the expense of management.26"
Now that it has been clearly established that the petitioners were regular
employees, their termination is considered illegal for lack of just or authorized
causes. Under Article 279 of the Labor Code, an employee who is unjustly dismissed
from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other
benefits or their monetary equivalent computed from the time his compensation
was withheld from him up to the time of his actual reinstatement. The law intends
the award of backwages and similar benefits to accumulate past the date of the LA
decision until the dismissed employee is actually reinstated.
WHEREFORE, the petition is GRANTED. The assailed July 18, 2012 decision of the
Court of Appeals and its November 12, 2012 Resolution in CA-G.R. SP No. 1244 70,
are hereby ANNULLED and SET ASIDE.
Accordingly, respondent Marulas Industrial Corporation is hereby ordered to
reinstate petitioners Macarthur Malicdem and Hermenigildo Flores to their former
positions without loss of seniority rights and other privileges and to pay their full
backwages, inclusive of allowances and their other benefits or their monetary
equivalent computed from the time their compensations were withheld from them
up to the time of their actual reinstatement plus the wage differentials stated in the
July 13, 2011 decision of the Labor Arbiter, as modified by the December 19, 2011
NLRC decision.
SO ORDERED.
JOSE
Associate Justice

CATRAL

FVR Skills v. Seva, G.R. No. 200857, October 22, 2014

G.R. No. 200857

October 22, 2014

MENDOZA

FVR SKILLS AND SERVICES EXPONENTS, INC. (SKILLEX), FULGENCIO V. RANA and
MONINA
R.
BURGOS, Petitioners,
vs.
JOVERT SEV A, JOSUEL V. V ALENCERINA, JANET ALCAZAR, ANGELITO AMPARO,
BENJAMIN ANAEN, JR., JOHN HILBERT BARBA, BONIFACIO BATANG, JR., VALERIANO
BINGCO,JR., RONALD CASTRO, MARLON CONSORTE, ROLANDO CORNELIO, EDITO
CULDORA, RUEL DUNCIL, MERVIN FLORES, LORD GALISIM, SOTERO GARCIA, JR., REY
GONZALES, DANTE ISIP, RYAN ISMEN, JOEL JUNIO, CARLITO LATOJA, ZALDY MARRA,
MICHAEL PANTANO, GLENN PILOTON, NORELDO QUIRANTE, ROEL RANCE, RENANTE
ROSARIO and LEONARDA TANAEL, Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari the challenge to the December 22, 2011
decision and the March 2, 2012 resolution (assailed CA rulings) of the Court of Appeals (CA) in CAG.R. SP No. 120991. These assailed CA rulings affirmed the April 28, 2011 decision and the June
16, 2011 resolution (NLRC rulings) of the National Labor Relations Commission (NLRC) in NLRC
LAC No. 08-001687-10 (NLRC NCR Case Nos. 08-11557-09 and 08-11399-09). The NLRC rulings
in turn reversed and set aside the June 4, 2010 decision of the labor arbiter (LA).
1

Factual Antecedents
The twenty-eight (28) respondents in this case were employees of petitioner FVR Skills and Services
Exponents, Inc. (petitioner), an independent contractor engaged in the business of providing
janitorial and other manpower services to its clients. As early as 1998, some of the respondents had
already been under the petitioner's employ.
The respondents' respective names, dates of hiring, and positions are indicated in the table below.
7

Respondents

Date of Hiring

Position

1. Edito Culdora

February 14, 1998

Janitor

2. Jovert R. Seva

July 29, 1999

Supervisor

3. Valeriano Bingco, Jr.

August 1, 1999

Leadman

4. Michael Pantano

January 22, 1999

Janitor

5. Marlon C. Consorte

May 6, 1999

Janitor

6. Lord Galisim

May 28, 1999

Janitor

7. Sotero A. Garcia, Jr.

April 14, 2000

Janitor

8. Joel G. Junio

May 4, 2000

Service Crew

9. Zaldy R. Marra

August 21, 2001

Janitor

10. Ryan G. Ismen

April 20, 2002

Janitor

11. Glenn Piloton

January 6, 2003

Janitor

12. Rey V. Gonzales

August 15, 2003

Janitor/Sanitation Aide

13. Roel P. Rance

August 16, 2003

Janitor/Sanitation Aide

14. Mervin D. Flores

January 1, 2004

Janitor

15. Renante Rosario

January 13, 2004

Janitor

16. Ronald Castro

February 2, 2004

Service Crew

17. John Hilbert D. Barba

February 22, 2004

Service Crew

18. Noreldo S. Quirante

March 13, 2004

Janitor

19. Benjamin C. Anaen, Jr.

April 22, 2004

Service Crew

20. Rolando G. Cornelio

August 5, 2004

Janitor

21. Angelito A. Amparo

July 28, 2005

Janitor Aide/Sanitation
Aide

22. Leonarda Tanael

February 1, 2007

Janitor

23. Janet Alcazar

March 1, 2007

Janitor

24. Dante F. Isip

February 1, 2007

Janitor

25. Carlito Latoja

February 1, 2007

Janitor/ Sanitation Aide

26. Ruel Duncil

February 1, 2007

Janitor/Sanitation Aide

27. Bonifacio P. Batang, Jr.

February 1, 2007

Janitor/Sanitation Aide

28. Josuel Valencerina

February 1, 2007

Supervisor

On April 21, 2008, the petitioner entered into a Contract of Janitorial Service (service contract) with
Robinsons Land Corporation (Robinsons). Both agreed that the petitioner shall supply janitorial,
manpower and sanitation services to Robinsons Place Ermita Mall for a period of one year - from
January 1, 2008 to December 31, 2008. Pursuant to this, the respondents were deployed to
Robinsons.
8

Halfway through the service contract, the petitioner asked the respondents to execute individual
contracts which stipulated that their respective employments shall end on December 31, 2008,
unless earlier terminated.
10

The petitioner and Robinsons no longer extended their contract of janitorial services. Consequently,
the petitioner dismissed the respondents as they were project employees whose duration of
employment was dependent on the petitioner's service contract with Robinsons.
The respondents responded to the termination of their employment by filing a complaint for illegal
dismissal with the NLRC. They argued that they were not project employees; they were regular
employees who may only be dismissed for just or authorized causes. The respondents also asked
for payment of their unpaid wage differential, 13th month pay differential, service incentive leave pay,
holiday pay and separation pay.
11

12

The Labor Arbitration Rulings

The LA ruled in the petitioner's favor. He held that the respondents were not regular employees.
They wereproject employees whose employment was dependent on the petitioner's service contract
with Robinsons. Since this contract was not renewed, the respondents' employment contracts must
also be terminated.
13

Also, in light of the petitioner's admission during the clarificatory hearing that the respondents were
entitled to their wage differential pay, 13th month differential pay and holiday pay,the LA granted the
respondents' money claims in the amount of P103,501.01.
14

The respondents disagreed with the LA and appealed to the NLRC, which reversed the LA's ruling,
and held that they were regular employees. The NLRC considered that the respondents had been
under the petitioner's employ for more than a year already, some of them as early as 1998.
Thus, as regular employees, the respondents may only be dismissed for just or authorized causes,
which the petitioner failed to show. The NLRC also awarded the respondents their separation pay of
one (1) month for every year of service as well as their full backwages from February 1, 2009 the
date of their illegal dismissal, until the finality of the decision.
15

The CA's Ruling

The CA dismissed the petitioner's certiorari petition and affirmed the NLRC's decision.
The CA noted that the petitioner individually hired the respondents on various dates from 1998 to
2007, to work as janitors, service crews and sanitation aides. These jobs were necessary or
desirable to the petitioner's business of providing janitorial, manpower and sanitation services to its
clients. The continuing need for the respondents' services, which lasted for more than a year,
validated that the respondents were regular and not project employees.
16

The CA also ruled that the fixed term employment contracts signed by the respondents had no
binding effect. The petitioner only used these contracts to justify the respondents'illegal dismissal;
the petitioner never asked the respondents to execute any contract since their initial hiring. Only
after it became apparent that the petitioner's service contract with Robinsons would not be renewed
(after its expiration on December 31, 2008), did the petitioner ask the respondents to sign their
employment contracts. This circumstance, coupled with the threat that the respondents would not
be given their salaries if they would not sign the contracts, showed the petitioner's intent to use the
contracts to prevent the respondents from attaining regular status.
17

Lastly, the CA held that petitioners Fulgencio V. Rana (Rana) and Monina R. Burgos (Burgos), the
president and general manager of FVR Skills and Services Exponents, Inc., respectively, are
solidarily liable with the corporation for the payment of the respondents' monetary awards. As
corporate officers, they acted in bad faith when they intimidated the respondents in the course of
asking them to sign their individual employment contracts.
18

The Petition
The petitioner now submits that the CA erred in ruling that the respondents were regular employees
and that they had been illegally dismissed. The respondents' contracts of employments did not only
provide for a fixed term, but werealso dependent on the continued existence of the Robinsons'
service contract. Since this main contract had not been renewed, the respondents' respective
19

employment contracts were properly terminated. Based on this reasoning, no illegal dismissal took
place, only the expiration of the respondents' fixed term contracts.
In the absence of any illegal dismissal, the CA also erred in affirming the NLRC's award of
separation pay to the respondents.
Lastly, the petitioner asserts that Rana and Burgos should not be held solidarily liable with the
corporation for respondents' monetary claims; they have personalities separate and distinct from the
corporation.
The Case for the Respondents
The respondents reiterate that even before the execution of the petitioner's service contract with
Robinsons, they had already been working for the petitioner between the years 1998 to 2007. Since
their hiring, they had been performing janitorial and other manpower activities that were necessary
or desirable to the petitioner's business.
20

They further argue that the employment contracts they executed were void since these were signed
under duress; the petitioner threatened not to release their salaries if they would refuse to sign.
21

Lastly, the respondents assert that the CA did not err in holding Rana and Burgos solidarily liable
with the corporation. These officers acted in bad faith when they obliged the respondents to execute
the employment contracts under threat.
22

The Court's Ruling

We resolve to DENY the petition.
The respondents are regular employees, not project employees.
Article 280 (now Article 294) of the Labor Code governs the determination of whether an employee
is a regular or a project employee.
23

24

Under this provision, there are two kinds of regular employees, namely: (1) those who were engaged
to perform activities which are usually necessary or desirable in the usual business or trade of the
employer; and (2) those casual employees who became regular after one year of service, whether
continuous or broken, but only with respect to the activity for which they have been hired.
We distinguish these two types of regular employees from a project employee, or one whose
employment was fixed for a specific project or undertaking, whose completion or termination had
been determined at the time of engagement.
A careful look at the factual circumstances of this case leads us to the legal conclusion that the
respondents are regular and not project employees.
The primary standard in determining regular employment is the reasonable connection between the
particular activity performed by the employee and the employer's business or trade. This connection
can be ascertained by considering the nature ofthe work performed and its relation to the scheme of
the particular business, or the trade in its entirety.
25

Guided by this test, we conclude that the respondents' work as janitors, service crews and sanitation
aides, are necessary or desirable to the petitioner's business of providing janitorial and manpower
services to its clients as an independent contractor.
Also, the respondents had already been working for the petitioner as early as 1998. Even before the
service contract with Robinsons, the respondents were already under the petitioner's employ. They
had been doing the same type of work and occupying the same positions from the time they were
hired and until they were dismissed in January 2009.The petitioner did not present any evidence
torefute the respondents' claim that from the time of their hiring until the time of their dismissal, there
was no gap in between the projects where theywere assigned to. The petitioner continuously availed
of their servicesby constantly deploying them to its clients.
26

Lastly, under Department Order (DO) 18-02, the applicable labor issuance to the petitioner's case,
the contractor or subcontractor is considered as the employer of the contractual employee for
purposes of enforcing the provisions of the Labor Code and other social legislation.
27

28

DO 18-02 grants contractual employees all the rights and privileges due a regular employee,
including the following: (a) safe and healthful working conditions;(b) labor standards such as service
incentive leave, rest days, overtime pay, holiday pay, 13th month pay and separation pay; (c) social
security and welfare benefits; (d) self-organization, collective bargaining and peaceful concerted
action; and (e) security of tenure.
29

In this light, we thus conclude that although the respondents were assigned as contractual
employees to the petitioner's various clients, under the law, they remain to be the petitioner'sr
regular employees, who are entitled to all the rights and benefits of regular employment.
The respondents' employment contracts, which were belatedly signed, are voidable.
The records show that at the time ofthe respondents' dismissal, they had already been continuously
working for the petitioner for more than a year. Despite this, they never signed any employment
contracts with the petitioner, except the contracts they belatedly signed when the petitioner's own
contract of janitorial services with Robinsons neared expiration.
As already discussed, for an employee to be validly categorized as a project employee, it is
necessary that the specific project or undertaking had been identified and its period and completion
date determined and made known to the employee atthe time of his engagement. This provision
ensures that the employee is completely apprised of the terms of his hiring and the corresponding
rights and obligations arising from his undertaking. Notably, the petitioner's service contract with
Robinsons was from January 1 to December 31, 2008. The respondents were only asked to sign
their employment contracts for their deployment with Robinsons halfway through 2008, when the
petitioner's service contract was about to expire. We find the timing of the execution of the
respondents' respective employment contracts to be indicative of the petitioner's calculated plan to
evade the respondents' right to security of tenure, to ensure their easy dismissal as soon as the
Robinsons' contract expired. The attendant circumstances cannot but raise doubts as to the
petitioner's good faith.
If the petitioner really intended the respondents to be project employees, then the contracts should
have been executed right from the time of hiring, or when the respondents were first assigned to
Robinsons, not when the petitioner's service contract was winding up.The terms and conditions of
the respondents' engagement should have been disclosed and explained to them from the
commencement of their employment. The petitioner's failure to do so supports the conclusion that it
had been in bad faith in evading the respondents' right to security of tenure.

In Glory Philippines, Inc. v. Vergara, the Court rejected the validity of a fixed term contract belatedly
executed, and ruled that its belated signing was a deliberate employer ploy to evade the employees'
right to security of tenure. As the Court explained:
30

To us, the private respondent's illegal intention became clearer from such acts. Its making the
petitioners sign written employment contracts a few days before the purported end of their
employment periods (as stated in such contracts) was a diaphanous ploy to set periods with a view
for their possible severance from employment should the private respondent so willed it. If the term
of the employment was truly determined at the beginning of the employment, why was there delay in
the signing of the ready-made contracts that were entirely prepared by the employer? Also, the
changes in the positions supposedly held by the petitioners in the company belied the private
respondent's adamant contention that the petitioners were hired solely for the purpose of manning
PIS during its alleged dry run period that ended on October 20, 1998. We view such situation as a
very obvious ploy of the private respondent to evade the petitioner's eventual
regularization. [Emphasis ours]
31

Moreover, under Article 1390 of the Civil Code, contracts where the consent of a party was vitiated
by mistake, violence, intimidation, undue influence or fraud, are voidable or annullable. The
petitioner's threat of nonpayment of the respondents' salaries clearly amounted to intimidation.
Under this situation, and the suspect timing when these contracts were executed, we rule that these
employment contracts were voidable and were effectively questioned when the respondents filed
their illegal dismissal complaint.
The respondents were illegally dismissed.
To be valid, an employee's dismissal must comply with the substantive and procedural requirements
of due process. Substantively, a dismissal should be supported by a just or authorized
cause. Procedurally, the employer must observe the twin notice and hearing requirements in
carrying out an employee's dismissal.
1wphi1

32

33

The petitioner argues that these substantive and procedural requisites do not apply to the
respondents' case since they were employed under fixed term contracts. According to the petitioner,
the respondents' employment contracts lapsed by operation of law asthe necessary consequence of
the termination and non-renewal of its service contract with Robinsons. Because of this, there was
no illegal dismissal to speak of, only contract expiration.
We do not agree with the petitioner.
Having already determined that the respondents are regular employees and not project employees,
and that the respondents' belated employment contracts could not be given any binding effect for
being signed under duress, we hold that illegal dismissal took place when the petitioner failed to
comply with the substantive and procedural due process requirements of the law.
The petitioner also asserts that the respondents' subsequent absorption by Robinsons' new
contractors Fieldmen Janitorial Service Corporation and Altaserv negates their illegal dismissal. This
reasoning is patently erroneous. The charge of illegal dismissal was made only against the petitioner
which is a separate juridical entity from Robinsons' new contractors; it cannot escape liabilityby
riding on the goodwill of others.
By law, the petitioner must bear the legal consequences of its violation of the respondents' right to
security of tenure. The facts of this case show that since the respondents' hiring, they had been
under the petitioner's employ as janitors, service crews and sanitation aides. Their services had

been continuously provided to the petitioner without any gap. Notably, the petitioner never refuted
this allegation of the respondents. Further, there was no allegation that the petitioner went out of
business after the nonrenewal of the Robinsons' service contract.Thus, had it not been for the
respondents' dismissal, they would have been deployed to the petitioner's other existing clients.
In D.M. Consunji, Inc. v. Jamin, an employee was dismissed after the expiration of the project he
was lastengaged in. After ruling that the respondent-employee was a regular and not a project
employee, this Court affirmed the grant of backwages, computed from the time of the employee's
illegal dismissal until his actual reinstatement. In these lights, we rule that the respondents are
entitled to their full backwages, inclusive of their allowances and other benefits from the time of their
dismissal up to their actual reinstatement.
34

35

With regard to the award of separation pay, we agree with the CA's finding that this litigation resulted
to strained relations between the petitioner and the respondents. Thus, we also affirm the CA's ruling
that instead of reinstatement, the respondents should bepaid their respective separation pays
equivalent to one (1) month pay for every year of service.
36

We cannot give credence to the petitioner's assertion that under Section 10 of DO 18-02, the
respondents are not entitled to separation pay because their employment was terminated due tothe
completion of the project where they had been engaged. This provision must be construed with the
rest of DO 18-02's other provisions.
37

As earlier pointed out, Section 7 of DO 18-02 treats contractual employees as the independent
contractor's regular employees for purposes of enforcing the Labor Code and other social legislation
laws. Consequently, a finding of regular employment entitles them to the rights granted to regular
employees, particularly the right to security of tenure and to separation pay. Thus, a holistic reading
of DO 18-02, guides us to the conclusion that Section 10 only pertains to contractual employees
who are really project employees. They are not entitled to separation pay since the end of the project
for which they had been hired necessarily results to the termination of their employment. On the
other hand, we already found that the respondents are the petitioner's regular employees. Thus,
their illegal dismissal entitles them to backwages and reinstatement or separation pay, in case
reinstatement is no longer feasible.
38

Solidary liability of the petitioner's officers

Finally, we modify the CA's ruling that Rana and Burgos, as the petitioner's president and general
manager, should beheld solidarily liable with the corporation for its monetary liabilities with the
respondents.
A corporation is a juridical entity with legal personality separate and distinct from those acting for and
in its behalf and, in general, from the people comprising it. The general rule is that, obligations
incurred by the corporation, acting through its directors, officers and employees, are its sole
liabilities.
39

A director or officer shall only be personally liable for the obligations of the corporation, if the
following conditions concur: (1) the complainant alleged in the complaint that the director or officer
assented to patently unlawful acts of the corporation, or that the officer was guilty of gross
negligence or bad faith; and (2) the complainant clearly and convincingly proved such unlawful acts,
negligence or bad faith.
40

In the present case, the respondents failed to show the existence of the first requisite. They did not
specifically allege in their complaint that Rana and Burgos willfully and knowingly assented to the

petitioner's patently unlawful act of forcing the respondents to sign the dubious employment
contracts in exchange for their salaries. The respondents also failed to prove that Rana and Burgos
had been guilty of gross negligence or bad faith in directing the affairs of the corporation. To hold an
officer personally liable for the debts of the corporation, and thus pierce the veil of corporate fiction, it
is necessary to clearly and convincingly establish the bad faith or wrongdoing of such officer, since
bad faith is never presumed. Because the respondents were not able to clearly show the definite
participation of Burgos and Rana in their illegal dismissal, we uphold the general rule that corporate
officers are not personally liable for the money claims of the discharged employees, unless they
acted with evident malice and bad faith in terminating their employment.
41

42

WHEREFORE, in light of these considerations, we hereby DENYthe petition. We AFFIRM with

MODIFICATION the Court of Appeals' decision dated December 22, 2011 and resolution dated
March 2, 2012 in CAG.R. SP No. 120991, which also AFFIRMED the National Labor Relation
Commission's decision dated April 28,2011 and resolution dated June 16, 2011. Petitioners
Fulgencio V. Rana and Monina R. Burgos are hereby absolved from paying the respondents'
monetary awards in their personal capacity. No costs.
SO ORDERED.
ARTURO
Associate Justice

D.

BRION

Project employment
Omni Hauling v. Bon, G.R. No. 199388, September 3, 2014
G.R. No. 199388

September 3, 2014

OMNI HAULING SERVICES, INC., LOLITA FRANCO, and ANICETO FRANCO, Petitioners,
vs.
BERNARDO BON, ROBERTO TORTOLES, ROMEO TORRES, RODELLO* RAMOS, RICARDO
DELOS SANTOS, JUANITO BON, ELENCIO ARTASTE,** CARLITO VOLOSO, ROMEL TORRES,
ROBERT A VILA, EDUARDO BAUTISTA, MARTY VOLOSO, OSCAR JABEL, RICKY
AMORANTO, BERNARD OSINAGA, EDUARDO BON, JERRY EDU ARCE, and FEDERICO
BRAZIL, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari are the Decision dated May 27, 2011 and the
Resolution dated November 11, 2011 of the Court of Appeals (CA) in CA-G.R. SP. No. 111413 which
reversed and set aside the Decision dated May 18, 2009 and the Resolution dated August 28, 2009
of the National Labor Relations Commission (NLRC) in NLRC CA No. 043217-05 and NLRC NCR
Case Nos. 00-11-12889-03, 00-03-03935-04, and 00-11-13591-03, declaring the dismissal of
respondents Bernardo Bon, Roberto Tortoles, Romeo Torres, Rodello Ramos, Ricardo Delos Santos,
1

Juanito Bon, Elencio Artaste, Carlito Voloso, Romel Torres, Robert Avila, Eduardo Bautista, Marty
Voloso, Oscar Jabel, Ricky Amoranto, Bernard Osinaga, Eduardo Bon, Jerry Eduarce, and Federico
Brazil (respondents) illegal.
The Facts
Petitioner Omni Hauling Services, Inc. (Omni), a company owned by petitioners Lolita and Aniceto
Franco (petitioners), was awarded a one (1) year service contract by the local government of
Quezon City to provide garbage hauling services for the period July 1, 2002 to June 30, 2003. For
this purpose, Omni hired respondents as garbage truck drivers and paleros who were then paid on a
per trip basis.
6

When the service contract was renewed for another year, or for the period July 1, 2003 to June 30,
2004, petitioners required each of the respondents to sign employment contracts which provided that
they will be "re-hired" only for the duration of the same period. However, respondents refused to sign
the employment contracts,claiming that they were regular employees since they were engaged to
perform activities which were necessary and desirable to Omnis usual business or trade. For this
reason, Omni terminated the employment of respondents which, in turn, resulted in the filing of
cases for illegal dismissal, nonpayment of Emergency Cost of Living Allowance (ECOLA) and 13th
month pay, and actual, moral, and exemplary damages. During the mandatory conference before the
Labor Arbiter (LA), Omni offered to re-employ respondents on the condition that they sign the
employment contracts butrespondents refused such offer.
8

10

11

The LA Ruling
In a Decision dated December 29, 2004, the LA ruled in favor of petitioners, finding that
respondents were not illegally dismissed.
12

The LA found that respondents, at the time of their engagement, were informed that their
employment will be limited for a specific period of one year and was co-terminus with the service
contract with the Quezon City government. Thus, respondents were not regular but merely project
employees whose hiring was solely dependent on the aforesaid service contract. As a result,
respondents contracts with Omni expired upon the service contracts expiration on June 30, 2003.
13

14

Dissatisfied with the LAs ruling, respondents filed an appeal before the NLRC.

15

The NLRC Ruling

In a Decision dated May 18, 2009, the NLRC affirmed the LAs ruling in toto.
16

It sustained the LAs finding that respondents were only project employees whose employment was
co-terminus with Omnis service contract with the Quezon City government. Thus, when respondents
refused to sign the employment contracts for the subsequent period, there was no dismissal to
speak of, but rather, a mereexpiration of respondents previous contracts. Unconvinced,
respondents filed a motion for reconsideration which was, however, denied in a Resolution dated
August 28, 2009, leading them to file a petition for certiorari before the CA.
17

18

19

20

The CA Ruling
In a Decision dated May 27, 2011, the CA reversed and set aside the NLRCs earlier
pronouncements.
21

It held that the NLRC failed to consider the glaring fact that no contract of employment exists to
support petitioners allegation that respondents are fixed-term (or properly speaking, project)
employees. Petitioners claim that respondents were properly apprised regarding the fixed period of
their employment at the time of their engagement is nothing but a mere allegation which is bereft of
substantiation. In view of the fact that no other evidence was offered to prove the supposed project
employment, petitioners failure to present an employment contract puts into serious doubt the
allegation that the employees, i.e., respondents, were properly informed at the onset of their
employment status as project employees. Besides, the CA pointed out that at the time respondents
were asked to sign the employment contracts, they already became regular employees by operation
of law. It added that in order to be deemed as project employees, it is not enough that an employee
is hired for a specific project or phase of work; there must also be a determination of, or a clear
agreement on, the completion or termination of the project at the time the employee was
engaged. Accordingly, the CA ruled that respondents were illegally dismissed, and therefore,
ordered their reinstatement or the payment of separation pay if such reinstatement is no longer
feasible, with full backwages in either case. Further, it remanded the instant case to the
Computation and Examination Unit of the NLRC for an updated computation of the above-mentioned
monetary awards in accordance with its Decision.
22

23

24

25

26

Aggrieved, petitioners filed a motion for reconsideration which was, however, denied by the CA in a
Resolution dated November 11, 2011, hence, this petition.
27

28

The Issue Before the Court

The core issue raised in the present petition is whether or not the CA erred in granting respondents
petition for certiorari, thereby setting aside the NLRCs Decision holding that respondents were
project employees.
The Courts Ruling
To justify the grant of the extraordinary remedy of certiorari, petitioners must satisfactorily show
thatthe court or quasi-judicial authority gravely abused the discretion conferred upon it. Grave abuse
of discretion connotes judgment exercised in a capricious and whimsical manner that is tantamount
to lack of jurisdiction. To be considered "grave," discretion must be exercised in a despotic manner
by reason of passion or personal hostility, and must be so patent and gross as toamount to an
evasion of positive duty or to a virtual refusal to perform the duty enjoined by or to act at all in
contemplation of law.
29

In labor disputes, grave abuse of discretion may be ascribed to the NLRC when, inter alia, its
findings and the conclusions reached thereby are not supported by substantial evidence. This
requirement of substantial evidence is clearly expressed in Section 5, Rule 133 of the Rules of Court
which provides that "[i]n cases filed before administrative or quasi-judicial bodies, a fact may be
deemed established if it is supported by substantial evidence, or that amount of relevant evidence
which a reasonable mind might accept as adequate to justify a conclusion."
30

Guided by these considerations, the Court finds that the CA correctly granted respondents
certioraripetition since the NLRC gravely abused its discretion when it held that respondents were
project employees despite petitioners failure to establish their project employment status through
substantial evidence.
Article 280 of the Labor Code distinguishes a "project employee" from a "regular employee" in this
wise:

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 inthe 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 ofthe engagement of the employeeor where the work or service to be
performed is seasonal in nature and the employment is for the duration of the season.
x x x x (Emphasis and underscoring supplied)
A project employee is assigned to a project which begins and ends at determined or determinable
times. Unlike regular employees who may only be dismissed for just and/or authorized causes
under the Labor Code, the services of employees who are hired as "project employees" may be
lawfully terminated at the completion of the project.
31

32

According to jurisprudence, the principal test for determining whether particular employees are
properly characterized as "project employees" as distinguished from "regular employees,"is whether
or not the employees were assigned to carry out a "specific project or undertaking," the duration
(and scope) of which were specified at the time they were engaged for that project. The project could
either be (1) a particular job or undertaking that is within the regular or usual business ofthe
employer company, but which is distinct and separate, and identifiable as such, from the other
undertakings of the company; or (2) a particular job or undertaking that is not within the regular
business of the corporation. In order to safeguard the rights of workers against the arbitrary use of
the word "project" to prevent employees from attaining a regular status, employers claiming that their
workers are project employees should not only prove that the duration and scope of the employment
was specified at the time they were engaged, but also that there was indeed a project.
1wphi1

33

Even though the absence of a written contract does not by itself grant regular status to respondents,
such a contract is evidence that respondents were informed of the duration and scopeof their work
and their status as project employees. As held in Hanjin Heavy Industries and Construction Co.,
Ltd. v. Ibaez, citing numerous precedents on the matter, where no other evidence was offered, the
absence of the employment contracts raises a serious question of whether the employees were
properly informed of their employment status as project employeesat the time of their engagement,
viz.:
34

35

While the absence of a written contract does not automatically confer regular status, it has been
construed by this Court as a red flag in cases involving the question of whether the workers
concerned are regular or project employees. In Grandspan Development Corporation v.
Bernardoand Audion Electric Co., Inc. v. National Labor Relations Commission, this Court took note
of the fact that the employer was unable to present employment contracts signed by the workers,
which stated the duration of the project. In another case, Raycor v. Aircontrol Systems, Inc. v.
National Labor Relations Commission, this Court refused to give any weight to the employment
contracts offered by the employers as evidence, which contained the signature of the president and
general manager, but not the signatures of the employees. In cases where this Court ruled that
construction workers repeatedly rehired retained their status as project employees, the employers
were ableto produce employment contracts clearly stipulatingthat the workers employment was
coterminous with the project to support their claims that the employees were notified of the scope
and duration of the project.
1wphi1

Hence, even though the absence of a written contract does not by itself grant regular status to
respondents, such a contract is evidence that respondents were informedof the duration and scope
of their work and their status as project employees. In this case, where no other evidence was

offered, the absence of an employment contract puts into serious question whether the employees
were properly informed at the onset of their employment status as project employees. It is doctrinally
entrenched that in illegal dismissal cases, the employer has the burden of proving with clear,
accurate, consistent and convincing evidence that a dismissal was valid. x x x. (Emphases
supplied; citations omitted)
36

In this case, records are bereftof any evidence to show that respondents were made to sign
employment contracts explicitly stating that they were going to be hired as project employees, with
the period of their employment to be co-terminus with the original period of Omnis service contract
with the Quezon City government. Neither is petitioners allegation that respondents were duly
apprised ofthe project-based nature of their employment supported by any other evidentiary proof.
Thus, the logical conclusion is that respondents were not clearly and knowingly informed of their
employment status as mere project employees, with the duration and scope of the project specified
at the time they were engaged. As such, the presumption of regular employment should be accorded
in their favor pursuant to Article 280 of the Labor Code which provides that "[employees] who have
rendered at least one year of service, whether such service is continuous or broken [ as
respondents in this case ] shall be considered as [regular employees]with respect to the activity in
which [they] are employed and [their] employment shall continue while such activity actually exists."
Add to this the obvious fact that respondents have been engaged to perform activities which are
usually necessary or desirable in the usual business or trade of Omni, i.e., garbage hauling, thereby
confirming the strength of the aforesaid conclusion.
The determination that respondents are regular and not merely project employees resultantly means
that their services could not have been validly terminated at the expiration of the project, or, in this
case, the service contract of Omni with the Quezon City government. As regular employees, it is
incumbent upon petitioners to establish that respondents had been dismissed for a just and/or
authorizedcause. However, petitioners failed in this respect; hence, respondents wereillegally
dismissed.
For its contrary ruling left unsupported by any substantial evidence, it then ultimately follows that the
NLRC gravely abused its discretion in dismissing respondents complaints for illegal dismissal. The
CA Decision reversing and setting aside the NLRCs ruling on certiorarimust perforce be made to
stand.
WHEREFORE, the petition is DENIED. The Decision dated May 27, 2011 and the Resolution dated
November 11, 2011 of the Court of Appeals in CA-G.R. SP. No. 111413 are hereby AFFIRMED.
SO ORDERED.
ESTELA
Associate Justice

M.

Asos v. PNCC, G.R. No. 192394, July 3, 2013

G.R. No. 192394

July 3, 2013

PERLAS-BERNABE

ROY
D.
P
vs.
PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, Respondent.

ASOS, Petitioner,

DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended, assailing the March 26, 2010 Decision 1 and May 26, 2010 Resolution2 of the Court of
Appeals (CA) in CA-G.R. SP No. 107805. The appellate court had affirmed the Decision 3 of the
National Labor Relations Commission (NLRC) dismissing the illegal dismissal complaint filed by
petitioner Roy D. Pasos against respondent Philippine National Construction Corporation (PNCC).
The antecedent facts follow:
Petitioner Roy D. Pasos started working for respondent PNCC on April 26, 1996. Based on the
PNCC's "Personnel Action Form Appointment for Project Employment" dated April 30,
1996,4 petitioner was designated as "Clerk II (Accounting)" and was assigned to the "NAIA II
Project." It was likewise stated therein:
PARTICULARS: Project employment starting on April 26, 1996 to July 25, 1996. This contract maybe
terminated at anytime for cause as provided for by law and/or existing Company Policy. This maybe
terminated if services are unsatisfactory, or when it shall no longer needed, as determined by the
Company. If services are still needed beyond the validity of this contract, the Company shall extend
your services. After services are terminated, the employee shall be under no obligation to re-employ
with the Company nor shall the Company be obliged to re-employ the employee. 5 (Emphasis
supplied.)
Petitioners employment, however, did not end on July 25, 1996 but was extended until August 4,
1998, or more than two years later, based on the "Personnel Action Form Project Employment"
dated July 7, 1998.6
Based on PNCCs "Appointment for Project Employment" dated November 11, 1998, 7 petitioner was
rehired on even date as "Accounting Clerk (Reliever)" and assigned to the "PCSO Q.I. Project." It
was stated therein that his employment shall end on February 11, 1999 and may be terminated for
cause or in accordance with the provisions of Article 282 of the Labor Code, as amended. However,
said employment did not actually end on February 11, 1999 but was extended until February 19,
1999 based on the "Personnel Action Form-Project Employment" dated February 17, 1999. 8
On February 23, 1999, petitioner was again hired by PNCC as "Accounting Clerk" and was assigned
to the "SM-Project" based on the "Appointment for Project Employment" dated February 18, 1999. 9 It
did not specify the date when his employment will end but it was stated therein that it will be "coterminus with the completion of the project." Said employment supposedly ended on August 19,
1999 per "Personnel Action Form Project Employment" dated August 18, 1999, 10 where it was
stated, "termination of petitioners project employment due to completion of assigned phase/stage of
work or project effective at the close of office hours on 19 August 1999." However, it appears that
said employment was extended per "Appointment for Project employment" dated August 20,
199911 as petitioner was again appointed as "Accounting Clerk" for "SM Project (Package II)." It did
not state a specific date up to when his extended employment will be, but it provided that it will be
"co-terminus with the x x x project." In "Personnel Action Form Project Employment" dated October
17, 2000,12 it appears that such extension would eventually end on October 19, 2000.

Despite the termination of his employment on October 19, 2000, petitioner claims that his superior
instructed him to report for work the following day, intimating to him that he will again be employed
for the succeeding SM projects. For purposes of reemployment, he then underwent a medical
examination which allegedly revealed that he had pneumonitis. Petitioner was advised by PNCCs
physician, Dr. Arthur C. Obena, to take a 14-day sick leave.
On November 27, 2000, after serving his sick leave, petitioner claims that he was again referred for
medical examination where it was revealed that he contracted Kochs disease. He was then required
to take a 60-day leave of absence. 13 The following day, he submitted his application for sick leave but
PNCCs Project Personnel Officer, Mr. R.S. Sanchez, told him that he was not entitled to sick leave
because he was not a regular employee.
Petitioner still served a 60-day sick leave and underwent another medical examination on February
16, 2001. He was then given a clean bill of health and was given a medical clearance by Dr. Obena
that he was fit to work.
Petitioner claims that after he presented his medical clearance to the Project Personnel Officer on
even date, he was informed that his services were already terminated on October 19, 2000 and he
was already replaced due to expiration of his contract. This prompted petitioner on February 18,
2003 to file a complaint14 for illegal dismissal against PNCC with a prayer for reinstatement and back
wages. He argued that he is deemed a regular employee of PNCC due to his prolonged employment
as a project employee as well as the failure on the part of PNCC to report his termination every time
a project is completed. He further contended that his termination without the benefit of an
administrative investigation was tantamount to an illegal dismissal.
PNCC countered that petitioner was hired as a project employee in several projects with specific
dates of engagement and termination and had full knowledge and consent that his appointment was
only for the duration of each project. It further contended that it had sufficiently complied with the
reportorial requirements to the Department of Labor and Employment (DOLE). It submitted
photocopies of three Establishment Termination Reports it purportedly filed with the DOLE. They
were for: (1) the "PCSOQ.I. Project" for February 1999; 15 (2) "SM Project" for August 1999;16 and (3)
"SM Project" for October 2000,17 all of which included petitioner as among the affected employees.
The submission of termination reports by PNCC was however disputed by petitioner based on the
verifications18 issued by the DOLE NCR office that he was not among the affected employees listed
in the reports filed by PNCC in August 1998, February 1999, August 1999 and October 2000.
On March 28, 2006, the Labor Arbiter rendered a Decision19 in favor of petitioner. The fallo reads:
WHEREFORE, premises considered, the complainant had attained regular employment thereby
making his termination from employment illegal since it was not for any valid or authorized causes.
Consequently, Respondent is ordered to pay complainant his full backwages less six (6) months
computed as follows:
Backwages:
Feb. 18, 2000 March 28, 2006 = 73.33 mos.
P6,277.00 x 73.33 =

P460,292.41

Less:
P6,277.00 X 6 mos. =

37,662.00
P422,630.41

The reinstatement could not as well be ordered due to the strained relations between the parties,
that in lieu thereof, separation pay is ordered paid to complainant in the amount of P37,662.00
[P6,277.00 x 6].
SO ORDERED.20
The Labor Arbiter ruled that petitioner attained regular employment status with the repeated hiring
and rehiring of his services more so when the services he was made to render were usual and
necessary to PNCCs business. The Labor Arbiter likewise found that from the time petitioner was
hired in 1996 until he was terminated, he was hired and rehired by PNCC and made to work not only
in the project he had signed to work on but on other projects as well, indicating that he is in fact a
regular employee. He also noted petitioners subsequent contracts did not anymore indicate the date
of completion of the contract and the fact that his first contract was extended way beyond the
supposed completion date. According to the Labor Arbiter, these circumstances indicate that the
employment is no longer a project employment but has graduated into a regular one. Having
attained regular status, the Labor Arbiter ruled that petitioner should have been accorded his right to
security of tenure.
Both PNCC and petitioner appealed the Labor Arbiters decision. PNCC insisted that petitioner was
just a project employee and his termination was brought about by the completion of the contract and
therefore he was not illegally dismissed. Petitioner, on the other hand, argued that his reinstatement
should have been ordered by the Labor Arbiter since there was no proof that there were strained
relations between the parties. He also questioned the deduction of six months pay from the back
wages awarded to him and the failure of the Labor Arbiter to award him damages and attorneys
fees. Petitioner likewise moved to dismiss PNCCs appeal contending that the supersedeas bond in
the amount of P422,630.41 filed by the latter was insufficient considering that the Labor Arbiters
monetary award is P460,292.41. He also argued that the person who verified the appeal, Felix M.
Erece, Jr., Personnel Services Department Head of PNCC, has no authority to file the same for and
in behalf of PNCC.
On October 31, 2008, the NLRC rendered its Decision granting PNCCs appeal but dismissing that
of petitioner. The dispositive portion reads:
WHEREFORE, premises considered, the appeal of respondent is GRANTED and the Decision
dated 28 March 2006 is REVERSED and SET ASIDE.
A new Decision is hereby issued ordering respondent Philippine National Construction Corporation
to pay completion bonus to complainant Roy Domingo Pasos in the amount of P25,000.
Complainants appeal is DISMISSED for lack of merit.
SO ORDERED.21
As to the procedural issues raised by petitioner, the NLRC ruled that there was substantial
compliance with the requirement of an appeal bond and that Mr. Erece, Jr., as head of the Personnel
Services Department, is the proper person to represent PNCC. As to the substantive issues, the
NLRC found that petitioner was employed in connection with certain construction projects and his
employment was co-terminus with each project as evidenced by the Personnel Action Forms and the
Termination Report submitted to the DOLE. It likewise noted the presence of the following project
employment indicators in the instant case, namely, the duration of the project for which petitioner
was engaged was determinable and expected completion was known to petitioner; the specific
service that petitioner rendered in the projects was that of an accounting clerk and that was made

clear to him and the service was connected with the projects; and PNCC submitted termination
reports to the DOLE and petitioners name was included in the list of affected employees.
Petitioner elevated the case to the CA via a petition for certiorari but the appellate court dismissed
the same for lack of merit.
Hence this petition. Petitioner argues that the CA erred when it:
I.
SUSTAINED THAT THE AMOUNT OF THE BOND POSTED BY THE RESPONDENTS FOR
PURPOSES OF APPEAL WAS SUFFICIENT NOTWITHSTANDING THAT THE SAME IS LESS
THAN THE ADJUDGED AMOUNT.
II.
SUSTAINED THAT FELIX M. ERECE, JR., HEAD OF RESPONDENT PNCCS PERSONNEL
SERVICE DEPARTMENT, IS DULY AUTHORIZED TO REPRESENT RESPONDENT IN THIS CASE
NOTWITHSTANDING THE ABSENCE OF ANY BOARD RESOLUTION OR SECRETARYS
CERTIFICATE OF THE RESPONDENT STATING THAT INDEED HE WAS DULY AUTHORIZED TO
INSTITUTE THESE PROCEEDINGS.
III.
SUSTAINED THAT PETITIONER WAS A PROJECT EMPLOYEE DESPITE THE FACT THAT
RESPONDENT PNCC HAD NOT SUBMITTED THE REQUISITE TERMINATION REPORTS IN ALL
OF THE ALLEGED PROJECTS WHERE THE PETITIONER WAS ASSIGNED.
IV.
SUSTAINED THAT THE PETITIONER IS A PROJECT EMPLOYEE DESPITE THE
CIRCUMSTANCE THAT THE ACTUAL WORK UNDERTAKEN BY THE PETITIONER WAS NOT
LIMITED TO THE WORK DESCRIBED IN HIS ALLEGED APPOINTMENT AS A PROJECT
EMPLOYEE.
V.
FAILED TO FIND THAT AT SOME TIME, THE EMPLOYMENT OF THE PETITIONER WAS
UNREASONABLY EXTENDED BEYOND THE DATE OF ITS COMPLETION AND AT OTHER
TIMES THE SAME DID NOT BEAR A DATE OF COMPLETION OR THAT THE SAME WAS
READILY DETERMINABLE AT THE TIME OF PETITIONERS ENGAGEMENT THEREBY
INDICATING THAT HE WAS NOT HIRED AS A PROJECT EMPLOYEE.
VI.
FAILED TO ORDER THE REINSTATEMENT OF THE PETITIONER BY FINDING THAT THERE
WAS STRAINED RELATIONS BETWEEN THE PARTIES NOTWITHSTANDING THAT THE
RESPONDENT NEVER EVEN ALLEGED NOR PROVED IN ITS PLEADINGS THE
CIRCUMSTANCE OF STRAINED RELATIONS.
VII.

SUSTAINED THE FAILURE OF THE NATIONAL LABOR RELATIONS COMMISSION TO RECTIFY

THE ERROR COMMITTED BY LABOR ARBITER LIBO-ON IN DEDUCTING THE EQUIVALENT OF
SIX MONTHS PAY OF BACKWAGES DESPITE THE MANDATE OF THE LABOR CODE THAT
WHEN THERE IS A FINDING OF ILLEGAL DISMISSAL, THE PAYMENT OF FULL BACKWAGES
FROM DATE OF DIMISSAL UP TO ACTUAL REINSTATEMENT SHOULD BE AWARDED.
VIII.
SUSTAINED THE FAILURE OF THE NATIONAL LABOR RELATIONS COMMISSION TO RECTIFY
THE ERROR COMMITTED BY LABOR ARBITER LIBO-ON IN FAILING TO AWARD DAMAGES
AND ATTORNEYS FEES TO THE PETITIONER.22
Petitioner contends that PNCCs appeal from the Labor Arbiters decision should not have been
allowed since the appeal bond filed was insufficient. He likewise argues that the appellate court
erred in heavily relying in the case of Cagayan Valley Drug Corporation v. Commissioner of Internal
Revenue23 which enumerated the officials and employees who can sign the verification and
certification without need of a board resolution. He contends that in said case, there was substantial
compliance with the requirement since a board resolution was submitted albeit belatedly unlike in the
instant case where no board resolution was ever submitted even belatedly.
As to the substantive issue, petitioner submits that the CA erroneously concluded that he was a
project employee when there are indicators which point otherwise. He contends that even if he was
just hired for the NAIA 2 Project from April 26, 1996 to July 25, 1996, he was made to work until
August 4, 1998. He also avers the DOLE had certified that he was not among the employees listed
in the termination reports submitted by PNCC which belies the photocopies of termination reports
attached by PNCC to its pleadings listing petitioner as one of the affected employees. Petitioner
points out that said termination reports attached to PNCCs pleadings are mere photocopies and
were not even certified by the DOLE-NCR as true copies of the originals on file with said office.
Further, he argues that in violation of the requirement of Department Order No. 19 that the duration
of the project employment is reasonably determinable, his contracts for the SM projects did not
specify the date of completion of the project nor was the completion determinable at the time that
petitioner was hired.
PNCC counters that documentary evidence would show that petitioner was clearly a project
employee and remained as such until his last engagement. It argues that the repeated rehiring of
petitioner as accounting clerk in different projects did not make him a regular employee. It also
insists that it complied with the reportorial requirements and that it filed and reported the termination
of petitioner upon every completion of project to which he was employed.
In sum, three main issues are presented before this Court for resolution: (1) Should an appeal be
dismissed outright if the appeal bond filed is less than the adjudged amount? (2) Can the head of the
personnel department sign the verification and certification on behalf of the corporation sans any
board resolution or secretarys certificate authorizing such officer to do the same? and (3) Is
petitioner a regular employee and not a mere project employee and thus can only be dismissed for
cause?
Substantial compliance with appeal
bond requirement
The perfection of an appeal within the reglementary period and in the manner prescribed by law is
jurisdictional, and noncompliance with such legal requirement is fatal and effectively renders the

judgment final and executory. As provided in Article 223 of the Labor Code, as amended, in case of a
judgment involving a monetary award, an appeal by the employer may be perfected only upon the
posting of a cash or surety bond issued by a reputable bonding company duly accredited by the
Commission in the amount equivalent to the monetary award in the judgment appealed from.
However, not only in one case has this Court relaxed this requirement in order to bring about the
immediate and appropriate resolution of cases on the merits. 24 In Quiambao v. National Labor
Relations Commission,25 this Court allowed the relaxation of the requirement when there is
substantial compliance with the rule. Likewise, in Ong v. Court of Appeals, 26 the Court held that the
bond requirement on appeals may be relaxed when there is substantial compliance with the Rules of
Procedure of the NLRC or when the appellant shows willingness to post a partial bond. The Court
held that "while the bond requirement on appeals involving monetary awards has been relaxed in
certain cases, this can only be done where there was substantial compliance of the Rules or where
the appellants, at the very least, exhibited willingness to pay by posting a partial bond."
In the instant case, the Labor Arbiter in his decision ordered PNCC to pay petitioner back wages
amounting toP422,630.41 and separation pay of P37,662 or a total of P460,292.41. When PNCC
filed an appeal bond amounting to P422,630.41 or at least 90% of the adjudged amount, there is no
question that this is substantial compliance with the requirement that allows relaxation of the rules.
Validity
of
the
verification
and
certification
signed
by
a
corporate
officer
on
behalf
of
the
corporation
without
the
requisite
board
resolution or secretarys certificate
It has been the constant holding of this Court in cases instituted by corporations that an individual
corporate officer cannot exercise any corporate power pertaining to the corporation without authority
from the board of directors pursuant to Section 23, in relation to Section 25 of the Corporation Code
which clearly enunciates that all corporate powers are exercised, all business conducted, and all
properties controlled by the board of directors. However, we have in many cases recognized the
authority of some corporate officers to sign the verification and certification against forum-shopping.
Some of these cases were enumerated in Cagayan Valley Drug Corporation v. Commissioner of
Internal Revenue27 which was cited by the appellate court:
In Mactan-Cebu International Airport Authority v. CA, we recognized the authority of a general
manager or acting general manager to sign the verification and certificate against forum shopping; in
Pfizer v. Galan, we upheld the validity of a verification signed by an "employment specialist" who had
not even presented any proof of her authority to represent the company; in Novelty Philippines, Inc.
v. CA, we ruled that a personnel officer who signed the petition but did not attach the authority from
the company is authorized to sign the verification and non-forum shopping certificate; and in Lepanto
Consolidated Mining Company v. WMC Resources International Pty. Ltd. (Lepanto), we ruled that
the Chairperson of the Board and President of the Company can sign the verification and certificate
against non-forum shopping even without the submission of the boards authorization.
In sum, we have held that the following officials or employees of the company can sign the
verification and certification without need of a board resolution: (1) the Chairperson of the Board of
Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager,
(4) Personnel Officer, and (5) an Employment Specialist in a labor case.
While the above cases do not provide a complete listing of authorized signatories to the verification
and certification required by the rules, the determination of the sufficiency of the authority was done
on a case to case basis. The rationale applied in the foregoing cases is to justify the authority of

corporate officers or representatives of the corporation to sign the verification or certificate against
forum shopping, being "in a position to verify the truthfulness and correctness of the allegations in
the petition."28 (Citations omitted.)
While we agree with petitioner that in Cagayan Valley, the requisite board resolution was submitted
though belatedly unlike in the instant case, this Court still recognizes the authority of Mr. Erece, Jr. to
sign the verification and certification on behalf of PNCC sans a board resolution or secretarys
certificate as we have allowed in Pfizer, Inc. v. Galan, 29 one of the cases cited in Cagayan Valley. In
Pfizer, the Court ruled as valid the verification signed by an employment specialist as she was in a
position to verify the truthfulness and correctness of the allegations in the petition 30 despite the fact
that no board resolution authorizing her was ever submitted by Pfizer, Inc. even belatedly. We
believe that like the employment specialist in Pfizer, Mr. Erece, Jr. too, as head of the Personnel
Services Department of PNCC, was in a position to assure that the allegations in the pleading have
been prepared in good faith and are true and correct.
Even assuming that the verification in the appeal filed by PNCC is defective, it is well settled that
rules of procedure in labor cases maybe relaxed. As provided in Article 221 of the Labor Code, as
amended, "rules of evidence prevailing in courts of law or equity shall not be controlling and it is the
spirit and intention of this Code that the Commission and its members and the Labor Arbiters shall
use every and all reasonable means to ascertain the facts in each case speedily and objectively and
without regard to technicalities of law or procedure, all in the interest of due process." Moreover, the
requirement of verification is merely formal and not jurisdictional. As held in Pacquing v. Coca-Cola
Philippines, Inc.31:
As to the defective verification in the appeal memorandum before the NLRC, the same liberality
applies. After all, the requirement regarding verification of a pleading is formal, not jurisdictional.
Such requirement is simply a condition affecting the form of pleading, the noncompliance of which
does not necessarily render the pleading fatally defective. Verification is simply intended to secure
an assurance that the allegations in the pleading are true and correct and not the product of the
imagination or a matter of speculation, and that the pleading is filed in good faith. The court or
tribunal may order the correction of the pleading if verification is lacking or act on the pleading
although it is not verified, if the attending circumstances are such that strict compliance with the rules
may be dispensed with in order that the ends of justice may thereby be served. 32
Duration
should
hiring

be

of
determined

project
at

the

time

employment
of

In the instant case, the appointments issued to petitioner indicated that he was hired for specific
projects. This Court is convinced however that although he started as a project employee, he
eventually became a regular employee of PNCC.
Under Article 280 of the Labor Code, as amended, a project employee is one whose "employment
has been fixed for a specific project or undertaking the completion or termination of which has been
determined at the time of the engagement of the employee or where the work or services to be
performed is seasonal in nature and the employment is for the duration of the season." Thus, the
principal test used to determine whether employees are project employees is whether or not the
employees were assigned to carry out a specific project or undertaking, the duration or scope of
which was specified at the time the employees were engaged for that project. 33
In the case at bar, petitioner worked continuously for more than two years after the supposed threemonth duration of his project employment for the NAIA II Project. While his appointment for said

project allowed such extension since it specifically provided that in case his "services are still needed
beyond the validity of the contract, the Company shall extend his services," there was no
subsequent contract or appointment that specified a particular duration for the extension. His
services were just extended indefinitely until "Personnel Action Form Project Employment" dated
July 7, 1998 was issued to him which provided that his employment will end a few weeks later or on
August 4, 1998. While for first three months, petitioner can be considered a project employee of
PNCC, his employment thereafter, when his services were extended without any specification of as
to the duration, made him a regular employee of PNCC. And his status as a regular employee was
not affected by the fact that he was assigned to several other projects and there were intervals in
between said projects since he enjoys security of tenure.
Failure
of
an
termination
reports
project
completion
employee is not a project employee

employer

to
after

proves

that

file
every
an

As a rule, the findings of fact of the CA are final and conclusive and this Court will not review them
on appeal.34The rule, however, is subject to the following exceptions:
The jurisdiction of the Court in cases brought before it from the appellate court is limited to reviewing
errors of law, and findings of fact of the Court of Appeals are conclusive upon the Court since it is not
the Courts function to analyze and weigh the evidence all over again. Nevertheless, in several
cases, the Court enumerated the exceptions to the rule that factual findings of the Court of Appeals
are binding on the Court: (1) when the findings are grounded entirely on speculations, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when
there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts;
(5) when the findings of fact are conflicting; (6) when in making its findings the Court of Appeals went
beyond the issues of the case, or its findings are contrary to the admissions of both the appellant
and the appellee; (7) when the findings are contrary to that of the trial court; (8) when the findings
are conclusions without citation of specific evidence on which they are based; (9) when the facts set
forth in the petition as well as in the petitioners main and reply briefs are not disputed by the
respondent; (10) when the findings of fact are premised on the supposed absence of evidence and
contradicted by the evidence on record; or (11) when the Court of Appeals manifestly overlooked
certain relevant facts not disputed by the parties, which, if properly considered, would justify a
different conclusion.35
In this case, records clearly show that PNCC did not report the termination of petitioners supposed
project employment for the NAIA II Project to the DOLE. Department Order No. 19, or the
"Guidelines Governing the Employment of Workers in the Construction Industry," requires employers
to submit a report of an employees termination to the nearest public employment office every time
an employees employment is terminated due to a completion of a project. PNCC submitted as
evidence of its compliance with the requirement supposed photocopies of its termination reports,
each listing petitioner as among the employees affected. Unfortunately, none of the reports
submitted pertain to the NAIA II Project. Moreover, DOLE NCR verified that petitioner is not included
in the list of affected workers based on the termination reports filed by PNCC on August 11, 17, 20
and 24, 1998 for petitioners supposed dismissal from the NAIA II Project effective August 4, 1998.
This certification from DOLE was not refuted by PNCC. In Tomas Lao Construction v. NLRC, 36 we
emphasized the indispensability of the reportorial requirement:
Moreover, if private respondents were indeed employed as "project employees," petitioners should
have submitted a report of termination to the nearest public employment office every time their
employment was terminated due to completion of each construction project. The records show that

they did not. Policy Instruction No. 20 is explicit that employers of project employees are exempted
from the clearance requirement but not from the submission of termination report. We have
consistently held that failure of the employer to file termination reports after every project completion
proves that the employees are not project employees. Nowhere in the New Labor Code is it provided
that the reportorial requirement is dispensed with. The fact is that Department Order No. 19
superseding Policy Instruction No. 20 expressly provides that the report of termination is one of the
indicators of project employment.37
A
regular
cause
other
authorized
causes
illegally dismissed

employee
than
provided

dismissed
the
by

for
just
law

a
or
is

Petitioners regular employment was terminated by PNCC due to contract expiration or project
completion, which are both not among the just or authorized causes provided in the Labor Code, as
amended, for dismissing a regular employee. Thus, petitioner was illegally dismissed.
Article 279 of the Labor Code, as amended, provides that an illegally dismissed employee is entitled
to reinstatement, full back wages, inclusive of allowances, and to his other benefits or their monetary
equivalent from the time his compensation was withheld from him up to the time of his actual
reinstatement.
We agree with petitioner that there was no basis for the Labor Arbiters finding of strained relations
and order of separation pay in lieu of reinstatement. This was neither alleged nor proved. Moreover,
it has long been settled that the doctrine of strained relations should be strictly applied so as not to
deprive an illegally dismissed employee of his right to reinstatement. As held in Globe-Mackay Cable
and Radio Corporation v. NLRC:38
Obviously, the principle of "strained relations" cannot be applied indiscriminately. Otherwise,
reinstatement can never be possible simply because some hostility is invariably engendered
between the parties as a result of litigation. That is human nature.
Besides, no strained relations should arise from a valid and legal act of asserting ones right;
otherwise an employee who shall assert his right could be easily separated from the service, by
merely paying his separation pay on the pretext that his relationship with his employer had already
become strained.39
As to the back wages due petitioner, there is likewise no basis in deducting therefrom back wages
equivalent to six months "representing the maximum period of confinement PNCC can require him to
undergo medical treatment." Besides, petitioner was not dismissed on the ground of disease but
expiration of term of project employment.
Regarding moral and exemplary damages, this Court rules that petitioner is not entitled to
them. Worth reiterating is the rule that moral damages are recoverable where the dismissal of the
employee was attended by bad faith or fraud or constituted an act oppressive to labor, or was done
in a manner contrary to morals, good customs, or public policy. Likewise, exemplary damages may
be awarded if the dismissal was effected in a wanton, oppressive or malevolent manner. 40 Apart from
his allegations, petitioner did not present any evidence to prove that his dismissal was attended with
bad faith or was done oppressively.
1wphi1

Petitioner is also entitled to attorney's fees m the amount of ten percent (10%) of his total monetary
award, having been forced to litigate in order to seek redress of his grievances, as provided in Article

111 of the Labor Code, as amended, and following this Court's pronouncement in Exodus
International Construction Corporation v. Biscocho. 41
In line with current jurisprudence, the award of back wages shall earn legal interest at the rate of six
percent ( 6%) per annum from the date of petitioner's dismissal until the finality of this
decision.42 Thereafter, it shall earn 12% legal interest until fully paid 43 in accordance with the
guidelines in Eastern Shipping Lines, Inc. v. Court of Appeals.44
WHEREFORE, the petition is GRANTED. The assailed March 26, 2010 Decision and May 26, 2010
Resolution of the Court of Appeals in CAG.R. SP No. 107805 are hereby REVERSED. The decision
of the Labor Arbiter is hereby REINSTATED with the following MODIFICATIONS:
1) respondent PNCC is DIRECTED to pay petitioner Roy D. Pasos full back wages from the
time of his illegal dismissal on October 19, 2000 up to the finality of this Decision, with
interest at 6% per annum, and 12% legal interest thereafter until fully paid;
2) respondent PNCC is ORDERED to reinstate petitioner Pasos to his former position or to a
substantially equivalent one, without loss of seniority rights and other benefits attendant to
the position; and
3) respondent PNCC is DIRECTED to pay petitioner Pasos attorney's fees equivalent to 10%
of his total monetary award.
No pronouncement as to costs.
SO ORDERED.
MARTIN
Associate Justice

S.

VILLARAMA,

JR.

See GMA Network v. Pabriga, G.R. No. 176419, November 27, 2013
See MacArthur Malicdem v. Marulas, G.R. No. 204406, February 26, 2014

Seasonal
Art. 280, Labor Code
Article 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
service 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.

Universal Robina v. Acibo, G.R. No. 186439, January 15, 2014

G.R. No. 186439

January 15, 2014

UNIVERSAL ROBINA SUGAR MILLING CORPORATION and RENE CABATI, Petitioners,

vs.
FERDINAND ACIBO, ROBERTO AGUILAR, EDDIE BALDOZA, RENE ABELLAR, DIOMEDES
ALICOS, MIGUEL ALICOS, ROGELIO AMAHIT, LARRY AMASCO, FELIPE BALANSAG, ROMEO
BALANSAG, MANUEL BANGOT, ANDY BANJAO, DIONISIO BENDIJO, JR., JOVENTINO
BROCE, ENRICO LITERAL, RODGER RAMIREZ, BIENVENIDO RODRIGUEZ, DIOCITO
PALAGTIW, ERNIE SABLAN, RICHARD PANCHO, RODRIGO ESTRABELA, DANNY
KADUSALE and ALLYROBYL OLPUS, Respondents.
DECISION
BRION, J.:
We resolve in this petition for review on certiorari the challenge to the November 29, 2007
decision and the January 22, 2009 resolution of the Court of Appeals (CA) in CA-G.R. CEB-SP No.
02028. This CA decision affirmed with modification the July 22, 2005 decision and the April 28, 2006
resolution of the National Labor Relations Commission (NLRC) in NLRC Case No. V-00006-03
which, in turn, reversed the October 9, 2002 decision of the Labor Arbiter (LA). The LAs decision
dismissed the complaint filed by complainants Ferdinand Acibo, et al. against petitioners Universal
Robina Sugar Milling Corporation (URSUMCO) and Rene Cabati.
1

The Factual Antecedents

URSUMCO is a domestic corporation engaged in the sugar cane milling business; Cabati is
URSUMCOs Business Unit General Manager.
The complainants were employees of URSUMCO. They were hired on various dates (between
February 1988 and April 1996) and on different capacities, i.e., drivers, crane operators, bucket
hookers, welders, mechanics, laboratory attendants and aides, steel workers, laborers, carpenters
and masons, among others. At the start of their respective engagements, the complainants signed
contracts of employment for a period of one (1) month or for a given season. URSUMCO repeatedly
hired the complainants to perform the same duties and, for every engagement, required the latter to
sign new employment contracts for the same duration of one month or a given season.
8

On August 23, 2002, the complainants filed before the LA complaints for regularization, entitlement
to the benefits under the existing Collective Bargaining Agreement (CBA),and attorneys fees.
9

In the decision dated October 9, 2002, the LA dismissed the complaint for lack of merit. The LA held
that the complainants were seasonal or project workers and not regular employees of URSUMCO.
10

The LA pointed out that the complainants were required to perform, for a definite period, phases of
URSUMCOs several projects that were not at all directly related to the latters main operations. As
the complainants were project employees, they could not be regularized since their respective
employments were coterminous with the phase of the work or special project to which they were
assigned and which employments end upon the completion of each project. Accordingly, the
complainants were not entitled to the benefits granted under the CBA that, as provided, covered only
the regular employees of URSUMCO.
Of the twenty-two original complainants before the LA, seven appealed the LAs ruling before the
NLRC, namely: respondents Ferdinand Acibo, Eddie Baldoza, Andy Banjao, Dionisio Bendijo, Jr.,
Rodger Ramirez, Diocito Palagtiw, Danny Kadusale and Allyrobyl Olpus.
The Ruling of the NLRC
In its decision of July 22, 2005, the NLRC reversed the LAs ruling; it declared the complainants as
regular URSUMCO employees and granted their monetary claims under the CBA. The NLRC
pointed out that the complainants performed activities which were usually necessary and desirable in
the usual trade or business of URSUMCO, and had been repeatedly hired for the same undertaking
every season. Thus, pursuant to Article 280 of the Labor Code, the NLRC declared that the
complainants were regular employees. As regular employees, the NLRC held that the complainants
were entitled to the benefits granted, under the CBA, to the regular URSUMCO employees.
11

The petitioners moved to reconsider this NLRC ruling which the NLRC denied in its April 28, 2006
resolution. The petitioners elevated the case to the CA via a petition for certiorari.
12

13

The Ruling of the CA

In its November 29, 2007 decision, the CA granted in part the petition; it affirmed the NLRCs ruling
finding the complainants to be regular employees of URSUMCO, but deleted the grant of monetary
benefits under the CBA.
14

The CA pointed out that the primary standard for determining regular employment is the reasonable
connection between a particular activity performed by the employee vis--vis the usual trade or
business of the employer. This connection, in turn, can be determined by considering the nature of
the work performed and the relation of this work to the business or trade of the employer in its
entirety.
In this regard, the CA held that the various activities that the complainants were tasked to do were
necessary, if not indispensable, to the nature of URSUMCOs business. As the complainants had
been performing their respective tasks for at least one year, the CA held that this repeated and
continuing need for the complainants performance of these same tasks, regardless of whether the
performance was continuous or intermittent, constitutes sufficient evidence of the necessity, if not
indispensability, of the activity to URSUMCOs business.
Further, the CA noted that the petitioners failed to prove that they gave the complainants opportunity
to work elsewhere during the off-season, which opportunity could have qualified the latter as
seasonal workers. Still, the CA pointed out that even during this off-season period, seasonal workers
are not separated from the service but are simply considered on leave until they are re-employed.
Thus, the CA concluded that the complainants were regular employees with respect to the activity
that they had been performing and while the activity continued.

On the claim for CBA benefits, the CA, however, ruled that the complainants were not entitled to
receive them. The CA pointed out that while the complainants were considered regular, albeit
seasonal, workers, the CBA-covered regular employees of URSUMCO were performing tasks
needed by the latter for the entire year with no regard to the changing sugar milling season. Hence,
the complainants did not belong to and could not be grouped together with the regular employees of
URSUMCO, for collective bargaining purposes; they constitute a bargaining unit separate and
distinct from the regular employees. Consequently, the CA declared that the complainants could not
be covered by the CBA.
The petitioners filed the present petition after the CA denied their motion for partial
reconsideration in the CAs January 22, 2009 resolution.
15

16

The Issues
The petition essentially presents the following issues for the Courts resolution: (1) whether the
respondents are regular employees of URSUMCO; and (2) whether affirmative relief can be given to
the fifteen (15) of the complainants who did not appeal the LAs decision.
17

The Courts Ruling

We resolve to partially GRANT the petition.
On the issue of the status of the respondents employment
The petitioners maintain that the respondents are contractual or project/seasonal workers and not
regular employees of URSUMCO. They thus argue that the CA erred in applying the legal
parameters and guidelines for regular employment to the respondents case. They contend that the
legal standards length of the employees engagement and the desirability or necessity of the
employees work in the usual trade or business of the employer apply only to regular employees
under paragraph 1, Article 280 of the Labor Code, and, under paragraph 2 of the same article, to
casual employees who are deemed regular by their length of service.
The respondents, the petitioners point out, were specifically engaged for a fixed and predetermined
duration of, on the average, one (1) month at a time that coincides with a particular phase of the
companys business operations or sugar milling season. By the nature of their engagement, the
respondents employment legally ends upon the end of the predetermined period; thus, URSUMCO
was under no legal obligation to rehire the respondents.
In their comment, the respondents maintain that they are regular employees of URSUMCO. Relying
on the NLRC and the CA rulings, they point out that they have been continuously working for
URSUMCO for more than one year, performing tasks which were necessary and desirable to
URSUMCOs business. Hence, under the above-stated legal parameters, they are regular
employees.
18

We disagree with the petitioners position. We find the respondents to be regular seasonal
employees of URSUMCO.
1wphi1

As the CA has explained in its challenged decision, Article 280 of the Labor Code provides for three
kinds of employment arrangements, namely: regular, project/seasonal and casual. Regular
employment refers to that arrangement whereby the employee "has been engaged to perform
activities which are usually necessary or desirable in the usual business or trade of the

employer[.]" Under the definition, the primary standard that determines regular employment is the
reasonable connection between the particular activity performed by the employee and the usual
business or trade of the employer; the emphasis is on the necessity or desirability of the employees
activity. Thus, when the employee performs activities considered necessary and desirable to the
overall business scheme of the employer, the law regards the employee as regular.
19

20

By way of an exception, paragraph 2, Article 280 of the Labor Code also considers regular a casual
employment arrangement when the casual employees engagement has lasted for at least one year,
regardless of the engagements continuity. The controlling test in this arrangement is the length of
time during which the employee is engaged.
A project employment, on the other hand, contemplates on arrangement whereby "the employment
has been fixed for a specific project or undertaking whose completion or termination has been
determined at the time of the engagement of the employee[.]" Two requirements, therefore, clearly
need to be satisfied to remove the engagement from the presumption of regularity of employment,
namely: (1) designation of a specific project or undertaking for which the employee is hired; and (2)
clear determination of the completion or termination of the project at the time of the employees
engagement. The services of the project employees are legally and automatically terminated upon
the end or completion of the project as the employees services are coterminous with the project.
21

22

Unlike in a regular employment under Article 280 of the Labor Code, however, the length of time of
the asserted "project" employees engagement is not controlling as the employment may, in fact, last
for more than a year, depending on the needs or circumstances of the project. Nevertheless, this
length of time (or the continuous rehiring of the employee even after the cessation of the project)
may serve as a badge of regular employment when the activities performed by the purported
"project" employee are necessary and indispensable to the usual business or trade of the
employer. In this latter case, the law will regard the arrangement as regular employment.
23

24

Seasonal employment operates much in the same way as project employment, albeit it involves
work or service that is seasonal in nature or lasting for the duration of the season. As with project
employment, although the seasonal employment arrangement involves work that is seasonal or
periodic in nature, the employment itself is not automatically considered seasonal so as to prevent
the employee from attaining regular status. To exclude the asserted "seasonal" employee from those
classified as regular employees, the employer must show that: (1) the employee must be performing
work or services that are seasonal in nature; and (2) he had been employed for the duration of the
season. Hence, when the "seasonal" workers are continuously and repeatedly hired to perform the
same tasks or activities for several seasons or even after the cessation of the season, this length of
time may likewise serve as badge of regular employment. In fact, even though denominated as
"seasonal workers," if these workers are called to work from time to time and are only temporarily
laid off during the off-season, the law does not consider them separated from the service during the
off-season period. The law simply considers these seasonal workers on leave until re-employed.
25

26

27

28

Casual employment, the third kind of employment arrangement, refers to any other employment
arrangement that does not fall under any of the first two categories, i.e., regular or project/seasonal.
Interestingly, the Labor Code does not mention another employment arrangement contractual or
fixed term employment (or employment for a term) which, if not for the fixed term, should fall under
the category of regular employment in view of the nature of the employees engagement, which is to
perform an activity usually necessary or desirable in the employers business.
In Brent School, Inc. v. Zamora, the Court, for the first time, recognized and resolved the anomaly
created by a narrow and literal interpretation of Article 280 of the Labor Code that appears to restrict
29

the employees right to freely stipulate with his employer on the duration of his engagement. In this
case, the Court upheld the validity of the fixed-term employment agreed upon by the employer, Brent
School, Inc., and the employee, Dorotio Alegre, declaring that the restrictive clause in Article 280
"should be construed to refer to the substantive evil that the Code itself x x x singled out:
agreements entered into precisely to circumvent security of tenure. It should have no application to
instances where [the] fixed period of employment was agreed upon knowingly and voluntarily by the
parties x x x absent any x x x circumstances vitiating [the employees] consent, or where [the facts
satisfactorily show] that the employer and [the] employee dealt with each other on more or less
equal terms[.]" The indispensability or desirability of the activity performed by the employee will not
preclude the parties from entering into an otherwise valid fixed term employment agreement; a
definite period of employment does not essentially contradict the nature of the employees duties as
necessary and desirable to the usual business or trade of the employer.
30

31

Nevertheless, "where the circumstances evidently show that the employer imposed the period
precisely to preclude the employee from acquiring tenurial security, the law and this Court will not
hesitate to strike down or disregard the period as contrary to public policy, morals, etc." In such a
case, the general restrictive rule under Article 280 of the Labor Code will apply and the employee
shall be deemed regular.
32

Clearly, therefore, the nature of the employment does not depend solely on the will or word of the
employer or on the procedure for hiring and the manner of designating the employee. Rather, the
nature of the employment depends on the nature of the activities to be performed by the employee,
considering the nature of the employers business, the duration and scope to be done, and, in some
cases, even the length of time of the performance and its continued existence.
33

In light of the above legal parameters laid down by the law and applicable jurisprudence, the
respondents are neither project, seasonal nor fixed-term employees, but regular seasonal workers of
URSUMCO. The following factual considerations from the records support this conclusion:
First, the respondents were made to perform various tasks that did not at all pertain to any specific
phase of URSUMCOs strict milling operations that would ultimately cease upon completion of a
particular phase in the milling of sugar; rather, they were tasked to perform duties regularly and
habitually needed in URSUMCOs operations during the milling season. The respondents duties as
loader operators, hookers, crane operators and drivers were necessary to haul and transport the
sugarcane from the plantation to the mill; laboratory attendants, workers and laborers to mill the
sugar; and welders, carpenters and utility workers to ensure the smooth and continuous operation of
the mill for the duration of the milling season, as distinguished from the production of the sugarcane
which involves the planting and raising of the sugarcane until it ripens for milling. The production of
sugarcane, it must be emphasized, requires a different set of workers who are experienced in farm
or agricultural work. Needless to say, they perform the activities that are necessary and desirable in
sugarcane production. As in the milling of sugarcane, the plantation workers perform their duties only
during the planting season.
Second, the respondents were regularly and repeatedly hired to perform the same tasks year after
year. This regular and repeated hiring of the same workers (two different sets) for two separate
seasons has put in place, principally through jurisprudence, the system of regular seasonal
employment in the sugar industry and other industries with a similar nature of operations.
Under the system, the plantation workers or the mill employees do not work continuously for one
whole year but only for the duration of the growing of the sugarcane or the milling season. Their
seasonal work, however, does not detract from considering them in regular employment since in a
litany of cases, this Court has already settled that seasonal workers who are called to work from time

to time and are temporarily laid off during the off-season are not separated from the service in said
period, but are merely considered on leave until re-employment. Be this as it may, regular seasonal
employees, like the respondents in this case, should not be confused with the regular employees of
the sugar mill such as the administrative or office personnel who perform their tasks for the entire
year regardless of the season. The NLRC, therefore, gravely erred when it declared the respondents
regular employees of URSUMCO without qualification and that they were entitled to the benefits
granted, under the CBA, to URSUMCOS regular employees.
34

Third, while the petitioners assert that the respondents were free to work elsewhere during the offseason, the records do not support this assertion. There is no evidence on record showing that after
the completion of their tasks at URSUMCO, the respondents sought and obtained employment
elsewhere.
Contrary to the petitioners position, Mercado, Sr. v. NLRC, 3rd Div. is not applicable to the
respondents as this case was resolved based on different factual considerations. In Mercado, the
workers were hired to perform phases of the agricultural work in their employers farm for a definite
period of time; afterwards, they were free to offer their services to any other farm owner. The workers
were not hired regularly and repeatedly for the same phase(s) of agricultural work, but only
intermittently for any single phase. And, more importantly, the employer in Mercado sufficiently
proved these factual circumstances. The Court reiterated these same observations in Hda. Fatima v.
Natl Fed. of Sugarcane Workers-Food and Gen. Trade and Hacienda Bino/Hortencia Starke, Inc. v.
Cuenca.
35

36

37

At this point, we reiterate the settled rule that in this jurisdiction, only questions of law are allowed in
a petition for review on certiorari. This Courts power of review in a Rule 45 petition is limited to
resolving matters pertaining to any perceived legal errors, which the CA may have committed in
issuing the assailed decision. In reviewing the legal correctness of the CAs Rule 65 decision in a
labor case, we examine the CA decision in the context that it determined, i.e., the presence or
absence of grave abuse of discretion in the NLRC decision before it and not on the basis of whether
the NLRC decision on the merits of the case was correct.40 In other words, we have to be keenly
aware that the CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it.
38

39

41

Viewed in this light, we find the need to place the CAs affirmation, albeit with modification, of the
NLRC decision of July 22, 2005 in perspective. To recall, the NLRC declared the respondents as
regular employees of URSUMCO. With such a declaration, the NLRC in effect granted the
respondents prayer for regularization and, concomitantly, their prayer for the grant of monetary
benefits under the CBA for URSUMCOs regular employees. In its challenged ruling, the CA
concurred with the NLRC finding, but with the respondents characterized as regular seasonal
employees of URSUMCO.
42

The CA misappreciated the real import of the NLRC ruling. The labor agency did not declare the
respondents as regular seasonal employees, but as regular employees. This is the only conclusion
that can be drawn from the NLRC decisions dispositive portion, thus:
WHEREFORE, premises considered, the appeal is hereby GRANTED. Complainants are declared
regular employees of respondent. As such, they are entitled to the monetary benefits granted to
regular employees of respondent company based on the CBA, reckoned three (3) years back from
the filing of the above-entitled case on 23 August 2002 up to the present or to their entire service
with respondent after the date of filing of the said complaint if they are no longer connected with
respondent company.
1wphi1

43

It is, therefore, clear that the issue brought to the CA for resolution is whether the NLRC gravely
abused its discretion in declaring the respondents regular employees of URSUMCO and, as such,
entitled to the benefits under the CBA for the regular employees.
Based on the established facts, we find that the CA grossly misread the NLRC ruling and missed the
implications of the respondents regularization. To reiterate, the respondents are regular seasonal
employees, as the CA itself opined when it declared that "private respondents who are regular
workers with respect to their seasonal tasks or activities and while such activities exist, cannot
automatically be governed by the CBA between petitioner URSUMCO and the authorized bargaining
representative of the regular and permanent employees." Citing jurisprudential standards, it then
proceeded to explain that the respondents cannot be lumped with the regular employees due to the
differences in the nature of their duties and the duration of their work vis-a-vis the operations of the
company.
44

45

The NLRC was well aware of these distinctions as it acknowledged that the respondents worked
only during the milling season, yet it ignored the distinctions and declared them regular employees, a
marked departure from existing jurisprudence. This, to us, is grave abuse of discretion, as it gave no
reason for disturbing the system of regular seasonal employment already in place in the sugar
industry and other industries with similar seasonal operations. For upholding the NLRCs flawed
decision on the respondents employment status, the CA committed a reversible error of judgment.
In sum, we find the complaint to be devoid of merit. The issue of granting affirmative relief to the
complainants who did not appeal the CA ruling has become academic.
WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. Except for the denial of
the respondents' claim for CBA benefits, the November 29, 2007 decision and the January 22, 2009
resolution of the Court of Appeals are SET ASIDE. The complaint is DISMISSED for lack of merit.
SO ORDERED.
ARTURO
Associate Justice

D.

BRION

Gapayao v. Fulo, G.R. No. 193493, June 13, 2013

G.R. No. 193493

June 13, 2013

JAIME
vs.
ROSARIO
FULO,
SOCIAL
COMMISSION, Respondents.
DECISION
SERENO, CJ.:

N.
SECURITY

GAPAYAO, Petitioner,
SYSTEM

and

SOCIAL

SECURITY

This is a Rule 45 Petition1 assailing the Decision2 and Resolution3 of the Court of Appeals (CA) in
CA-G.R. SP. No. 101688, affirming the Resolution 4 of the Social Security Commission (SSC). The
SSC held petitioner Jaime N. Gapayao liable to pay the unpaid social security contributions due to
the deceased Jaime Fulo, and the Social Security System (SSS) to pay private respondent Rosario
L. Fulo, the widow of the deceased, the appropriate death benefits pursuant to the Social Security
Law.
The antecedent facts are as follows:
On 4 November 1997, Jaime Fulo (deceased) died of "acute renal failure secondary to 1st degree
burn 70% secondary electrocution"5 while doing repairs at the residence and business establishment
of petitioner located at San Julian, Irosin, Sorsogon.
Allegedly moved by his Christian faith, petitioner extended some financial assistance to private
respondent. On 16 November 1997, the latter executed an Affidavit of Desistance 6 stating that she
was not holding them liable for the death of her late husband, Jaime Fulo, and was thereby waiving
her right and desisting from filing any criminal or civil action against petitioner.
On 14 January 1998, both parties executed a Compromise Agreement, 7 the relevant portion of which
is quoted below:
We, the undersigned unto this Honorable Regional Office/District Office/Provincial Agency Office
respectfully state:
1. The undersigned employer, hereby agrees to pay the sum of FORTY THOUSAND PESOS
(P40,000.00) to the surviving spouse of JAIME POLO, an employee who died of an accident,
as a complete and full payment for all claims due the victim.
2. On the other hand, the undersigned surviving spouse of the victim having received the
said amount do [sic] hereby release and discharge the employer from any and all claims that
maybe due the victim in connection with the victims employment thereat.
Thereafter, private respondent filed a claim for social security benefits with the Social Security
System (SSS)Sorosogon Branch.8 However, upon verification and evaluation, it was discovered
that the deceased was not a registered member of the SSS.9
Upon the insistence of private respondent that her late husband had been employed by petitioner
from January 1983 up to his untimely death on 4 November 1997, the SSS conducted a field
investigation to clarify his status of employment. In its field investigation report, 10 it enumerated its
findings as follows:
In connection with the complaint filed by Mrs. Rosario Fulo, hereunder are the findings per interview
with Mr. Leonor Delgra, Santiago Bolanos and Amado Gacelo:
1. That Mr. Jaime Fulo was an employee of Jaime Gapayao as farm laborer from 1983 to
1997.
2. Mr. Leonor Delgra and Santiago Bolanos are co-employees of Jaime Fulo.
3. Mr. Jaime Fulo receives compensation on a daily basis ranging from P5.00 to P60.00 from
1983 to 1997.

Per interview from Mrs. Estela Gapayao, please be informed that:

1. Jaime Fulo is an employee of Mr. & Mrs. Jaime Gapayao on an extra basis.
2. Sometimes Jaime Fulo is allowed to work in the farm as abaca harvester and earn 1/3
share of its harvest as his income.
3. Mr. & Mrs. Gapayao hired the services of Jaime Fulo not only in the farm as well as in
doing house repairs whenever it is available. Mr. Fulo receives his remuneration usually in
the afternoon after doing his job.
4. Mr. & Mrs. Gapayao hires 50-100 persons when necessary to work in their farm as laborer
and Jaime Fulo is one of them. Jaime Fulo receives more or less P50.00 a day. (Emphases
in the original)
Consequently, the SSS demanded that petitioner remit the social security contributions of the
deceased. When petitioner denied that the deceased was his employee, the SSS required private
respondent to present documentary and testimonial evidence to refute petitioners allegations. 11
Instead of presenting evidence, private respondent filed a Petition 12 before the SSC on 17 February
2003. In her Petition, she sought social security coverage and payment of contributions in order to
avail herself of the benefits accruing from the death of her husband.
On 6 May 2003, petitioner filed an Answer 13 disclaiming any liability on the premise that the
deceased was not the formers employee, but was rather an independent contractor whose tasks
were not subject to petitioners control and supervision. 14 Assuming arguendo that the deceased was
petitioners employee, he was still not entitled to be paid his SSS premiums for the intervening
period when he was not at work, as he was an "intermittent worker who was only summoned every
now and then as the need arose." 15 Hence, petitioner insisted that he was under no obligation to
report the formers demise to the SSS for social security coverage.
Subsequently, on 30 June 2003, the SSS filed a Petition-in-Intervention 16 before the SSC, outlining
the factual circumstances of the case and praying that judgment be rendered based on the evidence
adduced by the parties.
On 14 March 2007, the SSC rendered a Resolution,17 the dispositive portion of which provides:
WHEREFORE, PREMISES CONSIDERED, this Commission finds, and so holds, that Jaime Fulo,
the late husband of petitioner, was employed by respondent Jaime N. Gapayao from January 1983
to November 4, 1997, working for nine (9) months a year receiving the minimum wage then
prevailing.
Accordingly, the respondent is hereby ordered to pay P45,315.95 representing the unpaid SS
contributions due on behalf of deceased Jaime Fulo, the amount of P217,710.33 as 3% per month
penalty for late remittance thereof, computed as of March 30, 2006, without prejudice to the
collection of additional penalty accruing thereafter, and the sum of P230,542.20 (SSS)
and P166,000.00 (EC) as damages for the failure of the respondent to report the deceased Jaime
Fulo for SS coverage prior to his death pursuant to Section 24(a) of the SS Law, as amended.

The SSS is hereby directed to pay petitioner Rosario Fulo the appropriate death benefit, pursuant to
Section 13 of the SS Law, as amended, as well as its prevailing rules and regulations, and to inform
this Commission of its compliance herewith.
SO ORDERED.
On 18 May 2007, petitioner filed a Motion for Reconsideration, 18 which was denied in an
Order19 dated 16 August 2007.
Aggrieved, petitioner appealed to the CA on 19 December 2007. 20 On 17 March 2010, the CA
rendered a Decision21 in favor of private respondent, as follows:
In fine, public respondent SSC had sufficient basis in concluding that private respondents husband
was an employee of petitioner and should, therefore, be entitled to compulsory coverage under the
Social Security Law.
Having ruled in favor of the existence of employer-employee relationship between petitioner and the
late Jaime Fulo, it is no longer necessary to dwell on the other issues raised.
Resultantly, for his failure to report Jaime Fulo for compulsory social security coverage, petitioner
should bear the consequences thereof. Under the law, an employer who fails to report his employee
for social security coverage is liable to [1] pay the benefits of those who die, become disabled, get
sick or reach retirement age; [2] pay all unpaid contributions plus a penalty of three percent per
month; and [3] be held liable for a criminal offense punishable by fine and/or imprisonment. But an
employee is still entitled to social security benefits even is (sic) his employer fails or refuses to remit
his contribution to the SSS.
WHEREFORE, premises considered, the Resolution appealed from is AFFIRMED in toto.
SO ORDERED.
In holding thus, the CA gave credence to the findings of the SSC. The appellate court held that it
"does not follow that a person who does not observe normal hours of work cannot be deemed an
employee."22 For one, it is not essential for the employer to actually supervise the performance of
duties of the employee; it is sufficient that the former has a right to wield the power. In this case,
petitioner exercised his control through an overseer in the person of Amado Gacelo, the tenant on
petitioners land.23 Most important, petitioner entered into a Compromise Agreement with private
respondent and expressly admitted therein that he was the employer of the deceased. 24The CA
interpreted this admission as a declaration against interest, pursuant to Section 26, Rule 130 of the
Rules of Court.25
Hence, this petition.
Public respondents SSS26 and SSC27 filed their Comments on 31 January 2011 and 28 February
2011, respectively, while private respondent filed her Comment on 14 March 2011. 28 On 6 March
2012, petitioner filed a "Consolidated Reply to the Comments of the Public Respondents SSS and
SSC and Private Respondent Rosario Fulo."29
ISSUE

The sole issue presented before us is whether or not there exists between the deceased Jaime Fulo
and petitioner an employer-employee relationship that would merit an award of benefits in favor of
private respondent under social security laws.
THE COURTS RULING
In asserting the existence of an employer-employee relationship, private respondent alleges that her
late husband had been in the employ of petitioner for 14 years, from 1983 to 1997. 30 During that
period, he was made to work as a laborer in the agricultural landholdings, a harvester in the abaca
plantation, and a repairman/utility worker in several business establishments owned by
petitioner.31 To private respondent, the "considerable length of time during which [the deceased] was
given diverse tasks by petitioner was a clear indication of the necessity and indispensability of her
late husbands services to petitioners business." 32 This view is bolstered by the admission of
petitioner himself in the Compromise Agreement that he was the deceaseds employer.33
Private respondents position is similarly espoused by the SSC, which contends that its findings are
duly supported by evidence on record.34 It insists that pakyaw workers are considered employees, as
long as the employer exercises control over them. In this case, the exercise of control by the
employer was delegated to the caretaker of his farm, Amado Gacelo. The SSC further asserts that
the deceased rendered services essential for the petitioners harvest. While these services were not
rendered continuously (in the sense that they were not rendered every day throughout the year), still,
the deceased had never stopped working for petitioner from year to year until the day the former
died.35 In fact, the deceased was required to work in the other business ventures of petitioner, such
as the latters bakery and grocery store.36 The Compromise Agreement entered into by petitioner with
private respondent should not be a bar to an employee demanding what is legally due the latter.37
The SSS, while clarifying that it is "neither adversarial nor favoring any of the private parties x x x as
it is only tasked to carry out the purposes of the Social Security Law," 38 agrees with both private
respondent and SSC. It stresses that factual findings of the lower courts, when affirmed by the
appellate court, are generally conclusive and binding upon the Court. 39
Petitioner, on the other hand, insists that the deceased was not his employee. Supposedly, the latter,
during the performance of his function, was not under petitioners control. Control is not necessarily
present even if the worker works inside the premises of the person who has engaged his
services.40 Granting without admitting that petitioner gave rules or guidelines to the deceased in the
process of the latters performing his work, the situation cannot be interpreted as control, because it
was only intended to promote mutually desired results.41
Alternatively, petitioner insists that the deceased was hired by Adolfo Gamba, the contractor whom
he had hired to construct their building; 42 and by Amado Gacelo, the tenant whom petitioner
instructed to manage the latters farm. 43 For this reason, petitioner believes that a tenant is not
beholden to the landlord and is not under the latters control and supervision. So if a worker is hired
to work on the land of a tenant such as petitioner the former cannot be the worker of the
landlord, but of the tenants.44
Anent the Compromise Agreement, petitioner clarifies that it was executed to buy peace, because
"respondent kept on pestering them by asking for money." 45 Petitioner allegedly received threats that
if the matter was not settled, private respondent would refer the matter to the New Peoples
Army.46 Allegedly, the Compromise Agreement was "extortion camouflaged as an
agreement."47 Likewise, petitioner maintains that he shouldered the hospitalization and burial
expenses of the deceased to express his "compassion and sympathy to a distressed person and his
family," and not to admit liability.48

Lastly, petitioner alleges that the deceased is a freelance worker. Since he was engaged on a
pakyaw basis and worked for a short period of time, in the nature of a farm worker every season, he
was not precluded from working with other persons and in fact worked for them. Under Article 280 of
the Labor Code,49 seasonal employees are not covered by the definitions of regular and casual
employees.50 Petitioner cites Mercado, Sr. v. NLRC, 51 in which the Court held that seasonal workers
do not become regular employees by the mere fact that they have rendered at least one year of
service, whether continuous or broken.52
We see no cogent reason to reverse the CA.
I
Findings of fact of the SSC are given weight and credence.
At the outset, it is settled that the Court is not a trier of facts and will not weigh evidence all over
again. Findings of fact of administrative agencies and quasi-judicial bodies, which have acquired
expertise because their jurisdiction is confined to specific matters, are generally accorded not only
respect but finality when affirmed by the CA. 53 For as long as these findings are supported by
substantial evidence, they must be upheld.54
II
Farm workers may be considered regular seasonal employees.
Article 280 of the Labor Code states:
Article 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 actually exists.
Jurisprudence has identified the three types of employees mentioned in the provision: (1) regular
employees or those who have been engaged to perform activities that are usually necessary or
desirable in the usual business or trade of the employer; (2) project employees or those whose
employment has been fixed for a specific project or undertaking, the completion or termination of
which has been determined at the time of their engagement, or those whose work or service is
seasonal in nature and is performed for the duration of the season; and (3) casual employees or
those who are neither regular nor project employees.55
Farm workers generally fall under the definition of seasonal employees. We have consistently held
that seasonal employees may be considered as regular employees. 56 Regular seasonal employees
are those called to work from time to time. The nature of their relationship with the employer is such
that during the off season, they are temporarily laid off; but reemployed during the summer season

or when their services may be needed. 57 They are in regular employment because of the nature of
their job,and not because of the length of time they have worked.58
The rule, however, is not absolute. In Hacienda Fatima v. National Federation of Sugarcane
Workers-Food & General Trade,59 the Court held that seasonal workers who have worked for one
season only may not be considered regular employees. Similarly, in Mercado, Sr. v. NLRC, 60 it was
held that when seasonal employees are free to contract their services with other farm owners, then
the former are not regular employees.
For regular employees to be considered as such, the primary standard used is the reasonable
connection between the particular activity they perform and the usual trade or business of the
employer.61 This test has been explained thoroughly in De Leon v. NLRC,62 viz:
The primary standard, therefore, of determining a regular employment is the reasonable connection
between the particular activity performed by the employee in relation to the usual business or trade
of the employer. The test is whether the former is usually necessary or desirable in the usual
business or trade of the employer. The connection can be determined by considering the nature of
the work performed and its relation to the scheme of the particular business or trade in its entirety.
Also if the employee has been performing the job for at least one year, even if the performance is not
continuous or merely intermittent, the law deems the repeated and continuing need for its
performance as sufficient evidence of the necessity if not indispensability of that activity to the
business. Hence, the employment is also considered regular, but only with respect to such activity
and while such activity exists.
A reading of the records reveals that the deceased was indeed a farm worker who was in the regular
employ of petitioner. From year to year, starting January 1983 up until his death, the deceased had
been working on petitioners land by harvesting abaca and coconut, processing copra, and clearing
weeds. His employment was continuous in the sense that it was done for more than one harvesting
season. Moreover, no amount of reasoning could detract from the fact that these tasks were
necessary or desirable in the usual business of petitioner.
The other tasks allegedly done by the deceased outside his usual farm work only bolster the
existence of an employer-employee relationship. As found by the SSC, the deceased was a
construction worker in the building and a helper in the bakery, grocery, hardware, and piggery all
owned by petitioner.63 This fact only proves that even during the off season, the deceased was still in
the employ of petitioner.
The most telling indicia of this relationship is the Compromise Agreement executed by petitioner and
private respondent. It is a valid agreement as long as the consideration is reasonable and the
employee signed the waiver voluntarily, with a full understanding of what he or she was entering
into.64 All that is required for the compromise to be deemed voluntarily entered into is personal and
specific individual consent.65 Once executed by the workers or employees and their employers to
settle their differences, and done in good faith, a Compromise Agreement is deemed valid and
binding among the parties.66
Petitioner entered into the agreement with full knowledge that he was described as the employer of
the deceased.67 This knowledge cannot simply be denied by a statement that petitioner was merely
forced or threatened into such an agreement. His belated attempt to circumvent the agreement
should not be given any consideration or weight by this Court.
1wphi1

III

Pakyaw workers are regular employees,

provided they are subject to the control of petitioner.
Pakyaw workers are considered employees for as long as their employers exercise control over
them. In Legend Hotel Manila v. Realuyo, 68 the Court held that "the power of the employer to control
the work of the employee is considered the most significant determinant of the existence of an
employer-employee relationship. This is the so-called control test and is premised on whether the
person for whom the services are performed reserves the right to control both the end achieved and
the manner and means used to achieve that end." It should be remembered that the control test
merely calls for the existence of the right to control, and not necessarily the exercise thereof. 69 It is
not essential that the employer actually supervises the performance of duties by the employee. It is
enough that the former has a right to wield the power.70
In this case, we agree with the CA that petitioner wielded control over the deceased in the discharge
of his functions. Being the owner of the farm on which the latter worked, petitioner on his own or
through his overseer necessarily had the right to review the quality of work produced by his
laborers. It matters not whether the deceased conducted his work inside petitioners farm or not
because petitioner retained the right to control him in his work, and in fact exercised it through his
farm manager Amado Gacelo. The latter himself testified that petitioner had hired the deceased as
one of the pakyaw workers whose salaries were derived from the gross proceeds of the harvest. 71
We do not give credence to the allegation that the deceased was an independent contractor hired by
a certain Adolfo Gamba, the contractor whom petitioner himself had hired to build a building. The
allegation was based on the self-serving testimony of Joyce Gapay Demate, 72 the daughter of
petitioner. The latter has not offered any other proof apart from her testimony to prove the
contention.
The right of an employee to be covered by the Social Security Act is premised on the existence of an
employer-employee relationship.73 That having been established, the Court hereby rules in h1vor of
private respondent.
WHEREFORE, the Petition for Review on Certiorari is hereby DENIED. The assailed Decision and
resolution of the Court of Appeals in CA-G.R. SP. No. 101688 dated 17 March 2010 and 13 August
2010, respectively, are hereby AFFIRMED.
SO ORDERED.
MARIA
LOURDES
Chief Justice, Chairperson

P.

A.

SERENO

Casual
Art. 280, Labor Code
Article 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
service 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.

Book VI, Rule I, Sec. 5, b, Implementing Rules (Labor Code)

(b) Employment shall be deemed as casual in nature 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 not, 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.cralaw

See Tan v. Lagrama, G.R. No. 151228, August 15, 2002

Fixed-term
Fuji Television v. Espiritu, G.R. No. 204944-45, December 3, 2014
G.R. No. 204944-45

December 3, 2014

FUJI
TELEVISION
vs.
ARLENE S. ESPIRITU, Respondent.

NETWORK,

INC., Petitioner,

DECISION
LEONEN, J.:
It is the burden of the employer to prove that a person whose services it pays for is an independent
contractor rather than a regular employee with or without a fixed term. That a person has a disease
does not per se entitle the employer to terminate his or her services. Termination is the last resort. At
the very least, a competent public health authority must certify that the disease cannot be cured
within six ( 6) months, even with appropriate treatment.
We decide this petition for review on certiorari filed by Fuji Television Network, Inc., seeking the
reversal of the Court of Appeals Decision dated June 25, 2012, affirming with modification the
decision of the National Labor Relations Commission.
1

In 2005, Arlene S. Espiritu ("Arlene") was engaged by Fuji Television Network, Inc. ("Fuji") asa news
correspondent/producer "tasked to report Philippine news to Fuji through its Manila Bureau field
office." Arlenes employment contract initially provided for a term of one (1) year but was
successively renewed on a yearly basis with salary adjustment upon every renewal. Sometime in
January 2009, Arlenewas diagnosed with lung cancer. She informed Fuji about her condition. In turn,
the Chief of News Agency of Fuji, Yoshiki Aoki, informed Arlene "that the company will have a
problem renewing her contract" since it would be difficult for her to perform her job. She "insisted
that she was still fit to work as certified by her attending physician."
4

10

After several verbal and written communications, Arlene and Fuji signed a non-renewal contract on
May 5, 2009 where it was stipulated that her contract would no longer be renewed after its expiration
on May 31, 2009. The contract also provided that the parties release each other from liabilities and
responsibilities under the employment contract.
11

12

In consideration of the non-renewal contract, Arlene "acknowledged receipt of the total amount of
US$18,050.00 representing her monthly salary from March 2009 to May 2009, year-end bonus, midyear bonus, and separation pay." However, Arlene affixed her signature on the nonrenewal contract
with the initials "U.P." for "under protest."
13

14

On May 6, 2009, the day after Arlene signed the non-renewal contract, she filed a complaint for
illegal dismissal and attorneys fees with the National Capital Region Arbitration Branch of the
National Labor Relations Commission. She alleged that she was forced to sign the nonrenewal
contract when Fuji came to know of her illness and that Fuji withheld her salaries and other benefits
for March and April 2009 when she refused to sign.
15

Arlene claimed that she was left with no other recourse but to sign the non-renewal contract, and it
was only upon signing that she was given her salaries and bonuses, in addition to separation pay
equivalent to four (4) years.
16

In the decision dated September 10, 2009, Labor Arbiter Corazon C. Borbolla dismissed Arlenes
complaint. Citing Sonza v. ABS-CBN and applying the four-fold test, the Labor Arbiter held that
Arlene was not Fujis employee but an independent contractor.
17

18

19

20

Arlene appealed before the National Labor Relations Commission. In its decision dated March 5,
2010, the National Labor Relations Commission reversed the Labor Arbiters decision. It held that
Arlene was a regular employee with respect to the activities for which she was employed since she
continuously rendered services that were deemednecessary and desirable to Fujis business. The
National Labor Relations Commission ordered Fuji to pay Arlene backwages, computed from the
date of her illegal dismissal. The dispositive portion of the decision reads:
21

22

23

WHEREFORE, premises considered, judgment is hereby rendered GRANTING the instant appeal.
The Decision of the Labor Arbiter dated 19 September 2009 is hereby REVERSED and SET ASIDE,
and a new one is issued ordering respondents-appellees to pay complainant-appellant backwages
computed from the date of her illegal dismissal until finality of this Decision.
SO ORDERED.

24

Arlene and Fuji filed separat emotions for reconsideration. Both motions were denied by the
National Labor Relations Commission for lack of merit in the resolution dated April 26, 2010. From
the decision of the National Labor Relations Commission, both parties filed separate petitions for
certiorari before the Court of Appeals. The Court of Appeals consolidated the petitions and
considered the following issues for resolution:
25

26

27

1) Whether or not Espirituis a regular employee or a fixed-term contractual employee;

2) Whether or not Espiritu was illegally dismissed; and
3) Whether or not Espirituis entitled to damages and attorneys fees.

28

In the assailed decision, the Court of Appeals affirmed the National Labor Relations
Commission with the modification that Fuji immediately reinstate Arlene to her position as
News Producer without loss of seniority rights, and pay her backwages, 13th-month pay,
mid-year and year-end bonuses, sick leave and vacation leave with pay until reinstated,
moral damages, exemplary damages, attorneysfees, and legal interest of 12% per annum of
the total monetary awards. The Court of Appeals ruled that:
29

WHEREFORE, for lack of merit, the petition of Fuji Television Network, Inc. and Yoshiki Aoki is
DENIED and the petition of Arlene S. Espiritu is GRANTED. Accordingly, the Decision dated March
5, 2010 of the National Labor Relations Commission, 6th Division in NLRC NCR Case No. 05-0681109 and its subsequent Resolution dated April 26, 2010 are hereby AFFIRMED with
MODIFICATIONS, as follows:
Fuji Television, Inc. is hereby ORDERED to immediately REINSTATE Arlene S. Espiritu to her
position as News Producer without loss of seniority rights and privileges and to pay her the following:
1. Backwages at the rate of $1,900.00 per month computed from May 5, 2009 (the date of
dismissal), until reinstated;
2. 13th Month Pay at the rate of $1,900.00 per annum from the date of dismissal, until
reinstated;
3. One and a half (1 1/2) months pay or $2,850.00 as midyear bonus per year from the date
of dismissal, until reinstated;
4. One and a half (1 1/2) months pay or $2,850.00 as year-end bonus per year from the date
of dismissal, until reinstated;
5. Sick leave of 30 days with pay or $1,900.00 per year from the date of dismissal, until
reinstated; and
6. Vacation leave with pay equivalent to 14 days or $1,425.00 per annum from date of
dismissal, until reinstated.
7. The amount of P100,000.00 as moral damages;
8. The amount of P50,000.00 as exemplary damages;
9. Attorneys fees equivalent to 10% of the total monetary awards herein stated; and
10. Legal interest of twelve percent (12%) per annum of the total monetary awards computed
from May 5, 2009, until their full satisfaction.
The Labor Arbiter is hereby DIRECTED to make another recomputation of the above monetary
awards consistent with the above directives.

SO ORDERED.

30

In arriving at the decision, the Court of Appeals held that Arlene was a regular employee because
she was engaged to perform work that was necessary or desirable in the business of Fuji, and the
successive renewals of her fixed-term contract resulted in regular employment.
31

32

According to the Court of Appeals, Sonzadoes not apply in order to establish that Arlene was an
independent contractor because she was not contracted on account of any peculiar ability, special
talent, or skill. The fact that everything used by Arlene in her work was owned by Fuji negated the
idea of job contracting.
33

34

The Court of Appeals also held that Arlene was illegally dismissed because Fuji failed to comply with
the requirements of substantive and procedural due process necessary for her dismissal since she
was a regular employee.
35

The Court of Appeals found that Arlene did not sign the non-renewal contract voluntarily and that the
contract was a mere subterfuge by Fuji to secure its position that it was her choice not to renew her
contract. She was left with no choice since Fuji was decided on severing her employment.
36

Fuji filed a motion for reconsideration that was denied in the resolution dated December 7, 2012 for
failure to raise new matters.
37

38

Aggrieved, Fuji filed this petition for review and argued that the Court of Appeals erred in affirming
with modification the National Labor Relations Commissions decision, holding that Arlene was a
regular employee and that she was illegally dismissed. Fuji also questioned the award of monetary
claims, benefits, and damages.
39

Fuji points out that Arlene was hired as a stringer, and it informed her that she would remain
one. She was hired as an independent contractor as defined in Sonza. Fuji had no control over her
work. The employment contracts were executed and renewed annually upon Arlenes insistence to
which Fuji relented because she had skills that distinguished her from ordinary employees. Arlene
and Fuji dealt on equal terms when they negotiated and entered into the employment
contracts. There was no illegal dismissal because she freely agreed not to renew her fixed-term
contract as evidenced by her e-mail correspondences with Yoshiki Aoki. In fact, the signing of the
non-renewal contract was not necessary to terminate her employment since "such employment
terminated upon expiration of her contract." Finally, Fuji had dealt with Arlene in good faith, thus,
she should not have been awarded damages.
40

41

42

43

44

45

46

47

Fuji alleges that it did not need a permanent reporter since the news reported by Arlene could easily
be secured from other entities or from the internet. Fuji "never controlled the manner by which she
performed her functions." It was Arlene who insisted that Fuji execute yearly fixed-term contracts so
that she could negotiate for annual increases in her pay.
48

49

50

Fuji points out that Arlene reported for work for only five (5) days in February 2009, three (3) days in
March 2009, and one (1) day in April 2009. Despite the provision in her employment contract that
sick leaves in excess of 30 days shall not be paid, Fuji paid Arlene her entire salary for the months of
March, April, and May; four(4) months of separation pay; and a bonus for two and a half months for a
total of US$18,050.00. Despite having received the amount of US$18,050.00, Arlene still filed a
case for illegal dismissal.
51

52

53

Fuji further argues that the circumstances would show that Arlene was not illegally dismissed. The
decision tonot renew her contract was mutually agreed upon by the parties as indicated in Arlenes
e-mail dated March 11, 2009 where she consented to the non-renewal of her contract but refused to
sign anything. Aoki informed Arlene in an e-mail dated March 12, 2009 that she did not need to
sign a resignation letter and that Fuji would pay Arlenes salary and bonus until May 2009 as well as
separation pay.
54

55

56

57

Arlene sent an e-mail dated March 18, 2009 with her version of the non-renewal agreement that she
agreed to sign this time. This attached version contained a provision that Fuji shall re-hire her if she
was still interested to work for Fuji. For Fuji, Arlenes e-mail showed that she had the power to
bargain.
58

59

60

Fuji then posits that the Court of Appeals erred when it held that the elements of an employeremployee relationship are present, particularly that of control; that Arlenes separation from
employment upon the expiration of her contract constitutes illegal dismissal; that Arlene is entitled
to reinstatement; and that Fuji is liable to Arlene for damages and attorneys fees.
61

62

63

64

This petition for review on certiorari under Rule 45 was filed on February 8, 2013. On February 27,
2013, Arlene filed a manifestation stating that this court may not take jurisdiction over the case
since Fuji failed to authorize Corazon E. Acerden to sign the verification. Fuji filed a comment on
the manifestation on March 9, 2013.
65

66

67

68

Based on the arguments of the parties, there are procedural and substantive issues for resolution:
I. Whether the petition for review should be dismissed as Corazon E. Acerden, the signatory
of the verification and certification of non forum shopping of the petition, had no authority to
sign the verification and certification on behalf of Fuji;
II. Whether the Court of Appeals correctly determined that no grave abuse of discretion was
committed by the National Labor Relations Commission when it ruled that Arlene was a
regular employee, not an independent contractor, and that she was illegally dismissed; and
III. Whether the Court of Appeals properly modified the National Labor Relations
Commissions decision by awarding reinstatement, damages, and attorneys fees.
The petition should be dismissed.
I
Validity of the verification and certification against forum shopping
In its comment on Arlenes manifestation, Fuji alleges that Corazon was authorized to sign the
verification and certification of non-forum shopping because Mr. Shuji Yano was empowered under
the secretarys certificate to delegate his authority to sign the necessary pleadings, including the
verification and certification against forum shopping.
69

On the other hand, Arlene points outthat the authority given to Mr. Shuji Yano and Mr. Jin Eto in the
secretarys certificate is only for the petition for certiorari before the Court of Appeals. Fuji did not
attach any board resolution authorizing Corazon orany other person tofile a petition for review on
certiorari with this court. Shuji Yano and Jin Eto could not re-delegate the power thatwas delegated
70

71

to them. In addition, the special power of attorney executed by Shuji Yano in favor of Corazon
indicated that she was empowered to sign on behalf of Shuji Yano, and not on behalf of Fuji.
72

73

The
Rules
of
submission
of
certification against forum shopping

Court

requires
verification

the
and

Rule 7, Section 4 of the 1997 Rules of Civil Procedure provides the requirement of verification, while
Section 5 of the same rule provides the requirement of certification against forum shopping. These
sections state:
SEC. 4. Ver if ica tio n. Except when otherwise specifically required by law or rule, pleadings need
not be under oath, verified or accompanied by affidavit.
A pleading is verified by an affidavit that the affiant has read the pleading and that the allegations
therein are true and correct of his knowledge and belief.
A pleading required to be verifiedwhich containsa verification based on "information and belief," or
upon "knowledge, information and belief," or lacks a proper verification, shall be treated as an
unsigned pleading.
SEC. 5. Certification against forum shopping. The plaintiff or principal party shall certify under oath
in the complaint orother initiatory pleading asserting a claim for relief or in a sworn certification
annexed thereto and simultaneously filed therewith: (a) that he has not theretofore commenced any
action or filed any claim involving the same issues in any court, tribunal or quasi-judicial agency and,
to the best of his knowledge, no such other action or claim is pending therein; (b) if there is such
other pending action or claim, a complete statement of the present status thereof; and (c) if he
should thereafter learn that the same or similar action or claim has been filed or is pending, he shall
report that fact within five (5) days therefrom to the court wherein his aforesaid complaint or initiatory
pleading has been filed.
Failure to comply with the foregoing requirements shall not be curable by mere amendment of the
complaint or other initiatory pleading but shall be cause for the dismissal of the case without
prejudice, unless otherwise provided, upon motion and after hearing. The submission of a false
certification or non-compliance with any of the undertakings therein shall constitute indirect contempt
ofcourt, without prejudice to the corresponding administrative and criminalactions. If the acts of the
party or his counsel clearly constitute willful and deliberate forum shopping, the same shall be
ground for summary dismissal with prejudice and shall constitute direct contempt, as well as a cause
for administrative sanctions.
Section 4(e) of Rule 45 requires that petitions for review should "contain a sworn certification
against forum shopping as provided in the last paragraph of section 2, Rule 42." Section 5 of the
same rule provides that failure to comply with any requirement in Section 4 is sufficient ground to
dismiss the petition.
74

Effects of non-compliance
Uy v. Landbank discussed the effect of non-compliance with regard to verification and stated that:
75

[t]he requirement regarding verification of a pleading is formal, not jurisdictional. Such requirement is
simply a condition affecting the form of pleading, the non-compliance of which does not necessarily

render the pleading fatally defective. Verification is simply intended to secure an assurance that the
allegations in the pleading are true and correct and not the product of the imagination or a matter of
speculation, and that the pleading is filed in good faith. The court may order the correction of the
pleading if the verification is lacking or act on the pleading although it is not verified, if the attending
circumstances are such that strict compliance with the rules may be dispensed with inorder that the
ends of justice may thereby be served. (Citations omitted)
76

Shipside Incorporated v. Court of Appeals cited the discussion in Uy and differentiated its effect
from non-compliance with the requirement of certification against forum shopping:
77

On the other hand, the lack of certification against forum shopping is generally not curable by the
submission thereof after the filing of the petition. Section 5, Rule 45 of the 1997 Rules of Civil
Procedure provides that the failure of the petitioner tosubmit the required documents that should
accompany the petition, including the certification against forum shopping, shall be sufficient ground
for the dismissal thereof. The same rule applies to certifications against forum shopping signed by a
person on behalf of a corporation which are unaccompanied by proof that said signatory is
authorized to file a petition on behalf of the corporation. (Emphasis supplied) Effects of substantial
compliance with the requirement of verification and certification against forum shopping
78

Although the general rule is that failure to attach a verification and certification against forum
shopping isa ground for dismissal, there are cases where this court allowed substantial compliance.
In Loyola v. Court of Appeals, petitioner Alan Loyola submitted the required certification one day
after filing his electoral protest. This court considered the subsequent filing as substantial
compliance since the purpose of filing the certification is to curtail forum shopping.
79

80

81

In LDP Marketing, Inc. v. Monter, Ma. Lourdes Dela Pea signed the verification and certification
against forum shopping but failed to attach the board resolution indicating her authority to sign. In a
motion for reconsideration, LDP Marketing attached the secretarys certificate quoting the board
resolution that authorized Dela Pea. Citing Shipside, this court deemed the belated submission as
substantial compliance since LDP Marketing complied with the requirement; what it failed to do was
to attach proof of Dela Peas authority to sign. Havtor Management Phils., Inc. v. National Labor
Relations Commission and General Milling Corporation v. National Labor Relations
Commission involved petitions that were dismissed for failure to attach any document showing that
the signatory on the verification and certification against forum-shopping was authorized. In both
cases, the secretarys certificate was attached to the motion for reconsideration. This court
considered the subsequent submission of proof indicating authority to sign as substantial
compliance. Altres v. Empleo summarized the rules on verification and certification against forum
shopping in this manner:
82

83

84

85

86

87

88

89

90

91

For the guidance of the bench and bar, the Court restates in capsule form the jurisprudential
pronouncements . . . respecting non-compliance with the requirement on, or submission of defective,
verification and certification against forum shopping:
1) A distinction must be made between non-compliance with the requirement on or
submission of defective verification, and noncompliance with the requirement on or
submission of defective certification against forum shopping.
2) As to verification, non-compliance therewith or a defect therein does not necessarily
render the pleading fatally defective. The court may order its submission or correction or act
on the pleading if the attending circumstances are such that strict compliance with the Rule
may be dispensed with in order that the ends of justice may be served thereby.

3) Verification is deemed substantially complied with when one who has ample knowledge to
swear to the truth of the allegations in the complaint or petition signs the verification, and
when matters alleged in the petition have been made in good faith or are true and correct.
4) As to certification against forum shopping, non-compliance therewith or a defect therein,
unlike in verification, is generally not curable by its subsequent submission or correction
thereof, unless there is a need to relax the Rule on the ground of "substantial compliance" or
presence of "special circumstances or compelling reasons."
5) The certification against forum shopping must be signed by all the plaintiffs or petitioners
in a case; otherwise, those who did not sign will be dropped as parties to the case. Under
reasonable or justifiable circumstances, however, as when all the plaintiffs or petitioners
share a common interest and invoke a common cause of action or defense, the signature of
only one of them inthe certification against forum shopping substantially complies with the
Rule.
6) Finally, the certification against forum shopping must be executed by the party-pleader,
not by his counsel. If, however, for reasonable or justifiable reasons, the party-pleader is
unable to sign, he must execute a Special Power of Attorney designating his counsel of
record to sign on his behalf.
92

There
was
by Fuji Television Network, Inc.

substantial

compliance

Being a corporation, Fuji exercises its power to sue and be sued through its board of directors or
duly authorized officers and agents. Thus, the physical act of signing the verification and certification
against forum shopping can only be done by natural persons duly authorized either by the corporate
by-laws or a board resolution.
93

In its petition for review on certiorari, Fuji attached Hideaki Otas secretarys certificate, authorizing
Shuji Yano and Jin Eto to represent and sign for and on behalf of Fuji. The secretarys certificate
was duly authenticated by Sulpicio Confiado, Consul-General of the Philippines in Japan. Likewise
attached to the petition is the special power of attorney executed by Shuji Yano, authorizing Corazon
to sign on his behalf. The verification and certification against forum shopping was signed by
Corazon.
94

95

96

97

98

Arlene filed the manifestation dated February 27, 2013, arguing that the petition for review should be
dismissed because Corazon was not duly authorized to sign the verification and certification against
forum shopping.
Fuji filed a comment on Arlenes manifestation, stating that Corazon was properly authorized to sign.
On the basis of the secretarys certificate, Shuji Yano was empowered to delegate his authority.
Quoting the board resolution dated May 13, 2010, the secretary's certificate states:
(a) The Corporation shall file a Petition for Certiorari with the Court of Appeals, against
Philippines National Labor Relations Commission ("NLRC") and Arlene S. Espiritu,
pertaining to NLRC-NCR Case No. LAC 00-002697-09, RAB No. 05-06811-00 and entitled
"Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki", and participate in any other
subsequent proceeding that may necessarily arise therefrom, including but not limited to the
filing of appeals in the appropriate venue;

(b) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to verify and
execute the certification against nonforum shopping which may be necessary or required to
be attached to any pleading to [sic] submitted to the Court of Appeals; and the authority to so
verify and certify for the Corporation in favor of the said persons shall subsist and remain
effective until the termination of the said case;
....
(d) Mr. Shuji Yano and Mr. Jin Etobe authorized, as they are hereby authorized, to represent
and appear on behalf the [sic] Corporation in all stages of the [sic] this case and in any other
proceeding that may necessarily arise thereform [sic], and to act in the Corporations name,
place and stead to determine, propose, agree, decide, do, and perform any and all of the
following:
1. The possibility of amicable settlement or of submission to alternative mode of
dispute resolution;
2. The simplification of the issue;
3. The necessity or desirability of amendments to the pleadings;
4. The possibility of obtaining stipulation or admission of facts and documents; and
5. Such other matters as may aid in the prompt disposition of the action. (Emphasis
in the original; Italics omitted)
99

Shuji Yano executed a special power of attorney appointing Ms. Ma. Corazon E. Acerden and Mr.
Moises A. Rollera as his attorneys-in-fact. The special power of attorney states:
100

That I, SHUJI YANO, of legal age, Japanese national, with office address at 2-4-8 Daiba, Minato-Ku,
Tokyo, 137-8088 Japan, and being the representative of Fuji TV, INc., [sic] (evidenced by the
attached Secretarys Certificate) one of the respondents in NLRC-NCR Case No. 05-06811-00
entitled "Arlene S. Espiritu v. Fuji Television Network, Inc./Yoshiki Aoki", and subsequently docketed
before the Court of Appeals asC.A. G.R. S.P. No. 114867 (Consolidated with SP No. 114889) do
hereby make, constitute and appoint Ms. Ma. Corazon E. Acerden and Mr. Moises A. Rolleraas my
true and lawful attorneys-infact for me and my name, place and stead to act and represent me in the
above-mentioned case, with special power to make admission/s and stipulations and/or to make and
submit as well as to accept and approve compromise proposals upon such terms and conditions and
under such covenants as my attorney-in-fact may deem fit, and to engage the services of Villa Judan
and Cruz Law Officesas the legal counsel to represent the Company in the Supreme Court;
The said Attorneys-in-Fact are hereby further authorized to make, sign, execute and deliver such
papers ordocuments as may be necessary in furtherance of the power thus granted, particularly to
sign and execute the verification and certification of non-forum shopping needed to be
filed. (Emphasis in the original)
101

In its comment on Arlenes manifestation, Fuji argues that Shuji Yano could further delegate his
authority because the board resolution empowered him to "act in the Corporations name, place and
stead to determine, propose, agree, decided [sic], do and perform any and all of the following: . . .
such other matters as may aid in the prompt disposition of the action." To clarify, Fuji attached a
verification and certification against forum shopping, but Arlene questions Corazons authority to
102

103

sign. Arlene argues that the secretarys certificate empowered Shuji Yano to file a petition for
certiorari before the Court of Appeals, and not a petition for review before this court, and that since
Shuji Yanos authority was delegated to him, he could not further delegate such power. Moreover,
Corazon was representing Shuji Yano in his personal capacity, and not in his capacity as
representative of Fuji.
A review of the board resolution quoted in the secretarys certificate shows that Fuji shall "file a
Petition for Certiorari with the Court of Appeals" and "participate in any other subsequent
proceeding that may necessarily arise therefrom, including but not limited to the filing of appeals in
the appropriate venue," and that Shuji Yano and Jin Eto are authorized to represent Fuji "in any
other proceeding that may necessarily arise thereform [sic]." As pointed out by Fuji, Shuji Yano and
Jin Eto were also authorized to "act in the Corporations name, place and stead to determine,
propose, agree, decide, do, and perform anyand all of the following: . . . 5. Such other matters as
may aid in the prompt disposition of the action."
104

105

106

107

Considering that the subsequent proceeding that may arise from the petition for certiorari with the
Court of Appeals is the filing of a petition for review with this court, Fuji substantially complied with
the procedural requirement.
On the issue of whether Shuji Yano validly delegated his authority to Corazon, Article 1892 of the
Civil Code of the Philippines states:
ART. 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so;
but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power, but without designating the person, and the person
appointed was notoriously incompetent or insolvent. All acts of the substitute appointed
against the prohibition of the principal shall be void.
The secretarys certificate does not state that Shuji Yano is prohibited from appointing a substitute. In
fact, heis empowered to do acts that will aid in the resolution of this case.
This court has recognized that there are instances when officials or employees of a corporation can
sign the verification and certification against forum shopping without a board resolution. In Cagayan
Valley Drug Corporation v. CIR, it was held that:
108

In sum, we have held that the following officials or employees of the company can sign the
verification and certification without need of a board resolution: (1) the Chairperson of the Board of
Directors, (2) the President of a corporation, (3) the General Manager or Acting General Manager,
(4) Personnel Officer, and (5) an Employment Specialist in a labor case.
While the above cases do not provide a complete listing of authorized signatories to the verification
and certification required by the rules, the determination of the sufficiency of the authority was done
on a case to case basis. The rationale applied in the foregoing cases is to justify the authority of
corporate officers or representatives of the corporation to sign the verification or certificate against
forum shopping, being in a position to verify the truthfulness and correctness of the allegations in
the petition.
109

110

Corazons affidavit states that she is the "office manager and resident interpreter of the Manila
Bureau of Fuji Television Network, Inc." and that she has "held the position for the last twenty-three
years."
111

112

113

As the office manager for 23 years,Corazon can be considered as having knowledge of all matters in
Fujis Manila Bureau Office and is in a position to verify "the truthfulness and the correctness of the
allegations in the Petition."
114

Thus, Fuji substantially complied with the requirements of verification and certification against forum
shopping.
Before resolving the substantive issues in this case, this court will discuss the procedural parameters
of a Rule 45 petition for review in labor cases.
II
Procedural parameters of petitions for review in labor cases
Article 223 of the Labor Code does not provide any mode of appeal for decisions of the National
Labor Relations Commission. It merely states that "[t]he decision of the Commission shall be final
and executory after ten (10) calendar days from receipt thereof by the parties." Being final, it is no
longer appealable. However, the finality of the National Labor Relations Commissions decisions
does not mean that there is no more recourse for the parties.
115

In St. Martin Funeral Home v. National Labor Relations Commission, this court cited several
cases and rejected the notion that this court had no jurisdiction to review decisions of the National
Labor Relations Commission. It stated that this court had the power to review the acts of the
National Labor Relations Commission to see if it kept within its jurisdiction in deciding cases and
alsoas a form of check and balance. This court then clarified that judicial review of National Labor
Relations Commission decisions shall be by way of a petition for certiorari under Rule 65. Citing the
doctrine of hierarchy of courts, it further ruled that such petitions shall be filed before the Court of
Appeals. From the Court of Appeals, an aggrieved party may file a petition for review on certiorari
under Rule 45.
116

117

118

A petition for certiorari under Rule 65 is an original action where the issue is limited to grave abuse
of discretion. As an original action, it cannot be considered as a continuation of the proceedings of
the labor tribunals.
On the other hand, a petition for review on certiorari under Rule 45 is a mode of appeal where the
issue is limited to questions of law. In labor cases, a Rule 45 petition is limited toreviewing whether
the Court of Appeals correctly determined the presence or absence of grave abuse of discretion and
deciding other jurisdictional errors of the National Labor Relations Commission.
119

In Odango v. National Labor Relations Commission, this court explained that a petition for certiorari
is an extraordinary remedy that is "available only and restrictively in truly exceptional cases" and
that its sole office "is the correction of errors of jurisdiction including commission of grave abuse of
discretion amounting to lack or excess of jurisdiction." A petition for certiorari does not include a
review of findings of fact since the findings of the National Labor Relations Commission are
accorded finality. In cases where the aggrieved party assails the National Labor Relations
Commissions findings, he or she must be able to show that the Commission "acted capriciously and
whimsically or in total disregard of evidence material to the controversy."
120

121

122

123

124

When a decision of the Court of Appeals under a Rule 65 petition is brought to this court by way of a
petition for review under Rule 45, only questions of law may be decided upon. As held in Meralco
Industrial v. National Labor Relations Commission:
125

This Court is not a trier of facts. Well-settled is the rule that the jurisdiction of this Court ina petition
for review on certiorari under Rule 45 of the Revised Rules of Court is limited to reviewing only
errors of law, not of fact, unless the factual findings complained of are completely devoid of support
from the evidence on record, or the assailed judgment is based on a gross misapprehension of facts.
Besides, factual findings of quasi-judicial agencies like the NLRC, when affirmed by the Court of
Appeals, are conclusive upon the parties and binding on this Court.
126

Career Philippines v. Serna, citing Montoya v. Transmed, is instructive on the parameters of

judicial review under Rule 45:
127

128

As a rule, only questions of law may be raised in a Rule 45 petition. In one case, we discussed the
particular parameters of a Rule 45 appeal from the CAs Rule 65 decision on a labor case, as
follows:
In a Rule 45 review, we consider the correctness of the assailed CA decision, in contrast with the
review for jurisdictional error that we undertake under Rule 65. Furthermore, Rule 45 limits us to the
review of questions of law raised against the assailed CA decision. In ruling for legal correctness, we
have to view the CA decision in the same context that the petition for certiorari it ruled upon was
presented to it; we have to examine the CA decision from the prism of whether it correctly
determined the presence or absence of grave abuse of discretion in the NLRC decision before it, not
on the basis of whether the NLRC decision on the merits of the case was correct. In other words, we
have to be keenly aware that the CA undertook a Rule 65 review, not a review on appeal, of the
NLRC decision challenged before it. (Emphasis in the original)
129

Justice Brions dissenting opinion in Abott Laboratories, PhiIippines v. Aicaraz discussed that in
petitions for review under Rule 45, "the Court simply determines whether the legal correctness of the
CAs finding that the NLRC ruling . . . had basis in fact and in Iaw." In this kind of petition, the
proper question to be raised is, "Did the CA correctly determine whether the NLRC committed grave
abuse of discretion in ruling on the case?"
130

131

132

Justice Brions dissenting opinion also laid down the following guidelines:
If the NLRC ruling has basis in the evidence and the applicable law and jurisprudence, then no grave
abuse of discretion exists and the CA should so declare and, accordingly, dismiss the petition. If
grave abuse of discretion exists, then the CA must grant the petition and nullify the NLRC ruling,
entering at the same time the ruling that isjustified under the evidence and the governing law, rules
and jurisprudence. In our Rule 45 review, this Court must denythe petition if it finds that the CA
correctly acted. (Emphasis in the original)
133

These parameters shall be used in resolving the substantive issues in this petition.
III
Determination of employment status; burden of proof
In this case, there is no question thatArlene rendered services to Fuji. However, Fuji alleges that
Arlene was an independent contractor, while Arlene alleges that she was a regular employee. To

resolve this issue, we ascertain whether an employer-employee relationship existed between Fuji
and Arlene.
This court has often used the four-fold test to determine the existence of an employer-employee
relationship. Under the four-fold test, the "control test" is the most important. As to how the
elements in the four-fold test are proven, this court has discussed that:
134

[t]here is no hard and fast rule designed to establish the aforesaid elements. Any competent and
relevant evidence to prove the relationship may be admitted. Identification cards, cash vouchers,
social security registration, appointment letters or employment contracts, payrolls, organization
charts, and personnel lists, serve as evidence of employee status.
135

If the facts of this case vis--vis the four-fold test show that an employer-employee relationship
existed, we then determine the status of Arlenes employment, i.e., whether she was a regular
employee. Relative to this, we shall analyze Arlenes fixed-term contract and determine whether it
supports her argument that she was a regular employee, or the argument of Fuji that she was an
independent contractor. We shall scrutinize whether the nature of Arlenes work was necessary and
desirable to Fujis business or whether Fuji only needed the output of her work. If the circumstances
show that Arlenes work was necessary and desirable to Fuji, then she is presumed to be a regular
employee. The burden of proving that she was an independent contractor lies with Fuji.
In labor cases, the quantum of proof required is substantial evidence. "Substantial evidence" has
been defined as "such amount of relevant evidence which a reasonable mind might accept as
adequate to justify a conclusion."
136

137

If Arlene was a regular employee, we then determine whether she was illegally dismissed. In
complaints for illegal dismissal, the burden of proof is on the employee to prove the fact of
dismissal. Once the employee establishes the fact of dismissal, supported by substantial evidence,
the burden of proof shifts tothe employer to show that there was a just or authorized cause for the
dismissal and that due process was observed.
138

139

IV
Whether
the
Court
of
Appeals
correctly
affirmed
Relations Commissions finding that Arlene was a regular employee

the

National

Labor

Fuji alleges that Arlene was anindependent contractor, citing Sonza v. ABS-CBN and relying on the
following facts: (1) she was hired because of her skills; (2) her salary was US$1,900.00, which is
higher than the normal rate; (3) she had the power to bargain with her employer; and (4) her contract
was for a fixed term. According to Fuji, the Court of Appeals erred when it ruled that Arlene was
forcedto sign the non-renewal agreement, considering that she sent an email with another version of
the non-renewal agreement. Further, she is not entitled tomoral damages and attorneys fees
because she acted in bad faith when she filed a labor complaint against Fuji after receiving
US$18,050.00 representing her salary and other benefits. Arlene argues that she was a regular
employee because Fuji had control and supervision over her work. The news events that she
covered were all based on the instructions of Fuji. She maintains that the successive renewal of
her employment contracts for four (4) years indicates that her work was necessary and
desirable. In addition, Fujis payment of separation pay equivalent to one (1) months pay per year
of service indicates that she was a regular employee. To further support her argument that she was
not an independent contractor, she states that Fuji owns the laptop computer and mini-camera that
she used for work. Arlene also argues that Sonza is not applicable because she was a plain
reporter for Fuji, unlike Jay Sonza who was a news anchor, talk show host, and who enjoyed a
140

141

142

143

144

145

celebrity status. On her illness, Arlene points outthat it was not a ground for her dismissal because
her attending physician certified that she was fit to work.
146

147

Arlene admits that she signed the non-renewal agreement with quitclaim, not because she agreed to
itsterms, but because she was not in a position to reject the non-renewal agreement. Further, she
badly needed the salary withheld for her sustenance and medication. She posits that her
acceptance of separation pay does not bar filing of a complaint for illegal dismissal.
148

149

Article 280 of the Labor Code provides that:

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
heis employed and his employment shall continue while such activity exist.
This provision classifies employees into regular, project, seasonal, and casual. It further classifies
regular employees into two kinds: (1) those "engaged to perform activities which are usually
necessary or desirable in the usual business or trade of the employer"; and (2) casual employees
who have "rendered at least one year of service, whether such service is continuous or broken."
Another classification of employees, i.e., employees with fixed-term contracts, was recognized in
Brent School, Inc. v. Zamora where this court discussed that:
150

Logically, the decisive determinant in the term employment should not be the activities that the
employee is called upon to perform, but the day certain agreed upon by the parties for the
commencement and termination of their employment relationship, a day certainbeing understood to
be "that which must necessarily come, although it may not be known when." (Emphasis in the
original)
151

This court further discussed that there are employment contracts where "a fixed term is an essential
and natural appurtenance" such as overseas employment contracts and officers in educational
institutions.
152

153

Distinctions
employees,
and regular employees

among
independent

fixed-term
contractors,

GMA Network, Inc. v. Pabriga expounded the doctrine on fixed term contracts laid down in Brentin
the following manner:
154

Cognizant of the possibility of abuse in the utilization of fixed term employment contracts, we
emphasized in Brentthat 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 as

contrary to public policy or morals. We thus laid down indications or criteria under which "term
employment" cannot be said to be in circumvention of the law on security of tenure, namely:
1) The fixed period of employment was knowingly and voluntarily agreed upon by the parties without
any force, duress, or improper pressure being brought to bear upon the employee and absent any
other circumstances vitiating his consent; or
2) It satisfactorily appears that the employer and the employee dealt with each other on more or less
equal terms with no moral dominance exercised by the former or the latter.
These indications, which must be read together, make the Brent doctrine applicable only in a few
special cases wherein the employer and employee are on more or less in equal footing in entering
into the contract. The reason for this is evident: whena prospective employee, on account of special
skills or market forces, is in a position to make demands upon the prospective employer, such
prospective employee needs less protection than the ordinary worker. Lesser limitations on the
parties freedom of contract are thus required for the protection of the employee. (Citations omitted)
155

For as long as the guidelines laid down in Brentare satisfied, this court will recognize the validity of
the fixed-term contract.
In Labayog v. M.Y. San Biscuits, Inc., this court upheld the fixedterm employment of petitioners
because from the time they were hired, they were informed that their engagement was for a specific
period. This court stated that:
156

[s]imply put, petitioners were notregular employees. While their employment as mixers, packers and
machine operators was necessary and desirable in the usual business ofrespondent company, they
were employed temporarily only, during periods when there was heightened demand for production.
Consequently, there could have been no illegal dismissal when their services were terminated on
expiration of their contracts. There was even no need for notice of termination because they knew
exactly when their contracts would end. Contracts of employment for a fixed period terminate on
their own at the end of such period.
Contracts of employment for a fixed period are not unlawful. What is objectionable is the practice of
some scrupulous employers who try to circumvent the law protecting workers from the capricious
termination of employment. (Citation omitted)
157

Caparoso v. Court of Appeals upheld the validity of the fixed-term contract of employment.
Caparoso and Quindipan were hired as delivery men for three (3) months. At the end of the third
month, they were hired on a monthly basis. In total, they were hired for five (5) months. They filed a
complaint for illegal dismissal. This court ruled that there was no evidence indicating that they were
pressured into signing the fixed-term contracts. There was likewise no proof that their employer was
engaged in hiring workers for five (5) months onlyto prevent regularization. In the absence of these
facts, the fixed-term contracts were upheld as valid. On the other hand, an independent contractor
is defined as:
158

159

160

. . . one who carries on a distinct and independent business and undertakes to perform the job, work,
or service on its own account and under ones own responsibility according to ones own manner
and method, free from the control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof.
161

In view of the "distinct and independent business" of independent contractors, no employeremployee relationship exists between independent contractors and their principals. Independent
contractors are recognized under Article 106 of the Labor Code:
Art. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
....
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting
or restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who among
the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latterwere directly employed by him.
In Department Order No. 18-A, Seriesof 2011, of the Department of Labor and Employment, a
contractor is defined as having:
Section 3. . . .
....
(c) . . . an arrangement whereby a principal agrees to put out or farm out with a contractor the
performance or completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be performed or completed within
oroutside the premises of the principal.
This department order also states that there is a trilateral relationship in legitimate job contracting
and subcontracting arrangements among the principal, contractor, and employees of the contractor.
There is no employer-employee relationship between the contractor and principal who engages the
contractors services, but there is an employer-employee relationship between the contractor and
workers hired to accomplish the work for the principal.
162

Jurisprudence has recognized another kind of independent contractor: individuals with unique skills
and talents that set them apart from ordinary employees. There is no trilateral relationship in this
case because the independent contractor himself or herself performs the work for the principal. In
other words, the relationship is bilateral.
In Orozco v. Court of Appeals, Wilhelmina Orozco was a columnist for the Philippine Daily Inquirer.
This court ruled that she was an independent contractor because of her "talent, skill, experience, and
her unique viewpoint as a feminist advocate." In addition, the Philippine Daily Inquirer did not have
the power of control over Orozco, and she worked at her own pleasure.
163

164

165

Semblante v. Court of Appeals involved a masiador and a sentenciador. This court ruled that
"petitioners performed their functions as masiadorand sentenciador free from the direction and
control of respondents" and that the masiador and sentenciador "relied mainly on their expertise
that is characteristic of the cockfight gambling." Hence, no employer-employee relationship
existed.
166

167

168

169

170

Bernarte v. Philippine Basketball Association involved a basketball referee. This court ruled that "a
referee is an independent contractor, whose special skills and independent judgment are required
specifically for such position and cannot possibly be controlled by the hiring party."
171

172

In these cases, the workers were found to be independent contractors because of their unique skills
and talents and the lack of control over the means and methods in the performance of their work.
In other words, there are different kinds of independent contractors: those engaged in legitimate job
contracting and those who have unique skills and talents that set them apart from ordinary
employees.
Since no employer-employee relationship exists between independent contractors and their
principals, their contracts are governed by the Civil Code provisions on contracts and other
applicable laws.
173

A contract is defined as "a meeting of minds between two persons whereby one binds himself, with
respect to the other, to give something or to render some service." Parties are free to stipulate on
terms and conditions in contracts as long as these "are not contrary to law, morals, good customs,
public order, or public policy." This presupposes that the parties to a contract are on equal footing.
Theycan bargain on terms and conditions until they are able to reach an agreement.
174

175

On the other hand, contracts of employment are different and have a higher level of regulation
because they are impressed with public interest. Article XIII, Section 3 of the 1987 Constitution
provides full protection to labor:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
Section 3. The State shall afford full protection to labor, local and overseas, organized and
unorganized, and promote full employment and equality of employment opportunities for all.
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.
The State shall promote the principle of shared responsibility between workers and employers and
the preferential use of voluntary modes in settling disputes, including conciliation, and shall enforce
their mutual compliance therewith to foster industrial peace.

The State shall regulate the relations between workers and employers, recognizing the right of labor
to its just share in the fruits of production and the right of enterprises to reasonable returns on
investments, and to expansion and growth.
Apart from the constitutional guarantee of protection to labor, Article 1700 of the Civil Code states:
ART. 1700. The relations between capital and labor are not merely contractual. They are so
impressed with public interest that labor contracts must yield to the common good. Therefore, such
contracts are subject to the special laws on labor unions, collective bargaining, strikes and lockouts,
closed shop, wages, working conditions, hours of labor and similar subjects.
In contracts of employment, the employer and the employee are not on equal footing. Thus, it is
subject to regulatory review by the labor tribunals and courts of law. The law serves to equalize the
unequal. The labor force is a special class that is constitutionally protected because of the inequality
between capital and labor. This presupposes that the labor force is weak. However, the level of
protection to labor should vary from case to case; otherwise, the state might appear to be too
paternalistic in affording protection to labor. As stated in GMA Network, Inc. v. Pabriga, the ruling in
Brent applies in cases where it appears that the employer and employee are on equal footing. This
recognizes the fact that not all workers are weak. To reiterate the discussion in GMA Network v.
Pabriga:
176

177

The reason for this is evident: when a prospective employee, on account of special skills or market
forces, is in a position to make demands upon the prospective employer, such prospective employee
needs less protection than the ordinary worker. Lesser limitations on the parties freedom of contract
are thus required for the protection of the employee.
178

The level of protection to labor mustbe determined on the basis of the nature of the work,
qualifications of the employee, and other relevant circumstances.
For example, a prospective employee with a bachelors degree cannot be said to be on equal footing
witha grocery bagger with a high school diploma. Employees who qualify for jobs requiring special
qualifications such as "[having] a Masters degree" or "[having] passed the licensure exam" are
different from employees who qualify for jobs that require "[being a] high school graduate;
withpleasing personality." In these situations, it is clear that those with special qualifications can
bargain with the employer on equal footing. Thus, the level of protection afforded to these employees
should be different.
Fujis argument that Arlene was an independent contractor under a fixed-term contract is
contradictory. Employees under fixed-term contracts cannot be independent contractors because in
fixed-term contracts, an employer-employee relationship exists. The test in this kind of contract is not
the necessity and desirability of the employees activities, "but the day certain agreed upon by the
parties for the commencement and termination of the employment relationship." For regular
employees, the necessity and desirability of their work in the usual course of the employers
business are the determining factors. On the other hand, independent contractors do not have
employer-employee relationships with their principals. Hence, before the status of employment can
be determined, the existence of an employer-employee relationship must be established.
179

The four-fold test can be used in determining whether an employeremployee relationship exists.
The elements of the four-fold test are the following: (1) the selection and engagement of the
employee; (2) the payment of wages; (3) the power of dismissal; and (4) the power of control, which
is the most important element.
180

181

The "power of control" was explained by this court in Corporal, Sr. v. National Labor Relations
Commission:
182

The power to control refers to the existence of the power and not necessarily to the actual exercise
thereof, nor is it essential for the employer to actually supervise the performance of duties of the
employee. It is enough that the employer has the right to wield that power. (Citation omitted)
183

Orozco v. Court of Appeals further elucidated the meaning of "power of control" and stated the
following:
Logically, the line should be drawn between rules that merely serve as guidelines towards the
achievement of the mutually desired result without dictating the means or methods to be employed
in attaining it, and those that control or fix the methodology and bind or restrict the party hired to the
use of such means. The first, which aim only to promote the result, create no employer-employee
relationship unlike the second, which address both the result and the means used to achieve it. . . .
(Citation omitted)
184

In Locsin, et al. v. Philippine Long Distance Telephone Company, the "power of control" was
defined as "[the] right to control not only the end to be achieved but also the means to be used in
reaching such end."
185

186

Here, the Court of Appeals applied Sonza v. ABS-CBN and Dumpit Murillo v. Court of Appeals
determining whether Arlene was an independent contractor or a regular employee.

187

in

In deciding Sonza and Dumpit-Murillo, this court used the four-fold test. Both cases involved
newscasters and anchors. However, Sonza was held to be an independent contractor, while DumpitMurillo was held to be a regular employee.
Comparison
Dumpit-Murillo
the four-fold test

of

the
cases

Sonza

and
using

Sonza was engaged by ABS-CBN in view of his "unique skills, talent and celebrity status not
possessed by ordinary employees." His work was for radio and television programs. On the other
hand, Dumpit-Murillo was hired by ABC as a newscaster and co-anchor. Sonzas talent fee
amounted to P317,000.00 per month, which this court found to be a substantial amount that
indicatedhe was an independent contractor rather than a regular employee. Meanwhile, DumpitMurillos monthly salary was P28,000.00, a very low amount compared to what Sonza received.
188

189

190

191

192

Sonza was unable to prove that ABS-CBN could terminate his services apart from breach of
contract. There was no indication that he could be terminated based on just or authorized causes
under the Labor Code. In addition, ABS-CBN continued to pay his talent fee under their agreement,
even though his programs were no longer broadcasted. Dumpit-Murillo was found to have
beenillegally dismissed by her employer when they did not renew her contract on her fourth year
with ABC.
193

194

In Sonza, this court ruled that ABS-CBN did not control how Sonza delivered his lines, how he
appeared on television, or how he sounded on radio. All that Sonza needed was his
talent. Further, "ABS-CBN could not terminate or discipline SONZA even if the means and methods
of performance of his work . . . did not meet ABS-CBNs approval." In Dumpit-Murillo, the duties
195

196

197

and responsibilities enumerated in her contract was a clear indication that ABC had control over her
work.
198

Application of the four-fold test

The Court of Appeals did not err when it relied on the ruling in Dumpit-Murillo and affirmed the ruling
of the National Labor Relations Commission finding that Arlene was a regular employee. Arlene was
hired by Fuji as a news producer, but there was no showing that she was hired because of unique
skills that would distinguish her from ordinary employees. Neither was there any showing that she
had a celebrity status. Her monthly salary amounting to US$1,900.00 appears tobe a substantial
sum, especially if compared to her salary whenshe was still connected with GMA. Indeed, wages
may indicate whether oneis an independent contractor. Wages may also indicate that an employee is
able to bargain with the employer for better pay. However, wages should not be the conclusive factor
in determining whether one is an employee or an independent contractor.
199

Fuji had the power to dismiss Arlene, as provided for in paragraph 5 of her professional employment
contract. Her contract also indicated that Fuji had control over her work because she was required
to work for eight (8) hours from Monday to Friday, although on flexible time. Sonza was not
required to work for eight (8) hours, while Dumpit-Murillo had to be in ABC to do both on-air and offair tasks.
200

201

On the power to control, Arlene alleged that Fuji gave her instructions on what to report. Even the
mode of transportation in carrying out her functions was controlled by Fuji. Paragraph 6 of her
contract states:
202

6. During the travel to carry out work, if there is change of place or change of place of work, the train,
bus, or public transport shall be used for the trip. If the Employee uses the private car during the
work and there is an accident the Employer shall not be responsible for the damage, which may be
caused to the Employee.
203

Thus, the Court of Appeals did not err when it upheld the findings of the National Labor Relations
Commission that Arlene was not an independent contractor.
Having established that an employer-employee relationship existed between Fuji and Arlene, the
next questions for resolution are the following: Did the Court of Appeals correctly affirm the National
Labor Relations Commission that Arlene had become a regular employee? Was the nature of
Arlenes work necessary and desirable for Fujis usual course of business?
Arlene
was
with a fixed-term contract

regular

employee

The test for determining regular employment is whether there is a reasonable connection between
the employees activities and the usual business of the employer. Article 280 provides that the nature
of work must be "necessary or desirable in the usual business or trade of the employer" as the test
for determining regular employment. As stated in ABS-CBN Broadcasting Corporation v. Nazareno:
204

In determining whether an employment should be considered regular or non-regular, the applicable

test is the reasonable connection between the particular activity performed by the employee in
relation to the usual business or trade of the employer. The standard, supplied by the law itself, is
whether the work undertaken is necessary or desirable in the usual business or trade of the
employer, a fact that can be assessed by looking into the nature of the services rendered and its

relation to the general scheme under which the business or trade is pursued in the usual course. It is
distinguished from a specific undertaking that is divorced from the normal activities required
incarrying on the particular business or trade.
205

However, there may be a situation where an employees work is necessary but is not always
desirable inthe usual course of business of the employer. In this situation, there is no regular
employment.
In San Miguel Corporation v. National Labor Relations Commission, Francisco de Guzman was
hired to repair furnaces at San Miguel Corporations Manila glass plant. He had a separate contract
for every furnace that he repaired. He filed a complaint for illegal dismissal three (3) years after the
end of his last contract. In ruling that de Guzman did not attain the status of a regular employee,
this court explained:
206

207

Note that the plant where private respondent was employed for only seven months is engaged in the
manufacture of glass, an integral component of the packaging and manufacturing business of
petitioner. The process of manufacturing glass requires a furnace, which has a limited operating life.
Petitioner resorted to hiring project or fixed term employees in having said furnaces repaired since
said activity is not regularly performed. Said furnaces are to be repaired or overhauled only in case
of need and after being used continuously for a varying period of five (5) to ten (10) years. In 1990,
one of the furnaces of petitioner required repair and upgrading. This was an undertaking distinct and
separate from petitioner's business of manufacturing glass. For this purpose, petitioner must hire
workers to undertake the said repair and upgrading. . . .
....
Clearly, private respondent was hired for a specific project that was not within the regular business of
the corporation. For petitioner is not engaged in the business of repairing furnaces. Although the
activity was necessary to enable petitioner to continue manufacturing glass, the necessity therefor
arose only when a particular furnace reached the end of its life or operating cycle. Or, as in the
second undertaking, when a particular furnace required an emergency repair. In other words, the
undertakings where private respondent was hired primarily as helper/bricklayer have specified goals
and purposes which are fulfilled once the designated work was completed. Moreover, such
undertakings were also identifiably separate and distinct from the usual, ordinary or regular business
operations of petitioner, which is glass manufacturing. These undertakings, the duration and scope
of which had been determined and made known to private respondent at the time of his
employment, clearly indicated the nature of his employment as a project employee.
208

Fuji is engaged in the business of broadcasting, including news programming. It is based in

Japan and has overseas offices to cover international news.
209

211

210

212

Based on the record, Fujis Manila Bureau Office is a small unit and has a few employees. As
such, Arlene had to do all activities related to news gathering. Although Fuji insists that Arlene was a
stringer, it alleges that her designation was "News Talent/Reporter/Producer."
213

214

215

A news producer "plans and supervises newscast . . . [and] work[s] with reporters in the field
planning and gathering information. . . ." Arlenes tasks included "[m]onitoring and [g]etting [n]ews
[s]tories, [r]eporting interviewing subjects in front of a video camera," "the timely submission of
news and current events reports pertaining to the Philippines[,] and traveling [sic] to [Fujis] regional
office in Thailand." She also had to report for work in Fujis office in Manila from Mondays to
Fridays, eight (8) hours per day. She had no equipment and had to use the facilities of Fuji to
accomplish her tasks.
216

217

218

219

The Court of Appeals affirmed the finding of the National Labor Relations Commission that the
successive renewals of Arlenes contract indicated the necessity and desirability of her work in the
usual course of Fujis business. Because of this, Arlene had become a regular employee with the
right to security of tenure. The Court of Appeals ruled that:
220

Here, Espiritu was engaged by Fuji as a stinger [sic] or news producer for its Manila Bureau. She
was hired for the primary purpose of news gathering and reporting to the television networks
headquarters. Espiritu was not contracted on account of any peculiar ability or special talent and skill
that she may possess which the network desires to make use of. Parenthetically, ifit were true that
Espiritu is an independent contractor, as claimed by Fuji, the factthat everything that she uses to
perform her job is owned by the company including the laptop computer and mini camera discounts
the idea of job contracting.
221

Moreover, the Court of Appeals explained that Fujis argument that no employer-employee
relationship existed in view of the fixed-term contract does not persuade because fixed-term
contracts of employment are strictly construed. Further, the pieces of equipment Arlene used were
all owned by Fuji, showing that she was a regular employee and not an independent contractor.
222

223

The Court of Appeals likewise cited Dumpit-Murillo, which involved fixed-term contracts that were
successively renewed for four (4) years. This court held that "[t]his repeated engagement under
contract of hire is indicative of the necessity and desirability of the petitioners work in private
respondent ABCs business."
224

225

With regard to Fujis argument that Arlenes contract was for a fixed term, the Court of Appeals cited
Philips Semiconductors, Inc. v. Fadriquela and held that where an employees contract "had been
continuously extended or renewed to the same position, with the same duties and remained in the
employ without any interruption," then such employee is a regular employee. The continuous
renewal is a scheme to prevent regularization. On this basis, the Court of Appeals ruled in favor of
Arlene.
226

227

As stated in Price, et al. v. Innodata Corp., et al.:

228

The employment status of a person is defined and prescribed by law and not by what the parties say
it should be. Equally important to consider is that a contract of employment is impressed with public
interest such that labor contracts must yield to the common good. Thus, 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. (Citations omitted)
229

Arlenes contract indicating a fixed term did not automatically mean that she could never be a regular
employee. This is precisely what Article 280 seeks to avoid. The ruling in Brent remains as the
exception rather than the general rule.
Further, an employee can be a regular employee with a fixed-term contract. The law does not
preclude the possibility that a regular employee may opt to have a fixed-term contract for valid
reasons. This was recognized in Brent: For as long as it was the employee who requested, or
bargained, that the contract have a "definite date of termination," or that the fixed-term contract be
freely entered into by the employer and the employee, then the validity of the fixed-term contract will
be upheld.
230

Whether the Court of Appeals correctly affirmed

the National Labor Relations Commissions finding of illegal dismissal
Fuji argues that the Court of Appeals erred when it held that Arlene was illegally dismissed, in view
of the non-renewal contract voluntarily executed by the parties. Fuji also argues that Arlenes
contract merely expired; hence, she was not illegally dismissed.
231

Arlene alleges that she had no choice but to sign the non-renewal contract because Fuji withheldher
salary and benefits.
With regard to this issue, the Court of Appeals held:
We cannot subscribe to Fujis assertion that Espiritus contract merely expired and that she
voluntarily agreed not to renew the same. Even a cursory perusal of the subject Non-Renewal
Contract readily shows that the same was signed by Espiritu under protest. What is apparent is that
the Non-Renewal Contract was crafted merely as a subterfuge to secure Fujis position that it was
Espiritus choice not to renew her contract.
232

As a regular employee, Arlene was entitled to security of tenure and could be dismissed only for just
or authorized causes and after the observance of due process.
The right to security of tenureis guaranteed under Article XIII, Section 3 of the 1987 Constitution:
ARTICLE XIII. SOCIAL JUSTICE AND HUMAN RIGHTS
....
LABOR
....
It shall guarantee the rights of all workers to self-organization, collective bargaining and negotiations,
and peaceful concerted activities, including the right to strike in accordance with law. They shall be
entitled to security of tenure, humane conditions of work, and a living wage. They shall also
participate in policy and decision-making processes affecting their rights and benefits as may be
provided by law.
Article 279 of the Labor Code also provides for the right to security of tenure and states the
following:
Art. 279. Security of tenure.In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause of when authorized by this Title. An employee who is
unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement.
Thus, on the right to security of tenure, no employee shall be dismissed, unless there are just
orauthorized causes and only after compliance with procedural and substantive due process is
conducted.

Even probationary employees are entitled to the right to security of tenure. This was explained in
Philippine Daily Inquirer, Inc. v. Magtibay, Jr.:
233

Within the limited legal six-month probationary period, probationary employees are still entitled to
security of tenure. It is expressly provided in the afore-quoted Article 281 that a probationary
employee may be terminated only on two grounds: (a) for just cause, or (b) when he fails to qualify
as a regular employee in accordance with reasonable standards made known by the employer to the
employee at the time of his engagement. (Citation omitted)
234

The expiration of Arlenes contract does not negate the finding of illegal dismissal by Fuji. The
manner by which Fuji informed Arlene that her contract would no longer be renewed is tantamount to
constructive dismissal. To make matters worse, Arlene was asked to sign a letter of resignation
prepared by Fuji. The existence of a fixed-term contract should not mean that there can be no
illegal dismissal. Due process must still be observed in the pre-termination of fixed-term contracts of
employment.
235

In addition, the Court of Appeals and the National Labor Relations Commission found that Arlene
was dismissed because of her health condition. In the non-renewal agreement executed by Fuji and
Arlene, it is stated that:
WHEREAS, the SECOND PARTY is undergoing chemotherapy which prevents her from continuing
to effectively perform her functions under the said Contract such as the timely submission of news
and current events reports pertaining to the Philippines and travelling [sic] to the FIRST PARTYs
regional office in Thailand. (Emphasis supplied)
236

Disease as a ground for termination is recognized under Article 284 of the Labor Code:
Art. 284. Disease as ground for termination. An employer may terminate the services of an employee
who has been found to be suffering from any disease and whose continued employment is
prohibited by law or is prejudicial to his health as well as to the health of his co-employees: Provided,
That he is paid separation pay equivalent to at least one (1) month salary or to one-half (1/2) month
salary for every year of service, whichever is greater, a fraction of at least six (6) months being
considered as one (1) whole year.
Book VI, Rule 1, Section 8 of the Omnibus Rules Implementing the Labor Code provides:
Sec. 8. Disease as a ground for dismissal. Where the employee suffers from a disease and his
continued employment is prohibited by law or prejudicial to his healthor to the health of his
coemployees, the employer shall not terminate his employment unless there is a certification by a
competent public health authority that the disease is of such nature or at such a stage that it cannot
be cured within a period of six (6) months even with proper medical treatment. If the disease or
ailment can be cured within the period, the employer shall not terminate the employee but shall ask
the employee to take a leave. The employer shall reinstate such employee to his former position
immediately upon the restoration of his normal health.
For dismissal under Article 284 to bevalid, two requirements must be complied with: (1) the
employees disease cannot be cured within six (6) months and his "continued employment is
prohibited by law or prejudicial to his health as well as to the health of his co-employees"; and (2)
certification issued by a competent public health authority that even with proper medical treatment,
the disease cannot be cured within six (6) months. The burden of proving compliance with these
requisites is on the employer. Noncompliance leads to the conclusion that the dismissal was
illegal.
237

238

239

There is no evidence showing that Arlene was accorded due process. After informing her employer
of her lung cancer, she was not given the chance to present medical certificates. Fuji immediately
concluded that Arlene could no longer perform her duties because of chemotherapy. It did not ask
her how her condition would affect her work. Neither did it suggest for her to take a leave, even
though she was entitled to sick leaves. Worse, it did not present any certificate from a competent
public health authority. What Fuji did was to inform her thather contract would no longer be renewed,
and when she did not agree, her salary was withheld. Thus, the Court of Appeals correctly upheld
the finding of the National Labor Relations Commission that for failure of Fuji to comply with due
process, Arlene was illegally dismissed.
240

VI
Whether
the
Court
of
Appeals
the
National
Labor
Relations
when it awarded reinstatement, damages, and attorneys fees

properly
Commissions

modified
decision

The National Labor Relations Commission awarded separation pay in lieu of reinstatement, on the
ground that the filing of the complaint for illegal dismissal may have seriously strained relations
between the parties. Backwages were also awarded, to be computed from date of dismissal until the
finality of the National Labor Relations Commissions decision. However, only backwages were
included in the dispositive portion because the National Labor Relations Commission recognized
that Arlene had received separation pay in the amount of US$7,600.00. The Court of Appeals
affirmed the National Labor Relations Commissions decision but modified it by awarding moral and
exemplary damages and attorneys fees, and all other benefits Arlene was entitled to under her
contract with Fuji. The Court of Appeals also ordered reinstatement, reasoning that the grounds
when separation pay was awarded in lieu of reinstatement were not proven.
241

Article 279 of the Labor Code provides:

Art. 279. Security of tenure. In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement. (Emphasis supplied)
The Court of Appeals modification of the National Labor Relations Commissions decision was
proper because the law itself provides that illegally dismissed employees are entitled to
reinstatement, backwages including allowances, and all other benefits.
On reinstatement, the National Labor Relations Commission ordered payment of separation pay in
lieu of reinstatement, reasoning "that the filing of the instant suit may have seriously abraded the
relationship of the parties so as to render reinstatement impractical." The Court of Appeals
reversed this and ordered reinstatement on the ground that separation pay in lieu of reinstatement is
allowed only in several instances such as (1) when the employer has ceased operations; (2) when
the employees position is no longer available; (3) strained relations; and (4) a substantial period has
lapsed from date of filing to date of finality.
242

243

On this matter, Quijano v. Mercury Drug Corp. is instructive:

244

Well-entrenched is the rule that an illegally dismissed employee is entitled to reinstatement as a

matter of right. . . .

To protect labors security of tenure, we emphasize that the doctrine of "strained relations" should be
strictly applied so as not to deprive an illegally dismissed employee of his right to reinstatement.
Every labor dispute almost always results in "strained relations" and the phrase cannot be given an
overarching interpretation, otherwise, an unjustly dismissed employee can never be
reinstated. (Citations omitted)
245

The Court of Appeals reasoned that strained relations are a question of fact that must be supported
by evidence. No evidence was presented by Fuji to prove that reinstatement was no longer
feasible. Fuji did not allege that it ceased operations or that Arlenes position was no longer
available. Nothing in the records shows that Arlenes reinstatement would cause an atmosphere of
antagonism in the workplace. Arlene filed her complaint in 2009. Five (5) years are not yet a
substantial period to bar reinstatement.
246

247

On the award of damages, Fuji argues that Arlene is notentitled to the award of damages and
attorneys fees because the non-renewal agreement contained a quitclaim, which Arlene signed.
Quitclaims in labor cases do not bar illegally dismissed employees from filing labor complaints and
money claim. As explained by Arlene, she signed the non-renewal agreement out of necessity. In
Land and Housing Development Corporation v. Esquillo, this court explained: 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 holdof 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.
248

249

With regard to the Court of Appeals award of moral and exemplary damages and attorneys fees,
this court has recognized in several cases that moral damages are awarded "when the dismissal is
attended by bad faith or fraud or constitutes an act oppressive to labor, or is done in a manner
contrary to good morals, good customs or public policy." On the other hand, exemplary damages
may be awarded when the dismissal was effected "in a wanton, oppressive or malevolent manner."
250

251

The Court of Appeals and National Labor Relations Commission found that after Arlene had
informed Fuji of her cancer, she was informed that there would be problems in renewing her contract
on account of her condition. This information caused Arlene mental anguish, serious anxiety, and
wounded feelings that can be gleaned from the tenor of her email dated March 11, 2009. A portion of
her email reads:
I WAS SO SURPRISED . . . that at a time when I am at my lowest, being sick and very weak, you
suddenly came to deliver to me the NEWS that you will no longer renew my contract. I knew this will
come but I never thought that you will be so heartless and insensitive to deliver that news just a
month after I informed you that I am sick. I was asking for patience and understanding and your
response was not to RENEW my contract.
1awp++i1

252

Apart from Arlenes illegal dismissal, the manner of her dismissal was effected in an oppressive
approach withher salary and other benefits being withheld until May 5, 2009, when she had no other
choice but to sign the non-renewal contract. Thus, there was legal basis for the Court of Appeals to
modify the National Labor Relations Commissions decision.
However, Arlene receivedher salary for May 2009. Considering that the date of her illegal dismissal
was May 5, 2009, this amount may be subtracted from the total monetary award. With regard to the
award of attorneys fees, Article 111 of the Labor Code states that "[i]n cases of unlawful withholding
of wages, the culpable party may be assessed attorneys fees equivalent to ten percent of the
253

254

amount of wages recovered." Likewise, this court has recognized that "in actions for recovery of
wages or where an employee was forced to litigate and, thus, incur expenses to protect his rights
and interest, the award of attorneys fees is legallyand morally justifiable." Due to her illegal
dismissal, Arlene was forced to litigate.
255

In the dispositive portion of its decision, the Court of Appeals awarded legal interest at the rate of
12% per annum. In view of this courts ruling in Nacar v. Gallery Frames, the legal interest shall
be reducd to a rate of 6% per annum from July 1, 2013 until full satisfaction.
256

257

WHEREFORE, the petition is DENIED. The assailed Court of Appeals decision dated June 25, 2012
is AFFIRMED with the modification that backwages shall be computed from June 2009. Legal
interest shall be computed at the rate of 6% per annum of the total monetary award from date of
finality of this decision until full satisfaction.
SO ORDERED.
MARVIC
Associate Justice

M.V.F

LEONEN

See GMA Network v. Pabriga, G.R. No. 176419, November 27, 2013
See Universal Robina v. Acibo, G.R. No. 186439, January 15, 2014
Colegio del Santisimo v. Rojo, G.R. No. 170388, September 4, 2013
G.R. No. 170388

September 4, 2013

COLEGIO DEL SANTISIMO ROSARIO AND SR. ZENAIDA S. MOFADA, OP, PETITIONERS,
vs.
EMMANUEL ROJO,* RESPONDENT.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 assails the August 31, 2005 Decision2 and the November 10,
2005 Resolution3 of the Court of Appeals (CA) in CA-G.R. SP No. 85188, which affirmed the July 31,
2003 Decision4 of the National Labor Relations Commission (NLRC). Said NLRC Decision affirmed
with modification the October 7, 2002 Decision5 of the Labor Arbiter (LA) which, in turn, granted
respondent Emmanuel Rojos (respondent) Complaint6 for illegal dismissal.
Factual Antecedents
Petitioner Colegio del Santisimo Rosario (CSR) hired respondent as a high school teacher on
probationary basis for the school years 1992-1993, 1993-1994 7 and 1994-1995.8

On April 5, 1995, CSR, through petitioner Sr. Zenaida S. Mofada, OP (Mofada), decided not to renew
respondents services.9
Thus, on July 13, 1995, respondent filed a Complaint 10 for illegal dismissal. He alleged that since he
had served three consecutive school years which is the maximum number of terms allowed for
probationary employment, he should be extended permanent employment. Citing paragraph 75 of
the 1970 Manual of Regulations for Private Schools (1970 Manual), respondent asserted that "fulltime teachers who have rendered three (3) consecutive years of satisfactory services shall be
considered permanent."11
On the other hand, petitioners argued that respondent knew that his Teachers Contract for school
year 1994-1995 with CSR would expire on March 31, 1995. 12 Accordingly, respondent was not
dismissed but his probationary contract merely expired and was not renewed. 13 Petitioners also
claimed that the "three years" mentioned in paragraph 75 of the 1970 Manual refer to "36 months,"
not three school years.14 And since respondent served for only three school years of 10 months each
or 30 months, then he had not yet served the "three years" or 36 months mentioned in paragraph 75
of the 1970 Manual.15
Ruling of the Labor Arbiter
The LA ruled that "three school years" means three years of 10 months, not 12
months.16 Considering that respondent had already served for three consecutive school years, then
he has already attained regular employment status. Thus, the non-renewal of his contract for school
year 1995-1996 constitutes illegal dismissal.17
The LA also found petitioners guilty of bad faith when they treated respondents termination merely
as the expiration of the third employment contract and when they insisted that the school board
actually deliberated on the non-renewal of respondents employment without submitting admissible
proof of his alleged regular performance evaluation.18
The dispositive portion of the LAs Decision19 reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering the [petitioners]:
1. To pay [respondent] the total amount of P39,252.00 corresponding to his severance
compensation and 13th month pay, moral and exemplary damages.
2. To pay 10% of the total amount due to [respondent] as attorneys fees.
All other claims are dismissed for lack of merit.
SO ORDERED.20
Ruling of the National Labor Relations Commission
On appeal, the NLRC affirmed the LAs Decision with modification. It held that after serving three
school years, respondent had attained the status of regular employment 21 especially because CSR
did not make known to respondent the reasonable standards he should meet. 22 The NLRC also
agreed with the LA that respondents termination was done in bad faith. It held that respondent is
entitled to reinstatement, if viable; or separation pay, if reinstatement was no longer feasible, and
backwages, viz:

WHEREFORE, premises considered, the appealed Decision is hereby, AFFIRMED with

MODIFICATION only insofar as the award of separation pay is concerned. Since [respondent] had
been illegally dismissed, [petitioner] Colegio Del Santisimo Rosario is hereby ordered to reinstate
him to his former position without loss of seniority rights with full backwages until he is actually
reinstated. However, if reinstatement is no longer feasible, the respondent shall pay separation pay,
in [addition] to the payment of his full backwages.
The Computation Division is hereby directed to compute [respondents] full backwages to be
attached and to form part of this Decision.
The rest of the appealed Decision stands.
SO ORDERED.23
Petitioners moved for reconsideration which the NLRC denied in its April 28, 2004 Resolution 24 for
lack of merit.
Ruling of the Court of Appeals
Petitioners filed a Petition for Certiorari 25 before the CA alleging grave abuse of discretion on the part
of the NLRC in finding that respondent had attained the status of a regular employee and was
illegally dismissed from employment.
In a Decision26 dated August 31, 2005, the CA denied the Petition for lack of merit. Citing Cagayan
Capitol College v. National Labor Relations Commission,27 it held that respondent has satisfied all the
requirements necessary to acquire permanent employment and security of tenure viz:
1. The teacher is a full-time teacher;
2. The teacher must have rendered three (3) consecutive years of service; and
3. Such service must be satisfactory.28
According to the CA, respondent has attained the status of a regular employee after he was
employed for three consecutive school years as a full-time teacher and had served CSR
satisfactorily. Aside from being a high school teacher, he was also the Prefect of Discipline, a task
entailing much responsibility. The only reason given by Mofada for not renewing respondents
contract was the alleged expiration of the contract, not any unsatisfactory service. Also, there was no
showing that CSR set performance standards for the employment of respondent, which could be the
basis of his satisfactory or unsatisfactory performance. Hence, there being no reasonable standards
made known to him at the time of his engagement, respondent was deemed a regular employee and
was, thus, declared illegally dismissed when his contract was not renewed.
Petitioners moved for reconsideration. However, the CA denied the motion for lack of merit in its
November 10, 2005 Resolution.29
Hence, the instant Petition. Incidentally, on May 23, 2007, we issued a Resolution 30 directing the
parties to maintain the status quo pending the resolution of the present Petition.
Issue

WHETHER THE COURT OF APPEALS [AS WELL AS THE NATIONAL LABOR RELATIONS
COMMISSION] COMMITTED GRIEVOUS AND REVERSIBLE ERROR WHEN IT RULED THAT A
BASIC EDUCATION (ELEMENTARY) TEACHER HIRED FOR THREE (3) CONSECUTIVE
SCHOOL YEARS AS A PROBATIONARY EMPLOYEE AUTOMATICALLY AND/OR BY LAW
BECOMES A PERMANENT EMPLOYEE UPON COMPLETION OF HIS THIRD YEAR OF
PROBATION NOTWITHSTANDING [A] THE PRONOUNCEMENT OF THIS HONORABLE COURT
IN COLEGIO SAN AGUSTIN V. NLRC, 201 SCRA 398 1991 THAT A PROBATIONARY TEACHER
ACQUIRES PERMANENT STATUS "ONLY WHEN HE IS ALLOWED TO WORK AFTER THE
PROBATIONARY PERIOD" AND [B] DOLE-DECS-CHED-TESDA ORDER NO. 01, S. 1996 WHICH
PROVIDE THAT TEACHERS WHO HAVE SERVED THE PROBATIONARY PERIOD "SHALL BE
MADE REGULAR OR PERMANENT IF ALLOWED TO WORK AFTER SUCH PROBATIONARY
PERIOD."31
Petitioners maintain that upon the expiration of the probationary period, both the school and the
respondent were free to renew the contract or let it lapse. Petitioners insist that a teacher hired for
three consecutive years as a probationary employee does not automatically become a regular
employee upon completion of his third year of probation. It is the positive act of the school the
hiring of the teacher who has just completed three consecutive years of employment on probation for
the next school year that makes the teacher a regular employee of the school.
Our Ruling
We deny the Petition.
In Mercado v. AMA Computer College-Paraaque City, Inc., 32 we had occasion to rule that cases
dealing with employment on probationary status of teaching personnel are not governed solely by
the Labor Code as the law is supplemented, with respect to the period of probation, by special rules
found in the Manual of Regulations for Private Schools (the Manual). With regard to the probationary
period, Section 92 of the 1992 Manual33 provides:
Section 92. Probationary Period. Subject in all instances to compliance with the Department and
school requirements, the probationary period for academic personnel shall not be more than three
(3) consecutive years of satisfactory service for those in the elementary and secondary levels, six (6)
consecutive regular semesters of satisfactory service for those in the tertiary level, and nine (9)
consecutive trimesters of satisfactory service for those in the tertiary level where collegiate courses
are offered on a trimester basis. (Emphasis supplied)
In this case, petitioners teachers who were on probationary employment were made to enter into a
contract effective for one school year. Thereafter, it may be renewed for another school year, and the
probationary employment continues. At the end of the second fixed period of probationary
employment, the contract may again be renewed for the last time.
Such employment for fixed terms during the teachers probationary period is an accepted practice in
the teaching profession. In Magis Young Achievers Learning Center v. Manalo, 34 we noted that:
The common practice is for the employer and the teacher to enter into a contract, effective for one
school year. At the end of the school year, the employer has the option not to renew the contract,
particularly considering the teachers performance. If the contract is not renewed, the employment
relationship terminates. If the contract is renewed, usually for another school year, the probationary
employment continues. Again, at the end of that period, the parties may opt to renew or not to renew
the contract. If renewed, this second renewal of the contract for another school year would then be
the last year since it would be the third school year of probationary employment. At the end of

this third year, the employer may now decide whether to extend a permanent appointment to the
employee, primarily on the basis of the employee having met the reasonable standards of
competence and efficiency set by the employer. For the entire duration of this three-year period, the
teacher remains under probation. Upon the expiration of his contract of employment, being simply on
probation, he cannot automatically claim security of tenure and compel the employer to renew his
employment contract. It is when the yearly contract is renewed for the third time that Section 93 of
the Manual becomes operative, and the teacher then is entitled to regular or permanent employment
status. (Emphases supplied)
However, this scheme "of fixed-term contract is a system that operates during the probationary
period and for this reason is subject to Article 281 of the Labor Code," 35 which provides:
x x x The services of an employee who has been engaged on a probationary basis may be
terminated for a just cause or when he fails to qualify as a regular employee in accordance with
reasonable standards made known by the employer to the employee at the time of his engagement.
An employee who is allowed to work after a probationary period shall be considered a regular
employee. [Emphasis supplied]
In Mercado, we held that "[u]nless this reconciliation is made, the requirements of [Article 281 on
probationary status would be fully negated as the school may freely choose not to renew contracts
simply because their terms have expired."36 This will have an unsettling effect in the equilibrium visa-vis the relations between labor and management that the Constitution and Labor Code have
worked hard to establish.
That teachers on probationary employment also enjoy the protection afforded by Article 281 of the
Labor Code is supported by Section 93 of the 1992 Manual which provides:
Sec. 93. Regular or Permanent Status. - Those who have served the probationary period shall be
made regular or permanent. Full-time teachers who have satisfactorily completed their probationary
period shall be considered regular or permanent. (Emphasis supplied)
The above provision clearly provides that full-time teachers become regular or permanent
employees once they have satisfactorily completed the probationary period of three school
years.37 The use of the term satisfactorily necessarily connotes the requirement for schools to set
reasonable standards to be followed by teachers on probationary employment. For how else can
one determine if probationary teachers have satisfactorily completed the probationary period if
standards therefor are not provided?
As such, "no vested right to a permanent appointment shall accrue until the employee has
completed the prerequisite three-year period necessary for the acquisition of a permanent status.
[However, it must be emphasized that] mere rendition of service for three consecutive years does
not automatically ripen into a permanent appointment. It is also necessary that the employee be a
full-time teacher, and that the services he rendered are satisfactory." 38
In Mercado, this Court, speaking through J. Brion, held that:
The provision on employment on probationary status under the Labor Code is a primary example of
the fine balancing of interests between labor and management that the Code has institutionalized
pursuant to the underlying intent of the Constitution.

On the one hand, employment on probationary status affords management the chance to fully
scrutinize the true worth of hired personnel before the full force of the security of tenure guarantee of
the Constitution comes into play. Based on the standards set at the start of the probationary period,
management is given the widest opportunity during the probationary period to reject hirees who fail
to meet its own adopted but reasonable standards. These standards, together with the just and
authorized causes for termination of employment [which] the Labor Code expressly provides, are the
grounds available to terminate the employment of a teacher on probationary status. x x x
Labor, for its part, is given the protection during the probationary period of knowing the company
standards the new hires have to meet during the probationary period, and to be judged on the basis
of these standards, aside from the usual standards applicable to employees after they achieve
permanent status. Under the terms of the Labor Code, these standards should be made known to
the teachers on probationary status at the start of their probationary period, or at the very least under
the circumstances of the present case, at the start of the semester or the trimester during which the
probationary standards are to be applied. Of critical importance in invoking a failure to meet the
probationary standards, is that the school should show as a matter of due process how these
standards have been applied. This is effectively the second notice in a dismissal situation that the
law requires as a due process guarantee supporting the security of tenure provision, and is in
furtherance, too, of the basic rule in employee dismissal that the employer carries the burden of
justifying a dismissal. These rules ensure compliance with the limited security of tenure guarantee
the law extends to probationary employees.
When fixed-term employment is brought into play under the above probationary period rules, the
situation as in the present case may at first blush look muddled as fixed-term employment is in
itself a valid employment mode under Philippine law and jurisprudence. The conflict, however, is
more apparent than real when the respective nature of fixed-term employment and of employment
on probationary status are closely examined.
The fixed-term character of employment essentially refers to the period agreed upon between the
employer and the employee; employment exists only for the duration of the term and ends on its own
when the term expires. In a sense, employment on probationary status also refers to a period
because of the technical meaning "probation" carries in Philippine labor law a maximum period of
six months, or in the academe, a period of three years for those engaged in teaching jobs. Their
similarity ends there, however, because of the overriding meaning that being "on probation"
connotes, i.e., a process of testing and observing the character or abilities of a person who is new to
a role or job.
Understood in the above sense, the essentially protective character of probationary status for
management can readily be appreciated. But this same protective character gives rise to the
countervailing but equally protective rule that the probationary period can only last for a specific
maximum period and under reasonable, well-laid and properly communicated standards. Otherwise
stated, within the period of the probation, any employer move based on the probationary standards
and affecting the continuity of the employment must strictly conform to the probationary rules.
x x x If we pierce the veil, so to speak, of the parties so-called fixed-term employment contracts,
what undeniably comes out at the core is a fixed-term contract conveniently used by the school to
define and regulate its relations with its teachers during their probationary period. 39 (Emphasis
supplied; italics in the original)
In the same case, this Court has definitively pronounced that "in a situation where the probationary
status overlaps with a fixed-term contract not specifically used for the fixed term it offers, Article 281
should assume primacy and the fixed-period character of the contract must give way." 40

An example given of a fixed-term contract specifically used for the fixed term it offers is a
replacement teacher or a reliever contracted for a period of one year to temporarily take the place of
a permanent teacher who is on leave. The expiration of the relievers fixed-term contract does not
have probationary status implications as he or she was never employed on probationary basis. This
is because his or her employment is for a specific purpose with particular focus on the term. There
exists an intent to end his or her employment with the school upon expiration of this term. 41
However, for teachers on probationary employment, in which case a fixed term contract is not
specifically used for the fixed term it offers, it is incumbent upon the school to have not only set
reasonable standards to be followed by said teachers in determining qualification for regular
employment, the same must have also been communicated to the teachers at the start of the
probationary period, or at the very least, at the start of the period when they were to be applied.
These terms, in addition to those expressly provided by the Labor Code, would serve as the just
cause for the termination of the probationary contract. The specific details of this finding of just
cause must be communicated to the affected teachers as a matter of due process. 42 Corollarily,
should the teachers not have been apprised of such reasonable standards at the time specified
above, they shall be deemed regular employees.
1wphi1

In Tamsons Enterprises, Inc. v. Court of Appeals, 43 we held that "[t]he law is clear that in all cases of
probationary employment, the employer shall [convey] to the employee the standards under which
he will qualify as a regular employee at the time of his engagement. Where no standards are made
known to the employee at that time, he shall be deemed a regular employee.
In this case, glaringly absent from petitioners evidence are the reasonable standards that
respondent was expected to meet that could have served as proper guidelines for purposes of
evaluating his performance. Nowhere in the Teachers Contract 44 could such standards be
found.45 Neither was it mentioned that the same were ever conveyed to respondent. Even assuming
that respondent failed to meet the standards set forth by CSR and made known to the former at the
time he was engaged as a teacher on probationary status, still, the termination was flawed for failure
to give the required notice to respondent. 46 This is because Book VI, Rule I, Section 2 of the IRR of
the Labor Code provides:
Section 2. Security of Tenure. (a) In cases of regular employment, the employer shall not terminate
the services of an employee except for just or authorized causes as provided by law, and subject to
the requirements of due process.
(b) The foregoing shall also apply in cases of probationary employment; provided, however,
that in such cases, termination of employment due to failure of the employee to qualify in
accordance with the standards of the employer made known to the former at the time of
engagement may also be a ground for termination of employment.
xxxx
(d) In all cases of termination of employment, the following standards of due process shall be
substantially observed:
xxxx
If the termination is brought about by the completion of a contract or phase thereof, or by failure of
an employee to meet the standards of the employer in the case of probationary employment, it shall
be sufficient that a written notice is served the employee, within a reasonable time from the effective
date of termination. (Emphasis supplied)

Curiously, despite the absence of standards, Mofada mentioned the existence of alleged
performance evaluations47 in respondents case. We are, however, in a quandary as to what could
have been the basis of such evaluation, as no evidence were adduced to show the reasonable
standards with which respondents performance was to be assessed or that he was informed
thereof. Notably too, none of the supposed performance evaluations were presented. These flaws
violated respondents right to due process. As such, his dismissal is, for all intents and purposes,
illegal.
As a matter of due process, teachers on probationary employment, just like all probationary
employees, have the right to know whether they have met the standards against which their
performance was evaluated. Should they fail, they also have the right to know the reasons therefor.
It should be pointed out that absent any showing of unsatisfactory performance on the part of
respondent, it can be presumed that his performance was satisfactory, especially taking into
consideration the fact that even while he was still more than a year into his probationary
employment, he was already designated Prefect of Discipline. In such capacity, he was able to
uncover the existence of a drug syndicate within the school and lessen the incidence of drug use
therein. Yet despite respondents substantial contribution to the school, petitioners chose to
disregard the same and instead terminated his services; while most of those who were involved in
drug activities within the school were punished with a slap on the wrist as they were merely made to
write letters promising that the incident will not happen again. 48
Mofada would also have us believe that respondent chose to resign as he feared for his life, thus,
the schools decision not to renew his contract. However, no resignation letter was presented.
Besides, this is contrary to respondents act of immediately filing the instant case against petitioners.
WHEREFORE, the Petition is hereby DENIED. The August 31, 2005 Decision and the November 10,
2005 Resolution of the Court of Appeals in CA-G.R. SP No. 85188 are AFFIRMED. The status quo
order of this Court is LIFTED.
SO ORDERED.
MARIANO
Associate Justice

C.

DEL

CASTILLO

Job contracting
Effects of Labor-only contracting
Trilateral relationship in job contracting
Articles 106 to 109, Labor Code
Article 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.

In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor and Employment may, by appropriate regulations, restrict or prohibit the
contracting-out of labor to protect the rights of workers established under this Code. In so prohibiting
or restricting, he may make appropriate distinctions between labor-only contracting and job
contracting as well as differentiations within these types of contracting and determine who among
the parties involved shall be considered the employer for purposes of this Code, to prevent any
violation or circumvention of any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.
Article 107. Indirect employer. The provisions of the immediately preceding article shall likewise
apply to any person, partnership, association or corporation which, not being an employer, contracts
with an independent contractor for the performance of any work, task, job or project.
Article 108. Posting of bond. An employer or indirect employer may require the contractor or
subcontractor to furnish a bond equal to the cost of labor under contract, on condition that the bond
will answer for the wages due the employees should the contractor or subcontractor, as the case
may be, fail to pay the same.
Article 109. Solidary liability. The provisions of existing laws to the contrary notwithstanding, every
employer or indirect employer shall be held responsible with his contractor or subcontractor for any
violation of any provision of this Code. For purposes of determining the extent of their civil liability
under this Chapter, they shall be considered as direct employers.

Department Order No. 18-A

DEPARTMENT ORDER NO. 18-A
Series of 2011
RULES IMPLEMENTING ARTICLES 106 TO 109 OF THE LABOR CODE, AS
AMENDED
By virtue of the power vested in the Secretary of Labor and Employment under
Articles 5 and 106 to 109 of the Labor Code of the Philippines, as amended, the
following regulations governing contracting and subcontracting arrangements are
hereby issued:
Section 1. Guiding principles. Contracting and subcontracting arrangements are
expressly allowed by law and are subject to regulations for the promotion of
employment and the observance of the rights of workers to just and humane

conditions of work, security of tenure, self-organization and collective bargaining.

Labor-only contracting as defined herein shall be prohibited.
Section 2. Coverage. These Rules shall apply to all parties of contracting and
subcontracting arrangements where employer-employee relationships exist. It shall
also apply to cooperatives engaging in contracting or subcontracting arrangements.
Contractors and subcontractors referred to in these Rules are prohibited from
engaging in recruitment and placement activities as defined in Article 13(b) of the
Labor Code, whether for local or overseas employment.
Section 3. Definition of terms. The following terms as used in these Rules, shall
mean:
(a) Bond/s refers to the bond under Article 108 of the Labor Code that the
principal may require from the contractor to be posted equal to the cost of labor
under contract. The same may also refer to the security or guarantee posted by the
principal for the payment of the services of the contractors under the Service
Agreement.
(b) Cabo refers to a person or group of persons or to a labor group which, in the
guise of a labor organization, cooperative or any entity, supplies workers to an
employer, with or without any monetary or other consideration, whether in the
capacity of an agent of the employer or as an ostensible independent contractor.
(c) Contracting or Subcontracting refers to an arrangement whereby a
principal agrees to put out or farm out with a contractor the performance or
completion of a specific job, work or service within a definite or predetermined
period, regardless of whether such job, work or service is to be performed or
completed within or outside the premises of the principal.
(d) Contractor refers to any person or entity, including a cooperative, engaged
in a legitimate contracting or subcontracting arrangement providing either services,
skilled workers, temporary workers, or a combination of services to a principal under
a Service Agreement.
(e) Contractors employee includes one employed by a contractor to perform
or complete a job, work, or service pursuant to a Service Agreement with a
principal.
It shall also refer to regular employees of the contractor whose functions are not
dependent on the performance or completion of a specific job, work or service
within a definite period of time, i.e., administrative staff.
(f) In-house agency refers to a contractor which is owned, managed, or
controlled directly or indirectly by the principal or one where the principal
owns/represents any share of stock, and which operates solely or mainly for the
principal.
(g) Net Financial Contracting Capacity (NFCC)1 refers to the formula to
determine the financial capacity of the contractor to carry out the job, work or

services sought to be undertaken under a Service Agreement. NFCC is current

assets minus current liabilities multiplied by K, which stands for contract duration
equivalent to: 10 for one year or less; 15 for more than one (1) year up to two (2)
years; and 20 for more than two (2) years, minus the value of all outstanding or
ongoing projects including contracts to be started.
(h) Principal refers to any employer, whether a person or entity, including
government agencies and government-owned and controlled-corporations,
who/which puts out or farms out a job, service or work to a contractor.
(i) Right to control refers to the right reserved to the person for whom the
services of the contractual workers are performed, to determine not only the end to
be achieved, but also the manner and means to be used in reaching that end.
(j) Service Agreement refers to the contract between the principal and
contractor containing the terms and conditions governing the performance or
completion of a specific job, work or service being farmed out for a definite or
predetermined period.
(k) Solidary liability refers to the liability of the principal, pursuant to the
provision of Article 109 of the Labor Code, as direct employer together with the
contractor for any violation of any provision of the Labor Code.
It also refers to the liability of the principal, in the same manner and extent that
he/she is liable to his/her direct employees, to the extent of the work performed
under the contract when the contractor fails to pay the wages of his/her employees,
as provided in Article 106 of the Labor Code, as amended.
(l) Substantial capital refers to paid-up capital stocks/shares of at least Three
Million Pesos (P3,000,000.00) in the case of corporations, partnerships and
cooperatives; in the case of single proprietorship, a net worth of at least Three
Million Pesos (P3,000,000.00).

REFERS TO THE FORMULA SET OUT IN THE IMPLEMENTING RULES AND

REGULATIONS OF REPUBLIC ACT NO. 9184, OR AN ACT PROVIDING FOR THE
MODERNIZATION,
STANDARDIZATION
AND
REGULATION
OF
THE
PROCUREMENT ACTIVITIES OF THE GOVERNMENT AND FOR OTHER
PURPOSES.

(m) Trilateral Relationship refers to the relationship in a contracting or

subcontracting arrangement where there is a contract for a specific job, work or
service between the principal and the contractor, and a contract of employment
between the contractor and its workers. There are three (3) parties involved in these
arrangements: the principal who decides to farm out a job, work or service to a
contractor; the contractor who has the capacity to independently undertake the
performance of the job, work or service; and the contractual workers engaged by
the contractor to accomplish the job, work or service.

Section 4. Legitimate contracting or subcontracting. Contracting

subcontracting shall be legitimate if all the following circumstances concur:

or

(a) The contractor must be registered in accordance with these Rules and carries a
distinct and independent business and undertakes to perform the job, work or
service on its own responsibility, according to its own manner and method, and free
from control and direction of the principal in all matters connected with the
performance of the work except as to the results thereof;
(b) The contractor has substantial capital and/or investment; and
(c) The Service Agreement ensures compliance with all the rights and benefits
under Labor Laws.
Section 5. Trilateral relationship in contracting arrangements; Solidary
liability. In legitimate contracting or subcontracting arrangement there exists:
(a) An employer-employee relationship between the contractor and the employees it
engaged to perform the specific job, work or service being contracted; and
(b) A contractual relationship between the principal and the contractor as governed
by the provisions of the Civil Code.
In the event of any violation of any provision of the Labor Code, including the failure
to pay wages, there exists a solidary liability on the part of the principal and the
contractor for purposes of enforcing the provisions of the Labor Code and other
social legislation, to the extent of the work performed under the employment
contract.
However, the principal shall be deemed the direct employer of the contractors
employee in cases where there is a finding by a competent authority of labor-only
contracting, or commission of prohibited activities as provided in Section 7, or a
violation of either Sections 8 or 9 hereof.
Section 6. Prohibition against labor-only contracting. Labor-only contracting
is hereby declared prohibited. For this purpose, labor only contracting shall refer to
an arrangement where:
(a) The contractor does not have substantial capital or investments in the form of
tools, equipment, machineries, work premises, among others, and the employees
recruited and placed are performing activities which are usually necessary or
desirable to the operation of the company, or directly related to the main business
of the principal within a definite or predetermined period, regardless of whether
such job, work or service is to be performed or completed within or outside the
premises of the principal; or
(b) The contractor does not exercise the right to control over the performance of the
work of the employee.
Section 7. Other Prohibitions. Notwithstanding Section 6 of these Rules, the
following are hereby declared prohibited for being contrary to law or public policy:

A. Contracting out of jobs, works or services when not done in good faith and not
justified by the exigencies of the business such as the following:
(1) Contracting out of jobs, works or services when the same results in the
termination or reduction of regular employees and reduction of work hours or
reduction or splitting of the bargaining unit.
(2) Contracting out of work with a Cabo.
(3) Taking undue advantage of the economic situation or lack of bargaining strength
of the contractors employees, or undermining their security of tenure or basic
rights, or circumventing the provisions of regular employment, in any of the
following instances:
(i) Requiring them to perform functions which are currently being performed by the
regular employees of the principal; and
(ii) Requiring them to sign, as a precondition to employment or continued
employment, an antedated resignation letter; a blank payroll; a waiver of labor
standards including minimum wages and social or welfare benefits; or a quitclaim
releasing the principal, contractor or from any liability as to payment of future
claims.
(4) Contracting out of a job, work or service through an in-house agency.
(5) Contracting out of a job, work or service that is necessary or desirable or directly
related to the business or operation of the principal by reason of a strike or lockout
whether actual or imminent.
(6) Contracting out of a job, work or service being performed by union members
when such will interfere with, restrain or coerce employees in the exercise of their
rights to self-organization as provided in Art. 248 (c) of the Labor Code, as
amended.
(7) Repeated hiring of employees under an employment contract of short duration
or under a Service Agreement of short duration with the same or different
contractors, which circumvents the Labor Code provisions on Security of Tenure.
(8) Requiring employees under a subcontracting arrangement to sign a contract
fixing the period of employment to a term shorter than the term of the Service
Agreement, unless the contract is divisible into phases for which substantially
different skills are required and this is made known to the employee at the time of
engagement.
(9) Refusal to provide a copy of the Service Agreement and the employment
contracts between the contractor and the employees deployed to work in the
bargaining unit of the principals certified bargaining agent to the sole and exclusive
bargaining agent (SEBA).
(10) Engaging or maintaining by the principal of subcontracted employees in
excess of those provided for in the applicable Collective Bargaining
Agreement (CBA) or as set by the Industry Tripartite Council (ITC).

B. Contracting out of jobs, works or services analogous to the above when not done
in good faith and not justified by the exigencies of the business.
Section 8. Rights of contractors employees. All contractors employees,
whether deployed or assigned as reliever, seasonal, week-ender, temporary, or
promo jobbers, shall be entitled to all the rights and privileges as provided for in the
Labor Code, as amended, to include the following:
(a) Safe and healthful working conditions;
(b) Labor standards such as but not limited to service incentive leave, rest days,
overtime pay, holiday pay, 13 th month pay, and separation pay as may be provided
in the Service Agreement or under the Labor Code;
(c) Retirement benefits under the SSS or retirement plans of the contractor, if there
is any;
(d) Social security and welfare benefits;
(e) Self-organization, collective bargaining and peaceful concerted activities; and
(f) Security of tenure.
Section 9. Required contracts under these Rules.
(a) Employment contract between the contractor and its employee. Notwithstanding
any oral or written stipulations to the contrary, the contract between the contractor
and its employee shall be governed by the provisions of Articles 279 and 280 of the
Labor Code, as amended. It shall include the following terms and conditions:
i. The specific description of the job, work or service to be performed by
the employee;
ii. The place of work and terms and conditions of employment, including
a statement of the wage rate applicable to the individual employee; and
iii. The term or duration of employment that must be co-extensive with the Service
Agreement or with the specific phase of work for which the employee is engaged.
The contractor shall inform the employee of the foregoing terms and conditions of
employment in writing on or before the first day of his/her employment.
(b) Service Agreement between the principal and the contractor. The Service
Agreement shall include the following:
i. The specific description of the job, work or service being subcontracted.
ii.
The
place
of
work
and
terms
and
conditions
governing
the
contracting arrangement, to include the agreed amount of the services to be
rendered, the standard administrative fee of not less than ten percent (10%) of the
total contract cost.
iii. Provisions ensuring compliance with all the rights and benefits of the employees
under the Labor Code and these Rules on: provision for safe and healthful working

conditions; labor standards such as, service incentive leave, rest days, overtime
pay, 13th month pay and separation pay; retirement benefits; contributions and
remittance of SSS, Philhealth, PagIbig Fund, and other welfare benefits; the right to
self-organization, collective bargaining and peaceful concerted action; and the right
to security of tenure.
iv. A provision on the Net Financial Contracting Capacity of the contractor, which
must be equal to the total contract cost.
v. A provision on the issuance of the bond/s as defined in Section 3(m) renewable
every year.
vi. The contractor or subcontractor shall directly remit monthly the employers share
and employees contribution to the SSS, ECC, Philhealth and Pag-ibig.
vii. The term or duration of engagement.
The Service Agreement must conform to the DOLE Standard Computation and
Standard Service Agreement, which form part of these Rules as Annexes
A and B.
Section 10. Duties of the principal. Pursuant to the authority of the Secretary of
Labor and Employment to restrict or prohibit the contracting of labor to protect the
rights of the workers and to ensure compliance with the provisions of the Labor
Code, as amended, the principal, as the indirect employer or the user of the
services of the contractor, is hereby required to observe the provisions of these
Rules.
Section 11. Security of tenure of contractors employees. It is understood
that all contractors employees enjoy security of tenure regardless of whether the
contract of employment is co-terminus with the service agreement, or for a specific
job, work or service, or phase thereof.
Section 12. Observance of required standards of due process;
requirements of notice. In all cases of termination of employment, the standards
of due process laid down in Article 277(b) of the Labor Code, as amended, and
settled jurisprudence on the matter2, must be observed. Thus, the following is
hereby set out to clarify the standards of due process that must be observed:
I. For termination of employment based on just causes as defined in Article 282 of
the Code, the requirement of two written notices served on the employee shall
observe the following:
(A) The first written notice should contain:
(1) The specific causes or grounds for termination;
(2) Detailed narration of the facts and circumstances that will serve as basis for the
charge against the employee. A general description of the charge will not suffice;
(3) The company rule, if any, that is violated and/or the ground under Art. 282 that
is being charged against the employee; and

(4) A directive that the employee is given opportunity to submit a written

explanation within a reasonable period.
Reasonable period should be construed as a period of at least five (5) calendar
days from receipt of the notice to give the employee an opportunity to study the
accusation, consult a union official or lawyer, gather data and evidence, and decide
on the defenses against the complaint.
(B) After serving the first notice, the employer should afford the employee ample
opportunity to be heard and to defend himself/herself with the assistance of his/her
representative if he/she so desires, as provided in Article 277(b) of the Labor Code,
as
amended.
Ample opportunity to be heard means any meaningful opportunity (verbal or
written) given to the employee to answer the charges against him/her and submit

KING OF KINGS TRANSPORT, INC., CLAIRE DELA FUENTE, AND MELISSA

URN, VS. SANTIAGO 0. MAMAC, G.R. NO. 166208, (29 JUNE 2007); AND
FELIX B. PEREZ AND AMANTE G. DORIA V. PHILIPPINE TELEGRAPH AND
TELEPHONE COMPANY AND JOSE LUIS SANTIAGO, G.R. NO. 152048, (7
APRIL 2009), (EN BANC DECISION).

evidence in support of his/her defense, whether in a hearing, conference or some

other fair, just and reasonable way. A formal hearing or conference becomes
mandatory only when requested by the employee in writing or substantial
evidentiary disputes exist or a company rule or practice requires it, or when similar
circumstances justify it.
(C) After determining that termination of employment is justified, the employer
contractor shall serve the employee a written notice of termination indicating
that: (1) all circumstances involving the charge against the employees have been
considered; and (2) the grounds have been established to justify the severance of
their employment.
The foregoing notices shall be served on the employees last known address.
1. For termination of employment based on authorized causes defined in Article
283 of the Labor Code, the requirement of due process shall be deemed
complied with upon service of a written notice to the employee and the
appropriate regional office of the Department of Labor and Employment at
least thirty days before the effectivity of the termination, specifying the
ground or grounds for termination.
2. If the termination is brought about by the completion of the contract or phase
thereof, no prior notice is required. If the termination is brought about by the
failure of a probationary employee to meet the reasonable standards of the

employer, which was made known to the employee at the time of his/her
employment, it shall be sufficient that a written notice is served upon the
employee within a reasonable time prior to the expiration of the probationary
period.
Section 13. Effect of termination of employment. The termination of
employment of the contractor employee prior to the expiration of the Service
Agreement shall be governed by Articles 282, 283 and 284 of the Labor Code.
In case the termination of employment is caused by the pre-termination of the
Service Agreement not due to authorized causes under Article 283, the right of the
contractor employee to unpaid wages and other unpaid benefits including
unremitted legal mandatory contributions, e.g., SSS, Philhealth, Pag-ibig, ECC, shall
be borne by the party at fault, without prejudice to the solidary liability of the
parties to the Service Agreement.
Where the termination results from the expiration of the service agreement, or from
the completion of the phase of the job, work or service for which the employee is
engaged, the latter may opt for payment of separation benefits as may be provided
by law or the Service Agreement, without prejudice to his/her entitlement to the
completion bonuses or other emoluments, including retirement benefits whenever
applicable.
Section 14. Mandatory Registration and Registry of Legitimate
Contractors. Consistent with the authority of the Secretary of Labor and
Employment to restrict or prohibit the contracting out of labor to protect the rights
of workers, it shall be mandatory for all persons or entities, including cooperatives,
acting as contractors to register with the Regional Office of the Department of Labor
and Employment (DOLE) where it principally operates.
Failure to register shall give rise to the presumption that the contractor is engaged
in labor-only contracting.
Accordingly, the registration system governing contracting arrangements and
implemented by the Regional Offices of the DOLE is hereby established, with the
Bureau of Working Conditions (BWC) as the central registry.
Section 15. Requirements for registration. The application for registration as a
contractor shall be filed at the DOLE Regional Office in the region where it seeks to
principally operate. The applicant shall provide in the application form the following
information:
(a) The name and business address of the applicant and the areas where it seeks to
operate;
(b) The names and addresses of officers, if the applicant is a corporation,
partnership, cooperative or a labor organization;
(c) The nature of the applicants business and the industry or industries where the
applicant seeks to operate;

(d) The number of regular workers and the total workforce;

(e) The list of clients, if any, the number of personnel assigned to each client, if any,
and the services provided to the client;
(f) The description of the phases of the contract, including the number of employees
covered in each phase, where appropriate; and
(g) Proof of compliance with substantial capital requirement as defined in Section
3(l) of these Rules.
The application shall be supported by:
(a) A certified true copy of a certificate of registration of firm or business name from
the Securities and Exchange Commission (SEC), Department of Trade and Industry
(DTI), Cooperative Development Authority (CDA), or from the DOLE if the applicant
is a labor organization;
(b) A certified true copy of the license or business permit issued by the local
government unit or units where the contractor operates;
(c) A certified listing, with proof of ownership or lease contract, of facilities, tools,
equipment, premises implements, machineries and work premises, that are actually
and directly used by the contractor in the performance or completion of the job,
work or service contracted out. In addition, the applicant shall submit a photo of the
office building and premises where it holds office;
(d) A copy of audited financial statements if the applicant is a corporation,
partnership, cooperative or a labor organization, or copy of the latest ITR if the
applicant is a sole proprietorship; and
(e) A sworn disclosure that the registrant, its officers and owners or principal
stockholders or any one of them, has not been operating or previously operating as
a contractor under a different business name or entity or with pending cases of
violations of these Rules and/or labor standards, or with a cancelled registration. In
case any of the foregoing has a pending case, a copy of the complaint and the
latest status of the case shall be attached.
The application shall be verified. It shall include a DOLE certification of attendance
to orientation seminar on these Rules and an undertaking that the contractor shall
abide by all applicable labor laws and regulations.
Section 16. Filing and processing of application. The application with all
supporting documents shall be filed in triplicate in the Regional Office where the
applicant principally operates. No application for registration shall be accepted
unless all the requirements in the preceding Section are complied with.
Section 17. Verification inspection. Within two (2) working days upon receipt of
the application with complete supporting documents, the authorized representative
of the Regional Director shall conduct a verification inspection of the facilities, tools,
equipment, and work premises of the applicant.

Section 18. Approval or denial of the application. The Regional Office shall
deny or approve the application within one (1) working day after the verification
inspection.
Applications that fail to meet the requirements set forth in Section 15 of these Rules
shall be denied.
Section 19. Registration fee. Payment of registration fee of Twenty-Five Thousand
Pesos (P25,000.00) shall be required upon approval of the application.
Upon registration, the Regional Office shall return one set of the duly-stamped
application documents to the applicant, retain one set for its file, and transmit the
remaining set to the Bureau of Working Conditions (BWC) within five (5) days from
registration.
Section 20. Validity of certificate of registration of contractors. The
contractor shall be deemed registered only on the date of issuance of its Certificate
of Registration.
The Certificate of Registration shall be effective for three (3) years, unless cancelled
after due process. The same shall be valid in the region where it is registered.
In case the contractor has Service Agreements or operates outside the region where
it is registered, it shall request a duly authenticated copy of its Certificate of
Registration from the registering Regional Office and submit the same to the DOLE
Regional Office where it seeks to operate, together with a copy of its Service
Agreement/s in the area, for purposes of monitoring compliance with these Rules.
Section 21. Renewal of registration. All registered contractors shall apply for
renewal of their Certificates of Registration thirty (30) days before the expiration of
their registration to remain in the roster of legitimate service contractors. The
applicant shall pay a registration renewal fee of Twenty-Five Thousand Pesos
(P25,000.00) to the DOLE Regional Office.
Copies of all the updated supporting documents in letters (a) to (e) of Section 15
hereof shall be attached to the duly accomplished application form, including the
following:
(a) Certificate of membership and proof of payment of SSS, Philhealth, BIR, ECC and
Pag-Ibig contributions for the last three (3) years, as well as loan amortizations; and
(b) Certificate of pending or no pending labor standards violation case/s with the
National Labor Relations Commission (NLRC) and Department of Labor and
Employment (DOLE). The pendency of a case will not prejudice the renewal of the
registration, unless there is a finding of violation of labor standards by the DOLE
Regional Director.
Section 22. Semi-annual reporting. The contractor shall submit in triplicate its
subscribed semi-annual report using a prescribed form to the appropriate Regional
Office. The report shall include:
(a) A list of contracts entered with the principal during the subject reporting period;

(b) The number of workers covered by each contract with the principal;
(c) Proof of payment of remittances to the Social Security System (SSS), the Pag-lbig
Fund, Philhealth, Employees Compensation Commission (ECC), and Bureau of
Internal Revenue (BIR) due its employees during the subject reporting period and of
amortization of declared loans due from its employees; and
(d) A certified listing of all cases filed against the contractor before the NLRC and
DOLE.
The Regional Office shall return one set of the duly-stamped report to the
contractor, retain one set for its file, and transmit the remaining set to the Bureau of
Working Conditions (BWC) within five (5) days from receipt thereof.
Section 23. Grounds for cancellation of registration. The Regional Director
shall, upon a verified complaint, cancel or revoke the registration of a contractor
after due process, based on any of the following grounds:
(a) Misrepresentation of facts in the application;
(b) Submission of a falsified or tampered application or supporting documents to the
application for registration;
(c) Non-submission of Service Agreement between the principal and the contractor
when required to do so;
(d) Non-submission of the required semi-annual report as provided in Section 22
(Semi-annual reporting) hereof;
(e) Findings through arbitration that the contractor has engaged in labor-only
contracting and/or the prohibited activities as provided in Section 7 (Other
Prohibitions) hereof;
(f) Non-compliance with labor standards and working conditions;
(g) Findings of violation of Section 8 (Rights of contractors employees) or Section 9
(Required contracts) of these Rules;
(h) Non-compliance with SSS, the HDMF, Pag-Ibig, Philhealth, and ECC laws; and
(i) Collecting any fees not authorized by law and other applicable rules and
regulations.
Section 24. Due process in cancellation of registration. Complaint/s based on
any of the grounds enumerated in the preceding Section against the contractor
shall be filed in writing and under oath with the Regional Office which issued the
Certificate of Registration.
The complaint/s shall state the following:
(a) The name/s and address/es of the complainant/s;
(b) Name and address of the contractor;

(c) The ground/s for cancellation;

(d) When and where the action complained of happened;
(e) The amount of money claim, if any; and
(f) The relief/s sought.
Upon receipt of the complaint, the Regional Director shall direct the contractor, with
notice to the complainant, to file a verified answer/counter affidavit within ten (10)
calendar days without extension, incorporating therein all pertinent documents in
support of his/her defenses, with proof of service of a copy to the complainant.
Failure to file an answer/counter affidavit shall constitute a waiver on the part of the
respondent. No motion to dismiss shall be entertained.
The Regional Director or his duly authorized representative may conduct a
clarificatory hearing within the prescribed ten (10) calendar days within which to file
a verified answer/counter affidavit.
Within the said ten (10) calendar days period, the contractor shall make the
necessary corrections/rectifications on the violations that are immediately
rectifiable upon its own initiative in order to be fully compliant.
The Regional Director may avail himself of all reasonable means to ascertain the
facts of the case, including conduct of inspection, where appropriate, and
examination of informed persons.
The proceedings before the Regional Office shall be summary in nature.
The conduct of hearings shall be terminated within fifteen (15) calendar days from
the first scheduled clarificatory hearing. The Regional Director shall resolve the case
within ten (10) working days from the date of the last hearing. If there is no
necessity to conduct a hearing, the case shall be resolved within ten (10) working
days from receipt of the verified answer/counter affidavit.
Any motion for reconsideration from the Order of the Regional Director shall be
treated as an appeal.
Section 25. Appeal. The Order of the Regional Director is appealable to the
Secretary within ten (10) working days from receipt of the copy of the Order. The
appeal shall be filed with the Regional Office which issued the cancellation Order.
The Office of the Secretary shall have thirty (30) working days from receipt of the
records of the case to resolve the appeal. The Decision of the Secretary shall
become final and executory after ten (10) days from receipt thereof by the parties.
No motion for reconsideration of the Decision shall be entertained.
Section 26. Effects of cancellation of registration. A final Order of cancellation
shall divest the contractor of its legitimate status to engage in
contracting/subcontracting.
Such Order of cancellation shall be a ground to deny an application for renewal of
registration to a contractor under the Rules.

The cancellation of the registration of the contractor for engaging in labor-only

contracting or for violation of any of the provisions of these Rules involving a
particular Service Agreement will not, however, impair the validity of existing
legitimate job-contracting arrangements the contractor may have entered into with
other principals
prior to the cancellation of its registration. Any valid and subsisting Service
Agreement shall be respected until its expiration; thereafter, contracting with a
delisted contractor shall make the principal direct employer of all employees under
the Service Agreement pursuant to Articles 106 and 109 of the Labor Code.
Section 27. Effects of finding of labor-only contracting and/or violation of
Sections 7. 8 or 9 of the Rules. A finding by competent authority of labor-only
contracting shall render the principal jointly and severally liable with the contractor
to the latters employees, in the same manner and extent that the principal is liable
to employees directly hired by him/her, as provided in Article 106 of the Labor Code,
as amended.
A finding of commission of any of the prohibited activities in Section 7, or violation
of either Sections 8 or 9 hereof, shall render the principal the direct employer of the
employees of the contractor or subcontractor, pursuant to Article 109 of the Labor
Code, as amended.
Section 28. Retaliatory measures. Pursuant to Article 118 of the Labor Code, as
amended, it shall be unlawful for the principal, contractor, or any party privy to the
contract or services provided to refuse to pay or reduce the wages and benefits, and
discharge or in any manner discriminate against any worker who has filed any
complaint or instituted any proceeding on wages (under Title II, Book III of the Labor
Code), labor standards violation, or has testified or is about to testify in such
proceedings.
Section 29. Enforcement of labor standards and working conditions.
Consistent with Article 128 (Visitorial and Enforcement Power) of the Labor Code, as
amended, the Regional Director through his/her duly authorized representatives,
shall conduct routine inspection of establishments engaged in contracting
arrangement regardless of the number of employees engaged by the principal or by
the contractor. They 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 which may aid in the
enforcement of the Labor Code and of any labor law, wage order, or rules and
regulations issued pursuant thereto.
The findings of the duly authorized representative shall be referred to the Regional
Director for appropriate action as provided for in Article 128, and shall be furnished
the collective bargaining agent, if any.
Based on the visitorial and enforcement power of the Secretary of Labor and
Employment in Article 128 (a), (b), (c), and (d), the Regional Director shall issue

compliance orders to give effect to the labor standards provisions of the Labor Code
other labor legislation, and these Rules.
Section 30. Duty to produce copy of contract between the principal and
the contractor. The principal or the contractor shall be under an obligation to
produce a copy of the Service Agreement in the ordinary course of inspection. The
contractor shall likewise be under an obligation to produce a copy of any contract of
employment when directed to do so by the Regional Office Director or his/her
authorized representative.
Section 31. Tripartite implementation and monitoring of compliance; Use
of registration fees. A region-based tripartite monitoring team on the observance
of labor standards in contracting and subcontracting arrangements shall be
constituted as a subcommittee of the Regional Tripartite Industrial Peace Council
(RTIPC) within fifteen (15) days from the effectivity of these Rules. It shall submit a
quarterly regional monitoring report to the DOLE Secretary and to the National
Tripartite Industrial Peace Council (NTIPC). The Bureau of Working Conditions (BWC)
shall ensure the implementation of this provision, and shall conduct capacity
building to the members of the regional tripartite monitoring team.
For this purpose, a portion of the collected registration fees shall be used in the
operation of the region-based tripartite monitoring team, including in the
development of an internet-based monitoring system and database. It shall likewise
be used for transmittal of the monthly report of all registered contractors to the
Bureau of Local Employment (BLE), and in generating labor market information.
Section 32. Oversight function of the National TIPC. The National Tripartite
Industrial Peace Council (NTIPC) as created under Executive Order No. 49, Series of
1998, as amended, shall serve as the oversight committee to verify and monitor the
following:
(a) Engagement in allowable contracting activities; and
(b) e with administrative reporting requirements.
Section 33. Collective bargaining and/or Industry Tripartite Council
(ITC). Nothing herein shall preclude the parties in collective bargaining agreements
(CBAs) to determine the functions that can or cannot be farmed out or contracted
out to a legitimate contractor, including the terms and conditions of the workers
engagement under the arrangement, provided the provisions of these Rules are
observed.
In industries with established Industry Tripartite Councils (ITCs), the tripartite
partners may agree, through a voluntary code of good practices, on the functions or
processes that can or cannot be contracted out to a legitimate contractor.
Section
34.
Financial
Relief
Program;
Tripartite
Co-Regulation
Engagement. A Financial Relief Program or Unemployment Assistance Fund shall
be established for employees under a Service Agreement or employees in transition
from one Service Agreement to the next. For this purpose, the National Tripartite

Industrial Peace Council (NTIPC), upon the effectivity of this issuance, shall
constitute a Local Service Provider Tripartite Working Group (LSP-TWG) composed of
representatives of the stakeholders in the industry. The LSP-TWG shall:
(a) Recommend the mechanics and details in setting up the Financial Relief Program
or Unemployment Assistance Fund with proposed funding sources before end of
June 2012; and
(b) Draw-up the terms of a Tripartite Co-Regulation Engagement in ensuring full
compliance with labor laws for approval/endorsement by the NTIPC, including a
proposed Table of Progressive Rate of Increases in the minimum capitalization
requirement at reasonable intervals to ensure that only legitimate contractors can
engage in subcontracting arrangement.
Section 35. Enrollment in DOLE programs on improving compliance with
labor standards. For purposes of ensuring compliance with labor standards, the
principal and subcontractors covered by these Rules are encourage to enroll and
participate in the DOLE Kapatiran Work Improvement for Small Enterprise (WISE)TAV Program (Department Advisory No. 06, dated 07 March 2011) and/or in the
Incentivizing Compliance Program (Department Order No. 115-11).
Section 36. Contracting or subcontracting arrangements in the
Construction and Other Industries.Contracting or subcontracting arrangements
in the Construction Industry, under the licensing coverage of the Philippine
Construction Accreditation Board (PCAB), shall be covered by the applicable
provisions of these Rules and shall continue to be governed by Department Order
No. 19, Series of 1993 (Guidelines Governing the Employment of Workers in the
Construction Industry);Department Order No. 13, Series of 1998 (Guidelines
Governing the Occupational Safety and Health in the Construction Industry); and
DOLE-DPWH-DILG-DTI and PCAB Memorandum of Agreement-Joint Administrative
Order No. 1, Series of 2011 (on coordination and harmonization of policies and
programs on occupational safety and health in the construction industry).
In industries covered by a separate regulation of the DOLE or other government
agency, contracting or subcontracting therein shall be governed by these Rules
unless expressly provided otherwise.
Section 37. Prohibition on DOLE officials or employees. Any official or
employee of the DOLE or its attached agencies is prohibited from engaging or
having any interest in any contracting or subcontracting business.
Section 38. Non-impairment of existing contracts; Non-diminution of
benefits. Subject to the provisions of Articles 106 to 109 of the Labor Code, as
amended, the applicable provisions of the Civil Code and existing jurisprudence
nothing herein shall impair the rights or diminish the benefits being enjoyed by the
parties to existing contracting or subcontracting arrangements.
The effectivity of Certificates of Registration acquired under Department Order No.
18, Series of 2002, issued on 21 February 2002, shall be respected until expiration.

Section 39. Supersession. All rules and regulations issued by the Secretary of
Labor and Employment inconsistent with the provisions of these Rules are hereby
superseded.
Section 40. Separability Clause. If any provision or portion of these Rules are
declared void or unconstitutional, the remaining portions or provisions hereof shall
continue to be valid and effective.
Section 41. Effectivity. This Department Order shall be effective fifteen (15) days
after completion of its publication in a newspaper of general circulation.
Manila, Philippines, 14 November 2011.
(SGD.) ROSALINDA DIMAPILIS-BALDOZ
Secretary

Department Circular No. 01-12

Alilin v. Petron, G.R. No. 177592, June 9, 2014

G.R. No. 177592

June 9, 2014

AVELINO S. ALILIN, TEODORO CALESA, CHARLIE HINDANG, EUTIQUIO GINDANG, ALLAN

SUNGAHID, MAXIMO LEE, JOSE G. MORA TO, REX GABILAN, AND EUGEMA L.
LAURENTE, Petitioners,
vs.
PETRON CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:

A contractor is presumed to be a labor-only contractor, unless it proves that it has the substantial
capital, investment, tools and the like. However, where the principal is the one claiming that the
contractor is a legitimate contractor, the burden of proving the supposed status of the contractor
rests on the principal.
1

This Petition for Review on Certiorari assails the Decision dated May 10, 2006 of the Court of
Appeals (CA) in CA-G.R. SP No. 01291 which granted the Petition for Certiorari filed therewith,
reversed and set aside the February 18, 2005 Decision and August 24, 2005 Resolution of the
National Labor Relations Commission (NLRC) in NLRC Case No. V-000481-2003 and dismissed the
Complaint for illegal dismissal filed by petitioners Avelino Alilin (Alilin), Teodoro Calesa (Calesa),
Charlie Hindang (Hindang), Eutiquio Gindang (Gindang), Allan Sungahid (Sungahid), Maximo Lee
(Lee), Jose G. Morato (Morato), Rex Gabilan (Gabilan) and Eugema L. Laurente (Laurente) against
respondent Petron Corporation (Petron). Also assailed in this Petition is the CA Resolution dated
March 30, 2007 which denied petitioners Motion for Reconsideration and Supplemental Motion for
Reconsideration.
2

Factual Antecedents
Petron is a domestic corporation engaged in the oil business. It owns several bulk plants in the
country for receiving, storing and distributing its petroleum products.
In 1968, Romualdo D. Gindang Contractor, which was owned and operated by Romualdo D.
Gindang (Romualdo), started recruiting laborers for fielding to Petrons Mandaue Bulk Plant. When
Romualdo died in1989, his son Romeo D. Gindang (Romeo), through Romeo D. Gindang
Services(RDG), took over the business and continued to provide manpower services to Petron.
Petitioners were among those recruited by Romualdo D. Gindang Contractor and RDG to work in the
premises of the said bulk plant, with the corresponding dates of hiring and work duties, to wit:
Employees

Date of Hiring

Duties

Eutiquio Gindang

1968

utility/tanker receiver/barge loader/warehouseman/mixer

Eugema L. Laurente

June 1979

telephone operator/order taker

Teodoro Calesa

August 1, 1981

utility/tanker receiver/barge loader/sounder/gauger

Rex Gabilan

July 1, 1987

warehouseman/forklift driver/tanker receiver/barge loader

Charlie T. Hindang

September 18, 1990

utility/tanker receiver/barge loader/sounder/gauger

Allan P. Sungahid

September 18, 1990

filler/sealer/painter/tanker receiver/utility

Maximo S. Lee

September 18, 1990

gasul filler/painter/utility

Avelino S. Alilin

July 16, 1992

carpenter/driver

Jose Gerry M. Morato

March 16, 1993

cylinder checker/tanker receiver/grass cutter/janitor/utility

On June 1, 2000, Petron and RDG entered into a Contract for Services for the period from June 1,
2000 to May 31, 2002, whereby RDG undertook to provide Petron with janitorial, maintenance,
tanker receiving, packaging and other utility services in its Mandaue Bulk Plant. This contract was
extended on July 31, 2002 and further extended until September 30, 2002. Upon expiration thereof,
no further renewal of the service contract was done.
9

Proceedings before the Labor Arbiter

Alleging that they were barred fromcontinuing their services on October 16, 2002, petitioners Alilin,
Calesa, Hindang, Gindang, Sungahid, Lee, Morato and Gabilan filed a Complaint for illegal
dismissal, underpayment of wages, damages and attorneys fees against Petron and RDG on
November 12, 2002. Petitioner Laurente filed another Complaint for illegal dismissal, underpayment
of wages, non-payment of overtime pay, holiday pay, premium pay for holiday, rest day, 13th month
pay, service incentive leave pay, allowances, separation pay, retirement benefits, damages and
attorneys fees against Petron and RDG. The said complaints were later consolidated.
10

11

Petitioners did not deny that RDG hired them and paid their salaries. They, however, claimed that the
latter is a labor-only contractor, which merely acted as an agent of Petron, their true employer. They
asseverated that their jobs, which are directly related to Petrons business, entailed them to work
inside the premises of Petron using the required equipment and tools furnished by it and that they
were subject to Petrons supervision. Claiming to be regular employees, petitioners thus asserted
that their dismissal allegedly in view of the expiration of the service contract between Petron and
RDG is illegal.
RDG corroborated petitioners claim that they are regular employees of Petron. It alleged that Petron
directly supervised their activities; they performed jobs necessary and desirable to Petrons
business; Petron provided petitioners with supplies, tools and equipment used in their jobs; and that
petitioners workplace since the start of their employment was at Petrons bulk plant in Mandaue City.
RDG denied liability over petitioners claim of illegal dismissal and further argued that Petron cannot
capitalize on the service contract to escape liability.
Petron, on the other hand, maintained that RDG is an independent contractor and the real employer
of the petitioners. It was RDG which hired and selected petitioners, paid their salaries and wages,
and directly supervised their work. Attesting to these were two former employees of RDG and
Petrons Mandaue Terminal Superintendent whose joint affidavit and affidavit, respectively, were
submitted by Petron. Anent its allegation that RDG is an independent contractor, Petron presented
the following documents: (1) RDGs Certificate of Registration issued by the Department of Labor
and Employment (DOLE) on December 27, 2000; (2) RDGs Certificate of Registration of Business
Name issued by the Department of Trade and Industry (DTI) on August 18, 2000; (3) Contractors
Pre-Qualification Statement; (4) Conflict of Interest Statement signed by Romeo Gindang as
manager of RDG; (5) RDGs Audited Financial Statements for the years 1998 1999 and 2000; (6)
RDGs Mayors Permit for the years 2000 and 2001; (7) RDGs Certificate of Accreditation issued
by DTI in October 1991; (8) performance bond and insurance policy posted to insure against
liabilities; (9) Social Security System (SSS) Online Inquiry System Employee Contributions and
Employee Static Information; and, (10) Romeos affidavit stating that he had paid the salaries of
his employees assigned to Petron for the period of November 4, 2001 to December 31, 2001. Petron
argued that with the expiration of the service contract it entered with RDG, petitioners term of
employment has concomitantly ended. And not being the employer, Petron cannot be held liable for
petitioners claim of illegal dismissal.
12

13

14

15

16

17

18

21

23

24

26

19

20

22

25

27

In a Decision dated June 12, 2003,the Labor Arbiter ruled that petitioners are regular employees of
Petron. It found that their jobs were directly related to Petrons business operations; they worked
under the supervision of Petrons foreman and supervisor; and they were using Petrons tools and
equipment in the performance of their works. The Labor Arbiter also found that Petron merely utilized
RDG in its attempt to hide the existence of employee-employer relationship between it and
petitioners and avoid liability under labor laws. And there being no showing that petitioners dismissal
was for just or authorized cause, the Labor Arbiter declared them to have been illegally dismissed.
Petron was thus held solidarily liable with Romeo for the payment of petitioners separation pay (in
lieu of reinstatement due to strained relations with Petron) fixed at one month pay for every year of
service and backwages computed on the basis of the last salary rate at the time of dismissal. The
28

dispositive portion of the Decision reads: WHEREFORE, premises considered, judgment is hereby
rendered ordering the respondents Petron Corporation and Romeo Gindang to pay the complainants
as follows:
1. Teodoro Calesa

P 136,890.00

2. Eutiquio Gindang

P 202,800.00

3. Charlie T. Gindang

P 91,260.00

4. Allan P. Sungahid

P 91,260.00

5. Jose Gerry Morato

P 76,050.00

6. Avelino A. Alilin

P 95,680.00

7. Rex S. Gabilan

P 106,470.00

8. Maximo S. Lee

P 91,260.00

9. Eugema Minao Laurente

P 150,800.00

Total award

P1,042,470.00

The other claims are dismissed for lack of merit.

SO ORDERED.

29

Proceedings before the National Labor Relations Commission

Petron continued to insist that there is no employer-employee relationship between it and petitioners.
The NLRC, however, was not convinced. In its Decision of February 18, 2005, the NLRC ruled that
petitioners are Petrons regular employees because they are performing job assignments which are
germane to its main business. Thus:
30

WHEREFORE, premises considered, the Decision of the Labor Arbiter is hereby affirmed. It is
understood that the grant of backwages shall be until finality of the Decision.
The appeal of respondent Petron Corporation is hereby DISMISSED for lack of merit.
SO ORDERED.

31

The NLRC also denied Petrons Motion for Reconsideration in its Resolution of August 24, 2005.
32

Proceedings before the Court of Appeals

Petron filed a Petition for Certiorari with prayer for the issuance of a temporary restraining order or
writ of injunction before the CA. The said court resolved to grant the injunction. Hence, a Writ of
Preliminary Injunction to restrain the implementation of the February 18, 2005 Decision and August
24, 2005 Resolution of the NLRC was issued on March 3, 2006.
33

34

In a Decision dated May 10, 2006, the CA found no employer-employee relationship between the
parties. According to it, the records of the case do not show that petitioners were directly hired,
selected or employed by Petron; that their wages and other wage related benefits were paid by the
35

said company; and that Petron controlled the manner by which they carried out their tasks. On the
other hand, RDG was shown to be responsible for paying petitioners wages. In fact, SSS records
show that RDG is their employer and actually the one remitting their contributions thereto. Also, two
former employees of RDG who were likewise assigned in the Mandaue Bulk Plant confirmed by way
of a joint affidavit that it was Romeo and his brother Alejandre Gindang who supervised their work,
not Petrons foreman or supervisor. This was even corroborated by the Terminal Superintendent of
the Mandaue Bulk Plant.
The CA also found RDG to be an independent labor contractor with sufficient capitalization and
investment as shown by its financial statement for year-end 2000. In addition, the works for which
RDG was contracted to provide were menial which were neither directly related nor sensitive and
critical to Petrons principal business. The CA disposed of the case as follows:
WHEREFORE, the Petition is GRANTED. The February 18, 2005 Decision and the August 24, 2005
Resolution of the Fourth Division of the National Labor Relations Commission in NLRC Case No. V000481-2003, entitled "Teodoro Calesa et al. vs. Petron Corporation and R.D. Gindang Services",
having been rendered with grave abuse of discretion amounting to excess of jurisdiction, are hereby
REVERSED and SET ASIDE and a NEW ONE is entered DISMISSING private respondents
complaint against petitioner. It is so ordered.
36

Petitioners filed a Motion for Reconsideration insisting that Petron illegally dismissed them; that
RDG is a labor-only contractor; and that they performed jobs which are sensitive to Petrons
business operations. To support these, they attached to their Supplemental Motion for
Reconsideration Affidavits of former employees of Petron attesting to the fact that their jobs were
critical to Petrons business operations and that they were carried out under the control of a Petron
employee.
37

38

39

Petitioners motions were, however, denied by the CA in a Resolution dated March 30, 2007.
40

Hence, this Petition.

Issue
The primary issue to be resolved in this case is whether RDG is a legitimate job contractor. Upon
such finding hinges the determination of whether an employer-employee relationship exists between
the parties as to make Petron liable for petitioners dismissal.
Our Ruling
The Petition is impressed with merit. The conflicting findings of the Labor Arbiter and the NLRC on
one hand, and of the CA on the other, constrains the Court to review the factual issues involved in
this case.
As a general rule, the Court does not review errors that raise factual questions. Nonetheless, while
it is true that the determination of whether an employer-employee relationship existed between the
parties basically involves a question of fact, the conflicting findings of the Labor Arbiter and the
NLRC on one hand, and of the CA on the other, constrains the Court to review and reevaluate such
factual findings.
41

42

Labor-only contracting, distinguished

from permissible job contracting.

The prevailing rule on labor-only contracting at the time Petron and RDG entered into the Contract
for Services in June 2000 is DOLE Department Order No. 10, series of 1997, the pertinent provision
of which reads:
43

Section 4. x x x
xxxx
(f) "Labor-only contracting" prohibited under this Rule is an arrangement where the contractor or
subcontractor merely recruits, supplies or places workers to perform a job, work or service for a
principal and the following elements are present:
(i) The contractor or subcontractor does not have substantial capital or investment to actually
perform the job, work or service under its own account and responsibility; and
(ii) The employees recruited, supplied or placed by such contractor or subcontractor are
performing activities which are directly related to the main business of the principal.
xxxx
Section 6. Permissible contracting or subcontracting. - Subject to the conditions set forth in Section 3
(d) and (e) and Section 5 hereof, the principal may engage the services of a contractor or
subcontractor for the performance of any of the following:
(a) Works or services temporarily or occasionally needed to meet abnormal increase in the
demand of products or services, provided that the normal production capacity or regular
workforce of the principal cannot reasonably cope with such demands;
(b) Works or services temporarily or occasionally needed by the principal for undertakings
requiring expert or highly technical personnel to improve the management or operations of
an enterprise;
(c) Services temporarily needed for the introduction or promotion of new products, only for
the duration of the introductory or promotional period;
(d) Works or services not directly related or not integral to the main business or operation of
the principal, including casual work, janitorial, security, landscaping, and messengerial
services, and work not related to manufacturing processes in manufacturing establishments;
(e) Services involving the public display of manufacturers products which do not involve the
act of selling or issuance of receipts or invoices;
(f) Specialized works involving the use of some particular, unusual or peculiar skills,
expertise, tools or equipment the performance of which is beyond the competence of the
regular workforce or production capacity of the principal; and
(g) Unless a reliever system is in place among the regular workforce, substitute services for
absent regular employees, provided that the period of service shall be coextensive with the
period of absence and the same is made clear to the substitute employee at the time of

engagement. The phrase "absent regular employees" includes those who are serving
suspensions or other disciplinary measures not amounting to termination of employment
meted out by the principal, but excludes those on strike where all the formal requisites for the
legality of the strike have been prima facie complied with based on the records filed with the
National Conciliation and Mediation Board.
"Permissible job contracting or subcontracting refers to an arrangement whereby a principal agrees
to farm out with a contractor or subcontractor the performance of a specific job, work, or service
within a definite or predetermined period, regardless of whether such job, work or, service is to be
performed or completed within or outside the premises of the principal. Under this arrangement, the
following conditions must be met: (a) the contractor carries on a distinct and independent business
and undertakes the contract work on his account under his own responsibility according to his own
manner and method, free from the control and direction of his employer or principal in all matters
connected with the performance of his work except as to the results thereof; (b) the contractor has
substantial capital or investment; and (c) the agreement between the principal and contractor or
subcontractor assures the contractual employees entitlement to all labor and occupational safety
and health standards, free exercise of the right to self-organization, security of tenure, and social
welfare benefits." Labor-only contracting, on the other hand, is a prohibited act, defined as
"supplying workers to an employer who does not have substantial capital or investment in the form of
tools, equipment, machineries, work premises, among others, and the workers recruited and placed
by such person are performing activities which are directly related to the principal business of such
employer." "[I]n distinguishing between prohibited labor-only contracting and permissible job
contracting, the totality of the facts and the surrounding circumstances of the case shall be
considered." Generally, the contractor is presumed to be a labor-only contractor, unless such
contractor overcomes the burden of proving that it has the substantial capital, investment, tools and
the like. However, where the principal is the one claiming that the contractor is a legitimate
contractor, as in the present case, said principal has the burden of proving that supposed status. It
is thus incumbent upon Petron, and not upon petitioners as Petron insists, to prove that RDG is an
independent contractor.
44

45

46

47

48

Petron
failed
to
discharge
proving
that
RDG
contractor.
Hence,
the
RDG is a labor-only contractor stands.

the

burden
a
presumption

is

of
legitimate
that

Here, the audited financial statements and other financial documents of RDG for the years 1999 to
2001 establish that it does have sufficient working capital to meet the requirements of its service
contract. In fact, the financial evaluation conducted by Petron of RDGs financial statements for
years 1998-2000 showed RDG to have a maximum financial capability of Php4.807 Million as of
December 1998, and Php1.611 Million as of December 2000. Petron was able to establish RDGs
sufficient capitalization when it entered into the service contract in 2000. The Court stresses though
that this determination of RDGs status as an independent contractor is only with respect to its
financial capability for the period covered by the financial and other documents presented. In other
words, the evidence adduced merely proves that RDG was financially qualified as a legitimate
contractor but only with respect to its last service contract with Petron in the year 2000.
49

50

As may be recalled, petitioners have rendered work for Petron for a long period of time even before
the service contract was executed in 2000. The respective dates on which petitioners claim to have
started working for Petron, as well as the fact that they have rendered continuous service to it until
October 16, 2002, when they were prevented from entering the premises of Petrons Mandaue Bulk
Plant, were not at all disputed by Petron. In fact, Petron even recognized that some of the petitioners
were initially fielded by Romualdo Gindang, the father of Romeo, through RDGs precursor,

Romualdo D.Gindang Contractor, while the others were provided by Romeo himself when he took
over the business of his father in 1989. Hence, while Petron was able to establish that RDG was
financially capable as a legitimate contractor at the time of the execution of the service contract in
2000, it nevertheless failed to establish the financial capability of RDG at the time when petitioners
actually started to work for Petron in 1968, 1979, 1981, 1987, 1990,1992 and 1993.
1wphi1

Sections 8 and 9,Rule VIII, Book III of the implementing rules of the Labor Code, in force since
1976 and prior to DOLE Department Order No. 10, series of 1997, provide that for job contracting to
be permissible, one of the conditions that has to be met is that the contractor must have substantial
capital or investment. Petron having failed to show that this condition was met by RDG, it can be
concluded, on this score alone, that RDG is a mere labor-only contractor. Otherwise stated, the
presumption that RDG is a labor-only contractor stands due to the failure of Petron to discharge the
burden of proving the contrary.
51

52

The Court also finds, as will be discussed below, that the works performed by petitioners were
directly related to Petrons business, another factor which negates Petrons claim that RDG is an
independent contractor.
Petrons
power
petitioners exists in this case.

of

control

over

"[A] finding that a contractor is a labor-only contractor is equivalent to declaring that there is an
employer-employee relationship between the principal and the employees of the supposed
contractor." In this case, the employer employee relationship between Petron and petitioners
becomes all the more apparent due to the presence of the power of control on the part of the former
over the latter.
53

It was held in Orozco v. The Fifth Division of the Hon. Court of Appeals that:
54

This Court has constantly adhered to the "four-fold test" to determine whether there exists an
employer-employee relationship between the parties. The four elements of an employment
relationship are: (a) the selection and engagement of the employee; (b) the payment of wages; (c)
the power of dismissal; and (d) the power to control the employees conduct.
Of these four elements, it is the power to control which is the most crucial and most determinative
factor, so important, in fact, that, the other elements may even be disregarded." (Emphasis supplied)
Hence, the facts that petitioners were hired by Romeo or his father and that their salaries were paid
by them do not detract from the conclusion that there exists an employer-employee relationship
between the parties due to Petrons power of control over the petitioners. One manifestation of the
power of control is the power to transfer employees from one work assignment to another. Here,
Petron could order petitioners to do work outside of their regular "maintenance/utility" job. Also,
petitioners were required to report for work everyday at the bulk plant, observe an 8:00 a.m. to 5:00
p.m. daily work schedule, and wear proper uniform and safety helmets as prescribed by the safety
and security measures being implemented within the bulk plant. All these imply control. In an
industry where safety is of paramount concern, control and supervision over sensitive operations,
such as those performed by the petitioners, are inevitable if not at all necessary. Indeed, Petron
deals with commodities that are highly volatile and flammable which, if mishandled or not properly
attended to, may cause serious injuries and damage to property and the environment. Naturally,
supervision by Petron is essential in every aspect of its product handling in order not to compromise
the integrity, quality and safety of the products that it distributes to the consuming public.
55

Petitioners
already
status as employees of Petron.

attained

regular

Petitioners were given various work assignments such as tanker receiving, barge loading, sounding,
gauging, warehousing, mixing, painting, carpentry, driving, gasul filling and other utility works. Petron
refers to these work assignments as menial works which could be performed by any able-bodied
individual. The Court finds, however, that while the jobs performed by petitioners may be menial and
mechanical, they are nevertheless necessary and related to Petrons business operations. If not for
these tasks, Petrons products will not reach the consumers in their proper state. Indeed, petitioners
roles were vital inasmuch as they involve the preparation of the products that Petron will distribute to
its consumers.
Furthermore, while it may be true that any able-bodied individual can perform the tasks assigned to
petitioners, the Court notes the undisputed fact that for many years, it was the same able-bodied
individuals (petitioners) who performed the tasks for Petron. The engagement of petitioners for the
same works for a long period of time is a strong indication that such works were indeed necessary to
Petrons business. In view of these, and considering further that petitioners length of service entitles
them to become regular employees under the Labor Code, petitioners are deemed by law to have
already attained the status as Petrons regular employees. As such, Petron could not terminate their
services on the pretext that the service contract it entered with RDG has already lapsed. For one,
and as previously discussed, such regular status had already attached to them even before the
execution of the service contract in 2000. For another, the same does not constitute a just or
authorized cause for a valid dismissal of regular employees.
In sum, the Court finds that RDG is a labor-only contractor. As such, it is considered merely as an
agent of Petron. Consequently, the employer-employee relationship which the Court finds to exist in
this case is between petitioners as employees and Petron as their employer. Petron therefore, being
the principal employer and RDG, being the labor-only contractor, are solidarily liable for petitioners'
illegal dismissal and monetary claims.
56

WHEREFORE, the Petition is GRANTED. The May 10, 2006 Decision and March 30, 2007
Resolution of the Court of Appeals in CA-G.R. SP No. 01291 are REVERSED and SET ASIDE. The
February 18, 2005 Decision and August 24, 2005 Resolution of the National Labor Relations
Commission in NLRC Case No. V-000481-2003 are hereby REINSTATED and AFFIRMED.
SO ORDERED.
MARIANO
Associate Justice

C.

DEL

CASTILLO

First Philippine Industrial v. Calimbas, G.R. No. 179256, July 10, 2013
G.R. No. 179256

July 10, 2013

FIRST
PHILIPPINE
INDUSTRIAL
CORPORATION, PETITIONER,
vs.
RAQUEL M. CALIMBAS AND LUISA P. MAHILOM, RESPONDENTS.
DECISION

PERALTA, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of Court seeking the reversal of
the Decision1 dated March 6, 2007 and Resolution 2 dated August 16, 2007 of the Court of Appeals
(CA) in CA-G.R. SP No. 90527.
The factual and procedural antecedents, as found by the CA, are as follows:
Private respondent First Philippine Industrial Corporation (FPIC) is a domestic corporation primarily
engaged in the transportation of petroleum products by pipeline. Upon the other hand, petitioners
Raquel Calimbas and Luisa Mahilom were engaged by De Guzman Manpower Services ("DGMS")
to perform secretarial and clerical jobs for FPIC. [DGMS] is engaged in the business of supplying
manpower to render general clerical, building and grounds maintenance, and janitorial and utility
services.
On March 29, 1993, FPIC, represented by its Senior Vice-President and Head of Administration
Department, Eustaquio Generoso, Jr. entered into a Contract of Special Services with DGMS,
represented by its Operations Manager, Manuel De Guzman, wherein the latter agreed to undertake
some aspects of building and grounds maintenance at FPICs premises, offices and facilities, as well
as to provide clerical and other utility services as may be required from time to time by FPIC. The
pertinent portions of the said Contract, which took effect on April 1, 1993, reads:
B. Terms of Payment
FIRST PARTY [FPIC] shall pay the SECOND PARTY [DGMS] a contract price for services rendered
based on individual timesheets prepared and submitted by the SECOND PARTY and duly
authenticated by the FIRST PARTYs representative. The SECOND PARTY shall bill the FIRST
PARTY on a semi-monthly basis.
xxx
C. Other Terms and Conditions
SECOND PARTY shall undertake FIRST PARTYs projects only if covered by an approved Project
Contract (Appendix-B) which the FIRST PARTY will issue to the SECOND PARTY when the need
arises. The Project Contract shall indicate the scope of work to be done, duration and the manpower
required to undertake the work. The composition of the workers to be assigned to a specific
undertaking shall be agreed upon between the FIRST PARTY and the SECOND PARTY;
SECOND PARTY shall assign to FIRST PARTY competent personnel to do what is required in
accordance with the Project Contract. FIRST PARTY shall have the right to request for replacement
of an assigned personnel who is observed to be non-productive or unsafe, and if confirmed by its
own investigation and findings, SECOND PARTY shall replace such personnel;
SECOND PARTY shall provide the maintenance equipment and tools necessary to complete
assigned works. Parties hereto shall agree on the equipment, tools and supplies to be provided by
SECOND PARTY prior to the start of assigned work;
SECOND PARTY shall be liable for loss and/or damage to SECOND PARTYs property, found
caused by willful act or negligence of SECOND PARTYs personnel; and

There shall be no employer-employee relationship between the FIRST PARTY, on the one hand, and
the SECOND PARTY, and the person who the SECOND PARTY may assign to perform the services
called for, on the other. The SECOND PARTY hereby acknowledges that no authority has been
conferred upon it by the FIRST PARTY to hire any person in behalf of the FIRST PARTY. The
persons who (sic) the SECOND PARTY which hereby warrants full and faithful compliance with the
provisions of the Labor Code of the Philippines, as well as with all Presidential Decrees, Executive
Orders, General Orders, Letter of Instructions, Law Rules and Regulations pertaining to the
employment of labor now existing. SECOND PARTY shall assist and defend the FIRST PARTY in
any suit or proceedings and shall hold the FIRST PARTY free and harmless from any claims which
the SECOND PARTYs employees may lodge against the FIRST PARTY.
xxxx
Pursuant to the said Contract, petitioner Raquel Calimbas and Luisa Mahilom were engaged by the
DGMS to render services to FPIC. Thereat, petitioner Calimbas was assigned as a department
secretary at the Technical Services Department beginning June 3, 1996, while petitioner Mahilom
served as a clerk at the Money Movement Section of the Finance Division starting February 13,
1996.
On June 21, 2001, FPIC, through its Human Resources Manager, Lorna Young, informed the
petitioners that their services to the company would no longer be needed by July 31, 2001 as a
result of the "Pace-Setting" Study conducted by an outside consultant. Accordingly, on July 9, 2001,
Priscilla de Leon, Treasurer of DGMS, formally notified both the petitioners that their respective work
assignments in FPIC were no longer available to them effective July 31, 2001, citing the termination
of the Project Contract with FPIC as the main reason thereof. On August 3, 2001, petitioners
Calimbas and Mahilom signed quitclaims, releasing and discharging DGMS from whatever claims
that they might have against it by virtue of their past employment, upon receipt of the sums
ofP17,343.10 and P23,459.14, respectively.
Despite having executed the said quitclaims, the petitioners still filed on August 16, 2001 a
Complaint against FPIC for illegal dismissal and for the collection of monetary benefits, damages
and attorneys fees, alleging that they were regular employees of FPIC after serving almost five (5)
years, and that they were dismissed without cause. The Complaint was docketed as NLRC NCR
Case No. 00-08-04331-01 and was raffled to Labor Arbiter Joel Lustria. After conducting three (3)
mandatory conferences, the parties failed to reach any amicable settlement; thus, they were
required to submit their respective position papers, together with their documentary evidence.
In their Position Paper, the petitioners posited that they were regular employees of FPIC for having
served the same for almost five (5) years, rendering services which were usually necessary or
desirable in the usual business or trade of FPIC. They claimed that they were illegally dismissed
when they were relieved from their work assignments on July 31, 2001 without valid and serious
reasons therefor. The petitioners maintained and (sic) that their real employer was FPIC, and that
DGMS was merely its agent for having been engaged in prohibited labor-only contracting. The
petitioners averred that DGMS did not have substantial capital or investment by way of tools,
equipment, machines, work places and other materials. They claimed that they only used office
equipment and materials owned by FPIC at its offices in Ortigas Center, Pasig City. DGMS never
exercised control over them in all matters related to the performance of their work. In fact, DGMS
never maintained any representative at the FPICs office to supervise or oversee their work. They
insisted that their direct superiors, who were managerial employees of FPIC, had control over them
since the latter made sure that they always complied with the policies of FPIC.

Upon the other hand, FPIC insisted in its Position Paper/ Motion to Dismiss that the Complaint
should be dismissed considering that the Labor Arbiter had no jurisdiction over the case because
there was absolutely no employer-employee relationship between it and the petitioners. FPIC
claimed that the petitioners had never been its employees. FPIC insisted that their true employer
was DGMS considering that the petitioners were hired by DGMS and assigned them to the
Company to render services based on their Contract; that they received their wages and other
benefits from DGMS; and that they executed quitclaims in favor of DGMS. Also, FPIC submitted that
the termination of the petitioners employment with their employer, DGMS, was valid and lawful since
they executed quitclaims with their employer.3
On December 11, 2002, the Labor Arbiter rendered a Decision 4 holding that respondents were
regular employees of petitioner, and that they were illegally dismissed when their employment was
terminated without just or authorized cause. The fallo reads:
WHEREFORE, premises considered, let the judgment be, as it is hereby rendered, declaring
complainants dismissal illegal, and ordering the respondent, as follows:
1) To reinstate complainants to their former positions without loss of seniority rights and other
privileges;
2) To pay complainants, Raquel M. Calimbas the amount of P131,555.19; and Luisa P.
Mahilom, the amount of P115,403.14 representing their full backwages, from the time their
salaries were withheld from them up to the date of their actual reinstatement;
3) To pay the complainants the amount equivalent to ten (10%) percent of the total judgment
award, as and for attorneys fees.
The amount received by complainants, Raquel M. Calimbas in the amount of P17,343.10, and Luisa
P. Mahilom, the amount of P23,459.14 under the quitclaims that they signed must be deducted from
the awards herein made.
Other claims are hereby dismissed for lack of merit.
SO ORDERED.5
Aggrieved, petitioner elevated the case to the National Labor Relations Commission (NLRC).
On December 22, 2003, the NLRC dismissed petitioners appeal and upheld the Labor Arbiters
decision.
Unsatisfied, petitioner filed a Motion for Reconsideration reiterating the arguments brought up in its
Position Paper/ Motion to Dismiss.
In a Resolution6 dated April 30, 2004, the NLRC reversed its decision dated December 22, 2003 and
disposed of as follows:
After a second look, We observe that from the above-quoted issues, the Labor Arbiter assumed that
complainants were regular employees of PDIC (sic) which we find erroneous.
First, the Contract of Special Services was signed by FPIC and DGMS on March 29, 1993 which
shows that complainants employment in February and June 1996 was pursuant to said contract

which belies their submission that their working paper were forwarded by FPIC after directly
employing them in February and June 1996.
Second, undisputed in FPICs statement that, capitalized at P75,000.00, DGMS serviced the
manpower requirements of other clients like the Makati Commercial Estate Association and the
Philippine Transmarine Carrier which reinforces its being an independent contractor.
Third, complainants realization that DGMS and not respondent FPIC, was their employer is shown
by the fact that after they were disengaged, they went to DGMS, which paid them the amount
of P17,343. (sic) for Calimbas andP23,454.14 for Mahilom.
We therefore find, again after a second look, at the records, that respondent First Philippine
Industrial Corporation was not the employer of complainants Calimbas and Mahilom and that it was
the De Guzman Manpower Services which was later on incorporated as De Guzman Manpower
Corporation which was their employer. This finding, necessarily calls for the setting aside of the
decision of Labor Arbiter Lustria dated December 11, 2992 (sic) and Our decision promulgated on
December 22, 2003.
WHEREFORE, as we reconsider our Decision promulgated December 22, 2003, we set aside the
decision of Labor Arbiter Joel A. Lustria dated December 11, 2002 and declare respondent First
Pacific (sic) Industrial Corporation free from any liability whatsoever.
SO ORDERED.7
Respondents sought reconsideration of the above resolution, but the same was denied in a
Resolution8 dated April 20, 2005, maintaining that:
We deny. We find no legal basis to deem DGMS a "labor-only contracting" entity as maintained by
complainants. The fact that DGMS had only a capitalization of P75,000.00, without an investment in
tools, equipment, etc., does not necessarily constitute the latter as labor-only contractor since it has
shown its adequacy of resources, directly or indirectly, in the performance of completion of the job,
work or service contracted out, including operating costs, administrative costs such as training,
overhead and other costs as are necessary to enably (sic) DGMS to exercise control, supervision, or
direction over its employees in all aspects in performing or completing the job, work or services
contracted out. In the case of New Golden City Builders and Development Corp. et. al. vs. CA, et. al.
(G.R. No. 154715), December 11, 2003), the Supreme Court reiterated its ruling in Neri that not
having investment in the form of tools or machineries does not automatically reduce the independent
contractor to be a labor-only contractor. Moreover, the court has taken judicial notice of the general
practice adopted in several government and private institution and industries of hiring independent
contractors to perform special services.
Furthermore, the copy of payroll adduced on record persuade us that complainants received their
wages from DGMS contrary to their allegations that the contract consideration is by reimbursement
of wages. The execution likewise by complainants Calimbas and Mahilom of their respective
quitclaim and release fortifies the fact of their belief that their actual employer is DGMS and not
respondent FPIC.
WHEREFORE, we deny the motion. We accordingly AFFIRM the Resolution dated April 30, 2004 in
its entirety. No further motion of the same nature shall be entertained.
SO ORDERED.9

Unfazed, respondents elevated the case before the CA.

On March 6, 2007, the CA reversed and set aside the NLRCs resolutions and held as follows:
WHEREFORE, the instant Petition is hereby GRANTED. The assailed Resolutions dated April 30,
2004 and April 20, 2005 of the NLRC are REVERSED and SET ASIDE. The Decision dated
December 22, 2003 of the NLRC, affirming the Decision dated December 11, 2002 of the Labor
Arbiter is hereby REINSTATED.
SO ORDERED.10
Petitioner filed a Motion for Reconsideration, but the same was denied in a Resolution dated August
16, 2007.
Hence, the present petition, wherein petitioner posits that:
I
THE COURT OF APPEALS COMMITTED GRIEVOUS ERROR IN NOT CONSIDERING AND
APPLYING HERETO PERTINENT LAW AND JURISPRUDENCE WHICH PROVIDE THAT THE
EXISTENCE OF AN EMPLOYER-EMPLOYEE RELATIONSHIP BETWEEN THE PARTIES MUST
BE SUBSTANTIALLY ESTABLISHED AND NOT MERELY PRESUMED TO EXIST.
II
THE COURT OF APPEALS COMMITTED GRIEVOUS ERROR IN REVERSING THE UPRIGHT
AND JUDICIOUS RULING OF THE NATIONAL LABOR RELATIONS COMMISSION WHICH
FOUND THAT RESPONDENTS ARE NOT EMPLOYEES OF PETITIONER AND THEREFORE
WERE NOT ILLEGALLY DISMISSED AND AS SUCH ARE NOT ENTITLED TO THEIR CLAIMS
FOR REINSTATEMENT, BACKWAGES AND ATTORNEYS FEES.11
Simply, the issues are: (1) whether respondents are employees of petitioner; and (2) whether
respondents were lawfully dismissed from their employment.
Anent the first issue, Article 106 of the Labor Code pertinently provides:
Article 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting-out of
labor to protect the rights of workers established under the Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job-contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.

There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him.
In the same manner, Sections 8 and 9 of DOLE Department Order No. 10, Series of 1997, state:
Sec. 8. Job contracting. There is job contracting permissible under the Code if the following
conditions are met:
(1)
The contractor carries on an independent business and undertakes the contract work on his own
account under his own responsibility according to his own manner and method, free from the control
and direction of his employer or principal in all matters connected with the performance of the work
except as to the results thereof; and
(2)
The contractor has substantial capital or investment in the form of tools, equipment, machineries,
work premises, and other materials which are necessary in the conduct of his business.
Sec. 9. Labor-only contracting.
(a)
Any person who undertakes to supply workers to an employer shall be deemed to be engaged in
labor-only contracting where such person:
(1)
Does not have substantial capital or investment in the form of tools, equipment, machineries, work
premises and other materials; and
(2)
The workers recruited and placed by such persons are performing activities which are directly
related to the principal or operations of the employer in which workers are habitually employed.
(b)
Labor-only contracting as defined herein is hereby prohibited and the person acting as contractor
shall be considered merely as an agent or intermediary of the employer who shall be responsible to
the workers in the same manner and extent as if the latter were directly employed by him.
(c)

For cases not falling under this Article, the Secretary of Labor shall determine through appropriate
orders whether or not the contracting out of labor is permissible in the light of the circumstances of
each case and after considering the operating needs of the employer and the rights of the workers
involved. In such case, he may prescribe conditions and restrictions to insure the protection and
welfare of the workers.
Given the foregoing standards, we sustain the findings of the CA that respondents are petitioners
employees and that DGMS is engaged in labor-only contracting.
First, in Vinoya v. National Labor Relations Commission, 12 this Court categorically stated that the
actual paid-in capital of P75,000.00 could not be considered as substantial capital. Thus, DGMSs
actual paid-in capital in the amount of P75,000.00 does not constitute substantial capital essential to
carry out its business as an independent job contractor. In spite of its bare assertion that the Vinoya
case does not apply in the present case, DGMS has not shown any serious and cogent reason to
disregard the ruling in the aforementioned case. Records likewise reveal that DGMS has no
substantial equipment in the form of tools, equipment and machinery. As a matter of fact,
respondents were using office equipment and materials owned by petitioner while they were
rendering their services at its offices.
Second, petitioner exercised the power of control and supervision over the respondents. As aptly
observed by the CA, "the daily time records of respondents even had to be countersigned by the
officials of petitioner to check whether they had worked during the hours declared therein.
Furthermore, the fact that DGMS did not assign representatives to supervise over respondents work
in petitioners company tends to disprove the independence of DGMS. It is axiomatic that the test to
determine the existence of independent contractorship is whether one claiming to be an independent
contractor has contracted to do the work according to his own methods and without being subjected
to the control of the employer, except only to the results of the work. Obviously, on this score alone,
petitioner cannot rightly claim that DGMS was an independent job contractor inasmuch as
respondents were subjected to the control and supervision of petitioner while they were performing
their jobs."13
Third, also worth stressing are the points highlighted by respondents: (1) Respondents worked only
at petitioners offices for an uninterrupted period of five years, occupying the same position at the
same department under the supervision of company officials; (2) Three weeks ahead of the
termination letters issued by DGMS, petitioners HR Manager Lorna Young notified respondents, in a
closed-door meeting, that their services to the company would be terminated by July 31, 2001; (3) In
the termination letters prepared by DGMS, it was even stressed that the said termination letters will
formalize the verbal notice given by petitioners HR Administration personnel; (4) The direct
superiors of respondents were managerial employees of petitioner, and had direct control over all
the work-related activities of the latter. This control included the supervision of respondents
performance of their work and their compliance with petitioners company policies and procedures.
DGMS, on the other hand, never maintained any representative at the petitioners office to oversee
the work of respondents.14
All told, an employer-employee relationship exists between petitioner and respondents. And having
served for almost five years at petitioners company, respondents had already attained the status of
regular employees.
As to the second issue, i.e., whether respondents were lawfully dismissed from their employment,
this Court rules in the negative.

Recently, in Skippers United Pacific, Inc. v. Daza, 15 this Court held that for a workers dismissal to be
considered valid, it must comply with both procedural and substantive due process, viz.:
For a workers dismissal to be considered valid, it must comply with both procedural and substantive
due process. The legality of the manner of dismissal constitutes procedural due process, while the
legality of the act of dismissal constitutes substantive due process.
Procedural due process in dismissal cases consists of the twin requirements of notice and
hearing. The employer must furnish the employee with two written notices before the termination of
employment can be effected: (1) the first notice apprises the employee of the particular acts or
omissions for which his dismissal is sought; and (2) the second notice informs the employee of the
employers decision to dismiss him. Before the issuance of the second notice, the requirement of a
hearing must be complied with by giving the worker an opportunity to be heard. It is not necessary
that an actual hearing be conducted.
1wphi1

Substantive due process, on the other hand, requires that dismissal by the employer be made under
a just or authorized cause under Articles 282 to 284 of the Labor Code. 16
In the present case, petitioners failed to show any valid or just cause under the Labor Code on which
it may justify the termination of services of respondents. Also, apart from notifying that their services
had already been terminated, petitioner failed to comply with the rudimentary requirement of
notifying respondents regarding the acts or omissions which led to the termination of their services
as well as giving them an ample opportunity to contest the legality of their dismissal. Having failed to
establish compliance with the requirements of termination of employment under the Labor Code,
respondents dismissal is tainted with illegality.
Resultantly, the CA correctly held that respondents are entitled to reinstatement without loss of
seniority rights, and other privileges and to their full backwages, inclusive of allowances and other
benefits or their monetary equivalent, computed from the time their compensation was withheld up to
the time of their actual reinstatement. Considering that reinstatement is no longer feasible,
respondents are entitled instead to separation pay equivalent to one month salary for every year of
service.
WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED. The Decision
dated March 6, 2007 and Resolution dated August 16, 2007 of the Court of Appeals in CA-G.R. SP
No. 90527 are hereby AFFIRMED with MODIFICATION that respondents shall be entitled to
separation pay equivalent to one month salary for every year of service.
SO ORDERED.
Velasco, Jr., (Chairperson), Abad, Mendoza, and Leonen, JJ., concur.

Aviado v. Procter and Gamble, G.R. No. 160506, June 6, 2011

G.R. No. 160506

June 6, 2011

JOEB M. ALIVIADO, ARTHUR CORPUZ, ERIC ALIVIADO, MONCHITO AMPELOQUIO,

ABRAHAM BASMAYOR, JONATHAN MATEO, LORENZO PLATON, JOSE FERNANDO

GUTIERREZ, ESTANISLAO BUENAVENTURA, LOPE SALONGA, FRANZ DAVID, NESTOR

IGNACIO, JULIO REY, RUBEN MARQUEZ, JR., MAXIMINO PASCUAL, ERNESTO CALANAO,
ROLANDO ROMASANTA, RHUEL AGOO, BONIFACIO ORTEGA, ARSENIO SORIANO, JR.,
ARNEL ENDAYA, ROBERTO ENRIQUEZ, NESTOR BAQUILA, EDGARDO QUIAMBAO, SANTOS
BACALSO, SAMSON BASCO, ALADINO GREGORO, JR., EDWIN GARCIA, ARMANDO VILLAR,
EMIL TAWAT, MARIO P. LIONGSON, CRESENTE J. GARCIA, FERNANDO MACABENTE,
MELECIO CASAPAO, REYNALDO JACABAN, FERDINAND SALVO, ALSTANDO MONTOS,
RAINER N. SALVADOR, RAMIL REYES, PEDRO G. ROY, LEONARDO P. TALLEDO, ENRIQUE F.
TALLEDO, WILLIE ORTIZ, ERNESTO SOYOSA, ROMEO VASQUEZ, JOEL BILLONES, ALLAN
BALTAZAR, NOLI GABUYO, EMMANUEL E. LABAN, RAMIR E. PIAT, RAUL DULAY, TADEO
DURAN, JOSEPH BANICO, ALBERT LEYNES, ANTONIO DACUNA, RENATO DELA CRUZ,
ROMEO VIERNES, JR., ELAIS BASEO, WILFREDO TORRES, MELCHOR CARDANO, MARIANO
NARANIAN, JOHN SUMERGIDO, ROBERTO ROSALES, GERRY C. GATPO, GERMAN N.
GUEVARRA, GILBERT Y. MIRANDA, RODOLFO C. TOLEDO, ARNOLD D. LASTONA, PHILIP M.
LOZA, MARIO N. CULDAYON, ORLANDO P. JIMENEZ, FRED P. JIMENEZ, RESTITUTO C.
PAMINTUAN, JR., ROLANDO J. DE ANDRES, ARTUZ BUSTENERA, ROBERTO B. CRUZ,
ROSEDY O. YORDAN, DENNIS DACASIN, ALEJANDRINO ABATON, and ORLANDO S.
BALANGUE, Petitioners,
vs.
PROCTER & GAMBLE PHILS., INC., and PROMM-GEM INC., Respondents.
DECISION
DEL CASTILLO, J.:
Labor laws expressly prohibit "labor-only" contracting. To prevent its circumvention, the Labor Code
establishes an employer-employee relationship between the employer and the employees of the
labor-only contractor.
The instant petition for review assails the March 21, 2003 Decision 1 of the Court of Appeals (CA) in
CA-G.R. SP No. 52082 and its October 20, 2003 Resolution 2 denying the motions for reconsideration
separately filed by petitioners and respondent Procter & Gamble Phils. Inc. (P&G). The appellate
court affirmed the July 27, 1998 Decision of the National Labor Relations Commission (NLRC),
which in turn affirmed the November 29, 1996 Decision 3 of the Labor Arbiter. All these decisions
found Promm-Gem, Inc. (Promm-Gem) and Sales and Promotions Services (SAPS) to be legitimate
independent contractors and the employers of the petitioners.
Factual Antecedents
Petitioners worked as merchandisers of P&G from various dates, allegedly starting as early as 1982
or as late as June 1991, to either May 5, 1992 or March 11, 1993, more specifically as follows:
Name

Date Employed

Date Dismissed

1. Joeb M. Aliviado

November, 1985

May 5, 1992

2. Arthur Corpuz

1988

March 11, 1993

3. Eric Aliviado

1985

March 11, 1993

4. Monchito Ampeloquio

September, 1988

March 11, 1993

5. Abraham Basmayor[, Jr.]

1987

March 11, 1993

6. Jonathan Mateo May,

1988

March 11, 1993

7. Lorenzo Platon

1985

March 11, 1993

8. Jose Fernando Gutierrez

1988

May 5, 1992

9. Estanislao Buenaventura

June, 1988

March 11, 1993

10. Lope Salonga

1982

March 11, 1993

11. Franz David

1989

March 11, 1993

12. Nestor Ignacio

1982

March 11, 1993

13. Julio Rey

1989

May 5, 1992

14. Ruben [Vasquez], Jr.

1985

May 5, 1992

15. Maximino Pascual

1990

May 5, 1992

16. Ernesto Calanao[, Jr.]

1987

May 5, 1992

17. Rolando Romasanta

1983

March 11, 1993

18. [Roehl] Agoo

1988

March 11, 1993

19. Bonifacio Ortega

1988

March 11, 1993

20. Arsenio Soriano, Jr.

1985

March 11, 1993

21. Arnel Endaya

1983

March 11, 1993

22. Roberto Enriquez December,

1988

March 11, 1993

23. Nestor [Es]quila

1983

May 5, 1992

24. Ed[g]ardo Quiambao

1989

March 11, 1993

25. Santos Bacalso

1990

March 11, 1993

26. Samson Basco

1984

March 11, 1993

27. Aladino Gregor[e], Jr.

1980

May 5, 1992

28. Edwin Garcia

1987

May 5, 1992

29. Armando Villar

1990

May 5, 1992

30. Emil Tawat

1988

March 11, 1993

31. Mario P. Liongson

1991

May 5, 1992

32. Cresente J. Garcia

1984

March 11, 1993

33. Fernando Macabent[a]

1990

May 5, 1992

34. Melecio Casapao

1987

March 11, 1993

35. Reynaldo Jacaban

1990

May 5, 1992

36. Ferdinand Salvo

1985

May 5, 1992

37. Alstando Montos

1984

March 11, 1993

38. Rainer N. Salvador

1984

May 5, 1992

39. Ramil Reyes

1984

March 11, 1993

40. Pedro G. Roy

1987

41. Leonardo [F]. Talledo

1985

March 11, 1993

42. Enrique [F]. Talledo

1988

March 11, 1993

43. Willie Ortiz

1987

May 5, 1992

44. Ernesto Soyosa

1988

May 5, 1992

45. Romeo Vasquez

1985

March 11, 1993

46. Joel Billones

1987

March 11, 1993

47. Allan Baltazar

1989

March 11, 1993

48. Noli Gabuyo

1991

March 11, 1993

49. Emmanuel E. Laban

1987

May 5, 1992

50. Ramir[o] E. [Pita]

1990

May 5, 1992

51. Raul Dulay

1988

May 5, 1992

52. Tadeo Duran[o]

1988

May 5, 1992

53. Joseph Banico

1988

March 11, 1993

54. Albert Leynes

1990

May 5, 1992

55. Antonio Dacu[m]a

1990

May 5, 1992

56. Renato dela Cruz

1982

57. Romeo Viernes, Jr.

1986

58. El[ia]s Bas[c]o

1989

59. Wilfredo Torres

1986

May 5, 1992

60. Melchor Carda[]o

1991

May 5, 1992

61. [Marino] [Maranion]

1989

May 5, 1992

62. John Sumergido

1987

May 5, 1992

63. Roberto Rosales

May, 1987

May 5, 1992

64. Gerry [G]. Gatpo

November, 1990

March 11, 1993

65. German N. Guevara

May, 1990

March 11, 1993

66. Gilbert Y. Miranda

June, 1991

March 11, 1993

67. Rodolfo C. Toledo[, Jr.]

May 14, 1991

March 11, 1993

68. Arnold D. [Laspoa]

June 1991

March 11, 1993

69. Philip M. Loza

March 5, 1992

March 11, 1993

70. Mario N. C[o]ldayon

May 14, 1991

March 11, 1993

71. Orlando P. Jimenez

November 6, 1992

March 11, 1993

72. Fred P. Jimenez

September, 1991

March 11, 1993

73. Restituto C. Pamintuan, Jr.

March 5, 1992

March 11, 1993

74. Rolando J. de Andres

June, 1991

March 11, 1993

75. Artuz Bustenera[, Jr.]

December, 1989

March 11, 1993

76. Roberto B. Cruz

May 4, 1990

March 11, 1993

77. Rosedy O. Yordan

June, 1991

May 5, 1992

78. Dennis Dacasin

May. 1990

May 5, 1992

79. Alejandrino Abaton

1988

May 5, 1992

80. Orlando S. Balangue

March, 1989

March 11, 19934

They all individually signed employment contracts with either Promm-Gem or SAPS for periods of
more or less five months at a time.5 They were assigned at different outlets, supermarkets and stores
where they handled all the products of P&G. They received their wages from Promm-Gem or SAPS. 6
SAPS and Promm-Gem imposed disciplinary measures on erring merchandisers for reasons such
as habitual absenteeism, dishonesty or changing day-off without prior notice. 7
P&G is principally engaged in the manufacture and production of different consumer and health
products, which it sells on a wholesale basis to various supermarkets and distributors. 8 To enhance
consumer awareness and acceptance of the products, P&G entered into contracts with Promm-Gem
and SAPS for the promotion and merchandising of its products.9
In December 1991, petitioners filed a complaint 10 against P&G for regularization, service incentive
leave pay and other benefits with damages. The complaint was later amended 11 to include the matter
of their subsequent dismissal.
Ruling of the Labor Arbiter
On November 29, 1996, the Labor Arbiter dismissed the complaint for lack of merit and ruled that
there was no employer-employee relationship between petitioners and P&G. He found that the
selection and engagement of the petitioners, the payment of their wages, the power of dismissal and
control with respect to the means and methods by which their work was accomplished, were all done
and exercised by Promm-Gem/SAPS. He further found that Promm-Gem and SAPS were legitimate
independent job contractors. The dispositive portion of his Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered Dismissing the above-entitled
cases against respondent Procter & Gamble (Phils.), Inc. for lack of merit.
SO ORDERED.12
Ruling of the NLRC
Appealing to the NLRC, petitioners disputed the Labor Arbiters findings. On July 27, 1998, the
NLRC rendered a Decision13 disposing as follows:

WHEREFORE, premises considered, the appeal of complainants is hereby DISMISSED and the
decision appealed from AFFIRMED.
SO ORDERED.14
Petitioners filed a motion for reconsideration but the motion was denied in the November 19, 1998
Resolution.15
Ruling of the Court of Appeals
Petitioners then filed a petition for certiorari with the CA, alleging grave abuse of discretion
amounting to lack or excess of jurisdiction on the part of the Labor Arbiter and the NLRC. However,
said petition was also denied by the CA which disposed as follows:
WHEREFORE, the decision of the National Labor Relations Commission dated July 27, 1998 is
AFFIRMED with the MODIFICATION that respondent Procter & Gamble Phils., Inc. is ordered to pay
service incentive leave pay to petitioners.
SO ORDERED.16
Petitioners filed a motion for reconsideration but the motion was also denied. Hence, this petition.
Issues
Petitioners now come before us raising the following issues:
I.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A]
REVERSIBLE ERROR WHEN IT DID NOT FIND THE PUBLIC RESPONDENTS TO HAVE
ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OF OR IN
EXCESS OF JURISDICTION IN RENDERING THE QUESTIONED JUDGMENT WHEN,
OBVIOUSLY, THE PETITIONERS WERE ABLE TO PROVE AND ESTABLISH THAT
RESPONDENT PROCTER & GAMBLE PHILS., INC. IS THEIR EMPLOYER AND THAT
THEY WERE ILLEGALLY DISMISSED BY THE FORMER.
II.
WHETHER X X X THE HONORABLE COURT OF APPEALS HAS COMMITTED [A]
REVERSIBLE ERROR WHEN IT DID NOT DECLARE THAT THE PUBLIC RESPONDENTS
HAD ACTED WITH GRAVE ABUSE OF DISCRETION WHEN THE LATTER DID NOT FIND
THE PRIVATE RESPONDENTS LIABLE TO THE PETITIONERS FOR PAYMENT OF
ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS LITIGATION COSTS AND
ATTORNEYS FEES.17
Simply stated, the issues are: (1) whether P&G is the employer of petitioners; (2) whether petitioners
were illegally dismissed; and (3) whether petitioners are entitled for payment of actual, moral and
exemplary damages as well as litigation costs and attorneys fees.
Petitioners Arguments

Petitioners insist that they are employees of P&G. They claim that they were recruited by the
salesmen of P&G and were engaged to undertake merchandising chores for P&G long before the
existence of Promm-Gem and/or SAPS. They further claim that when the latter had its so-called realignment program, petitioners were instructed to fill up application forms and report to the agencies
which P&G created.18
Petitioners further claim that P&G instigated their dismissal from work as can be gleaned from its
letter19 to SAPS dated February 24, 1993, informing the latter that their Merchandising Services
Contract will no longer be renewed.
Petitioners further assert that Promm-Gem and SAPS are labor-only contractors providing services
of manpower to their client. They claim that the contractors have neither substantial capital nor tools
and equipment to undertake independent labor contracting. Petitioners insist that since they had
been engaged to perform activities which are necessary or desirable in the usual business or trade
of P&G, then they are its regular employees.20
Respondents Arguments
On the other hand, P&G points out that the instant petition raises only questions of fact and should
thus be thrown out as the Court is not a trier of facts. It argues that findings of facts of the NLRC,
particularly where the NLRC and the Labor Arbiter are in agreement, are deemed binding and
conclusive on the Supreme Court.
P&G further argues that there is no employment relationship between it and petitioners. It was
Promm-Gem or SAPS that (1) selected petitioners and engaged their services; (2) paid their
salaries; (3) wielded the power of dismissal; and (4) had the power of control over their conduct of
work.
P&G also contends that the Labor Code neither defines nor limits which services or activities may be
validly outsourced. Thus, an employer can farm out any of its activities to an independent contractor,
regardless of whether such activity is peripheral or core in nature. It insists that the determination of
whether to engage the services of a job contractor or to engage in direct hiring is within the ambit of
management prerogative.
At this juncture, it is worth mentioning that on January 29, 2007, we deemed as waived the filing of
the Comment of Promm-Gem on the petition. 21 Also, although SAPS was impleaded as a party in the
proceedings before the Labor Arbiter and the NLRC, it was no longer impleaded as a party in the
proceedings before the CA.22 Hence, our pronouncements with regard to SAPS are only for the
purpose of determining the obligations of P&G, if any.
Our Ruling
The petition has merit.
As a rule, the Court refrains from reviewing factual assessments of lower courts and agencies
exercising adjudicative functions, such as the NLRC. Occasionally, however, the Court is constrained
to wade into factual matters when there is insufficient or insubstantial evidence on record to support
those factual findings; or when too much is concluded, inferred or deduced from the bare or
incomplete facts appearing on record. 23 In the present case, we find the need to review the records
to ascertain the facts.

Labor-only contracting and job contracting

In order to resolve the issue of whether P&G is the employer of petitioners, it is necessary to first
determine whether Promm-Gem and SAPS are labor-only contractors or legitimate job contractors.
The pertinent Labor Code provision on the matter states:
ART. 106. Contractor or subcontractor. Whenever an employer enters into a contract with another
person for the performance of the formers work, the employees of the contractor and of the latters
subcontractor, if any, shall be paid in accordance with the provisions of this Code.
In the event that the contractor or subcontractor fails to pay the wages of his employees in
accordance with this Code, the employer shall be jointly and severally liable with his contractor or
subcontractor to such employees to the extent of the work performed under the contract, in the same
manner and extent that he is liable to employees directly employed by him.
The Secretary of Labor may, by appropriate regulations, restrict or prohibit the contracting out of
labor to protect the rights of workers established under this Code. In so prohibiting or restricting, he
may make appropriate distinctions between labor-only contracting and job contracting as well as
differentiations within these types of contracting and determine who among the parties involved shall
be considered the employer for purposes of this Code, to prevent any violation or circumvention of
any provision of this Code.
There is "labor-only" contracting where the person supplying workers to an employer does not have
substantial capital or investment in the form of tools, equipment, machineries, work premises, among
others, and the workers recruited and placed by such person are performing activities which are
directly related to the principal business of such employer. In such cases, the person or intermediary
shall be considered merely as an agent of the employer who shall be responsible to the workers in
the same manner and extent as if the latter were directly employed by him. (Emphasis and
underscoring supplied.)
Rule VIII-A, Book III of the Omnibus Rules Implementing the Labor Code, as amended by
Department Order No. 18-02,24 distinguishes between legitimate and labor-only contracting:
xxxx
Section 3. Trilateral Relationship in Contracting Arrangements. In legitimate contracting, there exists
a trilateral relationship under which there is a contract for a specific job, work or service between the
principal and the contractor or subcontractor, and a contract of employment between the contractor
or subcontractor and its workers. Hence, there are three parties involved in these arrangements, the
principal which decides to farm out a job or service to a contractor or subcontractor, the contractor or
subcontractor which has the capacity to independently undertake the performance of the job, work or
service, and the contractual workers engaged by the contractor or subcontractor to accomplish the
job[,] work or service.
xxxx
Section 5. Prohibition against labor-only contracting. Labor-only contracting is hereby declared
prohibited. For this purpose, labor-only contracting shall refer to an arrangement where the
contractor or subcontractor merely recruits, supplies or places workers to perform a job, work or
service for a principal, and any of the following elements are present:

i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied or
placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or
ii) [T]he contractor does not exercise the right to control over the performance of the work of
the contractual employee.
The foregoing provisions shall be without prejudice to the application of Article 248 (c) of the Labor
Code, as amended.
"Substantial capital or investment" refers to capital stocks and subscribed capitalization in the case
of corporations, tools, equipment, implements, machineries and work premises, actually and directly
used by the contractor or subcontractor in the performance or completion of the job, work or service
contracted out.
The "right to control" shall refer to the right reserved to the person for whom the services of the
contractual workers are performed, to determine not only the end to be achieved, but also the
manner and means to be used in reaching that end.
x x x x (Underscoring supplied.)
Clearly, the law and its implementing rules allow contracting arrangements for the performance of
specific jobs, works or services. Indeed, it is management prerogative to farm out any of its activities,
regardless of whether such activity is peripheral or core in nature. However, in order for such
outsourcing to be valid, it must be made to an independent contractor because the current labor
rules expressly prohibit labor-only contracting.
To emphasize, there is labor-only contracting when the contractor or sub-contractor merely recruits,
supplies or places workers to perform a job, work or service for a principal 25 and any of the following
elements are present:
i) The contractor or subcontractor does not have substantial capital or investment which
relates to the job, work or service to be performed and the employees recruited, supplied or
placed by such contractor or subcontractor are performing activities which are directly
related to the main business of the principal; or
ii) The contractor does not exercise the right to control over the performance of the work of
the contractualemployee. (Underscoring supplied)
In the instant case, the financial statements26 of Promm-Gem show that it
has authorized capital stock of P1 million and a paid-in capital, or capital available for operations,
of P500,000.00 as of 1990.27 It also has long term assets worth P432,895.28 and current assets
of P719,042.32. Promm-Gem has also proven that it maintained its own warehouse and office space
with a floor area of 870 square meters. 28 It also had under its name three registered vehicles which
were used for its promotional/merchandising business. 29Promm-Gem also has other clients 30 aside
from P&G.31 Under the circumstances, we find that Promm-Gem has substantial investment which
relates to the work to be performed. These factors negate the existence of the element specified in
Section 5(i) of DOLE Department Order No. 18-02.

The records also show that Promm-Gem supplied its complainant-workers with the relevant
materials, such as markers, tapes, liners and cutters, necessary for them to perform their work.
Promm-Gem also issued uniforms to them. It is also relevant to mention that Promm-Gem already
considered the complainants working under it as its regular, not merely contractual or project,
employees.32 This circumstance negates the existence of element (ii) as stated in Section 5 of DOLE
Department Order No. 18-02, which speaks of contractual employees. This, furthermore, negates
on the part of Promm-Gem bad faith and intent to circumvent labor laws which factors have often
been tipping points that lead the Court to strike down the employment practice or agreement
concerned as contrary to public policy, morals, good customs or public order.33
Under the circumstances, Promm-Gem cannot be considered as a labor-only contractor. We find that
it is a legitimate independent contractor.
On the other hand, the Articles of Incorporation of SAPS shows that it has a paid-in capital of
only P31,250.00. There is no other evidence presented to show how much its working capital and
assets are. Furthermore, there is no showing of substantial investment in tools, equipment or other
assets.
In Vinoya v. National Labor Relations Commission,34 the Court held that "[w]ith the current economic
atmosphere in the country, the paid-in capitalization of PMCI amounting to P75,000.00 cannot be
considered as substantial capital and, as such, PMCI cannot qualify as an independent
contractor."35 Applying the same rationale to the present case, it is clear that SAPS having a paid-in
capital of only P31,250 - has no substantial capital. SAPS lack of substantial capital is underlined by
the records36 which show that its payroll for its merchandisers alone for one month would already
total P44,561.00. It had 6-month contracts with P&G. 37 Yet SAPS failed to show that it could
complete the 6-month contracts using its own capital and investment. Its capital is not even sufficient
for one months payroll. SAPS failed to show that its paid-in capital of P31,250.00 is sufficient for the
period required for it to generate its needed revenue to sustain its operations independently.
Substantial capital refers to capitalization used in the performance or completion of the job, work or
service contracted out. In the present case, SAPS has failed to show substantial capital.
Furthermore, the petitioners have been charged with the merchandising and promotion of the
products of P&G, an activity that has already been considered by the Court as doubtlessly directly
related to the manufacturing business, 38 which is the principal business of P&G. Considering that
SAPS has no substantial capital or investment and the workers it recruited are performing activities
which are directly related to the principal business of P&G, we find that the former is engaged in
"labor-only contracting".
"Where labor-only contracting exists, the Labor Code itself establishes an employer-employee
relationship between the employer and the employees of the labor-only contractor." 39 The statute
establishes this relationship for a comprehensive purpose: to prevent a circumvention of labor laws.
The contractor is considered merely an agent of the principal employer and the latter is responsible
to the employees of the labor-only contractor as if such employees had been directly employed by
the principal employer.40
Consequently, the following petitioners, having been recruited and supplied
by SAPS41 -- which engaged in labor-only contracting -- are considered as the employees of P&G:
Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio, Abraham Basmayor, Jr., Jonathan Mateo,
Lorenzo Platon, Estanislao Buenaventura, Lope Salonga, Franz David, Nestor Ignacio, Jr., Rolando
Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano, Jr., Arnel Endaya, Roberto Enriquez,
Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando Montos, Rainer N. Salvador, Pedro

G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones, Allan Baltazar, Noli Gabuyo, Gerry
Gatpo, German Guevara, Gilbert V. Miranda, Rodolfo C. Toledo, Jr., Arnold D. Laspoa, Philip M.
Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez, Restituto C. Pamintuan, Jr.,
Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O. Yordan, Orlando S.
Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez, Renato dela Cruz,
Romeo Viernes, Jr., Elias Basco and Dennis Dacasin.
The following petitioners, having worked under, and been dismissed by Promm-Gem, are considered
the employees of Promm-Gem, not of P&G: Wilfredo Torres, John Sumergido, Edwin Garcia, Mario
P. Liongson, Jr., Ferdinand Salvo, Alejandrino Abaton, Emmanuel A. Laban, Ernesto Soyosa, Aladino
Gregore, Jr., Ramil Reyes, Ruben Vasquez, Jr., Maximino Pascual, Willie Ortiz, Armando Villar, Jose
Fernando Gutierrez, Ramiro Pita, Fernando Macabenta, Nestor Esquila, Julio Rey, Albert Leynes,
Ernesto Calanao, Roberto Rosales, Antonio Dacuma, Tadeo Durano, Raul Dulay, Marino Maranion,
Joseph Banico, Melchor Cardano, Reynaldo Jacaban, and Joeb Aliviado. 42
Termination of services
We now discuss the issue of whether petitioners were illegally dismissed. In cases of regular
employment, the employer shall not terminate the services of an employee except for a just 43 or
authorized44 cause.
In the instant case, the termination letters given by Promm-Gem to its employees uniformly specified
the cause of dismissal as grave misconduct and breach of trust, as follows:
xxxx
This informs you that effective May 5, 1992, your employment with our company, Promm-Gem, Inc.
has been terminated. We find your expressed admission, that you considered yourself as an
employee of Procter & Gamble Phils., Inc. and assailing the integrity of the Company as legitimate
and independent promotion firm, is deemed as an act of disloyalty prejudicial to the interests of our
Company: serious misconduct and breach of trust reposed upon you as employee of our Company
which [co]nstitute just cause for the termination of your employment.
x x x x45
Misconduct has been defined as improper or wrong conduct; the transgression of some established
and definite rule of action, a forbidden act, a dereliction of duty, unlawful in character implying
wrongful intent and not mere error of judgment. The misconduct to be serious must be of such grave
and aggravated character and not merely trivial and unimportant. 46 To be a just cause for dismissal,
such misconduct (a) must be serious; (b) must relate to the performance of the employees duties;
and (c) must show that the employee has become unfit to continue working for the employer.47
In other words, in order to constitute serious misconduct which will warrant the dismissal of an
employee under paragraph (a) of Article 282 of the Labor Code, it is not sufficient that the act or
conduct complained of has violated some established rules or policies. It is equally important and
required that the act or conduct must have been performed with wrongful intent. 48 In the instant case,
petitioners-employees of Promm-Gem may have committed an error of judgment in claiming to be
employees of P&G, but it cannot be said that they were motivated by any wrongful intent in doing so.
As such, we find them guilty of only simple misconduct for assailing the integrity of Promm-Gem as a
legitimate and independent promotion firm. A misconduct which is not serious or grave, as that
existing in the instant case, cannot be a valid basis for dismissing an employee.

Meanwhile, loss of trust and confidence, as a ground for dismissal, must be based on the willful
breach of the trust reposed in the employee by his employer. Ordinary breach will not suffice. A
breach of trust is willful if it is done intentionally, knowingly and purposely, without justifiable excuse,
as distinguished from an act done carelessly, thoughtlessly, heedlessly or inadvertently.49
Loss of trust and confidence, as a cause for termination of employment, is premised on the fact that
the employee concerned holds a position of responsibility or of trust and confidence. As such, he
must be invested with confidence on delicate matters, such as custody, handling or care and
protection of the property and assets of the employer. And, in order to constitute a just cause for
dismissal, the act complained of must be work-related and must show that the employee is unfit to
continue to work for the employer.50 In the instant case, the petitioners-employees of Promm-Gem
have not been shown to be occupying positions of responsibility or of trust and confidence. Neither is
there any evidence to show that they are unfit to continue to work as merchandisers for PrommGem.
All told, we find no valid cause for the dismissal of petitioners-employees of Promm-Gem.
While Promm-Gem had complied with the procedural aspect of due process in terminating the
employment of petitioners-employees, i.e., giving two notices and in between such notices, an
opportunity for the employees to answer and rebut the charges against them, it failed to comply with
the substantive aspect of due process as the acts complained of neither constitute serious
misconduct nor breach of trust. Hence, the dismissal is illegal.
With regard to the petitioners placed with P&G by SAPS, they were given no written notice of
dismissal. The records show that upon receipt by SAPS of P&Gs letter terminating their
"Merchandising Services Contact" effective March 11, 1993, they in turn verbally informed the
concerned petitioners not to report for work anymore. The concerned petitioners related their
dismissal as follows:
xxxx
5. On March 11, 1993, we were called to a meeting at SAPS office. We were told by Mr. Saturnino A.
Ponce that we should already stop working immediately because that was the order of Procter and
Gamble. According to him he could not do otherwise because Procter and Gamble was the one
paying us. To prove that Procter and Gamble was the one responsible in our dismissal, he showed
to us the letter51 dated February 24, 1993, x x x
February 24, 1993
Sales
Armons
Quezon City

and
Bldg.,

Attention:
Mr.
President & General Manager

Promotions
142

Saturnino

Kamias

Services
Road,

A.

Ponce

Gentlemen:
Based on our discussions last 5 and 19 February 1993, this formally informs you that we will not be
renewing our Merchandising Services Contract with your agency.

Please immediately undertake efforts to ensure that your services to the Company will terminate
effective close of business hours of 11 March 1993.
This is without prejudice to whatever obligations you may have to the company under the
abovementioned contract.
Very truly yours,
(Sgd.)
EMMANUEL
Sales Merchandising III

M.

NON

6. On March 12, 1993, we reported to our respective outlet assignments. But, we were no longer
allowed to work and we were refused entrance by the security guards posted. According to the
security guards, all merchandisers of Procter and Gamble under S[APS] who filed a case in the
Dept. of Labor are already dismissed as per letter of Procter and Gamble dated February 25, 1993. x
x x52
Neither SAPS nor P&G dispute the existence of these circumstances. Parenthetically, unlike PrommGem which dismissed its employees for grave misconduct and breach of trust due to disloyalty,
SAPS dismissed its employees upon the initiation of P&G. It is evident that SAPS does not carry on
its own business because the termination of its contract with P&G automatically meant for it also the
termination of its employees services. It is obvious from its act that SAPS had no other clients and
had no intention of seeking other clients in order to further its merchandising business. From all
indications SAPS, existed to cater solely to the need of P&G for the supply of employees in the
latters merchandising concerns only. Under the circumstances prevailing in the instant case, we
cannot consider SAPS as an independent contractor.
Going back to the matter of dismissal, it must be emphasized that the onus probandi to prove the
lawfulness of the dismissal rests with the employer.53 In termination cases, the burden of proof rests
upon the employer to show that the dismissal is for just and valid cause. 54 In the instant case, P&G
failed to discharge the burden of proving the legality and validity of the dismissals of those
petitioners who are considered its employees. Hence, the dismissals necessarily were not justified
and are therefore illegal.
Damages
We now go to the issue of whether petitioners are entitled to damages. Moral
and exemplary damages are recoverable where the dismissal of an employee was attended by bad
faith or fraud or constituted an act oppressive to labor or was done in a manner contrary to morals,
good customs or public policy.55
With regard to the employees of Promm-Gem, there being no evidence of bad faith, fraud or any
oppressive act on the part of the latter, we find no support for the award of damages.
As for P&G, the records show that it dismissed its employees through SAPS in a manner oppressive
to labor. The sudden and peremptory barring of the concerned petitioners from work, and from
admission to the work place, after just a one-day verbal notice, and for no valid cause bellows
oppression and utter disregard of the right to due process of the concerned petitioners. Hence, an
award of moral damages is called for.

Attorneys fees may likewise be awarded to the concerned petitioners who were illegally dismissed
in bad faith and were compelled to litigate or incur expenses to protect their rights by reason of the
oppressive acts56 of P&G.
Lastly, under Article 279 of the Labor Code, an employee who is unjustly dismissed from work shall
be entitled to reinstatement without loss of seniority rights and other privileges, inclusive of
allowances, and other benefits or their monetary equivalent from the time the compensation was
withheld up to the time of actual reinstatement. 57Hence, all the petitioners, having been illegally
dismissed are entitled to reinstatement without loss of seniority rights and with full back wages and
other benefits from the time of their illegal dismissal up to the time of their actual reinstatement.
1avvphi1

WHEREFORE, the petition is GRANTED. The Decision dated March 21, 2003 of the Court of
Appeals in CA-G.R. SP No. 52082 and the Resolution dated October 20, 2003
are REVERSED and SET ASIDE. Procter & Gamble Phils., Inc. and Promm-Gem, Inc.
are ORDERED to reinstate their respective employees immediately without loss of seniority rights
and with full backwages and other benefits from the time of their illegal dismissal up to the time of
their actual reinstatement. Procter & Gamble Phils., Inc. is further ORDERED to pay each of those
petitioners considered as its employees, namely Arthur Corpuz, Eric Aliviado, Monchito Ampeloquio,
Abraham Basmayor, Jr., Jonathan Mateo, Lorenzo Platon, Estanislao Buenaventura, Lope Salonga,
Franz David, Nestor Ignacio, Rolando Romasanta, Roehl Agoo, Bonifacio Ortega, Arsenio Soriano,
Jr., Arnel Endaya, Roberto Enriquez, Edgardo Quiambao, Santos Bacalso, Samson Basco, Alstando
Montos, Rainer N. Salvador, Pedro G. Roy, Leonardo F. Talledo, Enrique F. Talledo, Joel Billones,
Allan Baltazar, Noli Gabuyo, Gerry Gatpo, German Guevara, Gilbert Y. Miranda, Rodolfo C. Toledo,
Jr., Arnold D. Laspoa, Philip M. Loza, Mario N. Coldayon, Orlando P. Jimenez, Fred P. Jimenez,
Restituto C. Pamintuan, Jr., Rolando J. De Andres, Artuz Bustenera, Jr., Roberto B. Cruz, Rosedy O.
Yordan, Orlando S. Balangue, Emil Tawat, Cresente J. Garcia, Melencio Casapao, Romeo Vasquez,
Renato dela Cruz, Romeo Viernes, Jr., Elias Basco and Dennis Dacasin, P25,000.00 as moral
damages plus ten percent of the total sum as and for attorneys fees.
Let this case be REMANDED to the Labor Arbiter for the computation, within 30 days from receipt of
this Decision, of petitioners backwages and other benefits; and ten percent of the total sum as and
for attorneys fees as stated above; and for immediate execution.
SO ORDERED.
MARIANO
Associate Justice

C.

DEL

CASTILLO

Dismissal from employment

Just Causes
Arts. 282, 264, 263, 248, Labor Code
Article 282. Termination by employer. An employer may terminate an employment
for any of the following causes:
Serious misconduct or willful disobedience by the employee of the lawful orders of
his employer or representative in connection with his work;
Gross and habitual neglect by the employee of his duties;

Fraud or willful breach by the employee of the trust reposed in him by his employer
or duly authorized representative;
Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representatives; and
Other causes analogous to the foregoing.
Article 264. Prohibited activities.
No labor organization or employer shall declare a strike or lockout without first
having bargained collectively in accordance with Title VII of this Book or without first
having filed the notice required in the preceding Article or without the necessary
strike or lockout vote first having been obtained and reported to the Ministry.
No strike or lockout shall be declared after assumption of jurisdiction by the
President or the Minister or after certification or submission of the dispute to
compulsory or voluntary arbitration or during the pendency of cases involving the
same grounds for the strike or lockout.
Any worker whose employment has been terminated as a consequence of any
unlawful lockout shall be entitled to reinstatement with full backwages. Any union
officer who knowingly participates in an illegal strike and any worker or union officer
who knowingly participates in the commission of illegal acts during a strike may be
declared to have lost his employment status: Provided, That mere participation of a
worker in a lawful strike shall not constitute sufficient ground for termination of his
employment, even if a replacement had been hired by the employer during such
lawful strike.
No person shall obstruct, impede, or interfere with, by force, violence, coercion,
threats or intimidation, any peaceful picketing by employees during any labor
controversy or in the exercise of the right to self-organization or collective
bargaining, or shall aid or abet such obstruction or interference.
No employer shall use or employ any strike-breaker, nor shall any person be
employed as a strike-breaker.
No public official or employee, including officers and personnel of the New Armed
Forces of the Philippines or the Integrated National Police, or armed person, shall
bring in, introduce or escort in any manner, any individual who seeks to replace
strikers in entering or leaving the premises of a strike area, or work in place of the
strikers. The police force shall keep out of the picket lines unless actual violence or
other criminal acts occur therein: Provided, That nothing herein shall be interpreted
to prevent any public officer from taking any measure necessary to maintain peace
and order, protect life and property, and/or enforce the law and legal order. (As
amended by Executive Order No. 111, December 24, 1986)
No person engaged in picketing shall commit any act of violence, coercion or
intimidation or obstruct the free ingress to or egress from the employers premises

for lawful purposes, or obstruct public thoroughfares. (As amended by Batas

Pambansa Bilang 227, June 1, 1982)
Article 263. Strikes, picketing and lockouts.
It is the policy of the State to encourage free trade unionism and free collective
bargaining.
Workers shall have the right to engage in concerted activities for purposes of
collective bargaining or for their mutual benefit and protection. The right of
legitimate labor organizations to strike and picket and of employers to lockout,
consistent with the national interest, shall continue to be recognized and respected.
However, no labor union may strike and no employer may declare a lockout on
grounds involving inter-union and intra-union disputes.
In case of bargaining deadlocks, the duly certified or recognized bargaining agent
may file a notice of strike or the employer may file a notice of lockout with the
Ministry at least 30 day before the intended date thereof. In cases of unfair labor
practice, the period of notice shall be 15 days and in the absence of a duly certified
or recognized bargaining agent, the notice of strike may be filed by any legitimate
labor organization in behalf of its members. However, in case of dismissal from
employment of union officers duly elected in accordance with the union constitution
and by-laws, which may constitute union busting, where the existence of the union
is threatened, the 15-day cooling-off period shall not apply and the union may take
action immediately. (As amended by Executive Order No. 111, December 24, 1986)
The notice must be in accordance with such implementing rules and regulations as
the Minister of Labor and Employment may promulgate.
During the cooling-off period, it shall be the duty of the Ministry to exert all efforts
at mediation and conciliation to effect a voluntary settlement. Should the dispute
remain unsettled until the lapse of the requisite number of days from the mandatory
filing of the notice, the labor union may strike or the employer may declare a
lockout.
A decision to declare a strike must be approved by a majority of the total union
membership in the bargaining unit concerned, obtained by secret ballot in meetings
or referenda called for that purpose. A decision to declare a lockout must be
approved by a majority of the board of directors of the corporation or association or
of the partners in a partnership, obtained by secret ballot in a meeting called for
that purpose. The decision shall be valid for the duration of the dispute based on
substantially the same grounds considered when the strike or lockout vote was
taken. The Ministry may, at its own initiative or upon the request of any affected
party, supervise the conduct of the secret balloting. In every case, the union or the
employer shall furnish the Ministry the results of the voting at least seven days
before the intended strike or lockout, subject to the cooling-off period herein
provided. (As amended by Batas Pambansa Bilang 130, August 21, 1981 and further
amended by Executive Order No. 111, December 24, 1986)

When, in his opinion, there exists a labor dispute causing or likely to cause a strike
or lockout in an industry indispensable to the national interest, the Secretary of
Labor and Employment may assume jurisdiction over the dispute and decide it or
certify the same to the Commission for compulsory arbitration. Such assumption or
certification shall have the effect of automatically enjoining the intended or
impending strike or lockout as specified in the assumption or certification order. If
one has already taken place at the time of assumption or certification, all striking or
locked out employees shall immediately return-to-work and the employer shall
immediately resume operations and readmit all workers under the same terms and
conditions prevailing before the strike or lockout. The Secretary of Labor and
Employment or the Commission may seek the assistance of law enforcement
agencies to ensure compliance with this provision as well as with such orders as he
may issue to enforce the same.
In line with the national concern for and the highest respect accorded to the right of
patients to life and health, strikes and lockouts in hospitals, clinics and similar
medical institutions shall, to every extent possible, be avoided, and all serious
efforts, not only by labor and management but government as well, be exhausted to
substantially minimize, if not prevent, their adverse effects on such life and health,
through the exercise, however legitimate, by labor of its right to strike and by
management to lockout. In labor disputes adversely affecting the continued
operation of such hospitals, clinics or medical institutions, it shall be the duty of the
striking union or locking-out employer to provide and maintain an effective skeletal
workforce of medical and other health personnel, whose movement and services
shall be unhampered and unrestricted, as are necessary to insure the proper and
adequate protection of the life and health of its patients, most especially emergency
cases, for the duration of the strike or lockout. In such cases, therefore, the
Secretary of Labor and Employment may immediately assume, within twenty four
(24) hours from knowledge of the occurrence of such a strike or lockout, jurisdiction
over the same or certify it to the Commission for compulsory arbitration. For this
purpose, the contending parties are strictly enjoined to comply with such orders,
prohibitions and/or injunctions as are issued by the Secretary of Labor and
Employment or the Commission, under pain of immediate disciplinary action,
including dismissal or loss of employment status or payment by the locking-out
employer of backwages, damages and other affirmative relief, even criminal
prosecution against either or both of them.
The foregoing notwithstanding, the President of the Philippines shall not be
precluded from determining the industries that, in his opinion, are indispensable to
the national interest, and from intervening at any time and assuming jurisdiction
over any such labor dispute in order to settle or terminate the same.
Before or at any stage of the compulsory arbitration process, the parties may opt to
submit their dispute to voluntary arbitration.
The Secretary of Labor and Employment, the Commission or the voluntary arbitrator
shall decide or resolve the dispute, as the case may be. The decision of the
President, the Secretary of Labor and Employment, the Commission or the voluntary

arbitrator shall be final and executory ten (10) calendar days after receipt thereof
by the parties. (As amended by Section 27, Republic Act No. 6715, March 21, 1989)
Article 248. Unfair labor practices of employers. It shall be unlawful for an
employer to commit any of the following unfair labor practice:
To interfere with, restrain or coerce employees in the exercise of their right to selforganization;
To require as a condition of employment that a person or an employee shall not join
a labor organization or shall withdraw from one to which he belongs;
To contract out services or functions being performed by union members when such
will interfere with, restrain or coerce employees in the exercise of their rights to selforganization;
To initiate, dominate, assist or otherwise interfere with the formation or
administration of any labor organization, including the giving of financial or other
support to it or its organizers or supporters;
To discriminate in regard to wages, hours of work and other terms and conditions of
employment in order to encourage or discourage membership in any labor
organization. Nothing in this Code or in any other law shall stop the parties from
requiring membership in a recognized collective bargaining agent as a condition for
employment, except those employees who are already members of another union
at the time of the signing of the collective bargaining agreement. Employees of an
appropriate bargaining unit who are not members of the recognized collective
bargaining agent may be assessed a reasonable fee equivalent to the dues and
other fees paid by members of the recognized collective bargaining agent, if such
non-union members accept the benefits under the collective bargaining agreement:
Provided, that the individual authorization required under Article 242, paragraph (o)
of this Code shall not apply to the non-members of the recognized collective
bargaining agent;
To dismiss, discharge or otherwise prejudice or discriminate against an employee for
having given or being about to give testimony under this Code;
To violate the duty to bargain collectively as prescribed by this Code;
To pay negotiation or attorneys fees to the union or its officers or agents as part of
the settlement of any issue in collective bargaining or any other dispute; or
To violate a collective bargaining agreement.
The provisions of the preceding paragraph notwithstanding, only the officers and
agents of corporations, associations or partnerships who have actually participated
in, authorized or ratified unfair labor practices shall be held criminally liable. (As
amended by Batas Pambansa Bilang 130, August 21, 1981)

Imasen Phil. v. Alcon, G.R. No. 194884, October 22, 2014

G.R. No. 194884

October 22, 2014

IMASEN
PHILIPPINE
MANUFACTURING
vs.
RAMONCHITO T. ALCON and JOANN S. PAPA, Respondents.

CORPORATION, Petitioner,

DECISION
BRION, J.:
We resolve in this petition for review on certiorari the challenge to the June 9, 2010 decision and
the December 22, 2010 resolution of the Court of Appeals (CA) in CA-G.R. SP No. 110327. This CA
decision nullified the December 24, 2008 decision of the National Labor Relations Commission
(NLRC) in NLRC CA No. 043915-05 (NLRC CASE No. RAB IV-12-1661-02-L). The NLRC ruling, in
turn, affirmed the December 10, 2004 decision of the Labor Arbiter (LA), dismissing the illegal
dismissal complaint filed by respondents Ramonchito T. Alcon and Joann S. Papa (collectively
referred to as respondents).
1

The Factual Antecedents

Petitioner Imasen Philippine Manufacturing Corporation is a domestic corporation engaged in the
manufacture of auto seat-recliners and slide-adjusters. It hired the respondents as manual welders
in 2001.
On October 5, 2002, the respondents reported for work on the second shift from 8:00 pm to 5:00
am of the following day. At around 12:40 am, Cyrus A. Altiche, Imasens security guard on duty, went
to patrol and inspect the production plants premises. When Altiche reached Imasens Press Area, he
heard the sound of a running industrial fan. Intending to turn the fan off, he followed the sound that
led him to the plants "Tool and Die" section.
At the "Tool and Die" section, Altiche saw the respondents having sexual intercourse on the floor,
using a piece of carton as mattress. Altiche immediately went back to the guard house and relayed
what he saw to Danilo S. Ogana, another security guard on duty.
On Altiches request, Ogana madea follow-up inspection. Ogana went to the "Tool and Die" section
and saw several employees, including the respondents, already leaving the area. He noticed,
however, that Alcon picked up the carton that Altiche claimed the respondents used as mattress
during their sexual act, and returned it to the place where the cartons were kept. Altiche then
submitted a handwritten report of the incident to Imasens Finance and Administration Manager.
6

On October 14, 2002, Imasen issued the respondents separate interoffice memoranda informing
them of Altichesreport on the October 5, 2002 incident and directing them to submit their individual
explanation. The respondents complied with the directive; they claimed that they were merely
sleeping in the "Tool and Die" section at the time of the incident. They also claimed that other
employees were near the area, making the commission of the act charged impossible.
7

On October 22, 2002, Imasen issued the respondents another interoffice memorandum directing
them to appear atthe formal hearing of the administrative charge against them. The hearing was
conducted on October 30, 2002, presided by a mediator and attended by the representatives of
8

Imasen, the respondents, Altiche and Ogana. Altiche and Ogana reiterated the narrations in Altiches
handwritten report.
On December 4, 2002, Imasen issued the respondents separate interoffice memoranda terminating
their services. It found the respondents guilty of the act charged which it considered as "gross
misconduct contrary to the existing policies, rules and regulations of the company."
10

On December 5, 2002, the respondents filed before the LA the Complaint for illegal dismissal. The
respondents maintained their version of the incident.
11

In the December 10, 2004 decision, the LA dismissed the respondents complaint for lack of merit.
The LA found the respondents dismissal valid, i.e., for the just cause of gross misconduct and with
due process. The LA gave weight to Altiches account of the incident, which Ogana corroborated,
over the respondentsmere denial of the incident and the unsubstantiated explanation that other
employees were present near the "Tool and Die" section, making the sexual act impossible. The LA
additionally pointed out that the respondents did not show any ill motive or intent on the part of
Altiche and Ogano sufficient to render their accounts of the incident suspicious.
12

The NLRCs ruling

In its December 24, 2008 decision, the NLRC dismissed the respondents appeal for lack of merit.
In affirming the LAs ruling, the NLRC declared that Imasen substantially and convincingly proved
just cause for dismissing the respondents and complied with the required due process.
13

14

The respondents filed before the CA a petition for certiorari after the NLRC denied their motion for
reconsideration in its May 29, 2009 resolution.
15

16

17

The CAs ruling

In its June 9, 2010 decision, the CA nullified the NLRCs ruling. The CA agreed with the labor
tribunals findings regarding the infraction charged engaging in sexual intercourse on October 5,
2002 inside company premises and Imasens observance of due process in dismissing the
respondents from employment.
18

The CA, however, disagreed with the conclusion that the respondents sexual intercourse inside
company premises constituted serious misconduct that the Labor Code considers sufficient tojustify
the penalty of dismissal. The CA pointed out that the respondents act, while provoked by "reckless
passion in an inviting environment and time," was not done with wrongful intent or with the grave or
aggravated character that the law requires. To the CA, the penalty of dismissal is not commensurate
to the respondents act, considering especially that the respondents had not committed any infraction
in the past.
Accordingly, the CA reduced the respondents penalty to a threemonth suspension and ordered
Imasen to: (1) reinstate the respondents to their former position without loss of seniority rights and
other privileges; and (2) pay the respondents backwages from December 4, 2002 until actual
reinstatement, less the wages corresponding to the three-month suspension.
Imasen filed the present petition after the CA denied its motion for Reconsideration in the CAs
December 22, 2010 resolution.
19

20

The Petition

Imasen argues in this petition that the act of engaging in sexual intercourse inside company
premises during work hours is serious misconduct by whatever standard it is measured. According to
Imasen, the respondents infraction is an affront to its core values and high ethical work standards,
and justifies the dismissal. When the CA reduced the penalty from dismissal to three-month
suspension, Imasen points out that the CA, in effect, substituted its own judgment with its (Imasens)
own legally protected management prerogative.
Lastly, Imasen questions the CAs award of backwages in the respondents favor. Imasen argues that
the respondents would virtually gain from their infraction as they would be paid eight years worth of
wages without having rendered any service; eight (8) years, in fact, far exceeds their actual period of
service prior to their dismissal.
The Case for the Respondents
The respondents argue in their comment that the elements of serious misconduct that justifies an
employees dismissal are absent in this case, adopting thereby the CAs ruling. Hence, to the
respondents, the CA correctly reversed the NLRCs ruling; the CA, in deciding the case, took a
wholistic consideration of all the attendant facts, i.e., the time, the place, the persons involved, and
the surrounding circumstances before, during, and after the sexual intercourse, and not merely the
infraction committed.
21

The Issue
The sole issue for this Courts resolution is whether the respondents infraction engaging in sexual
intercourse inside company premises during work hours amounts to serious misconduct within the
terms of Article 282 (now Article 296) of the Labor Code justifying their dismissal.
The Courts Ruling
We GRANT the petition.
We find that the CA reversibly erred when it nullified the NLRCs decision for grave abuse of
discretion the NLRCs decision.
Preliminary considerations: tenurial security vis--vis management prerogative
The law and jurisprudence guaranteeto every employee security of tenure. This textual and the
ensuing jurisprudential commitment to the cause and welfare of the working class proceed from the
social justice principles of the Constitution that the Court zealously implements out of its concern for
those with less in life. Thus, the Court will not hesitate to strike down as invalid any employer act that
attempts to undermine workers tenurial security. All these the State undertakes under Article 279
(now Article 293) of the Labor Code which bar an employer from terminating the services of an
employee, except for just or authorized cause and upon observance of due process.
22

In protecting the rights of the workers, the law, however, does not authorize the oppression or selfdestruction of the employer. The constitutional commitment to the policy of social justice cannot be
understood to mean that every labor dispute shall automatically be decided in favor of labor. The
constitutional and legal protection equally recognize the employers right and prerogative to manage
its operation according to reasonable standards and norms of fair play.
23

24

Accordingly, except as limited by special law, an employer is free to regulate, according to his own
judgment and discretion, all aspects of employment, including hiring, work assignments, working
methods, time, place and manner of work, tools to beused, processes to be followed, supervision of
workers, working regulations, transfer of employees, worker supervision, layoff of workers and the
discipline, dismissal and recall of workers. As a general proposition, an employer has free reign
over every aspect of its business, including the dismissal of his employees as long as the exercise of
its management prerogativeis done reasonably, in good faith, and in a manner not otherwise
intended to defeat or circumvent the rights of workers.
25

In these lights, the Courts task inthe present petition is to balance the conflicting rights of the
respondents to security of tenure, on one hand, and of Imasen to dismiss erring employees pursuant
to the legitimate exercise of its management prerogative, on the other.
Managements right to dismiss an employee; serious misconduct as just cause for the dismissal
The just causes for dismissing an employee are provided under Article 282 (now Article 296) of the
Labor Code. Under Article 282(a), serious misconduct by the employee justifies the employer in
terminating his or her employment.
26

27

Misconduct is defined as an improper or wrong conduct. It is a transgression of some established

and definite rule of action, a forbidden act, a dereliction of duty, willful in character, and implies
wrongful intent and not mere error in judgment. To constitute a valid cause for the dismissal within
the text and meaning of Article 282 of the Labor Code, the employees misconduct must be serious,
i.e., of such grave and aggravated character and not merely trivial or unimportant.
28

29

Additionally, the misconduct must be related to the performance of the employees duties showing
him tobe unfit to continue working for the employer. Further, and equally important and required, the
act or conduct must have been performed with wrongful intent.
30

31

To summarize, for misconduct or improper behavior to be a just cause for dismissal, the following
elements must concur: (a) the misconduct must be serious; (b) it must relate to the performance of
the employees duties showing that the employee has become unfit to continue working for the
employer; and (c) it must have been performed with wrongful intent.
32

The respondents infraction amounts to serious misconduct within the terms of Article 282 (now
Article296) of the Labor Code justifying their dismissal
Dismissal situations (on the ground of serious misconduct) involving sexual acts, particularly sexual
intercourse committed by employees inside company premises and during workhours, are not usual
violations and are not found in abundance under jurisprudence. Thus, in resolving the present
petition, we are largely guided by the principles we discussed above, as applied to the totality of the
circumstances that surrounded the petitioners dismissal.
33

In other words, we view the petitioners act from the prism of the elements that must concur for an
act to constitute serious misconduct, analyzed and understood within the context of the overall
circumstances of the case. In taking this approach, weare guided, too, by the jurisdictional limitations
that a Rule 45 review of the CAs Rule 65 decision in labor cases imposes on our discretion.
34

In addressing the situation that we are faced with in this petition, we determine whether Imasen
validly exercised its prerogative as employer to dismiss the respondents-employees who, within
company premises and during work hours, engaged in sexual intercourse. As framed within our

limited Rule 45 jurisdiction, the question that we ask is: whether the NLRC committed grave abuse of
discretion in finding that the respondents act amounted to what Article 282 of the Labor Code
textually considers as serious misconduct to warrant their dismissal.
After due consideration, we find the NLRC legally correct and well within its jurisdiction when it
affirmed the validity of the respondents dismissal on the ground of serious misconduct.
Sexual acts and intimacies between two consenting adults belong, as a principled ideal, to the realm
of purely private relations. Whether aroused by lust or inflamed by sincere affection, sexual acts
should be carried out at such place, time and circumstance that, by the generally accepted norms of
conduct, will not offend public decency nor disturb the generally held or accepted social morals.
Under these parameters, sexual acts between two consenting adults do not have a place in the work
environment.
1wphi1

Indisputably, the respondents engaged in sexual intercourse inside company premisesand during
work hours. These circumstances, by themselves, are already punishablemisconduct. Added to
these considerations, however, is the implication that the respondents did not only disregard
company rules but flaunted their disregard in a manner that could reflect adversely on the status of
ethics and morality in the company.
Additionally, the respondents engaged in sexual intercourse in an area where co-employees or other
company personnel have ready and available access. The respondents likewise committed their act
at a time when the employees were expected to be and had, in fact, been at their respective posts,
and when they themselves were supposed to be, as all other employees had in fact been, working.
Under these factual premises and inthe context of legal parameters we discussed, we cannot help
but consider the respondents misconduct to be of grave and aggravated character so that the
company was justified in imposing the highest penalty available dismissal. Their infraction
transgressed the bounds of sociallyand morally accepted human public behavior, and at the same
time showedbrazen disregard for the respect that their employer expected of them as employees. By
their misconduct, the respondents, in effect, issued an open invitation for othersto commit the same
infraction, with like disregard for their employers rules, for the respect owed to their employer, and
for their co-employees sensitivities. Taken together, these considerations reveal a depraved
disposition that the Court cannot but consider as a valid cause for dismissal. In ruling as we do now,
we considered the balancing between the respondents tenurial rights and the petitioners interests
the need to defend their management prerogative and to maintain as well a high standard of ethics
and morality in the workplace. Unfortunately for the respondents, in this balancing under the
circumstances ofthe case, we have to rule against their tenurial rights in favor of the employers
management rights.
All told, the respondents misconduct,under the circumstances of this case, fell within the terms of
Article 282 (now Article 296) of the Labor Code. Consequently, we reverse the CAs decision for its
failure to recognize that no grave abuse of discretion attended the NLRCs decision to support the
respondents dismissal for serious misconduct.
WHEREFORE, in light of these considerations, we hereby GRANT the petition. We REVERSE the
decision dated June 9, 2010 and the resolution dated December 22, 2010 of the Court of Appeals in
CA-G.R. SP No. 110327 and REINSTATE the decision dated December 24, 2008 of the National
Labor Relations Commission in NLRC CA No. 043915-05 (NLRC Case No. RAB IV-12-1661-02-L).
SO ORDERED.

ARTURO
Associate Justice

D.

BRION

Realda v. New Age, G.R. No. 192190, April 25, 2012

G.R. No. 192190

April 25, 2012

BILLY
M.
vs.
NEW AGE GRAPHICS, INC. and JULIAN I. MIRASOL, JR. Respondents.

REALDA, Petitioner,

RESOLUTION
REYES, J.:
The petitioner, who was the former machine operator of respondent New Age Graphics Inc.
(Graphics, Inc.), files this petition for review under Rule 45 of the Rules of Court of the
Decision1 dated June 9, 2009 and Resolution2dated April 14, 2010 of the Court of Appeals (CA) in
CA-G.R. SP No. 106928. By way of its June 9, 2009 Decision, the CA reversed and set aside the
March 31, 2008 Decision3 and October 28, 2008 Resolution4 of the National Labor Relations
Commission (NLRC) in NLRC LAC No. 10-002759-07 affirming the August 15, 2007 Decision 5 of
Labor Arbiter Danna M. Castillon (LA Castillon), which found the petitioner to be illegally dismissed.
The CA exonerated the petitioner from the charges of destroying Graphics, Inc.s property and
disloyalty to Graphics, Inc. and its objectives. However, the CA ruled that the petitioners unjustified
refusal to render overtime work, unexplained failure to observe prescribed work standards, habitual
tardiness and chronic absenteeism despite warning and non-compliance with the directive for him to
explain his numerous unauthorized absences constitute sufficient grounds for his termination.
Specifically:
On the ground of repeated violations of companys rules and regulations, namely: insubordination,
deliberate slowdown of work, habitual tardiness, absence without official leave and inefficiency; We
find that public respondent commission, in affirming labor arbiter Castillon, rushed into conclusion
that petitioner has failed to convince the commission a quo on what company rules and regulations
private respondent had committed. x x x
The foregoing, notwithstanding, we find that private respondent should be dismissed on the ground
of willful disobedience of the warning and memoranda issued by petitioner. To be validly dismissed
on the ground of willful disobedience requires the concurrence of at least two requisites: (1) the
employees assailed conduct must have been willful or intentional, the willfulness being
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.
Private respondents continued refusal to acknowledge receipt and to present his defense against
the notice of suspension and of dismissal, render him guilty of insubordination or willful disobedience
of the reasonable and lawful order of petitioner. These orders were made with [regard] to his duties
to the company as a punctual employee and as the sole and exclusive operator of the printing
machine provided to him by petitioner. Therefore, the obligation to answer rests upon him who is

alleged to have committed infractions against his employer, otherwise he is deemed to have waived
his right to be heard and would be made to suffer the consequences of such refusal.
Private respondent is also accused of insubordination for the reason that he stubbornly refused to
follow the orders of his General Manager to show the latter and check on the computer using the
CMYK guide, whether the colors he is running in his printing machine are correct. After initially
following the said order, and confirming that the first color, cyan, running in the machine was correct,
he failed to observe the same procedure on the second color magenta and did not even bother to
remedy it after it was pointed out by the Computer Graphic Artist supervising him. Since this was not
the first time he was reprimanded for carelessly rushing the work assigned to him, disregarding
certain procedures to ensure the quality of the same and thereby resulting in mediocre products
which earn the ire of the companys clientele, his stubborn refusal to change shows a clear act of
insubordination against private respondent.
xxx
Private respondent has pending work on La Salleo Magazine on May 25-26, 2004, but refused to
do overtime in order to finish the same. Aside from this, he has two other works required for him to
finish, mainly: PCU-Manila Brochure and Hijas de Maria souvenir program. In procuring absences
during the times when workload was heavy, the printing deadlines for the months of April and May
were not met and petitioner incurred losses from overtime pay for the other employees who were
forced to take on the work left by private respondent and from penalties imposed by clients for every
day of delay after the deadlines set for the delivery of the printed materials.
xxx
Furthermore, private respondents refusal to render overtime work when required upon him,
contributed to losses incurred by the petitioner. Public respondent commission has erred in ruling
that rendition of the same is not mandatory. Art. 89 of the Labor Code empowers the employer to
legally compel his employees to perform overtime work against their will to prevent serious loss or
damage, to wit:
xxxx
In the present case, petitioners business is a printing press whose production schedule is
sometimes flexible and varying. It is only reasonable that workers are sometimes asked to render
overtime work in order to meet production deadlines.
On or before May 26, 2004, private respondent was asked to render overtime work but he refused to
do so despite the "rush" orders of customers and petitioners need to meet its deadlines set by the
former. In fact, he reneged on his promise to do the same, after being issued an Overtime Slip Form
by Mylene Altovar, and instead went out with another individual, as attested by his wife after calling
the company to inform it of such absence. He knew that he was going to be unavailable for work on
the following day, but instead of trying to finish his work before that date by rendering overtime, due
to the "rush" in meeting the deadlines, he opted to forego with the same, and thereby rejecting the
order of petitioner.
xxx
Petitioner further alleges habitual tardiness on the part of private respondent for which he received a
warning notice in April and May 2004. For the month of January and February 2004 alone, he

reported late for work 23 times and on May 2004, just prior to his suspension, he was yet again late
for 6 times. The Daily Time Records of private respondent contained the entries which [were]
personally written by him. x x x
Finally, on petitioners allegation on private respondents absences without official leave, We hold
that the latters actions were indeed unjustified. Despite the warning issued to private respondent by
petitioner on his AWOLs during the month of April and May, and instead of reporting to the company
to deny or to refute the basis for recommendation of dismissal, he absented himself from Jun. 15 to
Jul. 15, 2004, which prompted to (sic) the termination of his employment. The ruling of the labor
arbiter that since the final recommendation of petitioner was "dismissal for cause", private
respondent cannot be faulted for his failure to report for work on Jun. 15 does not hold water. What
was given to private respondent on Jun. 15, 2004 was indeed in the form of a notice of dismissal.
However, it was only recommended that he be dismissed from his employment and is still given the
opportunity to present his defense to deny or refute the said recommendation of company. 6 x x x
(Citations omitted)
Nonetheless, while the CA recognized the existence of just causes for petitioners dismissal, it found
the petitioner entitled to nominal damages in the amount of P5,000.00 due to Graphics, Inc.s failure
to observe the procedural requirements of due process.
Private respondent was not accorded due process when petitioner issued and served to the former
the written notice of dismissal dated Jun. 15, 2004. A careful perusal of the records will show that the
notice issued by the employer gives the employee only twenty-four (24) hours to answer and put up
his defenses against the accusations laid upon him by the company, in contravention with the rule of
a "reasonable" period as construed in King of Kings Transport v. Mamac. Moreover, the scheduled
hearing in front of Leticia D. Lago was on the same date at 1:00 p.m., which left private respondent
with no recourse to secure the services of a counsel, much less prepare a good rebuttal against the
alleged evidences for the valid dismissal of the former.
xxxx
x x x Considering that petitioner has made efforts in the past to afford private respondent the
opportunity to be able to defend himself, but the latter, instead of availing such remedy, rejected the
same; We have taken this into consideration, and impose [P]5,000.00 as the penalty for the
employers failure to comply with the due process requirement. 7 (Citations omitted)
This Court finds no cogent reason to reverse the assailed issuances of the CA.
First, the petitioners arbitrary defiance to Graphics, Inc.s order for him to render overtime work
constitutes willful disobedience. Taking this in conjunction with his inclination to absent himself and to
report late for work despite being previously penalized, the CA correctly ruled that the petitioner is
indeed utterly defiant of the lawful orders and the reasonable work standards prescribed by his
employer.
This particular issue is far from being novel as this Court had the opportunity in R.B. Michael Press v.
Galit8 to categorically state that an employer has the right to require the performance of overtime
service in any of the situations contemplated under Article 89 of the Labor Code and an employees
non-compliance is willful disobedience. Thus:
For willful disobedience to be a valid cause for dismissal, these two elements must concur: (1) the
employees 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.
In the present case, there is no question that petitioners order for respondent to render overtime
service to meet a production deadline complies with the second requisite. Art. 89 of the Labor Code
empowers the employer to legally compel his employees to perform overtime work against their will
to prevent serious loss or damage:
Art. 89. EMERGENCY OVERTIME WORK
Any employee may be required by the employer to perform overtime work in any of the following
cases:
xxxx
(c) When there is urgent work to be performed on machines, installations, or equipment, in order to
avoid serious loss or damage to the employer or some other cause of similar nature;
xxx
In the present case, petitioners business is a printing press whose production schedule is
sometimes flexible and varying. It is only reasonable that workers are sometimes asked to render
overtime work in order to meet production deadlines.
xxx
The issue now is, whether respondents refusal or failure to render overtime work was willful; that is,
whether such refusal or failure was characterized by a wrongful and perverse attitude. In Lakpue
Drug Inc. v. Belga, willfulness was described as "characterized by a wrongful and perverse mental
attitude rendering the employees act inconsistent with proper subordination." The fact that
respondent refused to provide overtime work despite his knowledge that there is a production
deadline that needs to be met, and that without him, the offset machine operator, no further printing
can be had, shows his wrongful and perverse mental attitude; thus, there is willfulness.
Respondents excuse that he was not feeling well that day is unbelievable and obviously an
afterthought. He failed to present any evidence other than his own assertion that he was sick. Also, if
it was true that he was then not feeling well, he would have taken the day off, or had gone home
earlier, on the contrary, he stayed and continued to work all day, and even tried to go to work the
next day, thus belying his excuse, which is, at most, a self-serving statement.
After a re-examination of the facts, we rule that respondent unjustifiably refused to render overtime
work despite a valid order to do so. The totality of his offenses against petitioner R.B. Michael Press
shows that he was a difficult employee. His refusal to render overtime work was the final straw that
broke the camels back, and, with his gross and habitual tardiness and absences, would merit
dismissal from service.9 (Citations omitted)
Noticeably, this case and R.B. Michael Press share a parallelism. Similar to the dismissed employee
in the above-quoted case, the petitioner exhibited willful disobedience to a reasonable order from his
employer and this Court does not find any reason why petitioner should be accorded a different
treatment.

Second, the petitioners failure to observe Graphics, Inc.s work standards constitutes inefficiency
that is a valid cause for dismissal. Failure to observe prescribed standards of work, or to fulfill
reasonable work assignments due to inefficiency may constitute just cause for dismissal. Such
inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to
complete the same within the alloted reasonable period, or by producing unsatisfactory results. As
the operator of Graphics, Inc.s printer, he is mandated to check whether the colors that would be
printed are in accordance with the clients specifications and for him to do so, he must consult the
General Manager and the color guide used by Graphics, Inc. before making a full run. Unfortunately,
he failed to observe this simple procedure and proceeded to print without making sure that the colors
were at par with the clients demands. This resulted to delays in the delivery of output, client
dissatisfaction, and additional costs on Graphics, Inc.s part.
Security of tenure is indeed constitutionally guaranteed. However, this should not be indiscriminately
invoked to deprive an employer of its management prerogatives and right to shield itself from
incompetence, inefficiency and disobedience displayed by its employees. The procedure laid down
by Graphics, Inc. which the petitioner was bound to observe does not appear to be unreasonable or
unnecessarily difficult. On the contrary, it is necessary and relevant to the achievement of Graphics,
Inc.s objectives. The petitioners non-compliance is therefore hard to comprehend.
While a penalty in the form of suspension had already been imposed on the petitioner for his
habitual tardiness and repeated absenteeism, the principle of "totality of infractions" sanctions the
act of Graphics, Inc. of considering such previous infractions in decreeing dismissal as the proper
penalty for his tardiness and unauthorized absences incurred afterwards, in addition to his refusal to
render overtime work and conform to the prescribed work standards. In Merin v. National Labor
Relations Commission,10 this Court expounded on the principle of totality of infractions as follows:
The totality of infractions or the number of violations committed during the period of employment
shall be considered in determining the penalty to be imposed upon an erring employee. The offenses
committed by petitioner should not be taken singly and separately. Fitness for continued employment
cannot be compartmentalized into tight little cubicles of aspects of character, conduct and ability
separate and independent of each other. While it may be true that petitioner was penalized for his
previous infractions, this does not and should not mean that his employment record would be wiped
clean of his infractions. After all, the record of an employee is a relevant consideration in determining
the penalty that should be meted out since an employee's past misconduct and present behavior
must be taken together in determining the proper imposable penalty[.] Despite the sanctions
imposed upon petitioner, he continued to commit misconduct and exhibit undesirable behavior on
board. Indeed, the employer cannot be compelled to retain a misbehaving employee, or one who is
guilty of acts inimical to its interests.11 (Citations omitted)
This Court cannot condone the petitioners attempt to belittle his habitual tardiness and absenteeism
as these are manifestation of lack of initiative, diligence and discipline that are adverse to Graphics,
Inc.s interest. In Challenge Socks Corporation v. Court of Appeals, 12 this Court said that it reflects an
indifferent attitude to and lack of motivation in work. It is inimical to the general productivity and
business of the employer. This is especially true when it occurred frequently and repeatedly within
an extensive period of time and despite several warnings.
This Court cannot likewise agree to the petitioners attempt to brush aside his refusal to render
overtime work as inconsequential when Graphics, Inc.s order for him to do so is justified by
Graphics, Inc.s contractual commitments to its clients. Such an order is legal under Article 89 of the
Labor Code and the petitioners unexplained refusal to obey is insubordination that merits dismissal
from service.

The petitioner harped on the improper motivations of Graphics, Inc. in ordering his dismissal, primary
of which was the complaint he filed before the Department of Labor and Employment that eventually
led to the finding of violations of laws on labor standards and tax regulations. However, the petitioner
fails to convince that he is not the incorrigible employee portrayed by the evidence presented by the
respondents. The petitioner does not deny that he had been habitually tardy and absent and
continued being so even after he had been warned and thereafter suspended. Neither does he deny
that he refused to render overtime work and that Graphics, Inc. had a legally acceptable reason for
requiring him to do so. The petitioner can only argue that his refusal is not tantamount to willful
disobedience, which of course, is disagreeable. In fact, the petitioners refusal despite knowledge
that his regular presence at work and extended hours thereat on some occasions were necessary
for Graphics, Inc. to meet its obligations to its clients does not only suggest willfulness on his part but
even bad faith. On the other hand, the petitioner only proffers a general denial of the claim that
Graphics, Inc. earned the ire of its clients due to the defective output resulting from the petitioners
failure to comply with the prescribed work standards.
Even assuming as true the petitioners claim that such complaint gave rise to ill-feelings on
Graphics, Inc.s part, he cannot reasonably and validly suggest that the respondents have stripped
themselves of the right to dismiss him for his deliberate disobedience and lack of discipline in
regularly and punctually reporting for work.
Undoubtedly, Graphics, Inc. complied with the substantive requirements of due process in effecting
employee dismissal. However, the same cannot be said insofar as the procedural requirements are
concerned. In King of Kings Transport, Inc. v. Mamac, 13 this Court laid down the manner by which the
procedural due requirements of due process can be satisfied:
To clarify, the following should be considered in terminating the services of employees:
(1) The first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five (5) calendar days from receipt of the notice to
give the employees an opportunity to study the accusation against them, consult a union
official or lawyer, gather data and evidence, and decide on the defenses they will raise
against the complaint. Moreover, in order to enable the employees to intelligently prepare
their explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A general
description of the charge will not suffice. Lastly, the notice should specifically mention which
company rules, if any, are violated and/or which among the grounds under Art. 282 is being
charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to: (1) explain and clarify
their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management. During the hearing
or conference, the employees are given the chance to defend themselves personally, with
the assistance of a representative or counsel of their choice. Moreover, this conference or
hearing could be used by the parties as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers shall serve
the employees a written notice of termination indicating that: (1) all circumstances involving

the charge against the employees have been considered; and (2) grounds have been
established to justify the severance of their employment. 14
As correctly observed by the CA, Graphics, Inc. failed to afford the petitioner with a reasonable
opportunity to be heard and defend itself. An administrative hearing set on the same day that the
petitioner received the memorandum and the twenty-four (24) hour period for him to submit a
written explanation are far from being reasonable.
Furthermore, there is no indication that Graphics, Inc. issued a second notice, informing the
petitioner of his dismissal. The respondents admit that Graphics, Inc. decided to terminate the
petitioners employment after he ceased reporting for work from the time he received the
memorandum requiring him to explain and subsequent to his failure to submit a written explanation.
However, there is nothing on record showing that Graphics, Inc. placed its decision to dismiss in
writing and that a copy thereof was sent to the petitioner.
Notably, the respondents do not question the findings of the CA. The respondents chose not to
convince this Court otherwise by not filing an appeal, which reasonably suggests that Graphics,
Inc.s failure to comply with the procedural requirements of due process is admitted.
Nonetheless, while the CA finding that the petitioner is entitled to nominal damages as his right to
procedural due process was not respected despite the presence of just causes for his dismissal is
affirmed, this Court finds the CA to have erred in fixing the amount that the Company is liable to pay.
The CA should have taken cognizance of the numerous cases decided by this Court where the
amount of nominal damages was fixed at P30,000.00 if the dismissal was for a just cause. One of
such cases is Agabon v. National Labor Relations Commission, 15 on which the CA relied in the
Assailed Decision and was reiterated in Genuino v. National Relations Commission 16 as follows:
In view of Citibank's failure to observe due process, however, nominal damages are in order but the
amount is hereby raised to PhP 30,000 pursuant to Agabon v. NLRC. The NLRC's order for payroll
reinstatement is set aside.
In Agabon, we explained:
The violation of the petitioners' right to statutory due process by the private respondent warrants the
payment of indemnity in the form of nominal damages. The amount of such damages is addressed
to the sound discretion of the court, taking into account the relevant circumstances. Considering the
prevailing circumstances in the case at bar, we deem it proper to fix it at [P]30,000.00. We believe
this form of damages would serve to deter employers from future violations of the statutory due
process rights of employees. At the very least, it provides a vindication or recognition of this
fundamental right granted to the latter under the Labor Code and its Implementing Rules.
1wphi1

Thus, the award of PhP 5,000 to Genuino as indemnity for non-observance of due process under the
CA's March 31, 2000 Resolution in CA-G.R. SP No. 51532 is increased to PhP 30,000. 17
WHEREFORE, premises considered, the petition is DENIED. The Decision of the Court of Appeals
in CA-G.R. SP No. 106928 is AFFIRMED with MODIFICATION in that respondent New Age
Graphics, Inc. is hereby ordered to pay petitioner Billy M. Realda nominal damages in the amount of
Thirty Thousand Pesos (P30,000.00).
SO ORDERED.

BIENVENIDO
Associate Justice

L.

REYES

International School v. I.S. Alliance, G.R. No. 167286, February 5, 2014

G.R. No. 167286

February 5, 2014

INTERNATIONAL
SCHOOL
MANILA
AND/OR
BRIAN
McCAULEY, Petitioners,
vs.
INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE) AND MEMBERS
REPRESENTED BY RAQUEL DAVID CHING, PRESIDENT, EVANGELINE SANTOS, JOSELYN
RUCIO AND METHELYN FILLER,Respondents.
DECISION
LEONARDO-DE CASTRO, J.:
In this petition for review on certiorari, petitioners International School Manila (hereafter the School)
and Brian McCauley seek to set aside the Decision dated November 17, 2004 and the
Resolution dated February 23, 2005 of the Court of Appeals in CA-G.R. SP No. 79031. The decision
of the appellate court upheld the illegality of respondent Evangeline Santos's termination from
employment in the School, while the assailed resolution denied the petitioners' motion for
reconsideration.
1

The complaint filed before the Labor Arbiter involved three individual complainants, aside from the
International School Alliance of Educators (ISAE). However, the instant petition concerns only the
case of Santos as the causes of action of the other complainants, Joselyn Rucio and Methelyn Filler,
had since been dismissed by the Labor Arbiter and the Court of Appeals, respectively.
4

The Material Facts

Santos was first hired by the School in 1978 as a full-time Spanish language teacher. In April 1992,
Santos filed for and was granted a leave of absence for the school year 1992-1993. She came back
from her leave of absence sometime in August 1993. Upon Santoss return to the School, only one
class of Spanish was available for her to teach. Thus, for the school year 1993-1994, Santos agreed
to teach one class of Spanish and four other classes of Filipino that were left behind by a retired
teacher.
5

Since it was Santoss first time to teach Filipino, the Schools high school administrators observed
the way she conducted her classes. The results of the observations on her classes were
summarized in Classroom Standards Evaluation Forms accomplished by the designated observers.
In accordance with said forms, Santos was evaluated in the areas of Planning, the Teaching Act,
Climate, Management and Communication.
On October 26, 1993, Dale Hill, then Assistant Principal, observed Santoss Filipino II class. In the
Classroom Standards Evaluation Form, Hill remarked that the lesson plan that Santos provided
"was written with little detail given." Santos was also noted as needing improvement in the following
criteria: (1) uses effective questioning techniques; (2) is punctual and time efficient; (3) states and
enforces academic and classroom behavior expectations in a positive manner; and (4) reinforces
7

appropriate behavior. Hill also stated that Santoss management of the class left much to be desired.
Hill added that "[t]he beginning and the end of the class were poorly structured with students both
coming late and leaving early with no apparent expectations to the contrary."
On January 17, 1994, Santos submitted to the Personnel Department of the School a
memorandum/form, which stated her assignment preference for the school year 1994-1995. She
indicated therein that she planned to return to the School staff for the said school year and she did
not prefer a change of teaching assignment.
8

On March 11, 1994, Hill observed Santoss Spanish I class. In the Classroom Standards Evaluation
Form he accomplished, Hill stated that Santos needed improvement on the following areas: (1) uses
effective questioning techniques; (2) uses appropriate praise; (3) deals with students in a fair and
consistent manner; (4) is punctual and time efficient; (5) states and enforces academic and
classroom behavior expectations in a positive manner; (6) reinforces appropriate behavior; (7)
organizes the classroom to enhance learning and minimize disruption; and (8) states expectations
and ideas clearly.
9

On May 30, 1994, Hill completed a Summary Evaluation Form of Santoss performance. Hill stated,
among others, that Santos should improve on managing the students punctuality and time
efficiency. Hill added that instructions were not well stated and presented to the class. He said that
Santos needed to identify and state positively the expectations she has for the students. In a
Professional Standards Form accomplished on the same date, Santos was found to be in need of
improvement in these areas: (1) has in-depth knowledge of the appropriate subject matter; and (2)
clearly defines consequences of inappropriate behavior and is consistent in follow through.
10

11

In the meantime, for the school year 1994-1995, Santos agreed to teach five classes of Filipino. On
November 7, 1994, Santos also informed the School of her assignment preference for the incoming
school year 1995-1996. In a memorandum/form submitted to the Personnel Department of the
School, Santos indicated that she did not prefer a change of teaching assignment. In the school year
1995-1996, Santos again taught five classes of Filipino.
12

13

14

On February 1, 1996, then Assistant Principal Peter Loy observed a Filipino IBS1 class of Santos. In
the Classroom Standards Evaluation Form he completed thereafter, Loy noted that Santos needed
improvement on the following aspects: (1) has daily lesson plans written out; (2) incorporates a
variety of activities, resources and teaching strategies into the lesson; (3) plans for the entire
instructional period; (4) provides an instructional sequence which is clear and logical, leading to
stated objectives; (5) uses effective questioning techniques; (6) develops rapport with and between
students by creating a supportive environment; (7) is punctual and time efficient; and (8) reinforces
appropriate behavior. Loy also observed that Santos did not meet the minimum standards in these
areas of concern: (1) has clearly defined lesson objectives that tie into unit objectives as well as into
the school curriculum; and (2) states and enforces academic and classroom behavior expectations
in a positive manner.
15

On February 2, 1996, Loy wrote a memo to Santos, calling her attention to the deficiencies in her
planning, to wit:
16

Good teaching is not something that happens spontaneously all the time. Good teaching is the
result, in part, of hard work and planning. Clearly the planning for your classes, as indicated by the
absence of detailed lesson plans, has resulted in below standard instruction. This is simply not
acceptable. A review of your planning book shows less-than-skeletal entries with no detail or
unification of direction of syllabus. You said that you had other written plans, but these were not
visible nor used for reference during class. Relying solely on memory is not always the best

approach. Although you are a veteran teacher with three decades of experience, you have been
teaching Filipino for only two years during which time there have been important changes in the
International Bacc[a]laureate structure. It is crucial that your plans, both medium and long range, be
well constructed and written and then utilized. (Emphasis ours.)
In a memo dated March 25, 1996, Loy commented on the outline of goals and activities of Santos
as follows:
17

1. You do not address any of the comments made in the Classroom Standards Evaluation Form, nor
how you plan to address those concerns. At present, your outline of activities for this semester is
sketchy. That is, your general lesson topics are listed, but without any daily substance or sequence.
One example, the area of planning, along with objectives and activities, is an area of major concern
for us. It is vital to your growth plan that you submit your detailed lesson plans to Mrs. Villajuan daily
and discuss these with her before the lesson and after to ensure direction and implementation. Thus,
a daily meeting with your department chair is required.
On March 29, 1996, Loy sent another memo to Santos, which required her to undergo the
remediation phase of the evaluation process through a Professional Growth Plan. Thus:
18

19

Given that planning is one of the areas of major concern, it is all the more disturbing that you have
shown virtually no written planning for this quarter.
For the record, please note that we met on February 2, 1996, the day after I observed your class for
the second time this school year. At that meeting, you were given a draft of my comments and
concerns, along with a two[-] page memo. Since that date, I have received a mere outline of your
fourth quarter syllabus which contains virtually no specific plan of activity, action, or means of
addressing the concerns. My memo of March 25 reiterates some of the concerns, while elaborating
on the shortcomings of the outline you submitted that same day.
xxxx
The impression you are creating is that planning for your classes is not taking place, nor is there any
immediate movement towards improvement. This lack of attention on your part only serves to
heighten our concern. Please find attached, therefore, my draft of your Growth Plan.
The March 29, 1996 Professional Growth Plan of Santos, which she signed with then Principal
Jeffrey Hammett, Assistant Principal Peter Loy, and Modern Languages Department Chair Normelita
Villajuan, reads:
20

Goals:
Improve classroom instruction through the implementation of the areas marked as "does not meet
minimum standards," "needs improvement," or "not observed" in classroom observations from
October 1993 through February 1996, as well as concerns noted in your Summary Evaluation of
May 30, 1994. These areas include PLANNING, THE TEACHING ACT, CLIMATE, MANAGEMENT
as specified and dated below.
Initial focus for the first part of this GROWTH PLAN, namely the fourth quarter of SY 1995-96 will be
on PLANNING. By focusing on planning first, other issues relative to climate and management may
also be assisted. This Growth Plan will be reviewed and revised as necessary for SY 1996-97.

Actions:
1. Write daily lesson plans (2/96)
2. Have clearly defined lesson objectives that tie into unit objectives as well as into the
school curriculum (2/96)
3. Incorporate a variety of activities, resources and teaching strategies into the lesson (2/96)
4. Plan for the entire instructional period (2/96)
5. Provide an instructional sequence which is clear and logical, leading to stated objectives
(2/96)
6. Use effective questioning techniques (2/96, 3/94, 10/93)
7. Provide sufficient guided practice and modeling to ensure success, particularly homework
assignments (11/95)
8. Develop rapport with and between students by creating a supportive environment (2/96,
11/95)
9. Be punctual and time efficient (2/96, 3/94, 10/93)
10. State and enforce academic and classroom behavior expectations in a positive manner
(2/96, 3/94, 10/93)
11. Reinforce appropriate behavior (2/96, 3/94, 10/93)
12. Organize the classroom to enhance learning and minimize disruption (11/95, 3/94)
In the memo to Santos dated April 18, 1996, Loy commented that since the implementation of
Santoss Professional Growth Plan, it was observed that there was noticeable improvement in the
writing of her lesson plans and the same had a clearer sense of direction for her classes.
21

Likewise, in the memo dated April 26, 1996, Loy noted that Santos was observed to be taking steps
to address the concerns in her Professional Growth Plan. In the succeeding memos to Santos dated
May 10, 1996 and May 16, 1996, Loy expressed his gladness at the progress of Santos and the
positive effect of the Professional Growth Plan on her performance.
22

23

24

Accordingly, in a memo dated May 24, 1996, Loy advised Santos that her Professional Growth Plan
had been revised as a result of her efforts and improvements.
25

The May 24, 1996 Revised Professional Growth Plan of Santos states:
26

Goals:
Improve classroom instruction through the implementation of the areas marked as "does not meet
minimum standards," "needs improvement," or "not observed" in classroom observations from
October 1993 through February 1996, as well as concerns noted in your Summary Evaluation of

May 30, 1994. These areas include PLANNING, THE TEACHING ACT, CLIMATE, MANAGEMENT
as specified and dated below.
Initial focus for the first part of this GROWTH PLAN was on PLANNING. Ms. Santos has shown
improvement in areas #1-4 under Short Term Planning during the fourth quarter of SY 1995-1996.
Having focused on planning first, other issues relative to climate and management may also have
assisted and can now be directly addressed in the 1996-97 school year.
Actions:
I. Continue the following, which was an area of focus in SY 1995-96:
A. Short Term Planning
1. Write daily lesson plans (2/96)
2. Have clearly defined lesson objectives that tie into unit objectives as well
as into the school curriculum (2/96)
3. Incorporate a variety of activities, resources and teaching strategies into
the lesson (2/96)
4. Plan for the entire instructional period (2/96)
II. Focus on the following areas in need of improvement:
(Note: these items have been grouped by topic area in this revised growth plan and therefore
re-numbered from the listing in the original growth plan)
B. Medium and Long Range Planning
5. Provide an instructional sequence which is clear and logical, leading to
stated objectives (2/96)
6. Be punctual and time efficient (2/96, 3/94, 10/93)
C. Classroom Climate and Management
7. Develop rapport with and between students by creating a supportive
environment (2/96, 11/95)
8. State and enforce academic and classroom behavior expectations in a
positive manner (2/96, 3/94, 10/93)
9. Reinforce appropriate behavior (2/96, 3/94, 10/93)
10. Organize the classroom to enhance learning and minimize disruption
(11/95, 3/94)
D. Teaching Techniques

11. Use effective questioning techniques (2/96, 3/94, 10/93)

12. Provide sufficient guided practice and modeling to ensure success,
particularly homework assignments (11/95)
For the school year 1996-1997, Santos again taught five classes of Filipino.

27

In a memo dated September 6, 1996, Loy reminded Santos that, to support her planning and
instruction, they agreed, among others, that she "would keep detailed daily lesson plans, medium
and long range plans and syllabi, and copies of instructional materials used." Subsequently, in a
memo dated September 19, 1996, Loy noted that there seemed to be progress as regards the
instruction that Santos would keep detailed lesson plans. Santos was then advised to continue and
improve her focus on medium and long range plans.
28

29

Thereafter, it seemed that the positive reviews of Santoss performance were gradually replaced by
renewed concerns on her planning. In a memo dated October 4, 1996, Loy stated that:
30

[Santos] submitted a plan for the semester using a form from Anne Marie that will be used by the
department to review the curriculum. A review of the plan submitted by [Santos] indicates that the
plan is vague; it needs additional thought and revision with regards to detail and timelines. The
vagueness of this plan is of concern because proper planning is one of the key areas in Santoss]
Professional Growth Plan. Proper planning was also noted in Mr. Hammetts observation comments
x x x. [Santos] needs to revise this semestral plan for our next meeting. (Emphasis ours.)
In the following memo dated October 18, 1996, Loy noted that Santos revised her plan for the
semester, but the same could use another revision. Santos was directed to add more details to her
plan.
31

On October 29, 1996, Loy observed the Conversational Filipino class of Santos. In the Classroom
Standards Evaluation Form he accomplished for that day, Loy observed that Santos needed
improvement on the following areas: (1) has daily lesson plans written out; (2) has clearly defined
lesson objectives that tie into unit objectives as well as into the school curriculum; and (3) reinforces
appropriate behavior. Loy also remarked to Santos that:
32

[T]here is still noted deficiency in the planning of your classes overall. Although your lesson plans for
Conversational Filipino and Filipino III are better organized than previously, they are still vague, lack
detail and are not clear as to how they fit into a well-sequenced unit. They are still stand-alone
lessons. In addition, your last written lesson plan for Filipino I was for October 24 -- two class
meetings ago. For Filipino A IBS2, there was only one written lesson plan -- for October 17, the first
day of the quarter. (Emphases ours.)
Thereafter, Loys memo dated November 14, 1996 sternly told Santos the following words:
33

Vangie, you stated that you had not revised your lesson plans, yet there was no reason. In light of
my observation of your class on October 29 which followed, planning remains a major concern. I
voiced concern that, given the draft of my October 29 observation which had three notations which
did not meet expectations, you had not responded to my request for a follow-up conference. x x x
Vangie, you need to plan thematic units and daily lessons for each class which are well sequenced
and relevant to the unit. This is one of the major areas of concern in your Professional Growth Plan.
For you not to address this issue from our previous meetings, and to have a planning book that does

not reflect proper planning, does not address the concerns of that Growth Plan; instead the concerns
not only persist, they become more problematic. Vangie, to quote you, you "play it by ear." Flexibility
only works when you are flexible within a clear plan. Otherwise, "playing it by ear" is synonymous
with "winging it day-by-day." You must plan, and you need to begin your second semester outlines
now. To this end, I am asking that you present a draft of your second semester syllabi and plans at
our next meeting."
The memo of Loy on November 15, 1996, further stated:
34

Thank you for coming to speak with me as follow-up to our meeting yesterday and to share your
impressions. You stated that you feel I am being too hard on you. However, when we reviewed your
lesson planning book which you brought with you we noted the following:
- For your Filipino 1 classes, there were lesson plans for November 6, 7 and 13, but no
lesson plans for November 11 and 12.
- For your Conversational Filipino and Filipino 3 classes, there were at least three "lesson
plans" with no activities listed.
- For your Filipino A1/S2, you had gone back to write, using a pen with a slightly different
colored ink to fill in parts of the lesson plan which I noted as deficient in my observation
report of October 29.
- There are no lesson plans for any class beyond todays date.
Clearly, this indicates a lack of planning. With this as your planning guide, I cannot agree that I am
"being too hard on you." As I have stated, your daily planning is often vague at best; your long term
planning does not exist in writing. A review of your planning book today only supports this.
(Emphases ours.)
In the memo dated December 6, 1996, Loy disclosed to Santos that:
35

Concern was expressed by both Mr. Hammett and myself that, after eight months working with your
Professional Growth Plan, we are still focused on but one of the four major areas of concern. Still to
be addressed, following Planning, are concerns under the Teaching Act, Climate and Management.
The third quarter is a crucial one for you, Vangie. We need to move beyond the initial concern in the
Growth Plan to work in the other areas as well.
On January 22, 1997, Loy observed the Filipino 3 class of Santos. The Classroom Standards
Evaluation Form he accomplished stated that Santos still needed improvement on the following
aspects: (1) has daily lesson plans written out; (2) incorporates a variety of activities, resources and
teaching strategies into the lesson; (3) provides an instructional sequence which is clear and logical,
leading to stated objectives; and (4) states and enforces academic and classroom behavior
expectations in a positive manner. Loy also remarked that Santoss "lesson plans do not give a clear
sense of direction towards a specified goal other than to reach the end of the chapter and the book."
36

In his memo dated January 24, 1997, Loy made known his apparent frustration at Santoss
performance in this manner:
37

As I said today, Vangie, I find myself continuing to use the phrases "vague" and "lacking specifics" in
reviewing your daily, unit, or semestral plans. Moreover, suggestions and contributions made in our

meetings to address those concerns do not seem to affect your planning. In your lesson plans, your
objectives are basic and elementary; your activities, vacuous. Objectives such as "enrich
vocabulary," "identify the theme of the chapter," and "participate actively in discussion" (for a class of
7) are not fitting of a high school lesson plan, much less a pre-International Baccalaureate course.
Your activities do not specify the format, criteria, analytical features, or relationship to the
days/courses objectives.
While you claim that you are doing much more than what you have in your lesson plans, my
contention is then, that the plans do not accurately reflect the lesson. As it is, I entered a question
mark next to "plans for the entire instructional period" because your plan gave so little direction
about what you were planning that day. If you know what the specific objectives are, based on
assessment goals, and you plan to include an activity as part of the lesson, include it in the plan and
be specific about what it is, what the criteria are, and why it is important. (Emphasis ours.)
Since then, Loy continued to voice his concerns on the planning process of Santos. He noted on his
memo dated February 7, 1997 that the objectives in Santoss daily lesson plans were very generic
and the activities listed were elementary and very basic. Judging from the lesson plans, Loy
concluded that Santoss planning is still substandard. On February 28, 1997, Loy sent another
memo to Santos, which informed her in no uncertain terms that the growth they see was
insufficient. Other than the substandard lessons, Loy commented that there was virtually no written
work nor adequate direction in her syllabus. Loy also warned her that "continuance in this manner
without marked improvement cannot be tolerated."
38

39

In a memo dated March 14, 1997, Loy called Santoss attention about a problem they discovered in
one of her classes. Loy said:
40

With regards to IBS2 Filipino, three of the eight students did not submit world literature papers as
required by the International Baccalaureate syllabus. Why? You have had these students for the past
two years and know the syllabus of the course. This required component should have been part of
the planning of the course throughout. Although these students are not IB diploma candidates, the
paper should have been drafted, revised, reviewed and polished throughout the course of the past
two years. As you admitted, you did not know until the day the papers were due that these students
were not submitting a paper.
With regards to your lesson planning, there is still a marked absence of writing activities in all your
classes. x x x
Vangie, I hear that you feel you are doing a good job. What worries me, then, is your perception of
how problematic this situation is. You are now one year into a Professional Growth Plan with
incremental movement in just one of several areas of concern. I am disappointed that you believe
that I do not want to have you continue as a member of our faculty. I have worked with you for the
past twelve months on this growth plan, meeting with you no fewer [than] fifteen times since August
1996. Throughout this time, I have offered observations on the areas of deficiency and suggestions
for ways to improve. Ms. Butt and Mr. Hammett have also been supportive of your stated desire to
improve. We want you to be a successful teacher in the area you teach for the sake of our students.
If, as you have confided, Filipino is not the language you would choose to teach, what are the
options? Mr. Hammett said again for the record that he did try to schedule a section of Spanish this
year, but was unable to do so. That situation may also exist next year as we already have four other
teachers teaching Spanish. Knowing all this, it may be difficult to consider your placement next year.

I look forward to continued discussions with you, Vangie, as we search for ways to assist your
improvement toward success as a teacher. I think we all realize, however, that we are running out of
time.
On April 2, 1997, Jeffrey Hammett sent a memo to Santos, likewise expressing his disappointment
with the latters performance. Hammett stated:
41

Vangie, we have been focusing on your planning for just over one year now, and this is just the first
of four areas we wanted to address in your growth plan of last March. We have met with you more
than thirty times this past year to check-on, discuss, and help improve your planning processes. Your
planning has become our number one concern. Still, as I look at the three-day plan you presented
me today for this pre-IB Filipino 3 class (see attached) note that this "plan" covers last Monday (31
March), today (2 April), and this coming Friday (4 April) - this one-page planning sheet is less than
half complete. In fact, the "objectives" section contains nothing more than an unfinished sentence.
You list no activities, no student outcomes. Whats more, I found nothing but blank pages for any
future class sessions.
In all honesty, Vangie, this illustrates to me even more explicitly than ever before how justified we are
in focusing our concerns on your planning. You cannot keep the daily objectives, activities, and
expected student outcomes only "in your head" and "wing it" as you did today. Frankly speaking, you
know how concerned we are with your planning, and you also know that you and I have had informal
conversations relative to your continued employment with us. I would have hoped and expected,
therefore, to see the complete plans for this quarter in your folder, or at the very least, a thoroughly
planned unit on Noli Me Tangere, the material being presented and covered this week. Your "plan"
shows me very little, and what I do see is completely unacceptable!
For me, the reality of this unacceptable lesson plan only reinforces the concerns being expressed by
Mr. Loy. You do not plan in any written and complete way for the success of your students, and this
lack of planning is now, has been, and always will be unacceptable in our school and in our
profession. (Emphasis ours.)
Subsequently, on April 10, 1997, McCauley sent a letter to Santos directing her to explain in writing
why her employment from the School should not be terminated because of her failure to meet the
criteria for improvement set out in her Professional Growth Plan and her substandard performance
as a teacher.
42

In her reply letter dated April 14, 1997, Santos blamed the School for her predicament. She said
that, in the last few years, she had been forced to teach Filipino, a subject which she had no
preparation for. The School allegedly made this happen against her objections and despite the fact
that she had no training in Filipino linguistics and literature. Santos also asked for clarification on
why she was being asked to explain and the reasons therefor.
43

On April 21, 1997, McCauley wrote a letter to Santos informing her that the School considered her
letter dated April 14, 1997 as her explanation. The School also set a formal administrative
investigation on April 23, 1997 in order to further clarify matters and accord Santos the opportunity to
explain her side. Santos was given the choice of bringing a representative or counsel to assist her.
44

According to the Minutes of the Administrative Investigation conducted on April 23, 1997, Santos
was accompanied by Raquel David Ching, the President of the ISAE. Ching first sought clarification
as regards the specific charge against Santos. McCauley referred to the letter dated April 10, 1997,
which asked Santos to explain why her employment should not be terminated by reason of her
performance that fell below the acceptable standards of the School. The charge against Santos was
45

gross inefficiency or negligence in the performance of her assigned work. After the parties made
known their positions, the investigating committee informed Santos and Ching that they would
consider the views presented and they would advise Santos of the Schools action on her case.
In a letter dated May 29, 1997, McCauley informed Santos that he was adopting the
recommendation of the investigation committee that Santoss employment from the School cannot
be continued. According to McCauley, the committee found that the numerous consultations of
Santos with her supervisors for the last three school years did not result in any appreciable
improvement on her part. McCauley pointed out that Santos categorically indicated that she
preferred to continue teaching Filipino for the school years 1994-1995 and 1995-1996. Given that
Santos was duly licensed to teach Filipino, McCauley stated that the committee could not accept her
claim that she was ill-equipped to teach the language. McCauley then told Santos that her
employment with the School would cease effective June 7, 1997.
46

On June 26, 1997, the ISAE filed a complaint against the petitioners, alleging the following causes
of action: (1) unfair labor practice; (2) illegal dismissal; (3) moral and exemplary damages; (4)
violation and refusal to comply with grievance procedures in the CBA; and (5) unresolved grievance
matter. The reliefs prayed for included reinstatement and the payment of backwages and damages.
The complaint was docketed as NLRC-NCR Case No. 00-06-04491-97. The complaint was
subsequently amended to include as complainants Evangeline Santos, Joselyn Rucio and Methelyn
Filler.
47

48

49

The Ruling of the Labor Arbiter

On April 3, 2001, the Labor Arbiter rendered a Decision finding, among others, that Santos was
illegally terminated from her employment. The relevant portions of the ruling state that:
50

The law is clear that for an employee to be validly dismissed, it must be shown that the inefficiency
or incompetency of the employee must be "gross or serious" and "habitual." What is gathered from
the submission made by the respondent is the fact that complainant Santos does not have the skill
and competency to teach Filipino as she was observed by her superior and peers to be lacking in
"preparation" of her lesson plan; she was not in control of her classes as observed since students
come in late; and, she has not communicated well with her students what the expectations and
objectives of the class were.
Based on the above arguments, it is this Offices finding, that if she was measured against them, the
complainant could not be considered as grossly or seriously inefficient or incompetent and therefore
her dismissal is unwarranted. It is unwarranted since her being caught once for not preparing her
lesson plan for the day is not and could not be, by itself as "gross or serious" as defined by law.
Likewise, the observations made by her superior and peers could not be the basis for concluding or
finding that she is grossly incompetent or inefficient.
The attendance of students to a greater extent is outside the control of the teacher. To hold her
grossly incompetent on account of the late coming of students under her class is erroneous
application of the intent of the law.
xxxx
This Office observed first hand (sic) the strained relations that developed and at times consumed the
parties, making reinstatement a not prudent disposition of the case, for it will only inflame so far the
subdued and subsiding emotions.

This Office was witness to the long and emotional and loud arguments that transpire every hearing.
This Office had to step in most of the times to control flying tempers and emotions. Thus, in lieu of
reinstatement, the respondent is directed to pay complainant separation pay equivalent to one-half
(1/2) month salary for every year of service.
Full backwages will not be awarded as well considering the fact that complainant is not without fault.
Partly, she contributed to the problem she found herself in only that, it is not "serious" or "gross" to
make a finding of legality of her termination. She is, therefore, awarded a limited backwages not to
exceed a year and a half in backwages as a form of penalty.
xxxx
WHEREFORE, judgment is hereby rendered as follows:
1. The complaint for unfair labor practice is dismissed for lack of merit;
2. The complaint of Rucio is dismissed for lack of merit;
3. The dismissal of Santos is declared unwarranted, and in view thereof, she is ordered paid
separation pay in lieu of reinstatement in the amount of Seven Hundred Fifty-Six Thousand
Five Hundred Thirty-Six and 55/100 (P756,536.55) Pesos, and, she is likewise ordered [paid]
a limited backwages equivalent to one and a half (1 1/2) year in the amount of One Million
One Hundred Fifty-Two Thousand Eight Hundred Seventeen and 60/100 (P1,152,817.60)
Pesos (please see computation Annex "A");
4. Ms. Filler is declared a regular employee. She is ordered paid backwages and benefits
due a regular employee covering the period from July 25, 1994 to the time of the rendition of
this decision in the total amount of One Million Thirty[-]Three Thousand Three Hundred
Seventy Five and 80/100 (P1,033,375.80) Pesos (please see computation Annex "A").
All other claims are denied for lack of merit. (Emphasis ours.)
51

Both parties appealed the Labor Arbiters Decision to the National Labor Relations Commission
(NLRC). The appeals were docketed as NLRC CA No. 028558-01.
52

The Judgment of the NLRC

On February 28, 2003, the NLRC issued a Resolution, which affirmed the decision of the Labor
Arbiter in this wise:
53

WHEREFORE, premises considered, the appeal is dismissed for lack of merit and the Decision
appealed from is affirmed en toto.
The NLRC upheld the ruling of the Labor Arbiter that Santoss dismissal from employment was not
warranted given that "her being caught once for not preparing her lesson plan for the day is not and
could not be, by itself, as gross or serious as defined by law. Likewise, the observations made by her
superior and peers could not be the basis for concluding or finding that she is grossly incompetent or
inefficient." The NLRC found the conclusion of the Labor Arbiter to be supported by substantial
evidence.
54

Petitioners moved for a reconsideration of the NLRC Resolution but the same was denied in a
Resolution dated June 30, 2003. Petitioners then filed a petition for certiorari before the Court of
Appeals.
55

56

57

The Decision of the Court of Appeals

On November 17, 2004, the Court of Appeals promulgated the assailed decision the decretal portion
of which provides:
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the instant petition is PARTLY GRANTED. The
Resolution of public respondent National Labor Relations Commission dated February 28, 2003, in
NLRC CA No. 028558-01, and its Resolution of June 30, 2003 on the partial motion for
reconsideration are AFFIRMED subject to the MODIFICATION that the award to private respondent
METHELYN FILLER of backwages and benefits due a regular employee from July 25, 1994 until the
rendition of the Labor Arbiters decision on April 3, 2001 is hereby DELETED. Without costs.
58

Brushing aside the argument that Santos did not exercise slight care or diligence in the performance
of her duties, the Court of Appeals pointed out that Santos did exert efforts to improve her
performance, which led to a revision of her original Professional Growth Plan. Echoing the findings
of the Labor Arbiter and the NLRC, the Court of Appeals agreed that Santos could not be said to be
habitually neglectful of her duties after she was "caught once with an inadequately prepared lesson
plan in 1997." Although the Court of Appeals acknowledged that Santoss performance as a teacher
was not at all satisfactory, it ruled that the same did not warrant the penalty of dismissal. To the
appellate court, a penalty of suspension from work was more equitable under the circumstances. As
a matter of right, Santos was adjudged to be entitled to reinstatement and backwages. However,
given the deep antagonism between her and the petitioners, the Court of Appeals ordered the award
of separation pay in lieu of reinstatement.
59

Both parties filed their respective motions for reconsideration of the above decision of the Court of
Appeals, but the same were denied in the assailed Resolution dated February 23, 2005.
60

The Petitioners Arguments

In challenging the assailed decision of the appellate court, petitioners raise for our consideration the
following issues:
a) WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING THAT
RESPONDENT EVANGELINE SANTOS WAS ILLEGALLY DISMISSED; and
b) WHETHER OR NOT RESPONDENT EVANGELINE SANTOS IS ENTITLED TO
REINSTATEMENT OR SEPARATION PAY WITH BACKWAGES.
61

Petitioners argue that Santoss repeated failure to maintain the standards of quality teaching
expected from every faculty member of the School illustrates her gross and habitual neglect of her
duties, which is a just cause for dismissal under Article 282 of the Labor Code. Petitioners lament the
fact that the Court of Appeals allegedly substituted its own judgment with the reasonable standards
of teaching set by the School. Petitioners point out that there was neither a finding that such
standards were arbitrary, nor was the evaluation process biased or that the School or any of its
personnel was motivated by ill will against Santos. Petitioners stress that Santos was not dismissed
solely on the ground that she failed to prepare her lesson plan for one particular day. On the
contrary, petitioners assert that Santos was dismissed from employment because she repeatedly

failed to meet the standards required by the school from 1993 to 1997. According to petitioners, this
repeated failure, especially after the one-year remediation period wherein school administrators met
with Santos no less than thirty (30) times to check on her, clarify and discuss her planning process,
and help her improve her performance, was clearly overlooked by the Court of Appeals.
Despite the application of the Professional Growth Plan, petitioners insist that Santos was still
repeatedly found to be lacking in preparation and planning. Petitioners claim that Santoss failure to
improve, most especially in the planning area of her teaching, justified the Schools decision to
terminate her services. Otherwise, to retain her in the roster of faculty would be tantamount to
sacrificing the welfare of the Schools very own students. At the very least, petitioners aver that
Santos was guilty of gross inefficiency in the performance of her teaching duties. Petitioners further
state that the School observed procedural due process before dismissing Santos. Since her
employment was lawfully terminated, petitioners posit that an award of separation pay with
backwages is not proper.
The Respondents Arguments
Respondents argue that the Court cannot examine anymore the factual findings of an administrative
tribunal, such as the Labor Arbiter, which has already gained expertise in its field. This holds truer if
the factual findings had been affirmed upon review by the NLRC and the Court of Appeals.
According to the respondents, it cannot be said that Santos did not exercise slight care or diligence
in the performance of her duties as she did exert efforts to make the necessary adjustments. That
Santos was shown to have inadequately prepared a lesson plan in 1997 did not necessarily show
that she was habitually neglectful of her duties. For the said reasons, respondents also rejected the
charge of gross inefficiency. Respondents aver that the administrative superiors of Santos found that
she had greatly improved on her preparations and she was never found wanting in the other areas of
her teaching. Respondents also stress that petitioners only brought up the claim of gross inefficiency
in the petition for certiorari before the Court of Appeals. Although respondents admit that Santos did
indeed perform her duties unsatisfactorily, they argue that the same does not warrant dismissal.
Considering that she had worked with the School for 17 long years with no known previous bad
record, they allege that the ends of social and compassionate justice would be better served if she
was merely suspended from work rather than terminated.
The Judgment of the Court
The Court finds the appeal meritorious.
Generally, on appeal, the findings of fact of an administrative agency like the NLRC are accorded not
only respect but also finality if the findings are supported by substantial evidence. Such rule,
however, is by no means absolute. As held in San Miguel Corporation v. Aballa, "when the findings
of fact of the labor arbiter and the NLRC are not supported by substantial evidence or their judgment
was based on a misapprehension of facts, the appellate court may make an independent evaluation
of the facts of the case." The Court finds the said exceptions extant in this case.
62

In Janssen Pharmaceutica v. Silayro, we stated that "[t]o constitute a valid dismissal from
employment, two requisites must concur: (1) the dismissal must be for any of the causes provided in
Article 282 of the Labor Code; and, (2) the employee must be given an opportunity to be heard and
to defend himself."
63

In the collective bargaining agreement (CBA) between the School and ISAE for the years 19921995, Section 13 of Appendix A thereof expressly states that "[t]ermination of employment shall be in
accordance with the laws of the Philippines as presented in the LABOR CODE (Book VI, Art. 282)."
64

Article 28265 of the Labor Code provides:

ART. 282. Termination by employer. An employer may terminate an employment for any of the
following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
In all cases involving termination of employment, the burden of proving the existence of the above
just causes rests upon the employer. The quantum of proof required in these cases is substantial
evidence, that is, such relevant evidence that a reasonable mind might accept as adequate to
support a conclusion, even if other equally reasonable minds might conceivably opine otherwise.
66

67

The Court had occasion to explain in Century Iron Works, Inc. v. Baas the concept of gross and
habitual neglect of duties. Thus:
68

Gross negligence connotes want or absence of or failure to exercise slight care or diligence, or the
entire absence of care. It evinces a thoughtless disregard of consequences without exerting any
effort to avoid them. Fraud and willful neglect of duties imply bad faith of the employee in failing to
perform his job, to the detriment of the employer and the latters business. Habitual neglect, on the
other hand, implies repeated failure to perform ones duties for a period of time, depending upon the
circumstances. (Citations omitted, emphasis supplied.)
We also reiterated in Union Motor Corporation v. National Labor Relations Commission that in
dismissing an employee for gross and habitual neglect of duties, the negligence should not merely
be gross, it should also be habitual.
69

On gross inefficiency, we ruled in Lim v. National Labor Relations Commission that:

70

[G]ross inefficiency falls within the purview of "other causes analogous to the foregoing," and
constitutes, therefore, just cause to terminate an employee under Article 282 of the Labor Code. One
is analogous to another if it is susceptible of comparison with the latter either in general or in some
specific detail; or has a close relationship with the latter. "Gross inefficiency" is closely related to
"gross neglect," for both involve specific acts of omission on the part of the employee resulting in
damage to the employer or to his business. In Buiser vs. Leogardo, this Court ruled that failure to
observe prescribed standards of work, or to fulfill reasonable work assignments due to inefficiency
may constitute just cause for dismissal. (Emphases ours; citations omitted.)
Viewed in light of the above doctrines, the Court is not convinced that the actuations of Santos
complained of by the petitioners constituted gross and habitual neglect of her duties.

From the very beginning of her tenure as a teacher of the Filipino language, the recurring problem
observed of Santos was that her lesson plans lacked details and coherent correlation to each other,
to the course, and to the curriculum, which in turn affected how lessons and instructions were
conveyed to the students. After Santos was placed in a Professional Growth Plan on March 29,
1996, petitioners observed a noticeable improvement on her part. In his memo dated May 24, 1996,
then Assistant Principal Loy even stated that Santoss improvement was a result of her positive
attitude in approaching her growth plan. Unfortunately, though, Santos could not sustain this
progress. Not long after, the School administrators were again admonishing Santos for her vague
lesson plans that lacked specifics.
71

72

What can be gathered from a thorough review of the records of this case is that the inadequacies of
Santos as a teacher did not stem from a reckless disregard of the welfare of her students or of the
issues raised by the School regarding her teaching. Far from being tainted with bad faith, Santoss
failings appeared to have resulted from her lack of necessary skills, in-depth knowledge, and
expertise to teach the Filipino language at the standards required of her by the School.
Be that as it may, we find that the petitioners had sufficiently proved the charge of gross inefficiency,
which warranted the dismissal of Santos from the School.
The Court enunciated in Pea v. National Labor Relations Commission that "it is the prerogative of
the school to set high standards of efficiency for its teachers since quality education is a mandate of
the Constitution. As long as the standards fixed are reasonable and not arbitrary, courts are not at
liberty to set them aside." Moreover, the prerogative of a school to provide standards for its teachers
and to determine whether these standards have been met is in accordance with academic freedom,
which gives the educational institution the right to choose who should teach.
73

74

The CBA between ISAE and the School for the years 1992-1995 also recognized the exclusive right
of the School to "hire and appoint qualified faculty subject to such reasonable rules and regulations
as it may prescribe," as well as the right of the School to discipline its faculty and determine
reasonable levels of performance. Section 8 of Appendix A of the CBA also states that "[a]ll faculty
members must meet the high standard of performance expected by the SCHOOL and abide by all its
policies, procedures and contractual terms."
75

76

77

Contrary to the ruling of the Labor Arbiter, it is not accurate to state that Santos was dismissed by
the School for inefficiency on account of the fact that she was caught only once without a lesson
plan. The documentary evidence submitted by petitioners, the contents of which we laid down in
detail in our statement of facts, pointed to the numerous instances when Santos failed to observe the
prescribed standards of performance set by the School in several areas of concern, not the least of
which was her lack of adequate planning for her Filipino classes. Said evidence established that the
School administrators informed Santos of her inadequacies as soon as they became apparent; that
they provided constructive criticism of her planning process and teaching performance; and that
regular conferences were held between Santos and the administrators in order to address the
latters concerns. In view of her slow progress, the School required her to undergo the remediation
phase of the evaluation process through a Professional Growth Plan. Despite the efforts of the
School administrators, Santos failed to show any substantial improvement in her planning process.
Having failed to exit the remediation process successfully, the School was left with no choice but to
terminate her employment.
The Court finds that, not only did the petitioners documentary evidence sufficiently prove Santoss
inefficient performance of duties, but the same also remained unrebutted by respondents own
evidence. On the contrary, Santos admits in her pleadings that her performance as a teacher of
Filipino had not been satisfactory but she prays for leniency on account of her prior good record as a

Spanish teacher at the School. Indeed, even the Labor Arbiter, the NLRC and the Court of Appeals
agreed that Santos was not without fault but the lower tribunals deemed that termination was too
harsh a penalty.
Nonetheless, the Court finds that petitioners had satisfactorily discharged the burden of proving the
existence of gross inefficiency on the part of Santos, warranting her separation from the school.
Anent the conclusion of the Labor Arbiter that "the observations made by [Santoss] superior and
peers could not be the basis for concluding or finding that she is grossly incompetent or
inefficient," the Court finds the same utterly baseless. Far from being random and unstructured
exercises, said observations were borne out of the evaluation procedures set up by the School in
order to assist the members of its faculty to improve their performance. In their petition before this
Court, petitioners attached a copy of their Reply/Position Paper before the Labor Arbiter. Annexed
to said pleading is the Schools Position Paper Regarding Professional Growth, Supervision and
Evaluation of Faculty, which expressly states that:
78

79

80

It is the policy of the International School Manila to assist teachers in the improvement of classroom
instruction at all levels in order to provide the highest quality educational program at ISM. To that
end, procedures have been established which include 1) the promotion of on-going professional
growth, 2) on-going supervision including regular monitoring, improvement of instructional practices
and evaluation for continuing employment or tenure, and 3) evaluation (performance assessment,
directed assistance, remediation and, if necessary, termination of employment).
81

Included in the supervision and evaluation process are formal and informal observations of a faculty
members performance in his/her classes. Thus, 2.1 Formal observations will take several forms.
Some will be total [sic] unannounced, with or without a pre-observation conference.
Others will be scheduled in advance, possibly including a pre-observation conference, and with a
post observation conference. One component of the formal observation will always be a written
commentary by the supervisor or colleague making the observation.
xxxx
2.3 Drop-in, informal observations, will be a part of the supervision and evaluation process. Drop-ins
may be of any length, from a few minutes to an hour or more. A note from the observer confirming
his or her impressions will be helpful to the teacher observed.
82

From the foregoing, it is clear that the Labor Arbiter erred in not giving weight to the observations
made by Santoss superiors and peers in determining whether she was grossly inefficient or not.
In view of the acts and omissions of Santos that constituted gross inefficiency, the Court finds that
the School was justified in not keeping her in its employ. At this point, the Court needs to stress that
Santos voluntarily agreed to teach the Filipino classes given to her when she came back from her
leave of absence. Said classes were not forced upon her by the School. This much she admitted in
the hearing of the case before the Labor Arbiter. She stated therein that for the school year 19931994, she was given the option to teach only one Spanish class and not have any Filipino teaching
loads. She, however, said that if she took that option she would have been underpaid and her salary
would not have been the same. Moreover, for the school years 1994-1995 and 1995-1996, she
made known to the School that she did not prefer a change in teaching assignment. Thus, when she
consented to take on the Filipino classes, it was Santoss responsibility to teach them well within the
standards of teaching required by the School, as she had done previously as a teacher of Spanish.
Failing in this, she must answer for the consequences.
83

As held in Agabon v. National Labor Relations Commission :

84

The law imposes many obligations on the employer such as providing just compensation to workers,
observance of the procedural requirements of notice and hearing in the termination of employment.
On the other hand, the law also recognizes the right of the employer to expect from its workers not
only good performance, adequate work and diligence, but also good conduct and loyalty. The
employer may not be compelled to continue to employ such persons whose continuance in the
service will patently be inimical to his interests. (citations omitted.)
As regards the requirements of procedural due process, Section 2(d) of Rule 1 of The Implementing
Rules of Book VI states that:
For termination of employment based on just causes as defined in Article 282 of the Labor Code:
(i) A written notice served on the employee specifying the ground or grounds for termination,
and giving said employee reasonable opportunity within which to explain his side.
(ii) A hearing or conference during which the employee concerned, with the assistance of
counsel if he so desires is given opportunity to respond to the charge, present his evidence,
or rebut the evidence presented against him.
(iii) A written notice of termination served on the employee, indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination. (Emphases ours.)
In this case, the School complied with the above requirements. After a thorough evaluation of
Santoss performance, the School held a series of conferences and meetings with Santos, in order
to improve her performance. On March 29, 1996, the School required Santos to undertake a
Professional Growth Plan. Thereafter, when the intervention of the School failed to yield any
considerable improvement on Santos, McCauley wrote her a letter on April 10, 1997, which required
her to explain in writing within forty-eight (48) hours why her employment should not be terminated in
view of her failure to meet the standards of the School on very specific areas of concern. On April
16, 1997, Santos responded to McCauleys letter, asking why she was being required to explain. On
April 21, 1997, McCauley wrote Santos a letter informing her that an administrative investigation
would be conducted on April 23, 1997 where she would be given the opportunity to be heard. On
April 23, 1997, an administrative investigation was conducted. Santos appeared therein with the
assistance of ISAE President Ching. In a letter dated May 29, 1997, the School informed Santos of
its decision to terminate her employment on the ground of her failure to meet the standards of the
School, which as discussed was tantamount to gross inefficiency.
In view of the finding that Santos was validly dismissed from employment, she would not ordinarily
be entitled to separation pay. An exception to this rule is when the court finds justification in
applying the principle of social justice according to the equities of the case. The Court explained in
Philippine Long Distance Telephone Co. (PLDT) v. National Labor Relations Commission that:
85

86

We hold that henceforth separation pay shall be allowed as a measure of social justice only in those
instances where the employee is validly dismissed for causes other than serious misconduct or
those reflecting on his moral character. Where the reason for the valid dismissal is, for example,
habitual intoxication or an offense involving moral turpitude, like theft or illicit sexual relations with a
fellow worker, the employer may not be required to give the dismissed employee separation pay, or
financial assistance, or whatever other name it is called, on the ground of social justice.

xxxx
The policy of social justice is not intended to countenance wrongdoing simply because it is
committed by the underprivileged. At best it may mitigate the penalty but it certainly will not condone
the offense. Compassion for the poor is an imperative of every humane society but only when the
recipient is not a rascal claiming an undeserved privilege. Social justice cannot be permitted to be
refuge of scoundrels any more than can equity be an impediment to the punishment of the guilty.
Those who invoke social justice may do so only if their hands are clean and their motives blameless
and not simply because they happen to be poor. This great policy of our Constitution is not meant for
the protection of those who have proved they are not worthy of it, like the workers who have tainted
the cause of labor with the blemishes of their own character.
In Toyota Motor Phils. Corp. Workers Association v. National Labor Relations Commission, we
modified our ruling in PLDT in this wise:
87

In all of the foregoing situations, the Court declined to grant termination pay because the causes for
dismissal recognized under Art. 282 of the Labor Code were serious or grave in nature and attended
by willful or wrongful intent or they reflected adversely on the moral character of the employees. We
therefore find that in addition to serious misconduct, in dismissals based on other grounds under Art.
282 like willful disobedience, gross and habitual neglect of duty, fraud or willful breach of trust, and
commission of a crime against the employer or his family, separation pay should not be conceded to
the dismissed employee.
In analogous causes for termination like inefficiency, drug use, and others, the NLRC or the courts
may opt to grant separation pay anchored on social justice in consideration of the length of service
of the employee, the amount involved, whether the act is the first offense, the performance of the
employee and the like, using the guideposts enunciated in PLDT on the propriety of the award of
separation pay. (Emphasis ours.)
1wphi1

In the instant case, the Court finds equitable and proper the award of separation pay in favor of
Santos in view of the length of her service with the School prior to the events that led to the
termination of her employment. To recall, Santos was first employed by the School in 1978 as a
Spanish language teacher. During this time, the records of this case are silent as to the fact of any
infraction that she committed and/or any other administrative case against her that was filed by the
School. Thus, an award of separation pay equivalent to one-half (1/2) month pay for every year of
service is awarded in favor of Santos on grounds of equity and social justice.
88

WHEREFORE, the instant petition is GRANTED. The assailed Decision and the Resolution of the
Court of Appeals in CA-G.R. SP No. 79031 are hereby REVERSED and a new one is entered
ordering the dismissal of the complaint of Evangeline Santos in NLRC-NCR Case No. 00-06-0449197. Petitioner International School Manila is ORDERED to pay respondent Evangeline Santos
separation pay equivalent to one-half (1/2) month pay for every year of service. No costs.
SO ORDERED.
TERESITA
Associate Justice

J.

LEONARDO-DE

CASTRO

School of the Holy Spirit v. Taguiam, G.R. No. 165565, July 14, 2008
G.R. No. 165565

July 14, 2008

SCHOOL OF THE HOLY SPIRIT OF QUEZON CITY and/or SR. CRISPINA A. TOLENTINO,
S.Sp.S.,Petitioners,
vs.
CORAZON P. TAGUIAM, Respondent.
DECISION
QUISUMBING, J.:
This petition assails the Decision 1 dated June 7, 2004 of the Court of Appeals in CA-G.R. SP No.
81480, which reversed the Resolution2 dated September 20, 2002 of the National Labor Relations
Commission (NLRC) in NLRC NCR CA No. 031627-02. The NLRC had affirmed the Decision 3 dated
March 26, 2002 of the Labor Arbiter dismissing respondents complaint for illegal dismissal. This
petition likewise assails the Resolution4 dated September 30, 2004 of the Court of Appeals denying
petitioners motion for reconsideration.
The antecedent facts are as follows:
Respondent Corazon P. Taguiam was the Class Adviser of Grade 5-Esmeralda of the petitioner,
School of the Holy Spirit of Quezon City. On March 10, 2000, the class president, wrote a letter 5 to
the grade school principal requesting permission to hold a year-end celebration at the school
grounds. The principal authorized the activity and allowed the pupils to use the swimming pool. In
this connection, respondent distributed the parents/guardians permit forms to the pupils.
Respondent admitted that Chiara Mae Federicos permit form 6 was unsigned. Nevertheless, she
concluded that Chiara Mae was allowed by her mother to join the activity since her mother
personally brought her to the school with her packed lunch and swimsuit.
Before the activity started, respondent warned the pupils who did not know how to swim to avoid the
deeper area. However, while the pupils were swimming, two of them sneaked out. Respondent went
after them to verify where they were going.
Unfortunately, while respondent was away, Chiara Mae drowned. When respondent returned, the
maintenance man was already administering cardiopulmonary resuscitation on Chiara Mae. She
was still alive when respondent rushed her to the General Malvar Hospital where she was
pronounced dead on arrival.
On May 23, 2000, petitioners issued a Notice of Administrative Charge 7 to respondent for alleged
gross negligence and required her to submit her written explanation. Thereafter, petitioners
conducted a clarificatory hearing which respondent attended. Respondent also submitted her
Affidavit of Explanation.8
On July 31, 2000, petitioners dismissed respondent on the ground of gross negligence resulting to
loss of trust and confidence. 9 Meanwhile, Chiara Maes parents filed a P7 Million damage suit
against petitioners and respondent, among others. They also filed against respondent a criminal
complaint for reckless imprudence resulting in homicide.

On July 25, 2001, respondent in turn filed a complaint 10 against the school and/or Sr. Crispina
Tolentino for illegal dismissal, with a prayer for reinstatement with full backwages and other money
claims, damages and attorneys fees.
In dismissing the complaint, the Labor Arbiter declared that respondent was validly terminated for
gross neglect of duty. He opined that Chiara Mae drowned because respondent had left the pupils
without any adult supervision. He also noted that the absence of adequate facilities should have
alerted respondent before allowing the pupils to use the swimming pool. The Labor Arbiter further
concluded that although respondents negligence was not habitual, the same warranted her
dismissal since death resulted therefrom.
Respondent appealed to the NLRC which, however, affirmed the dismissal of the complaint.
Aggrieved, respondent instituted a petition for certiorari before the Court of Appeals, which ruled in
her favor. The appellate court observed that there was insufficient proof that respondents negligence
was both gross and habitual. The Court of Appeals disposed, thus:

WHEREFORE, the Court hereby GRANTS the petition. The assailed September 20, 2002
Resolution of the National Labor Relations Commission entitled Corazon Taguiam vs. School of
the Holy Spirit and/or Sister Crispina Tolentino[,] NLRC NCR Case No. 00-07-03877-01[,]
NLRC NCR CA No. 031627-02 is hereby REVERSED andSET ASIDE, and a new one is
hereby ENTERED directing the private respondent the School of the Holy Spirit to:
(1) Pay the petitioner full backwages, plus all other benefits, bonuses and general increases
to which she would have been normally entitled, had she not been dismissed and had she
not been forced to stop working computed up to the finality of this decision;
(2) Pay the petitioner separation pay equivalent to one (1) month for every year of service in
addition to full backwages;
(3) Pay the petitioner an amount equivalent to 10% of the judgment award as attorneys fees;
(4) Pay the cost of this suit.
SO ORDERED.11
In this petition, petitioners contend that the Court of Appeals erred in:
REVERSING AND SETTING ASIDE THE DECISION AND RESOLUTION OF THE NATIONAL
LABOR RELATIONS COMMISSION AFFIRMING THE DECISION OF THE LABOR ARBITER
DISMISSING THE COMPLAINT FOR LACK OF MERIT.12
Simply stated, the sole issue presented for our resolution is whether respondents dismissal on the
ground of gross negligence resulting to loss of trust and confidence was valid.
The issue of whether a party is negligent is a question of fact. As a rule, the Supreme Court is not a
trier of facts and this applies with greater force in labor cases. 13 However, where the issue is
shrouded by a conflict of factual perception, we are constrained to review the factual findings of the
Court of Appeals. In this case, the findings of facts of the appellate court contradict those of the
Labor Arbiter and the NLRC.14

Under Article 28215 of the Labor Code, gross and habitual neglect of duties is a valid ground for an
employer to terminate an employee. Gross negligence implies a want or absence of or a failure to
exercise slight care or diligence, or the entire absence of care. It evinces a thoughtless disregard of
consequences without exerting any effort to avoid them.16 Habitual neglect implies repeated failure to
perform ones duties for a period of time, depending upon the circumstances. 17
Our perusal of the records leads us to conclude that respondent had been grossly negligent. First, it
is undisputed that Chiara Maes permit form was unsigned. Yet, respondent allowed her to join the
activity because she assumed that Chiara Maes mother has allowed her to join it by personally
bringing her to the school with her packed lunch and swimsuit.
The purpose of a permit form is precisely to ensure that the parents have allowed their child to join
the school activity involved. Respondent cannot simply ignore this by resorting to assumptions.
Respondent admitted that she was around when Chiara Mae and her mother arrived. She could
have requested the mother to sign the permit form before she left the school or at least called her up
to obtain her conformity.
Second, it was respondents responsibility as Class Adviser to supervise her class in all activities
sanctioned by the school.18 Thus, she should have coordinated with the school to ensure that proper
safeguards, such as adequate first aid and sufficient adult personnel, were present during their
activity. She should have been mindful of the fact that with the number of pupils involved, it would be
impossible for her by herself alone to keep an eye on each one of them.
As it turned out, since respondent was the only adult present, majority of the pupils were left
unsupervised when she followed the two pupils who sneaked out. In the light of the odds involved,
respondent should have considered that those who sneaked out could not have left the school
premises since there were guards manning the gates. The guards would not have allowed them to
go out in their swimsuits and without any adult accompanying them. But those who stayed at the
pool were put at greater risk, when she left them unattended by an adult.
1avvphi1

Notably, respondents negligence, although gross, was not habitual. In view of the considerable
resultant damage, however, we are in agreement that the cause is sufficient to dismiss respondent.
This is not the first time that we have departed from the requirements laid down by the law that
neglect of duties must be both gross and habitual. In Philippine Airlines, Inc. v. NLRC, 19 we ruled that
Philippine Airlines (PAL) cannot be legally compelled to continue with the employment of a person
admittedly guilty of gross negligence in the performance of his duties although it was his first
offense. In that case, we noted that a mere delay on PALs flight schedule due to aircraft damage
entails problems like hotel accommodations for its passengers, re-booking, the possibility of law
suits, and payment of special landing fees not to mention the soaring costs of replacing aircraft
parts.20 In another case,Fuentes v. National Labor Relations Commission,21 we held that it would be
unfair to compel Philippine Banking Corporation to continue employing its bank teller. In that case,
we observed that although the tellers infraction was not habitual, a substantial amount of money
was lost. The deposit slip had already been validated prior to its loss and the amount reflected
thereon is already considered as current liabilities in the banks balance sheet. 22Indeed, the
sufficiency of the evidence as well as the resultant damage to the employer should be considered in
the dismissal of the employee. In this case, the damage went as far as claiming the life of a child.
As a result of gross negligence in the present case, petitioners lost its trust and confidence in
respondent. Loss of trust and confidence to be a valid ground for dismissal must be based on a
willful breach of trust and founded on clearly established facts. A breach is willful if it is done
intentionally, knowingly and purposely, without justifiable excuse, as distinguished from an act done
carelessly, thoughtlessly, heedlessly or inadvertently.23 Otherwise stated, it must rest on substantial

grounds and not on the employers arbitrariness, whims, caprices or suspicion; otherwise, the
employee would eternally remain at the mercy of the employer. It should be genuine and not
simulated; nor should it appear as a mere afterthought to justify earlier action taken in bad faith or a
subterfuge for causes which are improper, illegal or unjustified. It has never been intended to afford
an occasion for abuse because of its subjective nature. There must, therefore, be an actual breach
of duty committed by the employee which must be established by substantial evidence. 24
As a teacher who stands in loco parentis to her pupils, respondent should have made sure that the
children were protected from all harm while in her company.25 Respondent should have known that
leaving the pupils in the swimming pool area all by themselves may result in an accident. A simple
reminder "not to go to the deepest part of the pool" 26 was insufficient to cast away all the serious
dangers that the situation presented to the children, especially when respondent knew that Chiara
Mae cannot swim.27 Dismally, respondent created an unsafe situation which exposed the lives of all
the pupils concerned to real danger. This is a clear violation not only of the trust and confidence
reposed on her by the parents of the pupils but of the school itself.
Finally, we note that based on the criminal complaint filed by Chiara Maes parents, the Assistant
City Prosecutor found probable cause to indict respondent for the crime of reckless imprudence
resulting in homicide. The Assistant City Prosecutor held that respondent "should have foreseen the
danger lurking in the waters." By leaving her pupils in the swimming pool, respondent displayed an
"inexcusable lack of foresight and precaution." 28 While this finding is not controlling for purposes of
the instant case, this only supports our conclusion that respondent has indeed been grossly
negligent.
All told, there being a clear showing that respondent was culpable for gross negligence resulting to
loss of trust and confidence, her dismissal was valid and legal. It was error for the Court of Appeals
to reverse and set aside the resolution of the NLRC.
WHEREFORE, the petition is GRANTED. The assailed Decision dated June 7, 2004 of the Court of
Appeals in CA-G.R. SP No. 81480 is SET ASIDE. The Resolution dated September 20, 2002 of the
National Labor Relations Commission in NLRC NCR CA No. 031627-02 is REINSTATED. No
pronouncement as to costs.
SO ORDERED.
LEONARDO
Associate Justice

A.

QUISUMBING

Fernandez v. Newfield Staff, G.R. No. 201979, July 10, 2013

G.R. No. 201979

July 10, 2013

GILDA
C.
FERNANDEZ
AND
BERNADETTE
A.
BELTRAN, Petitioners,
vs.
NEWFIELD STAFF SOLUTIONS, INC./ARNOLD "JAY" LOPEZ, JR., Respondents.
DECISION
VILLARAMA, JR., J.:

By this Rule 45 petition, petitioners Gilda C. Fernandez and Bernadette A. Beltran appeal the
Decision1 dated February 23, 2012 and Resolution2 dated May 18, 2012 of the Court of Appeals (CA)
in CA-G.R. SP No. 118766. The CA reversed the decision 3 of the National Labor Relations
Commission (NLRC) and dismissed petitioners' complaint for illegal dismissal.
The antecedent facts follow:
Respondent Newfield Staff Solutions, Inc. (Newfield) hired Fernandez as Recruitment Manager
starting September 30, 20084 with a salary of P50,000 and an allowance of P6,000 per month. It was
provided in the employment agreement that Fernandez will receive a loyalty bonus of P60,000 and
life insurance worth P500,000 upon reaching six months of employment with Newfield. 5 Newfield
also hired Beltran as probationary Recruitment Specialist starting October 7, 2008 6 with a salary
of P15,000 and an allowance of P2,000 per month. Her employment contract provided that Beltran
will receive a 10% salary and allowance increase upon reaching 12 months of employment with
Newfield.7
Petitioners guaranteed to perform their tasks for six months and breach of this guarantee would
make them liable for liquidated damages of P45,000. It was further provided in their employment
agreements that if they want to terminate their employment agreements 8 after the "guaranteed
period of engagement," they should send a written notice 45 days before the effective date of
termination. They should also surrender any equipment issued to them and secure a clearance. If
they fail to comply, Newfield can refuse to issue a clearance and to release any amount due them. 9
On October 17, 2008, respondent Arnold "Jay" Lopez, Jr., Newfields General Manager, asked
petitioners to come to his office and terminated their employment on the ground that they failed to
perform satisfactorily. Lopez, Jr. ordered them to immediately turn over the records in their
possession to their successors.10
A week later, petitioners received Lopez, Jr.s return-to-work letters 11 dated October 22, 2008. The
letters stated that they did not report since October 20, 2008 without resigning, in violation of their
employment agreements. They were directed to report and explain their failure to file resignation
letters.
Fernandez countered with a demand letter 12 dated November 11, 2008. She claimed that her salary
of P36,400 from September 30 to October 17, 2008 and mobile phone expenses of P3,000 incurred
in furtherance of Newfields business were not paid. She also said that she was able to hire one
team leader and 12 agents in three weeks, but Newfield still found her performance unsatisfactory
and told her to file her resignation letter. Thus, she referred the matter to her lawyer. She threatened
to sue unless Newfield responds favorably. Beltran for her part also sent a demand letter. Her
demand letter13 dated November 17, 2008 is similar to Fernandezs letter except for the amount of
the claim for unpaid salary which is P7,206.80.
When they failed to receive favourable action from respondents, petitioners filed on December 9,
2008, a complaint14 for illegal dismissal, nonpayment of salary and overtime pay, reimbursement of
cell phone billing, moral and exemplary damages and attorneys fees against respondents.
In their verified position paper,15 petitioners stated that on October 17, 2008, Lopez, Jr. asked them
to come to his office and terminated their employment on the ground that they failed to perform
satisfactorily. Lopez, Jr. told them: "YOURE FIRED, x x x this is your last day and turn over the
records to your successors."16

In their verified joint position paper,17 respondents stated that petitioners signed fixed-term
employment agreements where they agreed to perform their tasks for six months. They also agreed
to give a written notice 45 days in advance if they want to terminate their employment agreements.
But they never complied with their undertakings. Three weeks after working for Newfield, Fernandez
did not report for work. She never bothered to communicate with respondents despite the return-towork letter. Hence, Newfield declared her absent without official leave (AWOL) and terminated her
employment on the ground of breach of contract. Similarly, Newfield declared Beltran AWOL and
terminated her employment on the ground of breach of contract. Beltran stopped reporting two
weeks after she was hired and never bothered to communicate with respondents despite the returnto-work letter. Respondents claimed that no evidence shows or even hints that petitioners were
forced not to report for work. Petitioners simply no longer showed up for work.
In reply to respondents position paper,18 petitioners insisted that Lopez, Jr. terminated their
employment. In their own reply to petitioners position paper,19 respondents claimed that petitioners
abandoned their jobs.20
In their rejoinder,21 petitioners repeated that Lopez, Jr. terminated their employment and they
attached Josette Pasmans affidavit22 to prove that they were dismissed.
The Labor Arbiter ruled that petitioners dismissal was illegal, to wit:
WHEREFORE, premises considered, judgment is hereby rendered finding complainants dismissal
illegal. Concomitantly, respondents are ordered to pay them their salary from the time of their
dismissal up to the promulgation of this decision plus their separation pay. Furthermore, respondents
are ordered to pay complainants their unpaid salaries and allowances for the period October 1 to
October 17, 2008 plus ten percent (10%) of the total judgment award by way of and as attorneys
fees.
All other claims are dismissed for lack of merit.
SO ORDERED.23
The Labor Arbiter rejected respondents claim of abandonment and held that petitioners cannot be
said to have abandoned their work since they took steps to protest their layoff. Their complaint is
proof of their desire to return to work and negates any suggestion of abandonment. The Labor
Arbiter also believed petitioners that Lopez, Jr. dismissed them on October 17, 2008 and ordered
them to immediately turn over the records to their successors.
The NLRC affirmed the Labor Arbiters decision and said that it is supported by substantial evidence.
But since petitioners signed fixed-term employment agreements, the NLRC limited the award of back
wages to six months. The dispositive portion of the NLRC Decision dated July 20, 2010 in NLRC
LAC No. 11-003163-09 (NLRC NCR-12-17096-08) reads:
WHEREFORE, premises considered, the decision of the Labor Arbiter is AFFIRMED with
MODIFICATION, that is, the backwages shall be limited to the periods provided in their respective
contracts; Gilda Fernandez (from September 30, 2008 to March 30, 2009) and Bernadette Beltran
(from October 7, 2008 to April 7, 2009).
SO ORDERED.24

In its Resolution25 dated January 25, 2011, the NLRC denied the motions for reconsideration filed by
petitioners and respondents.
Thereafter, respondents filed a petition for certiorari under Rules 65 of the 1997 Rules of Civil
Procedure, as amended, before the CA. Petitioners no longer assailed the NLRC decision and
resolution.
As aforesaid, the CA reversed the NLRC and dismissed petitioners complaint for illegal dismissal, to
wit:
WHEREFORE, premises considered, the petition is granted. The Decision dated 20 July 2010 and
the Resolution dated 25 January 2011 of the National Labor Relations Commission are reversed and
set aside. The complaint for illegal dismissal is DISMISSED.
SO ORDERED.26
The CA ruled that petitioners abandoned their jobs and pre-terminated their six-month employment
agreements. They walked out after their meeting with Lopez, Jr. on October 17, 2008 when they
were advised of their unsatisfactory performance. The CA held that the meeting did not prove that
they were dismissed. However, it seems that they cannot accept constructive criticism and opted to
discontinue working. Instead of reporting for work and explaining their absence, they demanded
payment of wages and mobile phone expenses for the two to three weeks that they worked in
Newfield. Thus, it seems that they no longer wished to continue working for the remaining period of
their six-month employment. For breach of their employment agreements, they also opened
themselves to liability for liquidated damages, said the CA.
On May 18, 2012, the CA denied petitioners motion for reconsideration.
Hence, the instant petition for review on certiorari under Rule 45 anchored on the following grounds:
I. THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED WHEN IT DISMISSED
PETITIONERS COMPLAINT FOR ILLEGAL DISMISSAL. THE DECISION DATED 23
FEBRUARY 2012 IS CONTRARY TO LAW AND SETTLED RULINGS OF THE SUPREME
COURT.
II. THE HONORABLE COURT OF APPEALS GRIEVOUSLY ERRED IN REVERSING THE
FINDINGS OF THE NLRC AND LABOR ARBITER THAT PETITIONERS WERE ILLEGALLY
DISMISSED FROM EMPLOYMENT.27
Petitioners argue that for dismissal to be valid there must be a just or authorized cause and due
process must be observed. But respondents terminated their employment on October 17, 2008
when Lopez, Jr. asked them to come to his office, fired them and ordered them to turn over the
records to their successors. They were dismissed without any written notice informing them of the
cause for their termination.28
In their comment, respondents claim that "no such incident took place" on October 17, 2008. Lopez,
Jr. "merely called petitioners attention and advised them of their unsatisfactory work performance."
Respondents also point out that petitioners refused to comply with the return-to-work letters and
demanded instead payment of their salaries and reimbursement of mobile phone expenses. 29

As a rule, a petition for review on certiorari under Rule 45 must raise only questions of law. However,
the rule has exceptions such as when the findings of the Labor Arbiter, NLRC and CA vary,30 as in
this case.
After our own review of the case, we are constrained to reverse the CA. We agree with the NLRC
and Labor Arbiter that petitioners were illegally dismissed.
The CA erred in ruling that the meeting on October 17, 2008 did not prove that petitioners were
dismissed. We find that Lopez, Jr. terminated their employment on said date.
Petitioners stated in their verified position paper that Lopez, Jr. fired them on October 17, 2008, told
them that it was their last day and ordered them to turn over the records to their successors. We
reviewed respondents verified position paper and reply to petitioners position paper filed before the
Labor Arbiter and found nothing there denying what happened as stated under oath by petitioners.
Respondents merely said that no evidence shows or even hints that petitioners were forced not to
report for work and that petitioners abandoned their jobs. Even respondents appeal
memorandum31 filed before the NLRC is silent on petitioners claim that Lopez, Jr. fired them.
Respondents silence constitutes an admission that fortifies the truth of petitioners narration. As we
held in Tegimenta Chemical Phils. v. Oco32:
Most notably, the Labor Arbiter observed that the employers "did not deny the claims of complainant
Oco that she was simply told not to work." As in Solas v. Power & Telephone Supply Phils. Inc., this
silence constitutes an admission that fortifies the truth of the employees narration. Section 32, Rule
130 of the Rules of Court, provides:
An act or declaration made in the presence and within the hearing or observation of a party who
does or says nothing when the act or declaration is such as naturally to call for action or comment if
not true, and when proper and possible for him to do so, may be given in evidence against him.
We also note respondents confirmation that Lopez, Jr. met petitioners on October 17, 2008. But we
seriously doubt respondents claim in their comment filed before this Court that Lopez, Jr. did not fire
petitioners, that "no such incident took place." This denial was not raised in respondents position
paper, reply to petitioners position paper, and appeal memorandum. Respondents were not
forthcoming in said pleadings that indeed Lopez, Jr. met petitioners on October 17, 2008.
We further note that during the proceedings before the Labor Arbiter, petitioners submitted Josette
Pasmans affidavit as additional evidence. Pasman stated under oath that on October 21, 2008 she
called Newfields Timog Office to inquire about her salary, that she looked for Fernandez or Beltran,
and that she was surprised to find out they were no longer employed at Newfield.
The CA also erred in ruling that petitioners abandoned their jobs.
We clarify first that petitioners employment agreements are not fixed-term contracts for six months
because Fernandez becomes entitled to a loyalty bonus of P60,000 and life insurance
worth P500,000 upon reaching six months of employment with Newfield. Beltran will also receive a
10% salary and allowance increase upon reaching 12 months of employment with Newfield.
Petitioners merely guaranteed to perform their tasks for six months and failure to comply with this
guarantee makes them liable for liquidated damages. The employment agreements also provide that
if petitioners would want to terminate the agreements after the "guaranteed period of engagement,"
they must notify respondents 45 days in advance. Thus, respondents, the NLRC and CA misread the
guarantee as the fixed duration of petitioners employment.

Petitioners are not fixed-term employees but probationary employees. Respondents even admitted
that Beltran was hired as probationary Recruitment Specialist. A probationary employee may be
terminated for a just or authorized cause or when he fails to qualify as a regular employee in
accordance with reasonable standards prescribed by the employer.33
Abandonment is a form of neglect of duty, one of the just causes for an employer to terminate an
employee.34 For abandonment to exist, two factors must be present: (1) the failure to report for work
or absence without valid or justifiable reason; and (2) a clear intention to sever the employeremployee relationship, with the second element as the more determinative factor being manifested
by some overt acts.35
Since both factors are not present, petitioners are not guilty of abandonment. One, petitioners were
absent because Lopez, Jr. had fired them. Thus, we cannot fault them for refusing to comply with the
return-to-work letters and responding instead with their demand letters. Neither can they be accused
of being AWOL or of breaching their employment agreements. Indeed, as stated above, respondents
cannot claim that no evidence shows that petitioners were forced not to report for work. Two,
petitioners protest of their dismissal by sending demand letters and filing a complaint for illegal
dismissal with prayer for reinstatement convinces us that petitioners have no intention to sever the
employment relationship. Employees who take steps to protest their dismissal cannot logically be
said to have abandoned their work. A charge of abandonment is totally inconsistent with the
immediate filing of a complaint for illegal dismissal. The filing thereof is proof enough of ones desire
to return to work, thus negating any suggestion of abandonment.36
Hence, we disagree with the statement of the CA that petitioners no longer wish to continue working
for Newfield since they sought payment of their unpaid salaries. Petitioners did not limit their demand
letters as claims for payment of salaries. They also stated that they were told to resign despite their
accomplishments. Thus, they referred the matter to a lawyer and they threatened to sue if they
receive no favorable response from respondents. When they received none, they immediately sued
for illegal dismissal. Under the circumstances, we cannot infer petitioners intention to abandon their
jobs. As aptly observed also by the NLRC, Fernandez earns P56,000 and Beltran earns P17,000 per
month. "It defies reason that they would leave their jobs and then fight odds to win them back.
Human experience dictates that a worker will not just walk away from a good paying job and risk
unemployment and damages as a result thereof UNLESS illegally dismissed." 37
We therefore agree that petitioners were illegally dismissed since there is no just cause for their
dismissal.
Under Article 279 of the Labor Code, as amended, an employee unjustly dismissed from work is
entitled to reinstatement and full back wages from the time his compensation was withheld from him
up to the time of his actual reinstatement. However, the NLRCs award of back wages for six months
is binding on petitioners who no longer contested and are therefore presumed to have accepted the
adjudication in the NLRC decision and resolution. This is in accord with the doctrine that a party who
has not appealed cannot obtain from the appellate court any affirmative relief other than the ones
granted in the appealed decision.38
Similarly, the award of separation pay which was affirmed by the NLRC is binding on petitioners who
even admitted that reinstatement is no longer possible. 39
One last note. The dispositive portion of the Labor Arbiters decision, as affirmed and modified by the
NLRC, stated that "respondents are ordered to pay" petitioners. This gives the impression that
Lopez, Jr. is solidarily liable with Newfield. In Grandteq Industrial Steel Products, Inc. v. Estrella, 40 we
discussed how corporate agents incur solidary liability, as follows:

There is solidary liability when the obligation expressly so states, when the law so provides, or when
the nature of the obligation so requires. In MAM Realty Development Corporation v. NLRC, the
solidary liability of corporate officers in labor disputes was discussed in this wise:
"A corporation, being a juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, acting as such corporate agents, are not theirs but the direct
accountabilities of the corporation they represent. True, solidary liability may at times be incurred but
only when exceptional circumstances warrant such as, generally, in the following cases:
1. When directors and trustees or, in appropriate cases, the officers of a corporation (a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
xxxx
In labor cases, for instance, the Court has held corporate directors and officers solidarily liable with
the corporation for the termination of employment of employees done with malice or in bad faith."
(Italics, emphasis and underscoring in the original; citations omitted.)
Bad faith does not connote bad judgment or negligence; It Imports dishonest purpose or some moral
obliquity and conscious doing of wrong; it means breach of a known duty through some motive or
interest or ill will; it partakes of the nature of fraud. 41 To sustain such a finding, there should be
evidence on record that an officer or director acted maliciously or in bad faith in terminating the
employee.42
But here, the Labor Arbiter and NLRC have not found Lopez, Jr. guilty of malice or bad faith. Thus,
there is no basis to hold Lopez, Jr. solidarily liable with Newfield. Payment of the judgment award is
the direct accountability of Newfield.
WHEREFORE, the petition for review on certiorari is GRANTED. We REVERSE and SET ASIDE the
Decision dated February 23, 2012 and Resolution dated May I 8, 20I2 of the Court of Appeals in CAG.R. SP No. 118766. The Decision dated July 20, 2010 and Resolution dated January 25, 2011 of
the NLRC in NLRC LAC No. I 1-003163-09 (NLRC NCR-12-17096-08) are REINSTATED and
UPHELD with clarification that respondent Arnold "Jay" Lopez, Jr. is not solidarily liable with
respondent Newfield Staff Solutions, Inc.
No costs.
SO ORDERED.
MARTIN
Associate Justice

S.

VILLARAMA,

JR.

Sanden Aircon v. Rosales, G.R. No. 169260, March 23, 2011

G.R. No. 169260

March 23, 2011

SANDEN
AIRCON
PHILIPPINES
vs.
LORESSA P. ROSALES, Respondent.

and

ANTONIO

ANG, Petitioners,

DECISION
DEL CASTILLO, J.:
An employer has the discretion to dismiss an employee for loss of trust and confidence but the
former may not use the same to cloak an illegal dismissal.
This Petition for Review on Certiorari1 assails the Decision2 dated May 24, 2005 of the Court of
Appeals (CA) in CA-G.R. SP No. 85698, which granted the petition for certiorari and reversed and
set aside the Resolution3 dated November 28, 2003 of the National Labor Relations Commission
(NLRC) in NLRC CASE No. RAB-IV-9-9330-97-L (NLRC NCR CA No. 016826-98) and reinstated the
Resolution4 dated November 29, 2000 of the NLRC.
Also assailed is the Resolution5 dated August 1, 2005 denying the Motion for Reconsideration
Factual Antecedents
Sanden Aircon Philippines (Sanden) is a corporation engaged in the business of manufacturing,
assembling, and fabricating automotive air-conditioning systems.
In August 1992, Sanden employed Loressa P. Rosales (Loressa) as Management Information
System (MIS) Department Secretary. On December 26, 1996, she was promoted as Data Custodian
and Coordinator. As such, Loressa had access to all computer programs and marketing computer
data, including the Delivery Receipt Transaction files of Sanden. The Finance Department based its
billing and collection activities on the marketing delivery receipt transactions. Loressas functions and
authority include opening, editing and copying files in Sandens computers. She was also charged
with the duty of creating back-up copies of all files under her custody. For this purpose, she can
request all computer users at a particular time to log out or exit from the system.
On May 16, 1997, Sanden discovered that the marketing delivery receipt transactions computer files
were missing. The Internal Auditing Department, through its Audit Officer, Ernesto M. Bayubay
(Ernesto), immediately sent a memorandum6 dated May 17, 1997 to Garrick L. Ang (Garrick), the
MIS Manager, requesting that a technical investigation be conducted.
On May 19, 1997, Garrick issued a memorandum 7 enumerating the findings of the MIS Department,
the pertinent portions of which read:
This is in response on [sic] your request for a technical investigation regarding the missing Marketing
Delivery Receipt (DR) transactions filed inside our computer system. The incident happened at [sic]
the 16 of May 1997 12:35 noon in which we discovered a data corruption in the Marketing DR

transactions file wherein all the data were missing. We immediately conducted an investigation of
the incident and found out the following:
1. Before the incident, [the] Marketing Staff are still using the said file until 12:00 noon [when
they] were instructed by the Data Custodian (Ms. Loressa Rosales) to log out from the
system because a back-up was to be conducted. The back-up activities never took place for
[unknown reasons];
2. We dont have an updated back up on the mentioned file which was the responsibility of
the Data Custodian, the last back up of the file was [conducted] on 10 of May 1997.
3. The incident can only happen when only one user [was] using the file and after the
incident we immediately look[ed] into the Server Manager, a security auditing tool of the
system, and found out that Ms. Loressa Rosales was the only one log[ged] in on the system
at 12:05 noon to 12:21 noon with 16 minutes of usage time as witnesse[d] by many MIS
personnel including one audit officer.
4. The Data Custodian [has] all the rights of Add, Edit, Delete on all the files found in the
system.
5. So based on the facts that we have gathered it is highly probable that Ms. Loressa
Rosales was the culprit in the said incident.
On June 26, 1997, Atty. Reynaldo B. Destura (Atty. Reynaldo), the Personnel and Administrative
Services Manager sent a letter8 to Loressa charging her with data sabotage and absences without
leave (AWOL). She was given 24 hours to explain her side.
On July 2, 1997, Loressa submitted her letter9 to Atty. Reynaldo where she vehemently denied the
allegations of data sabotage. According to her, only a computer programmer equipped with the
necessary expertise and not a mere data custodian like her would be capable of such an act. As to
the charge of incurring absences without leave, she challenged Sanden to specify the dates and
circumstances of her alleged AWOL.
In a memorandum10 dated July 3, 1997, Atty. Reynaldo scheduled the administrative investigation on
the charge of "data sabotage" in the afternoon of the next day. The investigation pushed through as
scheduled.
On July 17, 1997, the husband of Loressa received a Notice 11 of Disciplinary Action from Sanden
notifying Loressa that management is terminating Loressas employment effective upon receipt of
the said communication. The reason cited by Sanden was the loss of trust on her capability to
continue as its Coordinator and Data Custodian. Sanden indicated in the said letter that based on all
the documents and written testimonies gathered during the investigation, Loressa caused the
deliberate sabotage of the marketing data involving the Delivery Receipts.
On September 9, 1997, Loressa filed a complaint 12 for illegal dismissal with a prayer for the payment
of 13th month pay, attorneys fees and other benefits.
In her position paper,13 Loressa alleged that no evidence was presented during the investigation
conducted by Sanden to prove that she indeed committed "data sabotage." She claimed that she
was singled out as the culprit based on mere suspicion unsupported by any testimonial or
documentary evidence. The Delivery Receipts, which Sanden claims to have been deleted, were not

presented during the investigation process. Moreover, there were no witnesses presented who
pointed to Loressa as the one who actually committed the "data sabotage."
On the other hand, in Sandens position paper,14 it alleged that at around noon of May 16, 1997,
Loressa requested the Marketing Staff to log out or exit from the computer system because she
would create a backup of the Marketing Delivery Receipt Transaction files. At that time, some
members of the Marketing Staff were still using and encoding additional data but as requested, all of
them logged out from the network. The Server Manager showed that from 12:05 p.m. to 12:21 p.m.,
the only computer logged in was that of Loressa. This is precisely the period when the deletion of the
Marketing Delivery Receipt Transaction files occurred.
Ruling of the Labor Arbiter
On May 28, 1998, Labor Arbiter Nieves De Castro rendered a Decision 15 finding that Sanden is guilty
of illegal dismissal. She ruled that there exists no justifiable basis for Sandens act of terminating the
services of Loressa. Nowhere in the records can be found evidence, documentary or otherwise (i)
that will directly point to Loressas having committed "data sabotage" or (ii) that she absented herself
without leave. The Labor Arbiter also ruled that since animosity between Sanden and Loressa
already exists, the award of separation pay in lieu of reinstatement is in order and in accord with
industrial peace and harmony. The dispositive portion of the Labor Arbiters Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered, declaring the dismissal of the
complainant illegal and respondent Sanden Aircon Philippines, Inc. is ordered:
1. To pay complainant backwages from the time of [her] dismissal up to the date of
promulgation of this decision[;]
2. To pay complainant separation pay of one (1) month for every year of service [from] the
date of employment up to the date of promulgation of this decision[;]
3. To pay attorneys fees of 10% of the total award[; and]
4. [To have its] financial analyst x x x compute the monetary award[s which form] part of this
decision.
All other claims are dismissed for lack of merit.
SO ORDERED.16
Ruling of the National Labor Relations Commission
Sanden sought recourse to the NLRC by submitting its Notice 17 of Appeal and Memorandum on
Appeal on September 28, 1998.
On November 29, 2000, the NLRC issued a Resolution 18 affirming the May 28, 1998 Decision of the
Labor Arbiter with the modification that the computation of the amount of separation pay to be
awarded be reckoned from December 26, 1996 which was the date when Loressa was hired by
Sanden as Data Custodian and Coordinator. The NLRC found that Loressa was paid separation pay
corresponding to the period beginning August 1992 (the date she was hired) up to December 26,
1996.

Sanden filed a Motion for Reconsideration19 of the NLRC Resolution.

On November 28, 2003, the NLRC issued another Resolution 20 which reversed its November 29,
2000 Resolution and dismissed the complaint for lack of merit.
Ruling of the Court of Appeals
Aggrieved, Loressa filed with the CA a petition for certiorari.21 The CA through a Resolution22 dated
August 19, 2004, directed her to submit within five days from receipt of said resolution copies of
Sandens appeal memorandum and motion for reconsideration of the November 29, 2000 resolution
which were mentioned in her petition but were not attached thereto. On September 8, 2004, Loressa
submitted the documents as directed by the CA. 23 On September 27, 2004, the CA issued its
Resolution24 noting the compliance of Loressa and also directing Sanden to file its comment.
On October 18, 2004, Sanden filed a Motion for Extension of Time to File Comment. 25 This was
granted by the CA through its Resolution 26 dated November 3, 2004. On November 5, 2004, Sanden
filed its comment.27
On May 24, 2005, the CA granted the petition and reversed and set aside the November 28, 2003
Resolution of the NLRC and reinstated the latters November 29, 2000 Resolution.
Petitioners moved for reconsideration,28 but to no avail. Hence, this appeal anchored on the following
grounds:
Issues
THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER SANDEN FAILED TO
SUBSTANTIATE RESPONDENT ROSALESS DISMISSAL, CONSIDERING THAT:
A. THE ASSERTION MADE BY THE COURT OF APPEALS AS TO THE POSSIBLE
EXISTENCE OF A PARALLEL SET OF DOCUMENTS CORRESPONDING TO THE
DELETED FILES, AS WELL AS THE POSSIBILITY OF A GLITCH IN THE
COMPUTER SYSTEM WHICH CAUSED THE DELETION OF THE SUBJECT
FILES, ARE HIGHLY SPECULATIVE AND CANNOT STAND AGAINST THE
EVIDENCE ON RECORD.
B. SIMILARLY, THE CLAIM THAT THE DELETION OF THE SUBJECT FILES
COULD HAVE OCCURRED AT ANY POINT IN TIME IS PURELY SPECULATIVE
AND CANNOT STAND AGAINST THE EVIDENCE ON RECORD.
C. LIKEWISE, THE CLAIM THAT ANOTHER PERSON COULD HAVE CAUSED THE
DELETION OF THE SUBJECT FILES CONSIDERING THAT RESPONDENT
ROSALES COULD NOT POSSIBLY HAVE BEEN THE SOLE PERSON WITH
ACCESS THERETO IS PURELY SPECULATIVE AND CANNOT STAND AGAINST
THE EVIDENCE ON RECORD.
D. HENCE, THERE IS MORE THAN SUFFICIENT SUBSTANTIAL EVIDENCE
WARRANTING THE VALID DISMISSAL OF RESPONDENT ROSALES.29

These matters boil down to a single issue of whether Sanden legally terminated Loressas
employment on the ground of willful breach of trust and confidence as Coordinator and Data
Custodian.
Petitioners Arguments
Petitioners contend that Loressa was vested with the delicate position of safekeeping the records of
Sanden. She was charged with the duty of creating back up files so that Sanden may be fully
protected in any eventuality. Loressas act, therefore, of maliciously deleting the Marketing Delivery
Receipt Transaction files is a valid ground to dismiss her from her employment on the ground of loss
of trust. It is betrayal of the highest order when the very custodian of the records deleted the same.
According to petitioners, it was clearly shown by evidence that before the deletion of said files, the
Marketing Staff were still using the files until noon when they were instructed by Loressa to log out
from the system because a back up was to be conducted. The back up activities never took place
and worse the data were deleted from the system. Petitioners emphasized that as Data Custodian,
Loressa has capability to add, edit, or delete all the files in the system of Sanden.
Petitioners also aver that from the time the data sabotage occurred on May 16, 1997 to May 30,
1997, Loressa went on AWOL for at least five times.
Respondents Arguments
Loressa insists that Sanden failed to provide sufficient evidence which would clearly point to her as
the one who erased the files. For loss of trust and confidence to be a valid ground for dismissal of an
employee, it must be founded on clearly established facts.
In this case, the fact that Loressas computer was the only one logged on during the period that the
alleged deletion of data occurred does not mean that she was the one who deleted the missing files.
Loressa maintains that Sanden failed to substantially prove her direct involvement in the alleged
deletion of the files except for a mere suspicion that it was she who deleted the data in question.
As to the charge of her absences without leave, Loressa claims that they were not substantiated by
any documentary evidence or testimony of a witness. As such, her dismissal from employment is
without any legal ground.
Our Ruling
The petition is bereft of merit.
Article 282 of the Labor Code states:
ART. 282. TERMINATION BY EMPLOYER. An employer may terminate an employment for any of
the following causes:
(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;

(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and
(e) Other causes analogous to the foregoing.
Article 282(c) of the Labor Code prescribes two separate and distinct grounds for termination of
employment, namely: (1) fraud or (2) willful breach by the employee of the trust reposed in him by
his employer or duly authorized representative.
Settled is the rule that under Article 282(c), the breach of trust must be willful. Ordinary breach will
not suffice. "A breach is willful if it is done intentionally and knowingly without any justifiable excuse,
as distinguished from an act done carelessly, thoughtlessly or inadvertently." 30
"As firmly entrenched in our jurisprudence, loss of trust and confidence as a just cause for
termination of employment is premised on the fact that an employee concerned holds a position
where greater trust is placed by management and from whom greater fidelity to duty is
correspondingly expected."31 "The betrayal of this trust is the essence of the offense for which an
employee is penalized."32
Sanden has the burden of proof to prove its allegations.
"Unlike in other cases where the complainant has the burden of proof to [prove] its allegations, the
burden of establishing facts as bases for an employers loss of confidence in an employee facts
which reasonably generate belief by the employer that the employee was connected with some
misconduct and the nature of his participation therein is such as to render him unworthy of trust and
confidence demanded of his position is on the employer." 33
While it is true that loss of trust and confidence is one of the just causes for termination, such loss of
trust and confidence must, however, have some basis. Proof beyond reasonable doubt is not
required. It is sufficient that there must only be some basis for such loss of confidence or that there is
reasonable ground to believe if not to entertain the moral conviction that the concerned employee is
responsible for the misconduct and that the nature of his participation therein rendered him
absolutely unworthy of trust and confidence demanded by his position. 34
Sanden failed to discharge the burden of proof that the dismissal of Loressa is for a just
cause.
The first requisite for dismissal on the ground of loss of trust and confidence is that the employee
concerned must be holding a position of trust and confidence.
In this case, we agree that Loressa, who had immediate access to Sandens confidential files,
papers and documents, held a position of trust and confidence as Coordinator and Data Custodian
of the MIS Department.
"The second requisite is that there must be an act that would justify the loss of trust and confidence.
Loss of trust and confidence, to be a valid cause for dismissal, must be based on a willful breach of
trust and founded on clearly established facts. The basis for the dismissal must be clearly and
convincingly established but proof beyond reasonable doubt is not necessary." 35

Sandens evidence against Loressa fails to meet this standard.

Worth
noting
are
the
pertinent
portions
of
dated November 29, 2000 before it reversed itself, to wit:

the

Resolution

of

the

NLRC

As correctly found by the Labor Arbiter, nowhere in the records can be found evidence that directly
point to complainant as having committed acts of sabotage. Also, during the administrative
investigation, the guilt of complainant-appellee was based on mere allegations not supported by
documentary evidence nor any factual basis. Even appellants cannot directly pinpoint appellee as
the culprit. They were only thinking of her as the one probably responsible thereto, considering that
when she used the computer, she told the other users to log out and thereafter, used the computer
for 16 minutes, with only 1 minute as usage time. But these allegations would not suffice (sic)
termination of employment of appellee. Note that security of tenure is protected by constitutional
mandate.
The same holds true with AWOL. Appellant failed to prove that complainant-appellee went on
absence without official leave. The appellant should have at least presented the daily time record of
appellee to prove that the latter was absent. Mere allegations again would not suffice. 36
During the Administrative Investigation conducted by Sanden, there was no evidence presented to
prove that Loressa indeed committed "data sabotage." The Minutes 37 of the Discussion with respect
to the May 16, 1997 data only made mention that "Bobots theory is that it was zapped, meaning
permanently deleted." It is therefore a mere theory with no apparent factual basis, testimonial or
documentary evidence, that would establish the guilt of Loressa for the charges of "data sabotage."
On the other hand, Loressa was able to provide documentary evidence to show that Sandens
computer system was experiencing some problems even before May 16, 1997. The March 22, 1996
Report38 of the System Administrator, stated, viz:
Marketing could not use their system due to error encountered such as an abnormal program
termination (problem in pairing). Warehouse A is affected by this. o.e. in updating marketing
inventory qty. (DR Transaction)39
xxxx
Furthermore, in the entry dated March 27, 1996, it was indicated:
Restored Marketing Data from March 23 back-up.
Files restored:
1. DR HEAD
2. DR ITEM
Reindexed both.
*lacking data shall be reentered 3/25/95 & 3/26/95 transactions 40

The following entries as reported by the System Administrator clearly show that the problem of
missing data already existed as early as 1995, when Loressa was still an MIS Secretary and was not
yet tasked to back up the Marketing Delivery Receipt Transaction files.
1awphil

We also fully agree with the CA when it ruled that:

On the contrary, we find the records bereft of any substantial evidence to show that the petitioner
was indeed directly responsible for the deletion of the subject files or the alleged data sabotage. It is
not difficult to see that the imputed guilt of the petitioner was based on mere allegations and theories
held by private respondents as possible causes for the deletion of the subject files. In the first place,
if the subject delivery receipt files were as crucial to the operations of the company as what the
private respondents claimed them to be, then sound business judgment would dictate that it keep a
record or paper trail of all its delivery transactions which could still be made available to the Finance
Department for its billing and collection activities. It is common knowledge that no computer system
is absolutely crash proof" or "bug-free" and that a total obliteration of a particular computer file could
be attributed to so many other causes other than the deliberate deletion of the same. In the second
place, the deletion of the subject files could have occurred at any one point or time and not
necessarily during the time at which the petitioner was the only registered user in the system. In this
case, the private respondents failed to determine with absolute certainty and to show proof of the
exact date or time when it occurred. Third and last, while it may be true that the petitioner had
access to the subject files as well as the code to delete the same, it is hardly believable that she
would be the sole person in the company who could access the same. It is noted that the petitioner
worked under the supervision of an MIS Manager as well as other company officers, who in all
probability also had access to the same files and codes available to the petitioner. x x x 41
Having shown that Sanden failed in discharging the burden of proof that the dismissal of Loressa is
for a just cause, we have no other recourse but to declare that she was illegally dismissed based on
the ground of loss of trust and confidence. This is in consonance with the constitutional guarantee of
security of tenure.
WHEREFORE, the instant petition for review on certiorari is DENIED. The Decision of the Court of
Appeals in CA-G.R. SP No. 85698 dated May 24, 2005 and its Resolution dated August 1, 2005 are
AFFIRMED.
SO ORDERED.
MARIANO
Associate Justice

C.

DEL

CASTILLO

Lhuillier v. Velayo, G.R. No. 198620, November 12, 2014

G.R. No. 198620

November 12, 2014

P.J.
LHUILLIER,
INC.
vs.
FLORDELIZ VELAYO, Respondent.
DECISION

and

MARIO

RAMON

LUDENA, Petitioners,

REYES, J.:
Before this Court is a petition for review on certiorari under Rule 45 of the Decision dated June 30,
2011 of the Court of Appeals (CA) in CA-GR. SP No. 03069, affirming the finding of the National
Labor Relations Commission (NLRC) that respondent Flordeliz Velayo (respondent) was illegally
dismissed. The Resolution dated September 14, 2011 denied the motion for reconsideration thereof.
1

The Facts
The essential antecedent facts are summarized in the assailed CA decision, to wit:
On June 13, 2003, (herein petitioner) PJ (CEBU) LHUILLIER, INC. (PJ LHUILLIER for brevity) hired
FLORDELIZ M. ABATAYO [sic] as Accounting Clerk at the LH-4, Cagayan de Oro City Branch with a
basic monthly salary ofP9,353.00. On February 9, 2008 appellant (herein private respondent) was
served with a Show Cause Memo by MARIO RAMON LUDEA, Area Operations Manager of PJ
Lhuillier (herein petitioner), ordering her to explain within 48 hours why no disciplinary action should
be taken against her for dishonesty, misappropriation, theft or embezz[le]ment of company funds
inviolation of Item 11, Rule V of the Company Code of Conduct. Thereafter, (s)he was placed under
preventive suspension from February 9 to March 8, 2008 while her case was under investigation.
The charges against the appellant (herein private respondent) were based on the Audit Findings
conducted on October 29, 2007, where the overage amount of P540.00 was not reported
immediately to the supervisor, not recorded atthe end of that day.
On February 11, 2008, complainant (herein private respondent) submitted her reply and admitted
that she was not able to report the overage to the supervisor since the latter was on leave on that
day and that she was still tracing the overage; and that the omission or failure to report immediately
the overage (sic) was just a simple mistake without intent to defraud her employer. On March 10,
2008, after the conduct of a formal investigation and after finding complainants (herein private
respondents) [explanations] without merit, PJ LHUILLIER (herein petitioner) terminated her
employment as per Notice of Termination on grounds of serious misconduct and breach of
trust. (Citation omitted)
4

On March 14, 2008, the respondent filed a complaint for illegal dismissal, separation pay and other
damages against P.J. Lhuillier, Inc. (PJLI) and Mario Ramon Ludea, Area Operations Manager
(petitioners). On July 23, 2008, the Labor Arbiter (LA) rendered judgment, the dispositive portion of
which reads as follows:
WHEREFORE, in view of all the foregoing, judgment is hereby entered ordering the dismissal of the
instant complaint for lack of merit.
SO ORDERED.

The LA found that the respondents termination was valid and based not on a mere act of simple
negligence in the performance of her duties as cashier:
This is not a case of simple negligence as the facts show that complainant, instead of reporting the
matter immediately, had set aside the P540.00 for her personal use instead of reporting the overage
or recording it in the operating system of the company.
Complainant is not entitled to moral as well as exemplary damages for lack of basis.

On appeal, the NLRC in its Decision dated March 19, 2009 countermanded the LA, holding that the
respondent was illegally dismissed since the petitioners failed to prove a just cause of serious
misconduct and willful breach of trust:
In fine, the Labor Arbiter a quoutterly disregarded the rule on proportionality that has been observed
in a number of cases, that is, "the penalty imposed should be commensurate to the gravity of his
offense." x x x
xxxx
In the instant case, PJ LHUILLIER was not able to discharge the burden of proving that the dismissal
of the complainant was for valid or just causes of serious misconduct and willful breach of trust.
Thus, We disagree with the Labor Arbiters findings and conclusion that complainant was validly
dismissed from service.
xxxx
... Significantly, the complainants omission or procedural lapse did not cause any loss or damage to
the company.
7

Nonetheless, finding that the relations between the petitioners and the respondent have become
strained, the NLRC did not order the reinstatement of the respondent. Thus:
WHEREFORE, the instant appealis GRANTED. The assailed decision is hereby SET ASIDE and
REVERSED, and a new one entered declaring that complainant was ILLEGALLY DISMISSED.
Accordingly, respondent PJ (CEBU) LHUILLIER, INC. is hereby ORDERED:
(a) to pay complainant separation pay equivalent to one (1) month salary for every year of
service, a fraction of at least six (6) months being considered as one (1) whole year in lieu of
reinstatement due to strained relationship, computed from June13, 2003 up to the finality of
the promulgation of this judgment;
(b) to pay complainant FULL BACKWAGES in accordance with Bustamante vs. NLRC ruling
(265 SCRA 061); and
(c) to pay ten percent (10%) of the total money award as attorneys fees.
SO ORDERED.

The NLRC subsequently denied the petitioners motion for reconsideration thereof. On July 31,2009,
the petitioners filed a petition for certiorariin the CA with prayer for issuance of a temporary
restraining order (TRO) and/or writ of preliminary injunction, invoking the following issues:
I
WHETHER OR NOT THE RESPONDENT [NLRC] COMMITTED GRAVE ABUSE OF DISCRETION
AMOUNTING TO LACK OR IN EXCESS OF JURISDICTION WHENIT DEVIATED FROM THE
FINDINGS OF FACTS OF THE HONORABLE LABOR ARBITER.
II

WHETHER OR NOT PETITIONERS ARE ENTITLED TO THE ISSUANCE OF A TEMPORARY

RESTRAINING ORDER AND/OR WRIT OF PRELIMINARY INJUNCTION PENDING THE
RESOLUTION OF THE INSTANT PETITION.
9

The respondent filed her comment on August 19, 2009. On October 8, 2009, the petitioners filed an
urgent motion to resolve their petition for certiorari and prayer for TRO and/or writ of preliminary
injunction. On November 9, 2009, the CA denied the petitioners prayerfor TRO stating that they
have not shown that they stood to suffer grave and irreparable injury if the TRO was denied. The
remaining issue in the CA, then, was whether the NLRC acted with grave abuse of discretion
amounting to lack or excess of jurisdiction when it set aside the factual conclusion and ruling of the
LA. The CA ruled in the negative:
We concur with the NLRC in finding for private respondent. Time and again, the Supreme Court has
held that it is cruel and unjust to impose the drastic penalty of dismissal if not commensurate to the
gravity of the misdeed.
In employee termination disputes, the employer bears the burden of proving that the employees
dismissal was for just and valid cause. In the instant case, the evidence does not support the finding
of the Labor Arbiter that private respondent is guilty of serious misconduct.
In this jurisdiction, the Supreme Court has consistently defined misconduct as an improper or wrong
conduct, a transgression of some established and definite rule of action, a forbidden act, a
dereliction of duty, willful in character, implies wrongful intent and not mere error of judgment. To be a
just cause for termination under Article 282 of the Labor Code of the Philippines, the misconduct
must be serious, that is, it must be of such grave and aggravated character and not merely trivial or
unimportant. However serious, such misconduct must nevertheless be in connection with the
employees work; the act complained of must be related to the performance of the employees duties
showing him to be unfit to continue working for the employer.
Private respondents lapse was not a "serious" one, let alone indicative of serious misconduct. In
fact, she (herein private respondent) admitted that she was not able to report the overage to the
supervisor since the latter was on leave on that day and that she was still tracing the overage; and
that the omission or failure to report immediately the overage was just a simple mistake without
intent to defraud her employer. As found by the NLRC, private respondent worked for petitioner for
almost six (6) years, and it is not shown that she committed any infraction of company rules during
her employment. In fact, private respondent was once awarded by petitioner due to her heroic act of
defending her Manager, Ms. Lilibeth Cortez, while resisting a hold-upper.
The settled rule is that when supported by substantial evidence, factual findings made by quasijudicial and administrative bodies are accorded great respect and even finality by the courts. These
findings are not infallible, though; when there is a showing that they were arrived at arbitrarily or in
disregard of the evidence on record, they may be examined by the courts. Hence, when factual
findings of the Labor Arbiter and the NLRC are contrary to each other, there is a necessity to review
the records to determine which conclusions are more conformable to the evidentiary facts. The case
before Us shows that the finding of the NLRC is supported by substantive evidence as compared to
the finding of the Labor Arbiter with respect to the issue of illegal dismissal. Moreover, in case of
doubt, such cases should be resolved in favor of labor, pursuant to the social justice policy of labor
laws and the Constitution.
Finally, it is a time-honored principle that although it is the prerogative of management to employ the
services of a person and likewise to discharge him, such is not without limitations and restrictions.
The dismissal of an employee must be done with just cause and without abuse of discretion. It must

not bedone in an arbitrary and despotic manner. To hold otherwise would render nugatory the
security of tenure clause enshrined in the Constitution. (Citations omitted and emphasis ours)
10

Invoking Article 279 of the Labor Code, the CA agreed with the NLRC that the respondent should
have been reinstated without loss of seniority rights and other privileges, with payment of her full
backwages, inclusive of allowances and other benefits or their monetary equivalent computed from
the time her compensation was withheld up to the time of actual reinstatement. However, with the
parties relations now strained, the CA conceded that the payment of a separation pay, along with
backwages as a separate and distinct relief, is an acceptable alternative to reinstatement. The CA
further awarded the respondent attorneys fees since she was forced to litigate and incur expenses
to protecther rights and interests by reason of the unjustified acts of the petitioners.
11

Petition for Review in the Supreme Court

In this petition, the petitioners raise the following issues:
I. WHETHER OR NOT THE MISAPPROPRIATION BY A PAWNSHOP PERSONNEL IN THE
AMOUNT OF [P]540.00, COUPLED WITH SUBSEQUENTDENIALS, AMOUNT TO A
SERIOUS MISCONDUCT IN OFFICE?
II. WHETHER OR NOT THE IMPOSITION OF THE PENALTY OF TERMINATION FROM
OFFICE [UPON] A PAWNSHOP PERSONNEL WHO MISAPPROPRIATED AN AMOUNT
OF P540.00 FROM THE COFFERS OF THE PAWNSHOP, AND WHO MADE
SUBSEQUENT DENIALS, IS CRUEL AND UNJUST?
12

The appellate court agreed with the NLRC that the respondents lapse was "just a simple mistake
without intent to defraud her employer;" that the incident was neither serious norindicative of
serious misconduct; and that her dismissal was disproportionate to her offense. It accepted the
respondents explanation that her failure to report her cash overage of P540.00 on October 29, 2007
to the branch manager, who was her immediate superior, was because the latter was then on leave,
and that for days thereafter, she was hard-pressed in trying to trace and determine the cause
thereof. The CA noted that the respondent had worked for PJLI for almost six years without any
previous infractions of company rules, and that she was once commended for a heroic act of
defending her former branch manager, Ms. Lilibeth Cortez, during a branch holdup.
13

On the other hand, the petitioners strongly maintain that under Rule V(A)(11) of its Code of Conduct
on "Dishonesty, Misappropriation, Theft or Embezzlement of Company Funds or Property," the
respondent committed a "First Level Offense" which is punishable by outright dismissal. According to
the petitioners, the respondent committed the following acts which constitute dishonesty and serious
misconduct:
1. The respondent did not enter the discovered cash overage in the "operating system"
(computerized cash ledger) of the branch on October 29, 2007 notwithstanding that she was
fully aware of the companys policy that such unexplained receipt should be recorded at the
end of the business day;
2. The respondent did not report the cash overage to her immediate superior, Branch
Manager Violette Grace Tuling (Tuling), upon the latters return from a leave ofabsence on
November 3, 2007. Neither did the respondent seek Tulings help concerning the matter, and
just averred that she was afraid to be scolded by Tuling;

3. The respondent deliberately lied about her cash overage after Tuling confronted her on
December 17, 2007;
4. Again, the respondent falsely denied the cash overage when the company auditor asked
her to explain how it happened; and
5. The respondent concocted a cover-up by claiming that a computer glitch occurred when
she was about to post the cash overage in the operating system.
14

Ruling of the Court

There is merit in the petition.
It need not be stressed that the nature or extent of the penalty imposed on an erring employee must
be commensurate to the gravity of the offense as weighed against the degree of responsibility and
trust expected of the employees position. On the other hand,the respondent is not just charged with
a misdeed, but with loss of trust and confidence under Article 282(c) of the Labor Code, a cause
premised on the fact that the employee holds a position whose functions may only be performed by
someone who enjoys the trust and confidence of management. Needless to say, such an employee
bears a greater burden of trustworthiness than ordinary workers, and the betrayal of the trust
reposed is the essence of the loss of trust and confidence which is a ground for the employees
dismissal.
15

The respondents misconduct must be viewed in light of the strictly fiduciary nature of her position.
In addition to its pawnshop operations, the PJLI offers its "Pera Padala" cash remittance service
whereby, for a fee or "sending charge," a customer may remit money to a consignee through its
network of pawnshop branches all over the country. On October 29, 2007, a customer sent P500.00
through its branch in Capistrano, Cagayan de Oro City, and paid a remittance fee of P40.00.
Inexplicably, however, no corresponding entry was made to recognize the cash receipt of P540.00 in
the computerized accounting system (operating system) ofthe PJLI. The respondent claimed that
she tried very hard but could not trace the source of her unexplained cash surplus ofP540.00, but a
branch audit conducted sometime in December 2007 showed that it came from a "Pera Padala"
customer.
To be sure, no significant financial injury was sustained by the PJLI in the loss of a mere P540.00 in
cash, which, according to the respondent she sincerely wanted to account for except that she was
pre-empted by fear of what her branch manager might do once she learned of it. But in treating the
respondents misconduct as a simple negligence or a simple mistake, both the CA and the NLRC
grossly failed to consider that she held a position of utmost trust and confidence in the company.
There are two classes of corporate positions of trust: on the one hand are the managerial employees
whose primary duty consists of the management of the establishment in which they are employed or
of a department or a subdivision thereof, and other officers or members of the managerial staff;on
the other hand are the fiduciary rank-and-file employees, such as cashiers, auditors, property
custodians, or those who, in the normal exercise of their functions, regularly handle significant
amounts of money or property. These employees, though rank-and-file, are routinely charged with
the care and custody of the employers money or property, and are thus classified as occupying
positions of trust and confidence.
16

The respondent was first hired by the petitioners as an accounting clerk on June 13, 2003, for which
she received a basic monthly salary of P9,353.00. On October 29, 2007, the date of the subject
incident, she performed the function of vault custodian and cashier in the petitioners Branch 4
pawnshop in Capistrano, Cagayan de Oro City. In addition to her custodial duties, it was the
respondent who electronically posted the days transactions in the books of accounts of the branch,
a function that is essentially separate from that of cashier or custodian. It is plain to see then that
when both functions are assigned to one person to perform, a very risky situation of conflicting
interests is created whereby the cashier can purloin the money in her custody and effectively cover
her tracks, at least temporarily, by simply not recording in the books the cash receipt she
misappropriated. This is commonly referred to as lapping of accounts. Only a most trusted clerk
would be allowed to perform the two functions, and the respondent enjoyed this trust.
17

The series of willful misconduct committed by the respondent in mishandling the unaccounted cash
receipt exposes her as unworthy of the utmost trust inherent in her position as branch cashier and
vault custodian and bookkeeper.
The respondent insists that she never intended to appropriate the money but was afraid that Tuling
would scold her, and that she kept the money for a long time in her drawer and only decided to take
it home after her search for the cause of the cash overage had proved futile. Both the CA and the
NLRC agreed with her, and held that what she committed was a simple mistake or simple
negligence.
The Court disagrees.
Granting arguendothat for some reason not due to her fault, the respondent could not trace the
source of the cash surplus, she nonetheless well knew and understood the companys policy that
unexplained cash must be treated as miscellaneous income under the account "Other Income," and
that the same must be so recognized and recorded at the end of the day in the branch books or
"operating system." No such entry was made by the respondent, resulting in unrecorded cash in her
possession of P540.00, which the company learned about only two months thereafter through a
branch audit.
Significantly, when Tuling returned on November 3, 2007 from her leave of absence, the respondent
did not just withhold from her the fact that she had an unaccounted overage, but she refused to seek
her help on what to do about it, despite having had five days to mull over the matter until Tulings
return.
In order that an employer may invoke loss of trust and confidence in terminating an employee under
Article 282(c) of the Labor Code, certain requirements must be complied with, namely: (1) the
employee must be holding a position of trust and confidence; and (2) there must be an act that
would justify the loss of trust and confidence. While loss of trust and confidence should be genuine,
it does notrequire proof beyond reasonable doubt, it being sufficient that there issome basis to
believe that the employee concerned is responsible for the misconduct and thatthe nature of the
employees participation therein rendered him unworthy of trust and confidence demanded by his
position.
18

19

20

The petitioners are fully justified in claiming loss of trust and confidence in the respondent. While it is
natural and understandable that the respondent should feel apprehensive about Tulings reaction
concerning her cash overage, considering that it was their first time to be working together in the
same branch, we must keep in mind thatthe unaccounted cash can only be imputed to the
respondents own negligence in failing to keep track of the transaction from which the money came.
A subsequent branch audit revealed that it came from a "Pera Padala" remittance, implying that

although the amount had been duly remitted to the consignee, the sending branch failed to record
the payment received from the consigning customer. For days following the overage, the respondent
tried but failed to reconcile her records, and for this inept handling of a "Pera Padala" remittance,
she already deserved to be sanctioned.
Further, as a matter of strict company policy, unexplained cash is recognized at the end of the day
as miscellaneous income. Inexplicably, despite being with the company for four years as accounting
clerk and cashier, the respondent failed to makethe required entry in the branch operating system
recognizing miscellaneous income. Such an entry could have been easily reversedonce it became
clear how the overage came about.
But the respondent obviously thought that by skipping the entry, she could keep Tuling from learning
about the overage. Her trustworthiness as branch cashier and bookkeeper has been irreparably
tarnished. The respondents untrustworthiness is further demonstrated when she began to concoct
lies concerning the overage: first, by denying its existence to Tuling and again to the company
auditor; later, when she falsely claimed that a computer glitch or malfunction had prevented her from
posting the amount on October 29, 2007; and finally,when she was forced to admit before the
companys investigating panel that she took and spent the money.
21

Mere substantial evidence is sufficient to establish loss of trust and confidence

The respondents actuations were willful and deliberate. A cashier who, through carelessness, lost a
document evidencing a cash receipt, and then wilfully chose not to record the excess cash as
miscellaneous income and instead took it home and spent it on herself, and later repeatedly denied
or concealed the cash overage when confronted, deserves to be dismissed.
Article 282 of the Labor Code allows an employer to dismiss an employee for willful breach of trust
or loss of confidence. It has been held that a special and unique employment relationship exists
between a corporation and its cashier. Truly, more than most key positions, that of a cashier calls for
utmost trust and confidence, and it is the breach of this trust that results in an employers loss of
confidence in the employee. In San Miguel Corporation v. NLRC, et al., the Court held:
22

23

24

25

As a rule this Court leans over backwards to help workers and employees continue in their
employment. We have mitigated penalties imposed by management on erring employees and
ordered employers to reinstate workers who have been punished enough through suspension.
However, breach of trust and confidence and actsof dishonesty and infidelity in the handling of funds
and properties are an entirely different matter. (Emphasis ours)
1wphi1

26

It has been held that in dismissing a cashier on the ground of loss of confidence, it is sufficientthat
there is some basis for the same or that the employer has a reasonable ground tobelieve that the
employee is responsible for the misconduct, thus making him unworthy of the trust and confidence
reposed in him. Therefore, if there issufficient evidence to show that the employer has ample
reason to distrust the employee, the labor tribunal cannot justly deny the employer the authority to
dismiss him. Indeed, employers are allowed wider latitude in dismissing an employee for loss of
trust and confidence,as the Court held in Atlas Fertilizer Corporation v. NLRC:
27

28

29

As a general rule, employers are allowed a wider latitude of discretion in terminating the services of
employees who perform functions which by their nature require the employers full trust and
confidence. Mere existence of basis for believingthat the employee has breached the trust of the
employer is sufficient and does not require proof beyond reasonable doubt. Thus, when an
employee has been guilty of breach of trust or his employer has ample reason to distrust him, a
labor tribunal cannot deny the employer the authority to dismiss him. x x x. (Citations omitted)
30

Furthermore, it must also be stressed that only substantial evidence is required in order to support a
finding that an employers trust and confidence accorded to its employee had been breached. As
explained in Lopez v. Alturas Group of Companies:
31

[T]he language of Article 282(c) of the Labor Code states that the loss of trust and confidence must
be based on willful breach of the trust reposed in the employee by his employer. Such breach is
willful if it is done intentionally, knowingly, and purposely, without justifiable excuse, as distinguished
from an act done carelessly, thoughtlessly, heedlessly or inadvertently. Moreover, it must be based
on substantial evidence and not on the employers whims or caprices or suspicions otherwise, the
employee would eternally remain at the mercy of the employer. Loss of confidence must not be
indiscriminately used as a shield by the employer against a claim that the dismissal of an employee
was arbitrary. And, in order to constitute a just cause for dismissal, the act complained of must be
work-related and shows that the employee concerned is unfit to continue working for the employer.
In addition, loss of confidence as a just cause for termination of employment is premised on the fact
that the employee concerned holds a position of responsibility, trust and confidence or that the
employee concerned is entrusted with confidence with respect to delicate matters, such as the
handling or care and protection of the property and assets of the employer. The betrayal of this trust
is the essence of the offense for which an employee is penalized. (Emphasis and underscoring in
the original)
32

In holding a position requiring full trust and confidence, the respondent gave up some of the rigid
guarantees available to ordinary employees. She insisted that her misconduct was just an "innocent
mistake," and maybe it was, had it been committed by other employees. But surely not as to the
respondent who precisely because of the special trust and confidence given her by her employer
mustbe penalized with a more severe sanction.
33

A cashiers inability to safeguard and account for missing cash is sufficient cause to dismiss her.
The respondent insisted that she never intended to misappropriate the missing fund, but in Santos v.
San Miguel Corp., the Court held that misappropriation of company funds, notwithstanding that the
shortage has been restituted, is a valid ground to terminate the services of an employee for loss of
trust and confidence. Also, in Caeda v. Philippine Airlines, Inc., the Court held that it is immaterial
what the respondents intent was concerning the missing fund, for the undisputed fact is that cash
which she held in trust for the company was missing in her custody. At the very least, she was
negligent and failed to meet the degree of care and fidelity demanded of her as cashier. Her excuses
and failure to give a satisfactory explanation for the missing cash only gavethe petitioners sufficient
reason to lose confidence in her. As it was held in Metro Drug Corporation v. NLRC:
34

35

36

37

38

It would be most unfair to require an employer to continue employing as its cashiera person whom it
reasonably believes is no longer capable of giving full and whole hearted trustworthiness in the
stewardship of company funds.
39

WHEREFORE, premises considered, the petition is hereby GRANTED. The Decision dated June 30,
2011 of the Court of Appeals in CA-G.R. SP No. 03069 is REVERSED and SET ASIDE. The
Decision of the Labor Arbiter dated July 23, 2008 is REINSTATED.
SO ORDERED.
BIENVENIDO
Associate Justice

L.

REYES

Aliling v. Feliciano, G.R. No. 185829, April 25, 2012

G.R. No. 185829

April 25, 2012

ARMANDO
ALILING, Petitioner,
vs.
JOSE B. FELICIANO, MANUEL F. SAN MATEO III, JOSEPH R. LARIOSA, and WIDE WIDE
WORLD EXPRESS CORPORATION, Respondents.
DECISION
VELASCO, JR., J.:
The Case
This Petition for Review on Certiorari under Rule 45 assails and seeks to set aside the July 3, 2008
Decision1 and December 15, 2008 Resolution 2 of the Court of Appeals (CA), in CA-G.R. SP No.
101309, entitled Armando Aliling v. National Labor Relations Commission, Wide Wide World Express
Corporation, Jose B. Feliciano, Manuel F. San Mateo III and Joseph R. Lariosa. The assailed
issuances modified the Resolutions dated May 31, 2007 3 and August 31, 20074 rendered by the
National Labor Relations Commission (NLRC) in NLRC NCR Case No. 00-10-11166-2004, affirming
the Decision dated April 25, 20065 of the Labor Arbiter.
The Facts
Via a letter dated June 2, 2004, 6 respondent Wide Wide World Express Corporation (WWWEC)
offered to employ petitioner Armando Aliling (Aliling) as "Account Executive (Seafreight Sales)," with
the following compensation package: a monthly salary of PhP 13,000, transportation allowance of
PhP 3,000, clothing allowance of PhP 800, cost of living allowance of PhP 500, each payable on a
per month basis and a 14th month pay depending on the profitability and availability of financial
resources of the company. The offer came with a six (6)-month probation period condition with this
express caveat: "Performance during [sic] probationary period shall be made as basis for
confirmation to Regular or Permanent Status."
On June 11, 2004, Aliling and WWWEC inked an Employment Contract 7 under the following terms,
among others:

Conversion to regular status shall be determined on the basis of work performance; and

Employment services may, at any time, be terminated for just cause or in accordance with
the standards defined at the time of engagement.8

Training then started. However, instead of a Seafreight Sale assignment, WWWEC asked Aliling to
handle Ground Express (GX), a new company product launched on June 18, 2004 involving
domestic cargo forwarding service for Luzon. Marketing this product and finding daily contracts for it
formed the core of Alilings new assignment.
Barely a month after, Manuel F. San Mateo III (San Mateo), WWWEC Sales and Marketing Director,
emailed Aliling9 to express dissatisfaction with the latters performance, thus:

Armand,
My expectations is [sic] that GX Shuttles should be 80% full by the 3rd week (August 5) after launch
(July 15). Pls. make that happen. It has been more than a month since you came in. I am expecting
sales to be pumping in by now. Thanks.
Nonong
Thereafter, in a letter of September 25, 2004, 10 Joseph R. Lariosa (Lariosa), Human Resources
Manager of WWWEC, asked Aliling to report to the Human Resources Department to explain his
absence taken without leave from September 20, 2004.
Aliling responded two days later. He denied being absent on the days in question, attaching to his
reply-letter11 a copy of his timesheet12 which showed that he worked from September 20 to 24, 2004.
Alilings explanation came with a query regarding the withholding of his salary corresponding to
September 11 to 25, 2004.
In a separate letter dated September 27, 2004, 13 Aliling wrote San Mateo stating: "Pursuant to your
instruction on September 20, 2004, I hereby tender my resignation effective October 15, 2004."
While WWWEC took no action on his tender, Aliling nonetheless demanded reinstatement and a
written apology, claiming in a subsequent letter dated October 1, 2004 14 to management that San
Mateo had forced him to resign.
Lariosas response-letter of October 1, 2004,15 informed Aliling that his case was still in the process
of being evaluated. On October 6, 2004, 16 Lariosa again wrote, this time to advise Aliling of the
termination of his services effective as of that date owing to his "non-satisfactory performance"
during his probationary period. Records show that Aliling, for the period indicated, was paid his
outstanding salary which consisted of:
PhP 4,988.18

(salary for the September 25, 2004 payroll)

1,987.28

(salary for 4 days in October 2004)

-----------------PhP 6,975.46

Total

Earlier, however, or on October 4, 2004, Aliling filed a Complaint 17 for illegal dismissal due to forced
resignation, nonpayment of salaries as well as damages with the NLRC against WWWEC.
Appended to the complaint was Alilings Affidavit dated November 12, 2004, 18 in which he stated: "5.
At the time of my engagement, respondents did not make known to me the standards under which I
will qualify as a regular employee."
Refuting Alilings basic posture, WWWEC stated in its Position Paper dated November 22,
200419 that, in addition to the letter-offer and employment contract adverted to, WWWEC and Aliling
have signed a letter of appointment20 on June 11, 2004 containing the following terms of
engagement:
Additionally, upon the effectivity of your probation, you and your immediate superior are required to
jointly define your objectives compared with the job requirements of the position. Based on the preagreed objectives, your performance shall be reviewed on the 3rd month to assess your competence
and work attitude. The 5th month Performance Appraisal shall be the basis in elevating or confirming
your employment status from Probationary to Regular.

Failure to meet the job requirements during the probation stage means that your services may be
terminated without prior notice and without recourse to separation pay.
WWWEC also attached to its Position Paper a memo dated September 20, 2004 21 in which San
Mateo asked Aliling to explain why he should not be terminated for failure to meet the expected job
performance, considering that the load factor for the GX Shuttles for the period July to September
was only 0.18% as opposed to the allegedly agreed upon load of 80% targeted for August 5, 2004.
According to WWWEC, Aliling, instead of explaining himself, simply submitted a resignation letter.
In a Reply-Affidavit dated December 13, 2004, 22 Aliling denied having received a copy of San
Mateos September 20, 2004 letter.
Issues having been joined, the Labor Arbiter issued on April 25, 2006 23 a Decision declaring Alilings
termination as unjustified. In its pertinent parts, the decision reads:
The grounds upon which complainants dismissal was based did not conform not only the standard
but also the compliance required under Article 281 of the Labor Code, Necessarily, complainants
termination is not justified for failure to comply with the mandate the law requires. Respondents
should be ordered to pay salaries corresponding to the unexpired portion of the contract of
employment and all other benefits amounting to a total of THIRTY FIVE THOUSAND EIGHT
HUNDRED ELEVEN PESOS (P35,811.00) covering the period from October 6 to December 7, 2004,
computed as follows:
Unexpired Portion of the Contract:
Basic Salary

P13,000.00

Transportation

3,000.00

Clothing Allowance

800.00

ECOLA

500.00
----------------P17,300.00

10/06/04
P17,300.00 x 2.7 mos. = P35,811.00

12/07/04

Complainants 13th month pay proportionately for 2004 was not shown to have been paid to
complainant, respondent be made liable to him therefore computed at SIX THOUSAND FIVE
HUNDRED THIRTY TWO PESOS AND 50/100 (P6,532.50).
For engaging the services of counsel to protect his interest, complainant is likewise entitled to a 10%
attorneys fees of the judgment amount. Such other claims for lack of basis sufficient to support for
their grant are unwarranted.
WHEREFORE, judgment is hereby rendered ordering respondent company to pay complainant
Armando Aliling the sum of THIRTY FIVE THOUSAND EIGHT HUNDRED ELEVEN PESOS
(P35,811.00) representing his salaries and other benefits as discussed above.

Respondent company is likewise ordered to pay said complainant the amount of TEN THOUSAND
SEVEN HUNDRED SIXTY SIX PESOS AND 85/100 ONLY (10.766.85) representing his
proportionate 13th month pay for 2004 plus 10% of the total judgment as and by way of attorneys
fees.
Other claims are hereby denied for lack of merit. (Emphasis supplied.)
The labor arbiter gave credence to Alilings allegation about not receiving and, therefore, not bound
by, San Mateos purported September 20, 2004 memo. The memo, to reiterate, supposedly apprised
Aliling of the sales quota he was, but failed, to meet. Pushing the point, the labor arbiter explained
that Aliling cannot be validly terminated for non-compliance with the quota threshold absent a prior
advisory of the reasonable standards upon which his performance would be evaluated.
Both parties appealed the above decision to the NLRC, which affirmed the Decision in toto in its
Resolution dated May 31, 2007. The separate motions for reconsideration were also denied by the
NLRC in its Resolution dated August 31, 2007.
Therefrom, Aliling went on certiorari to the CA, which eventually rendered the assailed Decision, the
dispositive portion of which reads:
WHEREFORE, the petition is PARTLY GRANTED. The assailed Resolutions of respondent (Third
Division) National Labor Relations Commission are AFFIRMED, with the following
MODIFICATION/CLARIFICATION: Respondents Wide Wide World Express Corp. and its officers,
Jose B. Feliciano, Manuel F. San Mateo III and Joseph R. Lariosa, are jointly and severally liable to
pay petitioner Armando Aliling: (A) the sum of Forty Two Thousand Three Hundred Thirty Three &
50/100 (P42,333.50) as the total money judgment, (B) the sum of Four Thousand Two Hundred
Thirty Three & 35/100 (P4,233.35) as attorneys fees, and (C) the additional sum equivalent to onehalf (1/2) month of petitioners salary as separation pay.
SO ORDERED.24 (Emphasis supplied.)
The CA anchored its assailed action on the strength of the following premises: (a) respondents failed
to prove that Alilings dismal performance constituted gross and habitual neglect necessary to justify
his dismissal; (b) not having been informed at the time of his engagement of the reasonable
standards under which he will qualify as a regular employee, Aliling was deemed to have been hired
from day one as a regular employee; and (c) the strained relationship existing between the parties
argues against the propriety of reinstatement.
Alilings motion for reconsideration was rejected by the CA through the assailed Resolution dated
December 15, 2008.
Hence, the instant petition.
The Issues
Aliling raises the following issues for consideration:
A. The failure of the Court of Appeals to order reinstatement (despite its finding that petitioner
was illegally dismissed from employment) is contrary to law and applicable jurisprudence.

B. The failure of the Court of Appeals to award backwages (even if it did not order
reinstatement) is contrary to law and applicable jurisprudence.
C. The failure of the Court of Appeals to award moral and exemplary damages (despite its
finding that petitioner was dismissed to prevent the acquisition of his regular status) is
contrary to law and applicable jurisprudence.25
In their Comment,26 respondents reiterated their position that WWWEC hired petitioner on a
probationary basis and fired him before he became a regular employee.
The Courts Ruling
The petition is partly meritorious.
Petitioner is a regular employee
On a procedural matter, petitioner Aliling argues that WWWEC, not having appealed from the
judgment of CA which declared Aliling as a regular employee from the time he signed the
employment contract, is now precluded from questioning the appellate courts determination as to
the nature of his employment.
Petitioner errs. The Court has, when a case is on appeal, the authority to review matters not
specifically raised or assigned as error if their consideration is necessary in reaching a just
conclusion of the case. We said as much in Sociedad Europea de Financiacion, SA v. Court of
Appeals,27 "It is axiomatic that an appeal, once accepted by this Court, throws the entire case open
to review, and that this Court has the authority to review matters not specifically raised or assigned
as error by the parties, if their consideration is necessary in arriving at a just resolution of the case."
The issue of whether or not petitioner was, during the period material, a probationary or regular
employee is of pivotal import. Its resolution is doubtless necessary at arriving at a fair and just
disposition of the controversy.
The Labor Arbiter cryptically held in his decision dated April 25, 2006 that:
Be that as it may, there appears no showing that indeed the said September 20, 2004 Memorandum
addressed to complainant was received by him. Moreover, complainants tasked where he was
assigned was a new developed service. In this regard, it is noted:
"Due process dictates that an employee be apprised beforehand of the conditions of his employment
and of the terms of advancement therein. Precisely, implicit in Article 281 of the Labor Code is the
requirement that reasonable standards be previously made known by the employer to the employee
at the time of his engagement (Ibid, citing Sameer Overseas Placement Agency, Inc. vs. NLRC, G.R.
No. 132564, October 20, 1999).28
From our review, it appears that the labor arbiter, and later the NLRC, considered Aliling a
probationary employee despite finding that he was not informed of the reasonable standards by
which his probationary employment was to be judged.
The CA, on the other hand, citing Cielo v. National Labor Relations Commission, 29 ruled that
petitioner was a regular employee from the outset inasmuch as he was not informed of the
standards by which his probationary employment would be measured. The CA wrote:

Petitioner was regularized from the time of the execution of the employment contract on June 11,
2004, although respondent company had arbitrarily shortened his tenure. As pointed out, respondent
company did not make known the reasonable standards under which he will qualify as a regular
employee at the time of his engagement. Hence, he was deemed to have been hired from day one
as a regular employee.30 (Emphasis supplied.)
WWWEC, however, excepts on the argument that it put Aliling on notice that he would be evaluated
on the 3rd and 5th months of his probationary employment. To WWWEC, its efforts translate to
sufficient compliance with the requirement that a probationary worker be apprised of the reasonable
standards for his regularization. WWWEC invokes the ensuing holding in Alcira v. National Labor
Relations Commission31 to support its case:
Conversely, an employer is deemed to substantially comply with the rule on notification of standards
if he apprises the employee that he will be subjected to a performance evaluation on a particular
date after his hiring. We agree with the labor arbiter when he ruled that:
In the instant case, petitioner cannot successfully say that he was never informed by private
respondent of the standards that he must satisfy in order to be converted into regular status. This
rans (sic) counter to the agreement between the parties that after five months of service the
petitioners performance would be evaluated. It is only but natural that the evaluation should be
made vis--vis the performance standards for the job. Private respondent Trifona Mamaradlo
speaks of such standard in her affidavit referring to the fact that petitioner did not perform well in his
assigned work and his attitude was below par compared to the companys standard required of him.
(Emphasis supplied.)
1wphi1

WWWECs contention is untenable.

Alcira is cast under a different factual setting. There, the labor arbiter, the NLRC, the CA, and even
finally this Court were one in their findings that the employee concerned knew, having been duly
informed during his engagement, of the standards for becoming a regular employee. This is in stark
contrast to the instant case where the element of being informed of the regularizing standards does
not obtain. As such, Alcira cannot be made to apply to the instant case.
To note, the June 2, 2004 letter-offer itself states that the regularization standards or the
performance norms to be used are still to be agreed upon by Aliling and his supervisor. WWWEC
has failed to prove that an agreement as regards thereto has been reached. Clearly then, there were
actually no performance standards to speak of. And lest it be overlooked, Aliling was assigned to GX
trucking sales, an activity entirely different to the Seafreight Sales he was originally hired and trained
for. Thus, at the time of his engagement, the standards relative to his assignment with GX sales
could not have plausibly been communicated to him as he was under Seafreight Sales. Even for this
reason alone, the conclusion reached in Alcira is of little relevant to the instant case.
Based on the facts established in this case in light of extant jurisprudence, the CAs holding as to the
kind of employment petitioner enjoyed is correct. So was the NLRC ruling, affirmatory of that of the
labor arbiter. In the final analysis, one common thread runs through the holding of the labor arbiter,
the NLRC and the CA, i.e., petitioner Aliling, albeit hired from managements standpoint as a
probationary employee, was deemed a regular employee by force of the following self-explanatory
provisions:
Article 281 of the Labor Code

ART. 281. Probationary employment. - Probationary employment shall not exceed six (6) months
from the date the employee started working, unless it is covered by an apprenticeship agreement
stipulating a longer period. The services of an employee who has been engaged on a probationary
basis may be terminated for a just cause or when he fails to qualify as a regular employee in
accordance with reasonable standards made known by the employer to the employee at the time of
his engagement. An employee who is allowed to work after a probationary period shall be
considered a regular employee. (Emphasis supplied.)
Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of the Labor Code
Sec. 6. Probationary employment. There is probationary employment where the employee, upon
his engagement, is made to undergo a trial period where the employee determines his fitness to
qualify for regular employment, based on reasonable standards made known to him at the time of
engagement.
Probationary employment shall be governed by the following rules:
xxxx
(d) In all cases of probationary employment, the employer shall make known to the employee the
standards under which he will qualify as a regular employee at the time of his engagement. Where
no standards are made known to the employee at that time, he shall be deemed a regular employee.
(Emphasis supplied.)
To repeat, the labor arbiter, NLRC and the CA are agreed, on the basis of documentary evidence
adduced, that respondent WWWEC did not inform petitioner Aliling of the reasonable standards by
which his probation would be measured against at the time of his engagement. The Court is loathed
to interfere with this factual determination. As We have held:
Settled is the rule that the findings of the Labor Arbiter, when affirmed by the NLRC and the Court of
Appeals, are binding on the Supreme Court, unless patently erroneous. It is not the function of the
Supreme Court to analyze or weigh all over again the evidence already considered in the
proceedings below. The jurisdiction of this Court in a petition for review on certiorari is limited to
reviewing only errors of law, not of fact, unless the factual findings being assailed are not supported
by evidence on record or the impugned judgment is based on a misapprehension of facts. 32
The more recent Peafrancia Tours and Travel Transport, Inc., v. Sarmiento 33 has reaffirmed the
above ruling, to wit:
Finally, the CA affirmed the ruling of the NLRC and adopted as its own the latter's factual findings.
Long-established is the doctrine that findings of fact of quasi-judicial bodies x x x are accorded
respect, even finality, if supported by substantial evidence. When passed upon and upheld by the
CA, they are binding and conclusive upon this Court and will not normally be disturbed. Though this
doctrine is not without exceptions, the Court finds that none are applicable to the present case.
WWWEC also cannot validly argue that "the factual findings being assailed are not supported by
evidence on record or the impugned judgment is based on a misapprehension of facts." Its very own
letter-offer of employment argues against its above posture. Excerpts of the letter-offer:
Additionally, upon the effectivity of your probation, you and your immediate superior are required to
jointly define your objectives compared with the job requirements of the position. Based on the pre-

agreed objectives, your performance shall be reviewed on the 3rd month to assess your competence
and work attitude. The 5th month Performance Appraisal shall be the basis in elevating or confirming
your employment status from Probationary to Regular.
Failure to meet the job requirements during the probation stage means that your services may be
terminated without prior notice and without recourse to separation pay. (Emphasis supplied.)
Respondents further allege that San Mateos email dated July 16, 2004 shows that the standards for
his regularization were made known to petitioner Aliling at the time of his engagement. To recall, in
that email message, San Mateo reminded Aliling of the sales quota he ought to meet as a condition
for his continued employment, i.e., that the GX trucks should already be 80% full by August 5, 2004.
Contrary to respondents contention, San Mateos email cannot support their allegation on Aliling
being informed of the standards for his continued employment, such as the sales quota, at the time
of his engagement. As it were, the email message was sent to Aliling more than a month after he
signed his employment contract with WWWEC. The aforequoted Section 6 of the Implementing
Rules of Book VI, Rule VIII-A of the Code specifically requires the employer to inform the
probationary employee of such reasonable standards at the time of his engagement, not at any time
later; else, the latter shall be considered a regular employee. Thus, pursuant to the explicit provision
of Article 281 of the Labor Code, Section 6(d) of the Implementing Rules of Book VI, Rule VIII-A of
the Labor Code and settled jurisprudence, petitioner Aliling is deemed a regular employee as of June
11, 2004, the date of his employment contract.
Petitioner was illegally dismissed
To justify fully the dismissal of an employee, the employer must, as a rule, prove that the dismissal
was for a just cause and that the employee was afforded due process prior to dismissal. As a
complementary principle, the employer has the onus of proving with clear, accurate, consistent, and
convincing evidence the validity of the dismissal. 34
WWWEC had failed to discharge its twin burden in the instant case.
First off, the attendant circumstances in the instant case aptly show that the issue of petitioners
alleged failure to achieve his quota, as a ground for terminating employment, strikes the Court as a
mere afterthought on the part of WWWEC. Consider: Lariosas letter of September 25, 2004 already
betrayed managements intention to dismiss the petitioner for alleged unauthorized absences. Aliling
was in fact made to explain and he did so satisfactorily. But, lo and behold, WWWEC nonetheless
proceeded with its plan to dismiss the petitioner for non-satisfactory performance, although the
corresponding termination letter dated October 6, 2004 did not even specifically state Alilings "nonsatisfactory performance," or that Alilings termination was by reason of his failure to achieve his set
quota.
What WWWEC considered as the evidence purportedly showing it gave Aliling the chance to explain
his inability to reach his quota was a purported September 20, 2004 memo of San Mateo addressed
to the latter. However, Aliling denies having received such letter and WWWEC has failed to refute his
contention of non-receipt. In net effect, WWWEC was at a loss to explain the exact just reason for
dismissing Aliling.
At any event, assuming for argument that the petitioner indeed failed to achieve his sales quota, his
termination from employment on that ground would still be unjustified.
Article 282 of the Labor Code considers any of the following acts or omission on the part of the
employee as just cause or ground for terminating employment:

(a) Serious misconduct or willful disobedience by the employee of the lawful orders of his
employer or representative in connection with his work;
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his employer or
duly authorized representative;
(d) Commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representatives; and
(e) Other causes analogous to the foregoing. (Emphasis supplied)
In Lim v. National Labor Relations Commission,35 the Court considered inefficiency as an analogous
just cause for termination of employment under Article 282 of the Labor Code:
We cannot but agree with PEPSI that "gross inefficiency" falls within the purview of "other causes
analogous to the foregoing," this constitutes, therefore, just cause to terminate an employee under
Article 282 of the Labor Code. One is analogous to another if it is susceptible of comparison with the
latter either in general or in some specific detail; or has a close relationship with the latter. "Gross
inefficiency" is closely related to "gross neglect," for both involve specific acts of omission on the part
of the employee resulting in damage to the employer or to his business. In Buiser vs. Leogardo, this
Court ruled that failure to observed prescribed standards to inefficiency may constitute just cause for
dismissal. (Emphasis supplied.)
It did so anew in Leonardo v. National Labor Relations Commission 36 on the following rationale:
An employer is entitled to impose productivity standards for its workers, and in fact, non-compliance
may be visited with a penalty even more severe than demotion. Thus,
[t]he practice of a company in laying off workers because they failed to make the work quota has
been recognized in this jurisdiction. (Philippine American Embroideries vs. Embroidery and Garment
Workers, 26 SCRA 634, 639). In the case at bar, the petitioners' failure to meet the sales quota
assigned to each of them constitute a just cause of their dismissal, regardless of the permanent or
probationary status of their employment. Failure to observe prescribed standards of work, or to
fulfill reasonable work assignments due to inefficiency may constitute just cause for dismissal. Such
inefficiency is understood to mean failure to attain work goals or work quotas, either by failing to
complete the same within the allotted reasonable period, or by producing unsatisfactory results. This
management prerogative of requiring standards may be availed of so long as they are exercised
in good faith for the advancement of the employer's interest. (Emphasis supplied.)
In fine, an employees failure to meet sales or work quotas falls under the concept of gross
inefficiency, which in turn is analogous to gross neglect of duty that is a just cause for dismissal
under Article 282 of the Code. However, in order for the quota imposed to be considered a valid
productivity standard and thereby validate a dismissal, managements prerogative of fixing the quota
must be exercised in good faith for the advancement of its interest. The duty to prove good faith,
however, rests with WWWEC as part of its burden to show that the dismissal was for a just cause.
WWWEC must show that such quota was imposed in good faith. This WWWEC failed to do,
perceptibly because it could not. The fact of the matter is that the alleged imposition of the quota
was a desperate attempt to lend a semblance of validity to Alilings illegal dismissal. It must be

stressed that even WWWECs sales manager, Eve Amador (Amador), in an internal e-mail to San
Mateo, hedged on whether petitioner performed below or above expectation:
Could not quantify level of performance as he as was tasked to handle a new product (GX).
Revenue report is not yet administered by IT on a month-to-month basis. Moreover, this in a way is
an experimental activity. Practically you have a close monitoring with Armand with regards to his
performance. Your assessment of him would be more accurate.
Being an experimental activity and having been launched for the first time, the sales of GX services
could not be reasonably quantified. This would explain why Amador implied in her email that other
bases besides sales figures will be used to determine Alilings performance. And yet, despite such a
neutral observation, Aliling was still dismissed for his dismal sales of GX services. In any event,
WWWEC failed to demonstrate the reasonableness and the bona fides on the quota imposition.
Employees must be reminded that while probationary employees do not enjoy permanent status,
they enjoy the constitutional protection of security of tenure. They can only be terminated for cause
or when they otherwise fail to meet the reasonable standards made known to them by the employer
at the time of their engagement.37Respondent WWWEC miserably failed to prove the termination of
petitioner was for a just cause nor was there substantial evidence to demonstrate the standards
were made known to the latter at the time of his engagement. Hence, petitioners right to security of
tenure was breached.
Alilings right to procedural due process was violated
As earlier stated, to effect a legal dismissal, the employer must show not only a valid ground
therefor, but also that procedural due process has properly been observed. When the Labor Code
speaks of procedural due process, the reference is usually to the two (2)-written notice rule
envisaged in Section 2 (III), Rule XXIII, Book V of the Omnibus Rules Implementing the Labor Code,
which provides:
Section 2. Standard of due process: requirements of notice. In all cases of termination of
employment, the following standards of due process shall be substantially observed.
I. For termination of employment based on just causes as defined in Article 282 of the Code:
(a) A written notice served on the employee specifying the ground or grounds for termination,
and giving to said employee reasonable opportunity within which to explain his side;
(b) A hearing or conference during which the employee concerned, with the assistance of
counsel if the employee so desires, is given opportunity to respond to the charge, present his
evidence or rebut the evidence presented against him; and
(c) A written notice [of] termination served on the employee indicating that upon due
consideration of all the circumstance, grounds have been established to justify his
termination.
In case of termination, the foregoing notices shall be served on the employees last known address.
MGG Marine Services, Inc. v. NLRC38 tersely described the mechanics of what may be considered a
two-part due process requirement which includes the two-notice rule, "x x x one, of the intention to
dismiss, indicating therein his acts or omissions complained against, and two, notice of the decision

to dismiss; and an opportunity to answer and rebut the charges against him, in between such
notices."
King of Kings Transport, Inc. v. Mamac39 expounded on this procedural requirement in this manner:
(1) The first written notice to be served on the employees should contain the specific causes
or grounds for termination against them, and a directive that the employees are given the
opportunity to submit their written explanation within a reasonable period. "Reasonable
opportunity" under the Omnibus Rules means every kind of assistance that management
must accord to the employees to enable them to prepare adequately for their defense. This
should be construed as a period of at least five calendar days from receipt of the notice xxxx
Moreover, in order to enable the employees to intelligently prepare their explanation and
defenses, the notice should contain a detailed narration of the facts and circumstances that
will serve as basis for the charge against the employees. A general description of the charge
will not suffice. Lastly, the notice should specifically mention which company rules, if any, are
violated and/or which among the grounds under Art. 288 [of the Labor Code] is being
charged against the employees
(2) After serving the first notice, the employees should schedule and conduct a hearing or
conference wherein the employees will be given the opportunity to (1) explain and clarify
their defenses to the charge against them; (2) present evidence in support of their defenses;
and (3) rebut the evidence presented against them by the management. During the hearing
or conference, the employees are given the chance to defend themselves personally, with
the assistance of a representative or counsel of their choice x x x.
(3) After determining that termination is justified, the employer shall serve the employees a
written notice of termination indicating that: (1) all the circumstances involving the charge
against the employees have been considered; and (2) grounds have been established to
justify the severance of their employment. (Emphasis in the original.)
Here, the first and second notice requirements have not been properly observed, thus tainting
petitioners dismissal with illegality.
The adverted memo dated September 20, 2004 of WWWEC supposedly informing Aliling of the
likelihood of his termination and directing him to account for his failure to meet the expected job
performance would have had constituted the "charge sheet," sufficient to answer for the first notice
requirement, but for the fact that there is no proof such letter had been sent to and received by him.
In fact, in his December 13, 2004 Complainants Reply Affidavit, Aliling goes on to tag such
letter/memorandum as fabrication. WWWEC did not adduce proof to show that a copy of the letter
was duly served upon Aliling. Clearly enough, WWWEC did not comply with the first notice
requirement.
Neither was there compliance with the imperatives of a hearing or conference. The Court need not
dwell at length on this particular breach of the due procedural requirement. Suffice it to point out that
the record is devoid of any showing of a hearing or conference having been conducted. On the
contrary, in its October 1, 2004 letter to Aliling, or barely five (5) days after it served the notice of
termination, WWWEC acknowledged that it was still evaluating his case. And the written notice of
termination itself did not indicate all the circumstances involving the charge to justify severance of
employment.
Aliling
is
entitled
and separation pay in lieu of reinstatement

to

backwages

As may be noted, the CA found Alilings dismissal as having been illegally effected, but nonetheless
concluded that his employment ceased at the end of the probationary period. Thus, the appellate
court merely affirmed the monetary award made by the NLRC, which consisted of the payment of
that amount corresponding to the unserved portion of the contract of employment.
The case disposition on the award is erroneous.
As earlier explained, Aliling cannot be rightfully considered as a mere probationary employee.
Accordingly, the probationary period set in the contract of employment dated June 11, 2004 was of
no moment. In net effect, as of that date June 11, 2004, Aliling became part of the WWWEC
organization as a regular employee of the company without a fixed term of employment. Thus, he is
entitled to backwages reckoned from the time he was illegally dismissed on October 6, 2004, with a
PhP 17,300.00 monthly salary, until the finality of this Decision. This disposition hews with the
Courts ensuing holding in Javellana v. Belen:40
Article 279 of the Labor Code, as amended by Section 34 of Republic Act 6715 instructs:
Art. 279. Security of Tenure. - In cases of regular employment, the employer shall not terminate the
services of an employee except for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement without loss of seniority rights and
other privileges and to his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from him up to the time
of his actual reinstatement. (Emphasis supplied)
Clearly, the law intends the award of backwages and similar benefits to accumulate past the date of
the Labor Arbiters decision until the dismissed employee is actually reinstated. But if, as in this case,
reinstatement is no longer possible, this Court has consistently ruled that backwages shall be
computed from the time of illegal dismissal until the date the decision becomes final. (Emphasis
supplied.)
Additionally, Aliling is entitled to separation pay in lieu of reinstatement on the ground of strained
relationship.
In Golden Ace Builders v. Talde,41 the Court ruled:
The basis for the payment of backwages is different from that for the award of separation
pay. Separation pay is granted where reinstatement is no longer advisable because of strained
relations between the employee and the employer. Backwages represent compensation that should
have been earned but were not collected because of the unjust dismissal. The basis for computing
backwages is usually the length of the employee's service while that for separation pay is the actual
period when the employee was unlawfully prevented from working.
1wphi1

As to how both awards should be computed, Macasero v. Southern Industrial Gases Philippines
instructs:
[T]he award of separation pay is inconsistent with a finding that there was no illegal dismissal, for
under Article 279 of the Labor Code and as held in a catena of cases, an employee who is dismissed
without just cause and without due process is entitled to backwages and reinstatement or payment
of separation pay in lieu thereof:

Thus, an illegally dismissed employee is entitled to two reliefs: backwages and reinstatement. The
two reliefs provided are separate and distinct. In instances where reinstatement is no longer feasible
because of strained relations between the employee and the employer, separation pay is granted. In
effect, an illegally dismissed employee is entitled to either reinstatement, if viable, or separation pay
if reinstatement is no longer viable, and backwages.
The normal consequences of respondents illegal dismissal, then, are reinstatement without loss of
seniority rights, and payment of backwages computed from the time compensation was withheld up
to the date of actual reinstatement. Where reinstatement is no longer viable as an option, separation
pay equivalent to one (1) month salary for every year of service should be awarded as an
alternative. The payment of separation pay is in addition to payment of backwages. x x x
Velasco v. National Labor Relations Commission emphasizes:
The accepted doctrine is that separation pay may avail in lieu of reinstatement if reinstatement is no
longer practical or in the best interest of the parties. Separation pay in lieu of reinstatement may
likewise be awarded if the employee decides not to be reinstated. (emphasis in the original; italics
supplied)
Under the doctrine of strained relations, the payment of separation pay is considered an acceptable
alternative to reinstatement when the latter option is no longer desirable or viable. On one hand,
such payment liberates the employee from what could be a highly oppressive work environment. On
the other hand, it releases the employer from the grossly unpalatable obligation of maintaining in its
employ a worker it could no longer trust.
Strained relations must be demonstrated as a fact, however, to be adequately supported by
evidence substantial evidence to show that the relationship between the employer and the
employee is indeed strained as a necessary consequence of the judicial controversy.
In the present case, the Labor Arbiter found that actual animosity existed between petitioner Azul
and respondent as a result of the filing of the illegal dismissal case. Such finding, especially when
affirmed by the appellate court as in the case at bar, is binding upon the Court, consistent with the
prevailing rules that this Court will not try facts anew and that findings of facts of quasi-judicial bodies
are accorded great respect, even finality. (Emphasis supplied.)
As the CA correctly observed, "To reinstate petitioner [Aliling] would only create an atmosphere of
antagonism and distrust, more so that he had only a short stint with respondent company." 42 The
Court need not belabor the fact that the patent animosity that had developed between employer and
employee generated what may be considered as the arbitrary dismissal of the petitioner.
Following the pronouncements of this Court Sagales v. Rustans Commercial Corporation, 43 the
computation of separation pay in lieu of reinstatement includes the period for which backwages were
awarded:
Thus, in lieu of reinstatement, it is but proper to award petitioner separation pay computed at onemonth salary for every year of service, a fraction of at least six (6) months considered as one whole
year. In the computation of separation pay, the period where backwages are awarded must be
included. (Emphasis supplied.)
Thus, Aliling is entitled to both backwages and separation pay (in lieu of reinstatement) in the
amount of one (1) months salary for every year of service, that is, from June 11, 2004 (date of

employment contract) until the finality of this decision with a fraction of a year of at least six (6)
months to be considered as one (1) whole year. As determined by the labor arbiter, the basis for the
computation of backwages and separation pay will be Alilings monthly salary at PhP 17,300.
Finally, Aliling is entitled to an award of PhP 30,000 as nominal damages in consonance with
prevailing jurisprudence44 for violation of due process.
Petitioner is not entitled to moral and exemplary damages
In Nazareno v. City of Dumaguete, 45 the Court expounded on the requisite elements for a litigants
entitlement to moral damages, thus:
Moral damages are awarded if the following elements exist in the case: (1) an injury clearly
sustained by the claimant; (2) a culpable act or omission factually established; (3) a wrongful act or
omission by the defendant as the proximate cause of the injury sustained by the claimant; and (4)
the award of damages predicated on any of the cases stated Article 2219 of the Civil Code. In
addition, the person claiming moral damages must prove the existence of bad faith by clear and
convincing evidence for the law always presumes good faith. It is not enough that one merely
suffered sleepless nights, mental anguish, and serious anxiety as the result of the actuations of the
other party. Invariably such action must be shown to have been willfully done in bad faith or with ill
motive. Bad faith, under the law, does not simply connote bad judgment or negligence. It imports a
dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of a known
duty through some motive or interest or ill will that partakes of the nature of fraud. (Emphasis
supplied.)
In alleging that WWWEC acted in bad faith, Aliling has the burden of proof to present evidence in
support of his claim, as ruled in Culili v. Eastern Telecommunications Philippines, Inc.: 46
According to jurisprudence, "basic is the principle that good faith is presumed and he who alleges
bad faith has the duty to prove the same." By imputing bad faith to the actuations of ETPI, Culili has
the burden of proof to present substantial evidence to support the allegation of unfair labor practice.
Culili failed to discharge this burden and his bare allegations deserve no credit.
This was reiterated in United Claimants Association of NEA (UNICAN) v. National Electrification
Administration (NEA),47 in this wise:
It must be noted that the burden of proving bad faith rests on the one alleging it. As the Court ruled in
Culili v. Eastern Telecommunications, Inc., "According to jurisprudence, basic is the principle that
good faith is presumed and he who alleges bad faith has the duty to prove the same." Moreover, in
Spouses Palada v. Solidbank Corporation, the Court stated, "Allegations of bad faith and fraud must
be proved by clear and convincing evidence."
Similarly, Aliling has failed to overcome such burden to prove bad faith on the part of WWWEC.
Aliling has not presented any clear and convincing evidence to show bad faith. The fact that he was
illegally dismissed is insufficient to prove bad faith. Thus, the CA correctly ruled that "[t]here was no
sufficient showing of bad faith or abuse of management prerogatives in the personal action taken
against petitioner."48 In Lambert Pawnbrokers and Jewelry Corporation v. Binamira, 49 the Court ruled:
A dismissal may be contrary to law but by itself alone, it does not establish bad faith to entitle the
dismissed employee to moral damages. The award of moral and exemplary damages cannot be

justified solely upon the premise that the employer dismissed his employee without authorized cause
and due process.
The
officers
of
WWWEC
jointly and severally liable with the company

cannot

be

held

The CA held the president of WWWEC, Jose B. Feliciano, San Mateo and Lariosa jointly and
severally liable for the monetary awards of Aliling on the ground that the officers are considered
"employers" acting in the interest of the corporation. The CA cited NYK International Knitwear
Corporation Philippines (NYK) v. National Labor Relations Commission 50 in support of its argument.
Notably, NYK in turn cited A.C. Ransom Labor Union-CCLU v. NLRC.51
Such ruling has been reversed by the Court in Alba v. Yupangco,52 where the Court ruled:
By Order of September 5, 2007, the Labor Arbiter denied respondents motion to quash the 3rd alias
writ. Brushing aside respondents contention that his liability is merely joint, the Labor Arbiter ruled:
Such issue regarding the personal liability of the officers of a corporation for the payment of wages
and money claims to its employees, as in the instant case, has long been resolved by the Supreme
Court in a long list of cases [A.C. Ransom Labor Union-CLU vs. NLRC (142 SCRA 269) and
reiterated in the cases of Chua vs. NLRC (182 SCRA 353), Gudez vs. NLRC (183 SCRA 644)]. In
the aforementioned cases, the Supreme Court has expressly held that the irresponsible officer of the
corporation (e.g. President) is liable for the corporations obligations to its workers. Thus, respondent
Yupangco, being the president of the respondent YL Land and Ultra Motors Corp., is properly jointly
and severally liable with the defendant corporations for the labor claims of Complainants Alba and
De Guzman. x x x
xxxx
As reflected above, the Labor Arbiter held that respondents liability is solidary.
There is solidary liability when the obligation expressly so states, when the law so provides, or when
the nature of the obligation so requires. MAM Realty Development Corporation v. NLRC, on solidary
liability of corporate officers in labor disputes, enlightens:
x x x A corporation being a juridical entity, may act only through its directors, officers and employees.
Obligations incurred by them, acting as such corporate agents are not theirs but the direct
accountabilities of the corporation they represent. True solidary liabilities may at times be incurred
but only when exceptional circumstances warrant such as, generally, in the following cases:
1. When directors and trustees or, in appropriate cases, the officers of a corporation:
(a) vote for or assent to patently unlawful acts of the corporation;
(b) act in bad faith or with gross negligence in directing the corporate affairs;
xxxx
In labor cases, for instance, the Court has held corporate directors and officers solidarily liable with
the corporation for the termination of employment of employees done with malice or in bad faith.

A review of the facts of the case does not reveal ample and satisfactory proof that respondent
officers of WWEC acted in bad faith or with malice in effecting the termination of petitioner Aliling.
Even assuming arguendo that the actions of WWWEC are ill-conceived and erroneous, respondent
officers cannot be held jointly and solidarily with it. Hence, the ruling on the joint and solidary liability
of individual respondents must be recalled.
Aliling is entitled to Attorneys Fees and Legal Interest
Petitioner Aliling is also entitled to attorneys fees in the amount of ten percent (10%) of his total
monetary award, having been forced to litigate in order to seek redress of his grievances, pursuant
to Article 111 of the Labor Code and following our ruling in Exodus International Construction
Corporation v. Biscocho,53 to wit:
In Rutaquio v. National Labor Relations Commission, this Court held that:
It is settled that in actions for recovery of wages or where an employee was forced to litigate and,
thus, incur expenses to protect his rights and interest, the award of attorneys fees is legally and
morally justifiable.
In Producers Bank of the Philippines v. Court of Appeals this Court ruled that:
Attorneys fees may be awarded when a party is compelled to litigate or to incur expenses to protect
his interest by reason of an unjustified act of the other party.
While in Lambert Pawnbrokers and Jewelry Corporation,54 the Court specifically ruled:
However, the award of attorneys fee is warranted pursuant to Article 111 of the Labor Code. Ten
(10%) percent of the total award is usually the reasonable amount of attorneys fees awarded. It is
settled that where an employee was forced to litigate and, thus, incur expenses to protect his rights
and interest, the award of attorneys fees is legally and morally justifiable.
Finally, legal interest shall be imposed on the monetary awards herein granted at the rate of 6% per
annum from October 6, 2004 (date of termination) until fully paid.
WHEREFORE, the petition is PARTIALLY GRANTED. The July 3, 2008 Decision of the Court of
Appeals in CA-G.R. SP No. 101309 is hereby MODIFIED to read:
WHEREFORE, the petition is PARTIALLY GRANTED. The assailed Resolutions of respondent
(Third Division) National Labor Relations Commission are AFFIRMED, with the following
MODIFICATION/CLARIFICATION: Respondent Wide Wide World Express Corp. is liable to pay
Armando Aliling the following: (a) backwages reckoned from October 6, 2004 up to the finality of this
Decision based on a salary of PhP 17,300 a month, with interest at 6% per annum on the principal
amount from October 6, 2004 until fully paid; (b) the additional sum equivalent to one (1) month
salary for every year of service, with a fraction of at least six (6) months considered as one whole
year based on the period from June 11, 2004 (date of employment contract) until the finality of this
Decision, as separation pay; (c) PhP 30,000 as nominal damages; and (d) Attorneys Fees
equivalent to 10% of the total award.
SO ORDERED.

PRESBITERO
Associate Justice

J.

VELASCO,

JR.

Reyes-Rayel v. Phil. Luen, G.R. No. 174893, July 11, 2012

G.R. No. 174893

July 11, 2012

FLORDELIZA
MARIA
vs.
PHILIPPINE LUEN THAI HOLDINGS, CORPORATION/L&T
PHILIPPINES, INC.,Respondents.

REYES-RAYEL, Petitioner,
INTERNATIONAL

GROUP

DECISION
DEL CASTILLO, J.:
The law is fair and just to both labor and management. Thus, while the Constitution accords an
employee security or tenure, it abhors oppression to an employer who cannot be compelled to retain
an employee whose continued employment would he patently inimical to its interest.
This Petition for Review on Certiorari 1 assails the July IR, 2006 Decision 2 or the Court of Appeals
(CA) in CJ\-G.R. SP No. 86937, which (I) reversed the National Labor Relations Commission
(NLRC) March 23, 2004 Resolution3 and in effect, its July 21, 2004 4 Resolution as well, (2) declared
petitioner Flordeliza Maria Reyes-Rayels (petitioner) dismissal from employment valid, and (3)
ordered respondents Philippine Luen Thai Holdings, Corp. (PLTHC)/L&T International Group Phils.,
Inc. (L&T) (respondents) to pay petitioner an amount equivalent to three months salary pursuant to
the termination provision of the employment contract.
Factual Antecedents
In February 2000, PLTHC hired petitioner as Corporate Human Resources (CHR) Director for
Manufacturing for its subsidiary/affiliate company, L&T. In the employment contract, 5 petitioner was
tasked to perform functions in relation to administration, recruitment, benefits, audit/compliance,
policy development/ structure, project plan, and such other works as may be assigned by her
immediate superior, Frank Sauceda (Sauceda), PLTHCs Corporate Director for Human Resources.
On September 6, 2001, petitioner received a Prerequisite Notice 6 from Sauceda and the Corporate
Legal Counsel of PLTHC, Ma. Lorelie T. Edles (Edles), which reads:
This has reference to your failure to perform in accordance with management directives in various
instances, which collectively have resulted in loss of confidence in your capability to promote the
interests of the Company.
The most deleterious to the Company has been your pronouncements against the Human Resource
Information System (HRIS) or HR2 Program, a corporate initiative that is at the core and is crucial to
the enhancement of personnel management for the global operations of the Company. On numerous
occasions, in the presence of colleagues and subordinates, you made statements that serve to
undermine the Companys efforts at pursuing the HR2 Program. You ought to have realized that

when leveled by an officer of your rank, no less than a Director of the Corporate Human Resources
Division, such remarks are highly inflammatory and their negative impact is magnified.
Just as flagrant is your inability to incite collaboration and harmony within the Corporate Human
Resources Division. Instead, colleagues and subordinates complain of your negative attitude
towards the Company, its officers and people. You have established notoriety for your temper and
have alienated most members of your division. You ought to have realized that when exhibited by an
officer of your rank, no less than a Director of the Corporate Human Resources Division, poor
interpersonal skills and the lack of moral suasion are extremely damaging.
The foregoing have, in fact, manifested in your own unsatisfactory performance rating, and in the
departure of promising employees who could not work with you.
In view of the above, we afford you the opportunity to submit your written reply to this memorandum
within forty-eight (48) hours from its receipt. Failure to so submit shall be construed as waiver of your
right to be heard. Consequently, the Company shall immediately decide on this matter.
xxx7
In petitioners written response 8 dated September 10, 2001, she explained that her alleged failure to
perform management directives could be attributed to the lack of effective communication with her
superiors due to malfunctioning email system. This caused her to miss certain directives coming
from her superiors and likewise, for her superiors to overlook the reports she was submitting. She
denied uttering negative comments about the HR2 Program and instead claimed to have intimated
her support for it. She further denied causing disharmony in her division. Petitioner emphasized that
in June 2001, she received a relatively good rating of 80.2% in her overall performance
appraisal 9 which meant that she displayed dependable work level performance as well as good
corporate relationship with her superiors and subordinates.
In a Termination Notice 10 dated September 12, 2001, respondents, through Sauceda and Edles,
dismissed petitioner from the service for loss of confidence on her ability to promote the interests of
the company. This led petitioner to file a Complaint 11 for illegal dismissal, payment of separation pay,
13th month pay, moral and exemplary damages, attorneys fees, and other unpaid company benefits
against respondents and its officers, namely, Sauceda, Edles and Willie
Tan (Tan), the Executive Vice-President of PLTHC.
Proceedings before the Labor Arbiter
In her Position Paper, 12 petitioner argued that her dismissal was without valid or just cause and was
effected without due process. According to her, the causes for her dismissal as stated in the
Prerequisite Notice and Notice of Termination are not proper grounds for termination under the Labor
Code and the same do not even pertain to any willful violation of the companys code of discipline or
any other company policy. Even the alleged loss of confidence was not supported by any evidence
of wrongdoing on her part. She likewise claimed that due process was not observed since she was
not afforded a hearing, investigation and right to appeal as per company procedure for disciplining
employees. Furthermore, respondents were guilty of violating the termination provision under the
employment contract which stipulated that employment after probationary period shall be terminated
by giving the employee a three-month notice in writing or by paying three months salary in lieu of
notice. Petitioner also accused respondents of having acted in bad faith by subjecting her to public
humiliation and embarrassment when she was ordered to immediately turn over the company car,

vacate her office and remove all her belongings on the same day she received the termination
notice, in full view of all the other employees.
Respondents, on the other hand, claimed that they have a wide discretion in dismissing petitioner as
she was occupying a managerial position. They claimed in their Position Paper 13 that petitioners
inefficiency and lackadaisical attitude in performing her work were just and valid grounds for
termination. In the same token, her gross and habitual neglect of duties were enough bases for
respondents to lose all their confidence in petitioners ability to perform her job satisfactorily. Also,
petitioner was accorded due process as she was furnished with two notices - the first requiring her to
explain why she should not be terminated, and the second apprising her of the managements
decision to terminate her from employment.
Further in their Reply 14 to petitioners position paper, respondents enumerated the various instances
which manifested petitioners poor work attitude and dismal performance, to wit: 1) her failure to
perform in accordance with management directives such as when she unreasonably delayed the
hiring of a Human Rights and Compliance Manager; failed to establish communication with superiors
and co-workers; failed to regularly update Sauceda of the progress of her work; requested for
reimbursement of unauthorized expenditures; and, gave orders contrary to policy on the computation
of legal and holiday pay; 2) her negative pronouncements against the companys program in the
presence of colleagues and subordinates; 3) her inability to incite collaboration and harmony within
her department; 4) her negative attitude towards the company, its officers and employees; and 5) her
low performance appraisal rating which is unacceptable for a top level personnel like herself.
Exchange of emails, affidavits and other documents were presented to provide proof of incidents
which gave rise to these allegations. Respondents also asserted that the procedure laid down in the
companys code of discipline, which provided for the mandatory requirements of notice,
hearing/investigation and right to appeal, only applies to rank and file, supervisory, junior managerial
and department managerial employees and not to petitioner, a CHR Director, who plays a key role in
these termination proceedings. Further, the three-month notice for termination, as written in the
employment contract, is only necessary when there is no just cause for the employees dismissal
and, therefore, not applicable to petitioner. Respondents then disputed petitioners money claims
and also sought the dropping of Sauceda, Edles and Tan from the complaint for not being real
parties in interest.
In her rejoinder, 15 petitioner stood firm on her conviction that she was dismissed without valid cause
by presenting documentary evidence of her good performance. Further, she insisted that she was
dismissed for reasons different from those mentioned in the Prerequisite Notice and Notice of
Termination, both of which did not state gross and habitual neglect of duties as a ground. She also
construed respondents act of offering her a settlement or compensation right after her termination
as their acknowledgement of the illegal act they committed against her. Moreover, petitioner argued
that the company policies on procedural due process apply to all its employees, whether rank and
file or managerial.
In a Decision 16 dated October 21, 2002, the Labor Arbiter declared petitioner to have been illegally
dismissed. It was held that petitioner cannot be charged with undermining the HR2 Program of the
company since evidence was presented to show that she was already divested of duties relative to
this program. Also, respondents accusation that petitioner caused disharmony among colleagues
and subordinates has no merit as there was ample proof that petitioner was in constant
communication with her co-workers through official channels and email. Further, the Labor Arbiter
theorized that petitioners performance rating demonstrated a passing or satisfactory grade and
therefore could not be a sufficient and legitimate basis to terminate her for loss of trust and
confidence. Moreover, petitioner cannot be dismissed based merely on these vague offenses but

only for specific offenses which, under the companys code of conduct, merit the penalty of outright
dismissal. The dispositive portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered declaring that complainant was
illegally dismissed by respondent corporation, and the latter is hereby directed to reinstate
complainant to her former position and pay her full backwages and benefits computed below, as
follows:
A. Backwages September 12, 2001 to October 21, 2002
1.
2.
3.

Salaries
and
P80,000 x 13.30 months =
13th
month
P1,064,000.00 / 12 =
VL
P80,000 / 26 x 10 days =

B. Attorneys Fees (10%)

Wages
P1,064,000.00
pay
88,666.67
34,102.56
P1,186,769.23
118,676.92
P1,305,446.15

SO ORDERED, 17
Proceedings before the National Labor Relations Commission
Respondents appealed to the NLRC.18 For her part, petitioner filed before the Labor Arbiter a Motion
for Recomputation 19 of the awards. This motion was, however, denied in an Order 20 dated March 17,
2003 on the ground that petitioner could challenge any disposition made only by way of an appeal
within the reglementary period and not through a motion.
In a Decision 21 dated August 20, 2003, the NLRC found merit in respondents appeal. To the NLRC,
respondents have sufficiently established the validity of petitioners dismissal on the ground of loss
of trust and confidence through the various emails, affidavits and other documents attached to the
records. Specifically, respondents have proven that petitioner failed to recruit a Human Rights and
Compliance Manager, ignored company policies, failed to effectively communicate with her superiors
and subordinates, and displayed ineptitude in her work as a director and in her relationship with her
co-workers. These showed that there exist enough bases for respondents to lose the trust they had
reposed on petitioner, who, as a managerial employee, was expected to possess exemplary work
attitude. The NLRC, however, noted that the employment contract specifically provided for payment
of three months salary in lieu of the stipulated three-month notice in case of termination, thus:
IN LIGHT OF THE FOREGOING PREMISES, the decision appealed from is hereby
MODIFIED, to declare the dismissal of complainant legal but to order respondents to pay
complainant the sum of P240,000.00 representing three months salary as expressed in
complainants contract of employment. All other claims are DISMISSED for lack of merit.
SO ORDERED. 22

Petitioner filed a Motion for Reconsideration 23 which was granted by the NLRC. In a
Resolution 24 dated March 23, 2004, the NLRC concluded that petitioner was not afforded due
process as she was not given the opportunity to refute the charges against her through an
investigation and an appeal at the company level. Thus, respondents failed to establish the
truthfulness of the allegations against her as to support the validity of the dismissal. The NLRC also
agreed with petitioners claim that she was subjected to humiliation on the day of her termination.
Consequently, the NLRC declared petitioners dismissal as illegal and thus reinstated the Labor
Arbiters Decision with modification that respondents be ordered to pay petitioner separation pay in
lieu of reinstatement due to the strained relation between the parties.
In a Resolution 25 dated July 21, 2004, the NLRC resolved to dismiss respondents motion for
reconsideration.
Proceedings before the Court of Appeals
Respondents thus filed with the CA a Petition for Certiorari with Urgent Motion for Issuance of
Temporary Restraining Order (TRO) or Writ of Preliminary Injunction. 26 Petitioner then filed her
Comment27 thereto. Subsequently, the CA denied respondents prayer for TRO in a
Resolution28 dated February 15, 2005.
On July 18, 2006, the CA rendered a Decision 29 finding merit in the petition. The CA found sufficient
evidence to support the dismissal of petitioner on the ground of loss of trust and confidence. It
regarded petitioners 80.2% performance rating as below par and hence, declared that she cannot
merely rely on the same in holding on to her position as CHR Director, a highly sensitive and
demanding post. Also, despite the opportunity to improve, petitioner continued to display poor work
attitude, dismal performance and rancorous and abusive behavior towards co-workers as gleaned
from the various emails and affidavits of her superiors and other employees. These circumstances,
taken together, constitute sufficient cause for respondents to lose confidence in petitioners ability to
continue in her job and to promote the interest of the company.
Moreover, the CA did not subscribe to petitioners allegation that she was denied due process. On
the contrary, said court found that she was adequately notified of the charges against her through
the show cause notice which clearly stated the instances that served as sufficient bases for the loss
of trust and confidence, to wit: her failure to perform in accordance with management directives and
her actions of undermining company goals and causing disharmony among her co-workers. After
finding her written response to be unsatisfactory, petitioner was likewise properly notified of the
companys decision to terminate her services. Clearly, respondents observed the requirements of
procedural due process. Nevertheless, respondents, in effecting the dismissal, should have paid
petitioner her salary for three months as provided for in the employment contract. For its failure to do
so, the CA ordered respondents to pay petitioner three months salary in accordance with their
contractual undertaking. The dispositive portion of the CA Decision states:
1wphi1

WHEREFORE, the Resolution of the National Labor Relations Commission dated March 23, 2004 is
REVERSED. [Respondents] are hereby ordered to pay petitioner the amount corresponding to three
[months] salary pursuant to the termination provision of the employment contract.
SO ORDERED.30
Petitioners Motion for Reconsideration31 was denied in the CA Resolution32 dated October 4, 2006.
Issues

Hence, the present petition raising the following issues:

I. WHETHER X X X THE COURT OF APPEALS COMMITTED AN ERROR WHEN IT
REVERSED THE DECISION OF THE NLRC ON CERTIORARI DESPITE THE FACT THAT
THE NLRC DID NOT COMMIT GRAVE ABUSE OF DISCRETION WHEN IT AFFIRMED
THE FACTUAL FINDINGS OF THE LABOR ARBITER THAT PETITIONER WAS
ILLEGALLY DISMISSED FROM HER EMPLOYMENT BY RESPONDENTS.
II. WHETHER X X X THE ALLEGED VALID OR JUST CAUSE FOR TERMINATION OF
PETITIONER FROM HER EMPLOYMENT WAS PROVEN AND ESTABLISHED BY
SUBSTANTIAL EVIDENCE ON RECORD.
III. WHETHER X X X RESPONDENTS DEPRIVED PETITIONER OF HER RIGHT TO DUE
PROCESS WHEN RESPONDENTS DISMISSED PETITIONER WITHOUT CONDUCTING
ANY INVESTIGATION TO DETERMINE THE VERACITY AND TRUTHFULNESS OF THE
ALLEGATIONS AGAINST PETITIONER IN VIOLATION OF RESPONDENTS OWN
COMPANY POLICIES.33
Petitioner posits that there is no substantial evidence to establish valid grounds for her dismissal
since various emails from her superiors illustrating her accomplishments and commendations, as
well as her "good" overall performance rating negate loss of trust and confidence. She also insists
that she was not afforded due process at the company level. She claims that she was not properly
informed of the offenses charged against her due to the vagueness of the terms written in the
termination notices and that no investigation and hearing was conducted as required by company
policy.
Our Ruling
The petition is devoid of merit. The Court finds no cogent reason to depart from the ruling of the CA
that petitioner was validly dismissed.
There exists a valid ground for petitioners termination from employment.
Jurisprudence provides that an employer has a distinct prerogative and wider latitude of discretion in
dismissing a managerial personnel who performs functions which by their nature require the
employers full trust and confidence.34 As distinguished from a rank and file personnel, mere
existence of a basis for believing that a managerial employee has breached the trust of the employer
justifies dismissal.35 "[L]oss of confidence as a ground for dismissal does not require proof beyond
reasonable doubt as the law requires only that there be at least some basis to justify it." 36
Petitioner, in the present case, was L&Ts CHR Director for Manufacturing. As such, she was directly
responsible for managing her own departmental staff. It is therefore without question that the CHR
Director for Manufacturing is a managerial position saddled with great responsibility. Because of this,
petitioner must enjoy the full trust and confidence of her superiors. Not only that, she ought to know
that she is "bound by more exacting work ethics" 37and should live up to thishigh standard of
responsibility. However, petitioner delivered dismal performance and displayed poor work attitude
which constitute sufficient reasons for an employer to terminate an employee on the ground of loss
of trust and confidence. Respondents also impute upon petitioner gross negligence and
incompetence which are likewise justifiable grounds for dismissal. 38 The burden of proving that the
termination was for a valid cause lies on the employer.39 Here, respondents were able to overcome
this burden as the evidence presented clearly support the validity of petitioners dismissal.

First, records show that petitioner indeed unreasonably failed to effectively communicate with her
immediate superior. There was an apparent neglect in her obligation to maintain constant
communication with Sauceda in order to ensure that her work is up to par. This is evident from the
various emails40 showing that she failed to update Sauceda on the progress of her important
assignments on several occasions. While petitioner explained in her written reply to the Prerequisite
Notice that such failure to communicate was due to the companys computer system breakdown,
respondents however were able to negate this as they have shown that the computer virus which
affected the companys system only damaged some email addresses of certain employees which did
not include that of Saucedas. On the other hand, petitioner failed to present any concrete proof that
the said computer virus also damaged Saucedas email account as to effectively disrupt their regular
communication. Moreover, we agree with respondents stance that petitioner could still reach
Sauceda through other means of communication and should not completely rely on the web.
Second, the affidavits of petitioners co-workers revealed her negative attitude and unprofessional
behavior towards them and the company. In her affidavit,41 Agnes Suzette Pasustento, L&Ts
Manager for the Corporate Communications Department, attested to petitioners "badmouthing" of
Sauceda in one of their meetings abroad and of discussing with her about filing a labor case against
the company. Also, in the affidavits of Rizza S. Esplana 42 (Saucedas Executive Assistant), Cynthia
Yiguez 43 (Corporate Human Resources Manager of an affiliate of L&T), and Ana Wilma
Arreza44 (Human Resources and Administration Division Manager of an affiliate of L&T), they
narrated several instances which demonstrated petitioners notoriously bad temper. They all
described her to have an "irrational" behavior and "superior and condescending" attitude in the
workplace. Unfortunately for petitioner, these sworn statements which notably remain uncontroverted
and unrefuted, militate against her innocence and strengthen the adverse averments against her. 45 It
is well to state that as a CHR Director tasked to efficiently manage the companys human resource
team and practically being considered the "face" of the Human Resource, petitioner should exhibit
utmost concern for her employers interest. She should likewise establish not only credibility but also
respect from co-workers which can only be attained if she demonstrates maturity and
professionalism in the discharge of her duties. She is also expected to act as a role model who
displays uprightness both in her own behavior and in her dealings with others.
The third and most important is petitioners display of inefficiency and ineptitude in her job as a CHR
Director. In the affidavit46 of Ornida B. Calma, Chief Accountant of L&Ts affiliate company, petitioner,
on two occasions, gave wrong information regarding issues on leave and holiday pay which
generated confusion among employees in the computation of salaries and wages. Due to the nature
of her functions, petitioner is expected to have strong working knowledge of labor laws and
regulations to help shed light on issues and questions regarding the same instead of complicating
them. Petitioner obviously failed in this respect.
No wonder she received a less than par performance in her performance evaluation conducted in
June 2001, contrary to her assertion that an 80.2% rating illustrates good and dependable work
performance. As can be gleaned in the performance appraisal form, petitioner received deficient
marks and low ratings on areas of problem solving and decision making, interpersonal relationships,
planning and organization, project management and integrity notwithstanding an overall passing
grade. As aptly remarked by the CA, these low marks revealed the "degree of [petitioners] work
handicap" and should have served as a notice for her to improve on her job. However, she appeared
complacent and remained lax in her duties and this naturally resulted to respondents loss of
confidence in her managerial abilities.
Taking all these circumstances collectively, the Court is convinced that respondents have sufficient
and valid reasons in terminating the services of petitioner as her continued employment would be
patently inimical to respondents interest. An employer "has the right to regulate, according to its

discretion and best judgment, all aspects of employment, including work assignment, working
methods, processes to be followed, working regulations, transfer of employees, work supervision,
lay-off of workers and the discipline, dismissal and recall of workers." 47 "[S]o 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,"48 the exercise of this management prerogative must be upheld.
Anent petitioners imputation of bad faith upon respondents, the same deserves no credence. That
she was publicly embarrassed when she was coerced by Sauceda and Edles to vacate her office,
return the company car and take all her personal belongings on the day she was dismissed, are all
mere allegations not substantiated by proof. And since it is hornbook rule that he who alleges must
prove, we could not therefore conclude that her termination was tainted with any malice or bad faith
without any sufficient basis to substantiate this bare allegation. Moreover, we are more inclined to
believe that respondents offer of settlement immediately after petitioners termination was more of a
generous offer of financial assistance rather than an indication of ill-motive on respondents part.
Petitioner was accorded due process.
Petitioner insists that she was not properly apprised of the specific grounds for her termination as to
give her a reasonable opportunity to explain. This is because the Prerequisite Notice and Notice of
Termination did not mention any valid or authorized cause for dismissal but rather merely contained
general allegations and vague terms.
We have examined the Prerequisite Notice and contrary to petitioners assertion, find the same to be
free from any ambiguity. The said notice properly advised petitioner to explain through a written
response her failure to perform in accordance with management directives, which deficiency resulted
in the companys loss of confidence in her capability to promote its interest. As correctly explained by
the CA, the notice cited specific incidents from various instances which showed petitioners
"repeated failure to comply with work directives, her inclination to make negative remarks about
company goals and her difficult personality," that have collectively contributed to the companys loss
of trust and confidence in her. Indeed, these specified acts, in addition to her low performance rating,
demonstrated petitioners neglect of duty and incompetence which support the termination for loss of
trust and confidence.
Neither can there be any denial of due process due to the absence of a hearing or investigation at
the company level. It has been held in a plethora of cases that due process requirement is met when
there is simply an opportunity to be heard and to explain ones side even if no hearing is
conducted.49 In the case of Perez v. Philippine Telegraph and Telephone Company,50 this Court
pronounced that an employee may be afforded ample opportunity to be heard by means of any
method, verbal or written, whether in a hearing, conference or some other fair, just and reasonable
way, in that:
xxxx
After receiving the first notice apprising him of the charges against him, the employee may submit a
written explanation (which may be in the form of a letter, memorandum, affidavit or position paper)
and offer evidence in support thereof, like relevant company records (such as his 201 file and daily
time records) and the sworn statements of his witnesses. For this purpose, he may prepare his
explanation personally or with the assistance of a representative or counsel. He may also ask the
employer to provide him copy of records material to his defense. His written explanation may also
include a request that a formal hearing or conference be held. In such a case, the conduct of a
formal hearing or conference becomes mandatory, just as it is where there exist substantial

evidentiary disputes or where company rules or practice requires an actual hearing as part of
employment pretermination procedure. To this extent, we refine the decisions we have rendered so
far on this point of law.
xxxx
In sum, the following are the guiding principles in connection with the hearing requirement in
dismissal cases:
(a) ample opportunity to be heard means any meaningful opportunity (verbal or written)
given to the employee to answer the charges against him and submit evidence in support of
his defense, whether in a hearing, conference or some other fair, just and reasonable way.
(b) a formal hearing or conference becomes mandatory only when requested by the
employee in writing or substantial evidentiary disputes exist or a company rule or practice
requires it, or when similar circumstances justify it.
(c) the ample opportunity to be heard standard in the Labor Code prevails over the hearing
or conference requirement in the implementing rules and regulations.51
In this case, petitioner's written response to the Prerequisite Notice provided her with an avenue to
explain and defend her side and thus served the purpose of due process. That there was no hearing.
investigation or right to appeal. which petitioner opined to be violation of company policies, is of no
moment since the records is bereft of any showing that there is an existing company policy that
requires these procedures with respect to the termination of a CHR Director like petitioner or that
company practice calls for the same. There was also no request for a formal hearing on the part of
petitioner.
As she was served with a notice apprising her of the changes against her and also a subsequent
notice informing her of the management's decision to terminate her services alter respondents found
her written response to the first notice unsatisfactory, petitioner was clearly afforded her right to due
process.
WHEREFORE, the petition is DENIED. The assailed Decision dated July 18, 2006 of the Court of
Appeals in CA-GR. SP No. 86937 is AFFIRMED.
SO ORDERED.
MARIANO
Associate Justice

C.

DEL

CASTILLO

Authorized Causes
Art 283

Edge Apparel v NLRC

G.R. No. 121314 February 12, 1998
EDGE
vs.

APPAREL,

INC., petitioner,

NATIONAL LABOR RELATIONS COMMISSION, Fourth Division, Cebu City;

Regional Arbitration Branch No. 7, Cebu City; and JOSEPHINE ANTIPUESTO,
NORINA ANDO, JULIET BAGUIO, APOLINARIA VELONTA, CORAZON PINO, and
JOSEPHINE CAETE, respondents.

VITUG, J.:
Pursuing its retrenchment program, petitioner Edge Apparel, Inc., dismissed private
respondents Josephine Antipuesto, Norina Ando, Juliet Baguio, Apolinaria Velonta,
Corazon Pino and Josephine Caete from employment effective 03 September 1992.
Feeling aggrieved, Antipuesto, et al., consulted with the Regional Director of the
Department of Labor and Employment ("DOLE") who opined that it would be best
for them to receive the separation pay being offered by the corporation. His advice
was heeded. The subsequent receipt of their separation pay benefits, nevertheless,
did not deter Antipuesto, et al., from later going through with their complaint for
illegal dismissal against the corporation. The charge averred that the retrenchment
program was a mere subterfuge used by Edge Apparel to give a semblance of
regularity and validity to the dismissal of the complainants.
Edge Apparel countered that its financial obligations, amounting to about P8 Million,
had begun to eat up most of its capital outlay and resulted in unabated losses of
P681,280.00 in 1989, P262,741.00 in 1990, P162,170.00 in 1991 and P749,294.00
in 1992, constraining the company to adopt and implement a retrenchment
program.
Satisfied with the legality of the retrenchment program, Labor Arbiter Nicasio C.
Anion, on 20 June 1994, dismissed the complaint of Antipuesto, et al., against Edge
Apparel.
Antipuesto, et al., appealed the decision of the Labor Arbiter to the National Labor
Relations Commission ("NLRC"). In their appeal, Antipuesto, et al., claimed that the
documents submitted by Edge Apparel to demonstrate its alleged losses had been
"bloated" so as to reflect financial losses.
In its decision, promulgated on 26 April 1995, the NLRC held:
There is therefore basis in the retrenchment of these 27 workers .
We note however that these 27 workers were assigned to row #8 of the sewing line
for simple garments which was phased out due in fact to the dropping of this
particular line of business.
Termination of an employee's services because of a reduction of work force due to a
decrease in the scope or volume of work of the employer is synonymous to, or a
shade of termination because of redundancy under Article 283 (formerly 284) of the
Labor Code. Redundancy exist where the services of an employee are in excess of
what is reasonably demanded by the actual requirements of the enterprise. A
position is redundant where it is superfluous, and superfluity of a position or
positions may be the outcome of a number of factors, such as overhiring of workers,

decreased volume of business, or dropping of a particular product line or service

activity previously manufactured or undertaken by the enterprise. (Tierra
International Construction Corporation vs. NLRC, 77 SCRA Vol. 211)
In case of termination due to the installation of labor saving devices or redundancy,
the worker affected thereby shall be entitled to at least one (1) month pay or to at
least one month pay for every year of service, which ever is higher. (Art. 283, Labor
Code).
Under the circumstances obtaining in this case, the termination of the 27
retrenched employees is considered a redundancy. Hence, the complainants, who
were already paid the separation pay equivalent to 1/2 month pay per year of
service, are entitled to be paid the additional separation pay equivalent to 1/2
month pay for every year of service.
WHEREFORE, the respondents are ordered to pay the complainants an additional
separation pay equivalent to 1/2 month pay for every year of service. The Decision
of the Labor Arbiter is AFFIRMED in all other respects.
SO ORDERED. 1
Edge Apparel filed a motion for a partial reconsideration of the above decision
insofar as it awarded "an additional separation pay equivalent to 1/2 month pay for
every year of service" to the complainants. In a resolution, dated 21 June 1995, the
NLRC denied the motion; thus:
From the foregoing, it can clearly be gleaned that row #8 in which complainants
were employed, was phased out because respondent Company's "buyers had
already ceased its orders for simple style garments." This is similar to "dropping of a
particular product line" or a "decrease in the volume of business," two (2) of the
reasons which justify the classification of positions as redundant, as ruled in TierraInternational Construction Corporation vs. NLRC, 77 SCRA 211, cited in Our decision.
Although the phasing out of row #8 was also caused by financial and business
losses of respondent company, the real and proximate cause thereof was the
cessation of orders from respondent Company's buyers.
We, therefore, rule, as We did in Our Decision, that the cause of termination of the
employment of the complainants was redundancy.
WHEREFORE, the Motion for Reconsideration of respondent is hereby DENIED, for
lack of merit. 2
In its instant petition for certiorari and prohibition, Edge Apparel argues that
RESPONDENT NLRC'S AWARD TO PRIVATE RESPONDENTS OF "ADDITIONAL
SEPARATION PAY" IS CONTRARY TO THE DOCTRINE LAID DOWN BY THIS HONORABLE
COURT IN THE FACTUALLY-SIMILAR CASE OF CAFFCO INTERNATIONAL LIMITED
VS. OFFICE OF THE MINISTER-MINISTRY OF LABOR AND EMPLOYMENT . 3
The employer has a right to dismiss employees for valid causes after proper
observance of due process. 4 These valid causes are categorized into two

groups, i.e., "just" causes under Article 282 of the Labor Code and "authorized"
causesunder Articles 283 and 284 of the same code.
The just causes for termination of employment, enumerated in Article 282, include

(a) Serious misconduct or willful disobedience by the employee of the lawful orders
of his employer or representative relative to his work; 5
(b) Gross and habitual neglect by the employee of his duties;
(c) Fraud or willful breach by the employee of the trust reposed in him by his
employer or duly authorized representative; 6
(d) Commission of a crime or offense by the employee against the person of his
employer or any immediate member of his family or his duly authorized
representative; 7 and
(e) Other causes analogous to the foregoing.
An employee who is terminated from employment for a just cause is not entitled to
payment of separation benefits. 8Section 7, Rule I, Book VI, of the Omnibus Rules
Implementing the Labor Code provides, thus:
Sec. 7. Termination of employment by employer. The just causes for terminating
the services of an employee shall be those provided in Article 282 of the Code. The
separation from work of an employee for a just cause does not entitle him to the
termination pay provided in Code, without prejudice, however, to whatever rights,
benefits and privileges he may have under the applicable individual or collective
bargaining agreement with the employer or voluntary employer policy or practice.
Article 283, in turn, specifies the authorized causes for the termination of
employment, viz:
(a) installation of labor-saving devices;
(b) redundancy;
(c) retrenchment to prevent losses; and
(d) closing or cessation of operation of the establishment or undertaking unless the
closing is for the purpose of circumventing the provisions of law. 9
In addition, Article 284 provides that an employer would be authorized to terminate
the services of an employee found to be suffering from any disease if the
employee's continued employment is prohibited by law or is prejudicial to his health
or to the health of his fellow employees.
The installation of labor-saving devices contemplates the installation of machinery
to effect economy and efficiency in its method of production. 10
Redundancy exists where the services of an employee are in excess of what would
reasonably be demanded by the actual requirements of the enterprise. 11 A position

is redundant when it is superfluous, and superfluity of a position or positions could

be the result of a number of factors, such as the overhiring of workers, a decrease in
the volume of business or the dropping of a particular line or service previously
manufactured or undertaken by the enterprise. 12 An employer has no legal
obligation to keep on the payroll employees more than the number needed for the
operation of the business. 13
Retrenchment, in contrast to redundancy, is an economic ground to reduce the
number of employees. In order to be justified, the termination of employment by
reason of retrenchment must be due to business losses or reverses which are
serious, actual and real. 14 Not every loss incurred or expected to be incurred by the
employer will justify retrenchment, 15 since, in the nature of things, the possibility of
incurring losses is constantly present, in greater or lesser degree, in carrying on the
business operations. 16 Retrenchment is normally resorted to by management
during periods of business reverses and economic difficulties occasioned by such
events as recession, industrial depression, or seasonal fluctuations. 17 It is an act of
the employer of reducing the work force because of losses in the operation of the
enterprise, lack of work, or considerable reduction on the volume of
business. 18 Retrenchment is, in many ways, a measure of last resort when other
less drastic means have been tried and found to be inadequate. 19 A lull caused by
lack of orders or shortage of materials must be of such nature as would severely
affect the continued business operations of the employer to the detriment of all and
sundry if not properly addressed. The institution of "new methods or more efficient
machinery, or of automation" is technically a ground for termination of employment
by reason of installation of labor-saving devices but where the introduction of these
methods is resorted to not merely to effect greater efficiency in the operations of
the business but principally because of serious business reverses and to avert
further losses, the device could then verily be considered one of retrenchment.
The payment of separation pay would be due when a dismissal is on account of
an authorized cause. The amount of separation pay depends on the ground for the
termination of employment. A dismissal due to the installation of labor saving
devices, redundancy (Article 283) or disease (Article 284), entitles the worker to a
separation pay equivalent to "one (1) month pay or at least one (1) month pay for
every year of service, whichever is higher." When the termination of employment is
due to retrenchment to prevent losses, or to closure or cessation of operations of
establishment or undertaking not due to serious business losses or financial
reverses, the separation pay is only an equivalent of "one (1) month pay or at least
one-half (1/2) month pay for every year of service, whichever is higher." In the
above instances, a fraction of at least six (6) months is considered as one (1) whole
year.
In this case, the Labor Arbiter and the NLRC both concluded that there had been a
valid ground for the retrenchment of private respondents. The documents presented
in evidence were found to "conclusively show that (petitioner) suffered serious
financial losses." 20 The general standards or elements needed for the retrenchment
to be valid i.e., that the losses expected are substantial and not merely de
minimis in extent; that the expected losses are reasonably imminent such as can be

perceived objectively and in good faith by the employer; that the retrenchment is
reasonably necessary and likely to effectively prevent the expected losses; and that
the imminent losses sought to be forestalled are substantiated 21 were
adequately shown in the present case. The findings of the Labor Arbiter and the
NLRC would negate any impression that petitioner was guilty of bad faith or
misdoing in its retrenchment policy; the NLRC stated:
The complainants questioned the firm's financial statements which were made the
bases to support the validity of the retrenchment. The complainants pointed out in
their appeal that while the gross profit on sales increased by about 26% in 1989,
expenses on representation and entertainment increased by 45.65% in 1989. These
expenses were manipulated, according to the complainants, to justify the
retrenchment of these 27 employees.
A perusal of the financial statements show that the company incurred recreation
and entertainment expenses as follows: 1988 P385,711; 1989 P561,816; 1990
P261,120; 1991 P327,081; and 1992 P374,290 for a total of P1,910,018 in
five (5) years or at an average of P382,003.60 per year.
These 27 retrenched employees received a daily wage of P105 in 1992. Multiplying
this daily wage by 314 days will result in a yearly income of P32,970 per retrenched
worker. To retain the services of these 27 workers would cost the company
P964,372.50 per annum just to pay their basic wages & 13th month pay.
It is therefore very clear, that the deletion of this annual entertainment &
representation expense of P382,003.60 and reallocate it for the budget on salaries
and wages would not be sufficient to pay the salaries of the 27 retrenched workers
amounting to P964,372.50 as of 1992. 22
Procedurally, in order to validly effect retrenchment, the employer must observe
two other requirements, viz: (a) service of a prior written notice of at least one
month on the workers and the Department of Labor and Employment, and (b)
payment of the due separation pay. 23 In the decision of Labor Arbiter Nicasio C.
Anion, affirmed by the NLRC, petitioner has been found to have complied with the
above requirements of the law, including the payment of separation pay equivalent
to at least one month pay or to one-half (1/2) month pay for every year of service,
whichever is higher, with a fraction of at least six months being considered one
whole year. 24
The NLRC, unfortunately, went further by holding that the dismissal of private
respondents could likewise be considered to have been occasioned by redundancy
since it was only private respondents' line of work which was phased out by
petitioner.
The Court agrees with the Solicitor General that here the NLRC has gravely abused
its discretion. The law acknowledges the right of every business entity to reduce its
work force if such measure is made necessary or compelled by economic factors
that would otherwise endanger its stability or existence. 25 In exercising its right to
retrench employees, the firm may choose to close all, or a part of, its business to

avoid further losses or mitigate expenses. 26 In Caffco International Limited vs. Office
of the Minister-Ministry of Labor and Employment, 27 the Court has aptly observed
that
Business enterprises today are faced with the pressures of economic recession, stiff
competition, and labor unrest. Thus, businessmen are always pressured to adopt
certain changes and programs in order to enhance their profits and protect their
investments. Such changes may take various forms. Management may even choose
to close a branch, a department, a plant, or a shop (Phil. Engineering Corp. vs. CIR,
41 SCRA 89 [1971]). 28
Clearly, the fact alone that a mere portion of the business of an employer, not the
whole of it, is shut down does not necessarily remove that measure from the ambit
of the term "retrenchment" within the meaning of Section 283(c) of the Labor Code.
The Court, accordingly, must sustain the position taken by the Labor Arbiter that
private respondents should only be entitled to severance compensation equivalent
to one-half (1/2) month pay for every year of service.
WHEREFORE, the appealed decision, promulgated on 26 April 1995, is MODIFIED by
deleting the additional award of separation pay to private respondents decreed by
the NLRC. No costs.
SO ORDERED.
Davide, Jr., Bellosillo, Panganiban and Quisumbing, JJ., concur.

Magnolia Dairy v. NLRC

G.R. No. 114952

January 29, 1996

MAGNOLIA
DAIRY
PRODUCTS
CORPORATION, petitioner,
vs.
NATIONAL
LABOR
RELATIONS
COMMISSION
and
JENNY
A.
CALIBO, respondents.
DECISION
FRANCISCO, J.:
Petitioner, a division of San Miguel Corporation (SMC), entered into a contract of
service with Skillpower, Inc., a duly organized corporation engaged in the business
of offering and providing manpower services to the public. On June 11, 1983,
Skillpower, Inc., assigned private respondent Jenny A. Calibo to petitioner's Tetra
Paster Division with these functions: "(i) to remove "bulgings" (damaged goods)
from dilapidated cartons; (ii) to replace damaged goods and re-paste the carton
thereof; (iii) to dispose the damaged goods or returned goods from Magnolia's
warehouse to avoid bad odors; and (iv) to clean leftovers of leaking tetra pack by
mopping or washing the contaminated premises." 1
In September 1986, Skillpower, Inc., pulled-out private respondent from petitioner's
Tetra Paster Division, but assigned her back on May 2, 1987 with the same

functions. When petitioner's contract with Skillpower, Inc., expired, private

respondent applied with Lippercon Services, Inc., also a corporation engaged in
providing manpower services. In July 1987, Lippercon Services, Inc., assigned her to
petitioner's Tetra Paster Division as a cleaning aide. In December 1987, she was
terminated from service due to petitioner's installation of automated machines. On
July 11, 1989, private respondent instituted a complaint for illegal dismissal against
petitioner. In answer thereto, petitioner averred that it has no employer-employee
relationship with private respondent and that the dismissal was prompted by the
installation of labor saving devices an authorized cause for dismissal under the
Labor Code, as amended.
The Labor Arbiter ruled that petitioner is the private respondent's employer because
Skillpower, Inc., and Lippercon Services, Inc., were mere "labor-only" contractors
falling under Section 9, Rule VIII, Book III of the Omnibus Rules Implementing the
Labor Code. The installation of labor saving devices was also ruled a valid ground
for the termination of private respondent's employment, but the Labor Arbiter
emphasized that this did not exculpate petitioner from the charge of illegal
dismissal for its failure to observe the due process of law in terminating from service
its employee. Accordingly, petitioner was ordered "to pay [private respondent] her
backwages in the amount of P23,296.00 [and] [i]n lieu of reinstatement, . . . to pay
[private respondent] separation pay in the amount of P11,648.00." 2 On appeal, the
NLRC modified the decision by directing private respondent's reinstatement and
payment of backwages not exceeding three (3) years. 3 Thus, this petition.
The forefront question is whether or not an employer-employee relationship exists
between petitioner and private respondent.
Petitioner insists that it has no employer-employee relationship with private
respondent since Skillpower, Inc., and Lippercon Services, Inc., were solely
responsible for private respondent's employment. More than that, petitioner points
out that private respondent is assigned to a janitorial work which is neither related
to nor connected with its business of producing or manufacturing fruit juices.
Petitioner argues that Skillpower, Inc., and Lippercon Services, Inc., cannot be
deemed to be engaged in "labor-only" contracting since both have sufficient
investment in the form of tools, equipments, machineries and work materials.
Belatedly, in its petition and reply to public respondent's comment, petitioner
additionally contends that both manpower corporations have sufficient
capitalization with subscribed capital stocks amounting to P600,000.00 and
P100,000.00 respectively.4
A perusal of petitioner's contracts of service with Skillpower, Inc., and Lippercon
Services, Inc. reveals that the workers supplied by the two manpower corporations
perform usual, regular and necessary services for petitioner's production of
goods.5 In this connection, the Labor Arbiter observed:
. . . The undertaking
respondent Magnolia
the undertaking of
respondent Magnolia

given by respondents Skillpower and/or Lippercon in favor of

was not the performance of a specific job. In the instant case,
respondents Skillpower and/or Lippercon was to provide
with a certain number of persons able to carry out the works

in the production line. These workers supplied by Skillpower and/or Lippercon in

performing their works utilized the premises, tools, equipments and machineries of
respondent Magnolia and not those of the former. The work being performed by
complainant, such as, to remove "bulgings" (damaged goods) from dilapidated
cartoons, (sic) to replace damaged goods and re-paste the cartoon (sic) thereof, to
dispose the damaged goods or returned goods from Magnolia's warehouse to avoid
bad odors, to clean leftovers of leaking tetra-pak by mopping or washing the
contaminated premises, and others, are of course directly related to the day to day
operations of respondent Magnolia. Respondent Magnolia failed to negate this
evidence that the undertaking assigned to the complainant is not related or
necessary to its business operations. Necessarily, if the undertaking assigned to the
complainant is not related nor necessary to the business operations, she cannot be
considered as employee of respondent Magnolia. But the contrary holds true. 6
In full agreement with the Labor Arbiter's finding, public respondent NLRC
categorically stated the following, which we quote with approval:
As borne by the evidence on record, respondents Skillpower and Lipercon were
merely agents of the respondent Magnolia and that the latter was the real employer.
Consequently, the respondent Magnolia was responsible to the employee of the
labor-only contract as if such employee had been directly employed by the
employer. Thus, where "labor only" contracting exists, as in the case at bar, the
status itself implies or establishes an employer-employee relationship between the
employer and the employees of the "labor-only" contractor. The law in effect holds
both the employer and the "labor only" contractor responsible to the latter's
employees for the more effective safeguarding of the employees' rights under the
Labor Code. (PBCom vs. NLRC, 146 SCRA 347 [1986]). 7
We note that petitioner also exercises the power to discipline and suspend private
respondent a factor that further militates against its claim. In fact, the latter was
meted a suspension by Mr. Antonio Cinco, a supervisor of SMC. 8
The existence of an employer-employee relationship is factual in nature 9 and we
give due deference to the NLRC's findings in the absence of a clear showing of
arbitrariness in its appreciation of the evidence. Its findings in this case are fully
supported by substantial evidence on record. Findings of fact of administrative
agencies and quasi-judicial bodies which have acquired expertise because their
jurisdiction is confined to specific matters, like the NLRC, are generally accorded not
only respect but even finality and are binding upon the Court. 10
Thus, petitioner's contention that both Skillpower, Inc., and Lippercon Services, Inc.,
should be considered the employer of private respondent because they have
sufficient investments in the form of tools, equipments, and machineries deserves
scant consideration in view of the findings of the Labor Arbiter and the NLRC. In
addition, petitioner's contention that both corporations have sufficient capitalization
merits no significance. This issue was belatedly raised in this appeal. Issues and
arguments not adequately and seriously brought below cannot be raised for the first
time on appeal. The resolution of this issue requires the admission and calibration of
evidence and the Labor Arbiter and the NLRC did not pass upon it in their assailed

decisions. Our review of labor cases are confined to questions of jurisdiction or

grave abuse of discretion and the Supreme Court is not a trier of facts. We thus find
that the NLRC neither exceeded its jurisdiction, nor abused its discretion, in
ascertaining the existence of an employer-employee relationship between petitioner
and private respondent.
Petitioner next asseverates that private respondent was not illegally dismissed since
the termination of her employment was due to a cause expressly authorized by the
Labor Code and the absence of notice therefor did not make it so. Petitioner
cites Wenphil Corp. v. NLRC, et al. (170 SCRA 69 [1989]) in support of its claim that
private respondent is only entitled to an indemnity of P1,000.00, but not backwages
or separation pay. The NLRC, on the other hand, insists that termination without the
benefit of any investigation or notice makes an employee's dismissal from service
illegal.
Article 283 of the Labor Code provides in part:
Art. 283. Closure of establishment and reduction of personnel. The employer may
also terminate the employment of any employee due to the installation of labor
saving devices, . . ., by serving a written notice on the workers and the Ministry of
Labor and Employment at least one (1) month before the intended date thereof. In
case of termination due to the installation of labor saving devices or redundancy,
the worker affected thereby shall be entitled to a separation pay equivalent to at
least his one (1) month pay or to at least one (1) month pay for every year of
service, whichever is higher. . . A fraction of at least six (6) months shall be
considered one (1) whole year.
The law authorizes an employer, like the herein petitioner, to terminate the
employment of any employee due to the installation of labor saving devices. The
installation of these devices is a management prerogative, and the courts will not
interfere with its exercise in the absence of abuse of discretion, arbitrariness, or
maliciousness on the part of management, as in this case. Nonetheless, this did not
excuse petitioner from complying with the required written notice to the employee
and to the Department of Labor and Employment (DOLE) at least one month before
the intended date of termination. This procedure enables an employee to contest
the reality or good faith character of the asserted ground for the termination of his
services before the DOLE.11
The failure of petitioner to serve the written notice to private respondent and to the
DOLE, however, does not ipso facto make private respondent's termination from
service illegal so as to entitle her to reinstatement and payment of backwages. 12 If
at all, her termination from service is merely defective because it was not tainted
with bad faith or arbitrariness and was due to a valid cause.
The well settled rule is that the employer shall be sanctioned for non-compliance
with the requirements of, or for failure to observe due process in terminating from
service its employee. In Wenphil Corp. v. NLRC,13 we sanctioned the employer for
this failure by ordering it to indemnify the employee the amount of P1,000.00.
Similarly, we imposed the same amount as indemnification in Rubberworld (Phils.),

Inc. v. NLRC,14 and, in Aurelio v. NLRC.15The indemnity was raised to P10,000.00

in Reta v. NLRC16 and Alhambra Industries, Inc. v. NLRC.17 Subsequently, the sum of
P5,000.00 was awarded to an employee in Worldwide Papermills, Inc. v. NLRC,18 and
P2,000.00 inSebuguero, et al. v. NLRC, et al.19 Recently, the sum of P5,000.00 was
again imposed as indemnity against the employer. 20 We see no valid and cogent
reason why petitioner should not be likewise sanctioned for its failure to serve the
mandatory written notice. Under the attendant facts, we find the amount of
P5,000.00, to be just and reasonable.
Lastly, the NLRC's grant of backwages and order of reinstatement are untenable.
These awards are proper for illegally dismissed employees which obviously is not
the situation in this case. The appropriate award is separation pay pursuant to the
ruling of this Court in Philippine Long Distance Telephone Co., Inc. v. NLRC:21
We hold that henceforth separation pay shall be allowed as a measure of social
justice only in those instances where the employee is validly dismissed for causes
other than serious misconduct or those reflecting on his moral character. Where the
reason for the valid dismissal is, for example, habitual intoxication or an offense
involving moral turpitude, like theft or illicit sexual relations with a fellow worker,
the employer may not be required to give the dismissed employee separation pay,
or financial assistance, or whatever other name it is called, on the ground of social
justice.
and Article 283 of the Labor Code which explicitly provides that an employee
removed from service due to the installation of labor saving devices is entitled to
separation pay.
WHEREFORE, the decision appealed from is MODIFIED by setting aside the award of
reinstatement and backwages. In lieu thereof, petitioner is ordered to pay
separation pay equivalent to one (1) month pay for every year of service. In
addition, petitioner is ordered to pay the sum of P5,000.00 as indemnification for its
failure to serve the required notice mandated by law.
SO ORDERED.
Narvasa, C.J., Davide, Jr., Melo and Panganiban, JJ., concur.

Arabit v Jardine Pacific

G.R. No. 181719

April 21, 2014

EUGENE S. ARABIT, EDGARDO C. SADSAD, LOWELL C. FUNTANOZ, GERARDO F.

PUNZALAN, FREDDIE M. MENDOZA, EMILIO B. BELEN, VIOLETA C. DIUMANO and MB
FINANCE EMPLOYEES ASSOCIATION FFW CHAPTER (FEDERATION OF FREE
WORKERS), Petitioners,
vs.
JARDINE PACIFIC FINANCE, INC. (FORMERLY MB FINANCE), Respondent.
DECISION

BRION, J.:
We resolve in this petition for review on certiorari the challenge to the March 23, 2007 decision and
the February 11, 2008 resolution of the Court of Appeals (CA) in CA G.R. SP No. 91952. These
assailed CA rulings annulled and set aside the December 1, 2004 decision and the July 21, 2005
resolution of the National Labor Relations Commission (NLRC) in NLRC NCR CA No. 029753-01
(NLRC NCR Case No. 06-06112-99). The NLRC rulings, in turn, fully affirmed the September 29,
2000 decision of Labor Arbiter (LA) Jovencio LL Mayor, Jr. The LA's decision ordered the petitioners
Eugene S. Arabit, Edgardo C. Sadsad, Lowell C. Funtanoz, Gerardo F. Punzalan, Freddie M.
Mendoza, Emilio B. Belen and Violeta C. Diumanos reinstatement to their former positions without
loss of seniority rights and the payment of full backwages, computed from the time of their dismissal
on May 30, 1999.
1

Factual Antecedents
Petitioners were former regular employees of respondent Jardine Pacific Finance, Inc. (formerly MB
Finance) (Jardine). The petitioners were also officers and members of MB Finance Employees
Association-FFW Chapter (the Union), a legitimate labor union and the sole exclusive bargaining
agent of the employees of Jardine. The table below shows the petitioners previously occupied
positions, as well as their total length of service with Jardine before their dismissal from employment.
Petitioner

Position

Number of
Years of
Service

Eugene S. Arabit

Field Collector

20 years

Edgardo C. Sadsad

Field Collector

3 years

Lowell C. Funtanoz

Field Collector

7 years

Gerardo F. Punzalan

Field Collector

16 years

Freddie M. Mendoza

Field Collector

20 years

Senior Credit Investigator/Field

Collector- San Pablo Branch

18 years

Senior Accounting
Clerk/Documentation Clerk-San Pablo Branch

19 years

Emilio B. Belen
Violeta C. Diumano

On the claim of financial losses, Jardine decided to reorganize and implement a redundancy
program among its employees. The petitioners were among those affected by the redundancy
program. Jardine thereafter hired contractual employees to undertake the functions these employees
used to perform.
The Union filed a notice of strike with the National Conciliation and Mediation Board (NCMB),
questioning the termination of employment of the petitioners who were also union officers. The Union
alleged unfair labor practice on the part of Jardine, as well as discrimination in the dismissal of its
officers and members.
Negotiations ensued between the Union and Jardine under the auspices of the NCMB, and both
parties eventually reached an amicable settlement. In the settlement, the petitioners accepted their
redundancy pay without prejudice to their right to question the legality of their dismissal with the

NLRC. Jardine paid the petitioners a separation package composed of their severance pay, plus
their grossed up transportation allowance.
7

On June 1, 1999, the petitioners and the Union filed a complaint against Jardine with the NLRC for
illegal dismissal and unfair labor practice.
The Labor Arbitration Rulings
Before the LA, the parties decided to limit the issues to two, namely: (a) whether the separation of
the petitioners was valid or not; and (b) whether Jardine committed an unfair labor practice against
the Union.
The petitioners alleged before the LA that their dismissal was illegal and was tainted with bad faith
as their positions were not superfluous. They argued that if their positions had really been
redundant, then Jardine should have not hired contractual workers to replace them.
8

The petitioners also argued that Jardine was guilty of unfair labor practice for contracting out
services that the petitioners previously held. Unfair labor practice took place under Article 248 of the
Labor Code as the petitioners were union officers.
9

The petitioners likewise claimed that Jardines act of hiring contractual employees as replacements
was a restraint on the Unions right to self-organization. The petitioners also pointed out that they
were Union officers and panel members in the scheduled collective bargaining agreement (CBA)
negotiations between Jardine and the Union. The petitioners particularly found the company action
objectionable as their employment was terminated when their CBA negotiations were about to
commence.
10

Jardine argued in its defense that the company had been incurring substantial business losses from
1996 to 1998. According to Jardine, its audited financial statements reflect that for 1996, it suffered a
net loss of P5,538,960.00; for 1997, a net loss in the amount of P57,274,018.00; and a net loss
of P95,529,527.00 for 1998.
11

12

13

Because of these serious business losses, Jardine asserted that it had to lay-off some of its
employees and reorganize its ranks to eliminate positions that were in excess of what its business
required.
14

Jardine, however, admitted that it hired contractual employees to replace petitioners in their previous
posts. Jardine reasoned out that no bad faith took place since the hiring of contractual employees
was a valid exercise of its management prerogative. Jardine argued that the distinction between
redundancy and retrenchment is not material; an employer resorts to retrenchment or redundancy
for the same reason, namely the economics of business. Since Jardine successfully established
that it incurred serious business losses, then termination of employment of the petitioners was valid
for all intents and purposes.
15

16

17

In reply to the petitioners allegation of unfair labor practice, Jardine argued that had it intended to
commit union busting, then it should not have merely dismissed the seven petitioners; it should have
also dismissed other employees who were union officers and members. According to Jardine, the
termination of the petitioners services did not interfere with the Union and its remaining members
right to self-organization since Jardine continuously dealt with the Union and recognized it as the
sole and exclusive bargaining representative of its rank-and-file employees.
18

19

The LA ruled in the petitioners favor. In its decision dated September 29, 2000, the LA held that the
hiring of contractual employees to replace the petitioners directly contradicts the concept of
redundancy which involves the trimming down of the workforce because a task is being carried out
by too many people. The LA explained that the companys action was a circumvention of the right of
the petitioners to security of tenure.
20

21

22

The LA further held that it was not enough for Jardine to simply focus on its losses. According to the
LA, it was error for Jardine to simply lump together the seven petitioners as employees whose
positions have become redundant without explaining why their respective positions became
superfluous in relation to the other positions and employees of the company.
23

On the petitioners allegation of unfair labor practice, the LA held that not enough evidence was
presented to prove the claim against Jardine.
Both parties appealed the LAs decision to the NLRC. In its decision dated December 1, 2004, the
NLRC dismissed the appeals and affirmed the LAs decision in its entirety.
24

25

Jardine moved for the reconsideration of the NLRCs decision, which motion the NLRC also denied
in its resolution of July 21, 2005. Jardine thereafter sought recourse with the CA via a petition for
certiorari under Rule 65.
26

27

The CAs Ruling

In its decision dated March 23, 2007, the CA reversed the LAs and the NLRCs rulings, and granted
Jardines petition for certiorari.
28

The CA found that Jardines act of hiring contractual employees in replacement of the petitioners
does not run counter to the argument that their positions are already superfluous. According to the
CA, the hiring of contractual employees is a management prerogative that Jardine has the right to
exercise. In the absence of any showing of malice or arbitrariness on the part of Jardine in
implementing its redundancy program, the courts must not interfere with the companys exercise of a
bona fide management decision. The CA cited for this purpose the case of De Ocampo v. National
Labor Relations Commission which explains:
29

30

31

32

The reduction of the number of workers in a company made necessary by the introduction of the
services of Gemac Machineries in the maintenance and repair of its industrial machinery is justified.
There can be no question as to the right of the company to contract the services of Gemac
Machineries to replace the services rendered by the terminated mechanics with a view to effecting
more economic and efficient methods of production.
In the same case, We ruled that "(t)he characterization of (petitioners) services as no longer
necessary or sustainable, and therefore properly terminable, was an exercise of business judgment
on the part of (private respondent) company. The wisdom or soundness of such characterization or
decision was not subject to discretionary review on the part of the Labor Arbiter nor of the NLRC so
long, of course, as violation of law or merely arbitrary and malicious action is not shown" (ibid, p.
673).
In contracting the services of Gemac Machineries, as part of the company's cost-saving program,
the services rendered by the mechanics became redundant and superfluous, and therefore properly
terminable. The company merely exercised its business judgment or management prerogative. And

in the absence of any proof that the management abused its discretion or acted in a malicious or
arbitrary manner, the court will not interfere with the exercise of such prerogative.
33

The CA further held that Jardine successfully established that for the years 1996 to 1998, the
company incurred serious losses. The appellate court also observed that the reduction in the
number of workers, made necessary by the introduction of the services of an independent
contractor, is justified when undertaken to implement more economic and efficient methods of
production.
34

35

These justifications led to the CAs ruling which annulled and set aside the December 1, 2004
decision and the July 21, 2005 resolution of the NLRC and to its own ruling that the petitioners had
not been illegally dismissed.
The CA denied the petitioners subsequent motion for reconsideration. The petitioners are now
before this Court on a petition for review on certiorari under Rule 45 of the Rules of Court.
The Petition
In their petition, the petitioners maintain that the CA gravely abused its discretion and that its ruling is
not in conformity with the law and jurisprudence.
The petitioners argue that there is a difference between financial loss and decline of earnings. They
posit that what Jardine actually experienced was a decline in capital and not substantial financial
losses for the years 1996 to 1998.
36

The petitioners also assert that Jardine did not take any remedial measure before it implemented its
redundancy program. It simply hastily terminated the petitioners from the service. In support of this
argument, the petitioners cited the case of Golden Thread Knitting Industries, Inc. v. NLRC where
the Court laid down guidelines to be considered in selecting employees who would be dismissed
from the service in case of redundancy. The petitioners contend that the records show that Jardine
did not lay down any basis or criteria in choosing the petitioners for inclusion in the program.
37

38

39

40

According to the petitioners, they are all regular employees whose years of service range from three
(3) to twenty (20) years. Since Jardine immediately terminated their services without evaluating their
performance in relation with those of the other employees and without considering other relevant
factors, then Jardines decision was arbitrary and in disregard of the guidelines set by this Court in
Golden Thread.
41

Finally, the petitioners also reiterate the findings of the LA and of the NLRC that Jardines act of
hiring contractual employees as their replacements is contrary to Jardines claim that there was
redundancy. They also contend that the hiring of new employees negates Jardines argument that it
was suffering from substantial losses. Based on these premises, the petitioners posit that the CA
erred in annulling and setting aside the NLRCs decision, and pray instead for its reinstatement.
42

43

The Courts Ruling

We resolve to GRANT the petition.
Procedural consideration: the nature
of a Rule 45 petition

We emphasize at the outset that the current petition was brought under Rule 45 of the Rules of
Court. As a rule, only questions of law may be raised on appeal under this remedy. This is in
contrast with a petition for certiorari brought under Rule 65 where the review centers on the
jurisdictional errors the lower court or tribunal may have committed.
44

45

We thus limit our review to errors of law which the CA might have committed. A question of law
arises when there is doubt as to what the law is on a certain state of facts, while there is a question
of fact when the doubt arises as to the truth or falsity of the alleged facts. For a question to be one of
law, the same must not involve an examination of the probative value of the evidence presented by
the litigants or any of them.
46

"In ruling for legal correctness, we have to view the CA decision in the same context that the petition
for certiorari it ruled upon was presented to it; we have to examine the CA decision from the prism of
whether it correctly determined the presence or absence of grave abuse of discretion in the NLRC
decision before it, not on the basis of whether the NLRC decision on the merits of the case was
correct. In other words, we have to be keenly aware that the CA undertook a Rule 65 review, not a
review on appeal, of the NLRC decision challenged before it. This is the approach that should be
basic in a Rule 45 review of a CA ruling in a labor case. In question form, the question to ask is: Did
the CA correctly determine whether the NLRC committed grave abuse of discretion in ruling on the
case?"
47

In this context, the primary question we confront is: did the CA correctly rule that the NLRC
committed grave abuse of discretion when it found that Jardine validly terminated the petitioners
employment because of redundancy?
Redundancy in contrast with retrenchment
Jardine, in its petition for certiorari with the CA, posited that the distinction between redundancy and
retrenchment is not material. It contended that employers resort to these causes of dismissal for
purely economic considerations. Jardine further argued that the immateriality of the distinction
between these two just causes for dismissal is shown by the fact that redundancy and retrenchment
are found and lumped together in just one single provision of the Labor Code (Article 283 thereof).
48

49

We cannot accept Jardines shallow understanding of the concepts of redundancy and retrenchment
in determining the validity of the severance of an employer-employee relationship. The fact that they
are found together in just one provision does not necessarily give rise to the conclusion that the
difference between them is immaterial. This Court has already ruled before that retrenchment and
redundancy are two different concepts; they are not synonymous; thus, they should not be used
interchangeably. The clear distinction between these two concepts was discussed in Andrada, et
al., v. NLRC, citing the case of Sebuguero v. NLRC, where this Court clarified:
50

51

52

Redundancy exists where the services of an employee are in excess of what is reasonably
demanded by the actual requirements of the enterprise. A position is redundant where it is
superfluous, and superfluity of a position or positions may be the outcome of a number of factors,
such as over hiring of workers, decreased volume of business, or dropping of a particular product
line or service activity previously manufactured or undertaken by the enterprise.
Retrenchment, on the other hand, is used interchangeably with the term "lay-off." It is the termination
of employment initiated by the employer through no fault of the employees and without prejudice to
the latter, resorted to by management during periods of business recession, industrial depression, or
seasonal fluctuations, or during lulls occasioned by lack of orders, shortage of materials, conversion
of the plant for a new production program or the introduction of new methods or more efficient

machinery, or of automation. Simply put, it is an act of the employer of dismissing employees

because of losses in the operation of a business, lack of work, and considerable reduction on the
volume of his business, a right consistently recognized and affirmed by this Court.
These rulings appropriately clarify that redundancy does not need to be always triggered by a
decline in the business. Primarily, employers resort to redundancy when the functions of an
employee have already become superfluous or in excess of what the business requires. Thus, even
if a business is doing well, an employer can still validly dismiss an employee from the service due to
redundancy if that employees position has already become in excess of what the employers
enterprise requires.
From this perspective, it is illogical for Jardine to terminate the petitioners employment and replace
them with contractual employees. The replacement effectively belies Jardines claim that the
petitioners positions were abolished due to superfluity. Redundancy could have been justified if the
functions of the petitioners were transferred to other existing employees of the company.
To dismiss the petitioners and hire new contractual employees as replacements necessarily give rise
to the sound conclusion that the petitioners services have not really become in excess of what
Jardines business requires. To replace the petitioners who were all regular employees with
contractual ones would amount to a violation of their right to security of tenure. For this, we affirm the
NLRCs ruling, citing the LAs decision, when it ruled:
In the case at bench, respondents did not dispute that after laying-off complainants herein, they
engaged the services of an agency to perform the tasks use (sic) to be done by complainants. This
is [in direct] contradiction to the concept of redundancy which precisely requires the trimming down
of the [workforce] because a task is being carried out by just too many people. The subsequent
contracting out to an agency the functions or duties that used to be the domain of individual
complainants herein is a circumvention of their constitutional rights to security of tenure, and
therefore illegal.
53

Guidelines in implementing redundancy

We recognize that management has the prerogative to characterize an employees services as no
longer necessary or sustainable, and therefore properly terminable.
54

The CA also correctly cited De Ocampo, et al., v. NLRC when it discussed that Jardines decision to
hire contractual employees as replacements is a management prerogative which the company has
the right to undertake to implement a more economic and efficient operation of its business.
55

56

In De Ocampo, this Court held that, in the absence of proof that the management abused its
discretion or acted in a malicious or arbitrary manner in replacing dismissed employees with
contractual ones, judicial intervention should not be made in the companys exercise of its
management prerogative.
57

The employers exercise of its management prerogative, however, is not an unbridled right that
cannot be subjected to this Courts scrutiny. The exercise of management prerogative is subject to
the caveat that it should not performed in violation of any law and that it is not tainted by any
arbitrary or malicious motive on the part of the employer.
58

This Court, in several cases, sufficiently explained that the employer must follow certain guidelines to
dismiss employees due to redundancy. These guidelines aim to ensure that the dismissal is not
implemented arbitrarily and is not tainted with bad faith against the dismissed employees.
In Golden Thread Knitting Industries, Inc. v. NLRC, this Court laid down the principle that the
employer must use fair and reasonable criteria in the selection of employees who will be dismissed
from employment due to redundancy. Such fair and reasonable criteria may include the following,
but are not limited to: (a) less preferred status (e.g. temporary employee); (b) efficiency; and (c)
seniority. The presence of these criteria used by the employer shows good faith on its part and is
evidence that the implementation of redundancy was painstakingly done by the employer in order to
properly justify the termination from the service of its employees.
59

60

As the petitioners pointed out, the records are bereft of indications that Jardine employed clear
criteria when it decided who among its employees, who held similar positions as the petitioners,
should be removed from their posts because of redundancy. Jardine never bothered to explain how
and why the petitioners were the ones dismissed. Jardines acts became more suspect given that
the petitioners were all union officers and some of them were panel members in the scheduled CBA
negotiations between Jardine and the Union.
Aside from the guidelines for the selection of employees who will be terminated, the Court, in Asian
Alcohol Corp. v. NLRC, also laid down guidelines for redundancy to be characterized as validly
undertaken by the employer. The Court ruled:
61

For the implementation of a redundancy program to be valid, the employer must comply with the
following requisites: (1) written notice served on both the employees and the Department of Labor
and Employment at least one month prior to the intended date of retrenchment; (2) payment of
separation pay equivalent to at least one month pay or at least one month pay for every year of
service, whichever is higher; (3) good faith in abolishing the redundant positions; and (4) fair and
reasonable criteria in ascertaining what positions are to be declared redundant and accordingly
abolished.
62

Admittedly, Jardine complied with guidelines 1 and 2 of the guidelines in Asian Alcohol. Jardine
informed the Department of Labor and Employment of the petitioners separation from the service
due to redundancy on April 30, 1999, one month before their terminations effectivity. Also, the
petitioners were given their individual separation packages, composed of their severance pay, plus
their grossed up transportation allowance.
Guidelines 3 and 4 of Asian Alcohol, however, are different matters. These last two guidelines are
interrelated to ensure good faith in abolishing redundant positions; the employer must clearly show
that it used fair and reasonable criteria in ascertaining what positions are to be declared redundant.
In this cited case, the employer took pains to discuss and elaborate on the reasons why the position
of the private respondent was the one chosen by the employer to be abolished. We quote the
Courts ruling:
In 1992, the lease contract, which also provided for a right of way leading to the site of the wells, was
terminated. Also, the water from the wells had become salty due to extensive prawn farming nearby
and could no longer be used by Asian Alcohol for its purpose. The wells had to be closed and
needless to say, the services of Carias, Martinez and Sendon had to be terminated on the twin
grounds of redundancy and retrenchment.
1awp++i1

xxxx

Private respondent Amacio was among the ten (10) mechanics who manned the machine shop at
the plant site. At their current production level, the new management found that it was more cost
efficient to maintain only nine (9) mechanics. In choosing whom to separate among the ten (10)
mechanics, the management examined employment records and reports to determine the least
efficient among them. It was private respondent Amacio who appeared the least efficient because of
his poor health condition.
63

Jardine never undertook what the employer in Asian Alcohol did. Jardine was never able to explain
in any of its pleadings why the petitioners positions were redundant. It never even attempted to
discuss the attendant facts and circumstances that led to the conclusion that the petitioners
positions had become superfluous and unnecessary to Jardines business requirements. Thus, we
can only speculate on what actually happened.
1wphi1

As the LA correctly found, Jardine lumped together the seven petitioners into one group whose
positions had become redundant. This move was despite the fact that not all of them occupied the
same positions and performed the same functions. Under the circumstances of the case, Jardines
move was thus illegal. We affirm the LAs ruling that fair play and good faith require that where one
employee will be chosen over the others, the employer must be able to clearly explain the merit of
the choice it has taken.
64

65

To sum up, based on the guidelines set by the Court in the cases of Golden Thread and Asian
Alcohol, we find that at two levels, Jardine failed to set the required fair and reasonable criteria in the
termination of the petitioners employment, leading to the conclusion that the termination from the
service was arbitrary and in bad faith.
The first level, based on Asian Alcohol, is broader as the case recognized distinctions on a per
position basis. At this level, Jardine failed to explain why among all of the existing positions in its
organization, Jardine chose the petitioners posts as the ones which have already become redundant
and terminable.
1wphi1

The second level, derived from Golden Thread, is more specific. Here the distinction narrows down
to the particular employees occupying the same positions which were already declared to be
redundant. At this level, Jardines lapse is shown by its failure to explain why among all of its
employees whose positions were determined to be redundant, the petitioners were the ones
selected to be dismissed from the service.
Notably, the LA and the NLRC also arrived at the same conclusion that the redundancy program was
not valid because Jardine hired contractual employees as replacements, thus, contradicting
underlying reasons of redundancy. The CA significantly chose to disregard these coherent labor
findings without fully justifying its move. At the very least, this was an indicator that something was
wrong somewhere in these dismissals. It was clear legal error for the CA to recognize grave abuse
of discretion when none occurred.
WHEREFORE, we hereby GRANT the petition. We REVERSE the decision dated March 23, 2007
and the resolution dated February 11, 2008 of the Court of Appeals in CA G.R. SP No. 91952, and
uphold the decision dated December 1, 2004 and the resolution dated July 21, 2005 of the National
Labor Relations Commission which affirmed in its entirety the September 29, 2000 decision of the
Labor Arbiter.
SO ORDERED.

Manila Polo Club Employees v Manila Polo Club

Deoferio v Intel Technology
G.R. No. 202996

June 18, 2014

MARLO A. DEOFERIO, Petitioner,

vs.
INTEL TECHNOLOGY PHILIPPINES, INC. and/or MIKE
WENTLING, Respondents.
DECISION
BRION, J.:
We resolve the petition for review on certiorari 1 filed by petitioner Marlo A. Deoferio
to challenge the February 24, 2012 decision 2 and the August 2, 2012 resolution3 of
the Court of Appeals (CA) in CA-G.R. SP No. 115708.
The Factual Antecedents
On February 1, 1996, respondent Intel Technology Philippines, Inc. (Intel)employed
Deoferio as a product quality and reliability engineer with a monthly salary
of P9,000.00. In July2001, Intel assigned him to the United States as a validation
engineer for an agreed period of two years and with a monthly salary of
US$3,000.00. On January 27, 2002, Deoferio was repatriated to the Philippines after
being confined at Providence St. Vincent Medical Center for major depression with
psychosis.4 In the Philippines, he worked as a product engineer with a monthly
salary ofP23,000.00.5
Deoferio underwent a series of medical and psychiatric treatment at Intels expense
after his confinement in the United States. In 2002, Dr. Elizabeth Rondain of Makati
Medical Center diagnosed him to be suffering from mood disorder, major
depression, and auditory hallucination.6 He was also referred to Dr. Norieta
Balderrama, Intels forensic psychologist, and to a certain Dr. Cynthia Leynes who
both confirmed his mental condition.7 On August 8, 2005, Dr. Paul Lee, a consultant
psychiatrist of the Philippine General Hospital, concluded that Deoferio was
suffering from schizophrenia. After several consultations, Dr. Lee issued a
psychiatric report dated January 17,2006 concluding and stating that Deoferios
psychotic symptoms are not curable within a period of six months and "will
negatively affect his work and social relation with his co-worker[s]." 8 Pursuant to
these findings, Intel issued Deoferio a notice of termination on March 10, 2006. 9
Deoferio responded to his termination of employment by filing a complaint for illegal
dismissal with prayer for money claims against respondents Intel and Mike Wentling
(respondents). He denied that he ever had mental illness and insisted that he
satisfactorily performed his duties as a product engineer. He argued that Intel
violated his statutory right to procedural due process when it summarily issued a
notice of termination. He further claimed that he was entitled to a salary differential
equivalent to the pre-terminated period of his assignment in the United States

minus the base pay that he had already received. Deoferio also prayed for
backwages, separation pay, moral and exemplary damages, as well as attorneys
fees.10
In defense, the respondents argued that Deoferios dismissal was based on Dr. Lees
certification that: (1) his schizophrenia was not curable within a period of six months
even with proper medical treatment; and (2) his continued employment would be
prejudicial to his and to the other employees health. 11 The respondents also
insisted that Deoferios presence at Intels premises would pose an actual harm to
his co-employees as shown by his previous acts. On May 8, 2003, Deoferio emailed
an Intel employee with this message: "All souls day back to work Monday WW45.1."
On January 18, 2005, he cut the mouse cables, stepped on the keyboards, and
disarranged the desks of his co-employees. 12 The respondents also highlighted that
Deoferio incurred numerous absences from work due to his mental condition,
specifically, from January 31, 2002 until February 28, 2002, 13 from August 2002 until
September 2002,14 and from May 2003 until July 2003.15 Deoferio also took an
administrative leave with pay from January 2005 until December 2005. 16
The respondents further asserted that the twin-notice requirement in dismissals
does not apply to terminations under Article 284 of the Labor Code. 17 They
emphasized that the Labor Codes implementing rules (IRR) only requires a
competent public health authoritys certification to effectively terminate the
services of an employee.18They insisted that Deoferios separation and retirement
payments for P247,517.35 were offset by his company car loan which amounted
to P448,132.43.19 He was likewise not entitled to moral and exemplary damages, as
well as attorneys fees, because the respondents faithfully relied on Dr. Lees
certification that he was not fit to work as a product engineer. 20
The Labor Arbitration Ruling
In a decision21 dated March 6, 2008,the Labor Arbiter (LA) ruled that Deoferio had
been validly dismissed. The LA gave weight to Dr. Lees certification that Deoferio
had been suffering from schizophrenia and was not fit for employment. The
evidence on record shows that Deoferios continued employment at Intel would
pose a threat to the health of his co-employees. The LA further held that the Labor
Code and its IRR do not require the employer to comply with the twin-notice
requirement in dismissals due to disease. The LA also found unmeritorious
Deoferios money claims against Intel.22
On appeal by Deoferio, the National Labor Relations Commission (NLRC) wholly
affirmed the LAs ruling.23 The NLRC also denied24 Deoferios motion for
reconsideration,25 prompting him to seek relief from the CA through a petition for
certiorari under Rule 65 of the Rules of Court.
The CAs Ruling
On February 24, 2012, the CA affirmed the NLRC decision. It agreed with the lower
tribunals findings that Deoferio was suffering from schizophrenia and that his
continued employment at Intel would be prejudicial to his health and to those of his

co-employees. It ruled that the only procedural requirement under the IRR is the
certification by a competent public health authority on the non-curability of the
disease within a period of six months even with proper medical treatment. It also
concurred with the lower tribunals that Intel was justified in not paying Deoferio
separation pay as required by Article 284 of the Labor Code because this obligation
had already been offset by the matured car loan that Deoferio owed Intel. 26
Deoferio filed the present petition after the CA denied his motion for
reconsideration.27
The Petition
In the present petition before the Court, Deoferio argues that the uniform finding
that he was suffering from schizophrenia is belied by his subsequent employment at
Maxim Philippines Operating Corp. and Philips Semiconductors Corp., which both
offered him higher compensations. He also asserts that the Labor Code does not
exempt the employer from complying with the twin-notice requirement in
terminations due to disease.28
The Respondents Position
In their Comment,29 the respondents posit that the petition raises purely questions
of fact which a petition for review on certiorari does not allow. They submit that
Deoferios arguments have been fully passed upon and found unmeritorious by the
lower tribunals and by the CA. They additionally argue that Deoferios subsequent
employment in other corporations is irrelevant in determining the validity of his
dismissal; the law merely requires the non-curability of the disease within a period
of six months even with proper medical treatment.
The respondents also maintain that Deoferios claim for salary differential is already
barred by prescription under Article 291 of the Labor Code. 30 Even assuming that
the claim for salary differential has been timely filed, the respondents assert that
the parties expressly agreed in the International Assignment Relocation Agreement
that "the assignment length is only an estimate and not a guarantee of employment
for any particular length of time."31Moreover, his assignment in the United States
was merely temporary and did not change his salary base, an amount which he
already received.
The Issues
This case presents to us the following issues:
(1) Whether Deoferio was suffering from schizophrenia and whether his continued
employment was prejudicial to his health, as well as to the health of his coemployees;
(2) Whether the twin-notice requirement in dismissals applies to terminations due to
disease; and
As part of the second issue, the following issues are raised:

(a) Whether Deoferio is entitled to nominal damages for violation of his right to
statutory procedural due process; and
(b) Whether the respondents are solidarily liable to Deoferio for nominal damages.
(3) Whether Deoferio is entitled to salary differential, backwages, separation pay,
moral and exemplary damages, as well as attorneys fees.
The Courts Ruling
We find the petition partly meritorious.
Intel had an authorized cause to dismiss Deoferio from employment
Concomitant to the employers right to freely select and engage an employee is the
employers right to discharge the employee for just and/or authorized causes. To
validly effect terminations of employment, the discharge must be for a valid cause
in the manner required by law. The purpose of these two-pronged qualifications is to
protect the working class from the employers arbitrary and unreasonable exercise
of its right to dismiss. Thus, in termination cases, the law places the burden of proof
upon the employer to show by substantial evidence that the termination was for a
lawful cause and in the manner required by law.
In concrete terms, these qualifications embody the due process requirement in labor
cases - substantive and procedural due process. Substantive due process means
that the termination must be based on just and/or authorized causes of dismissal.
On the other hand, procedural due process requires the employer to effect the
dismissal in a manner specified in the Labor Code and its IRR. 32
The present case involves termination due to disease an authorized cause for
dismissal under Article 284 of the Labor Code. As substantive requirements, the
Labor Code and its IRR33 require the presence of the following elements:
(1) An employer has been found to be suffering from any disease.
(2) His continued employment is prohibited by law or prejudicial to his health, as
well as to the health of his co-employees.
(3) A competent public health authority certifies that the disease is of such nature
or at such a stage that it cannot be cured within a period of six months even with
proper medical treatment. With respect to the first and second elements, the Court
liberally construed the phrase "prejudicial to his health as well as to the health of his
co-employees" to mean "prejudicial to his health or to the health of his coemployees." We did not limit the scope of this phrase to contagious diseases for the
reason that this phrase is preceded by the phrase "any disease" under Article 284 of
the Labor Code, to wit:
Art. 284. Disease as ground for termination. An employer may terminate the
services of an employee who has been found to be suffering from any disease and
whose continued employment is prohibited by law or is prejudicial to his health as
well as to the health of his co-employees: Provided, That he is paid separation pay
equivalent to at least one (1) month salary or to one-half (1/2) month salary for

every year of service, whichever is greater, a fraction of at least six (6) months
being considered as one (1) whole year. [underscores, italics and emphases ours]
Consistent with this construction, we applied this provision in resolving illegal
dismissal cases due to non-contagious diseases such as stroke, heart attack,
osteoarthritis, and eye cataract, among others. In Baby Bus, Inc. v. Minister of
Labor,34 we upheld the labor arbitrations finding that Jacinto Mangalinos continued
employment after he suffered several strokes would be prejudicial to his health.
In Duterte v. Kingswood Trading Co., Inc., 35 we recognized the applicability of Article
284 of the Labor Code to heart attacks. In that case, we held that the employercompanys failure to present a certification from a public health authority rendered
Roque Dutertes termination due to a heart attack illegal. We also applied this
provision in Sy v. Court of Appeals36 to determine whether Jaime Sahot was illegally
dismissed dueto various ailments such as presleyopia, hypertensive retinopathy,
osteoarthritis, and heart enlargement, among others. In Manly Express, Inc. v.
Payong, Jr.,37 we ruled that the employer-companys non-presentment of a
certification from a public health authority with respect to Romualdo Payong Jr.s eye
cataract was fatal to its defense.
The third element substantiates the contention that the employee has indeed been
suffering from a disease that: (1) is prejudicial to his health as well as to the health
of his co-employees; and (2) cannot be cured within a period of six months even
with proper medical treatment. Without the medical certificate, there can be no
authorized cause for the employees dismissal. The absence of this element thus
renders the dismissal void and illegal.
Simply stated, this requirement is not merely a procedural requirement, but a
substantive one.1wphi1 The certification from a competent public health authority
is precisely the substantial evidence required by law to prove the existence of the
disease itself, its non-curability within a period of six months even with proper
medical treatment, and the prejudice that it would cause to the health of the sick
employee and to those of his co-employees.
In the current case, we agree with the CA that Dr. Lees psychiatric report
substantially proves that Deoferio was suffering from schizophrenia, that his disease
was not curable within a period of six months even with proper medical treatment,
and that his continued employment would be prejudicial to his mental health. This
conclusion is further substantiated by the unusual and bizarre acts that Deoferio
committed while at Intels employ.
The twin-notice requirement applies
to terminations under Article 284 of
the Labor Code
The Labor Code and its IRR are silent on the procedural due process required in
terminations due to disease. Despite the seeming gap in the law, Section 2, Rule 1,
Book VI of the IRR expressly states that the employee should be afforded procedural
due process in all cases of dismissals.38

In Sy v. Court of Appeals39 and Manly Express, Inc. v. Payong, Jr.,40 promulgated in

2003 and 2005, respectively, the Court finally pronounced the rule that the
employer must furnish the employee two written notices in terminations due to
disease, namely: (1) the notice to apprise the employee of the ground for which his
dismissal is sought; and (2) the notice informing the employee of his dismissal, to
be issued after the employee has been given reasonable opportunity to answer and
to be heard on his defense. These rulings reinforce the State policy of protecting the
workers from being terminated without cause and without affording them the
opportunity to explain their side of the controversy.
From these perspectives, the CA erred in not finding that the NLRC gravely abused
its discretion when it ruled that the twin-notice requirement does not apply to
Article 284 of the Labor Code. This conclusion is totally devoid of any legal basis; its
ruling is wholly unsupported by law and jurisprudence. In other words, the NLRCs
unprecedented, whimsical and arbitrary ruling, which the CA erroneously affirmed,
amounted to a jurisdictional error.
Deoferio is entitled to nominal
damages for violation of his right to
statutory procedural due process
Intels violation of Deoferios right to statutory procedural due process warrants the
payment of indemnity in the form of nominal damages. In Jaka Food Processing
Corp. v. Pacot,41 we distinguished between terminations based on Article 282 of the
Labor Code42 and dismissals under Article 283 of the Labor Code. 43 We then pegged
the nominal damages at P30,000.00 if the dismissal is based on a just cause but the
employer failed to comply with the twin-notice requirement. On the other hand, we
fixed the nominal damages at P50,000.00 if the dismissal is due to an authorized
cause under Article 283 of the Labor Code but the employer failed to comply with
the notice requirement. The reason is that dismissals for just cause imply that the
employee has committed a violation against the employer, while terminations under
Article 283 of the Labor Code are initiated by the employer in the exercise of his
management prerogative.
With respect to Article 284 of the Labor Code, terminations due to disease do not
entail any wrongdoing on the part of the employee. It also does not purely involve
the employers willful and voluntary exercise of management prerogative a
function associated with the employer's inherent right to control and effectively
manage its enterprise.44 Rather, terminations due to disease are occasioned by
matters generally beyond the worker and the employer's control.
In fixing the amount of nominal damages whose determination is addressed to our
sound discretion, the Court should take into account several factors surrounding the
case, such as: (1) the employers financial, medical, and/or moral assistance to the
sick employee; (2) the flexibility and leeway that the employer allowed the sick
employee in performing his duties while attending to his medical needs; (3) the
employers grant of other termination benefits in favor of the employee; and (4)
whether there was a bona fide attempt on the part of the employer to comply with
the twin-notice requirement as opposed to giving no notice at all.

We award Deoferio the sum of P30,000.00 as nominal damages for violation of his
statutory right to procedural due process. In so ruling, we take into account Intels
faithful compliance with Article 284 of the Labor Code and Section 8, Rule 1, Book 6
of the IRR. We also note that Deoferios separation pay equivalent to one-half month
salary for every year of service45 was validly offset by his matured car loan. Under
Article 1278 of the Civil Code, in relation to Article 1706 of the Civil Code 46 and
Article 113(c) of the Labor Code,47 compensation shall take place when two persons
are creditors and debtors of each other in their own right. We likewise consider the
fact that Intel exhibited real concern to Deoferio when it financed his medical
expenses for more than four years. Furthermore, prior to his termination, Intel
liberally allowed Deoferio to take lengthy leave of absences to allow him to attend
to his medical needs.
Wentling is not personally liable for
the satisfaction of nominal damages
in favor of Deoferio
Intel shall be solely liable to Deoferio for the satisfaction of nominal damages.
Wentling, as a corporate officer, cannot be held liable for acts done in his official
capacity because a corporation, by legal fiction, has a personality separate and
distinct from its officers, stockholders, and members. There is also no ground for
piercing the veil of corporate fiction because Wentling acted in good faith and
merely relied on Dr. Lees psychiatric report in carrying out the dismissal. 48
Deoferio is not entitled to salary
differential, backwages, separation
pay, moral and exemplary damages,
as well as attorney's fees
Deoferio's claim for salary differential is already barred by prescription. Under
Article 291 of the Labor Code, all money claims arising from employer-employee
relations shall be filed within three years from the time the cause of action accrued.
In the current case, more than four years have elapsed from the pre-termination of
his assignment to the United States until the filing of his complaint against the
respondents. We thus see no point in further discussing this matter. His claim for
backwages, separation pay, moral and exemplary damages, as well as attorney's
fees must also necessarily fail as a consequence of our finding that his dismissal
was for an authorized cause and that the respondents acted in good faith when they
terminated his services.
WHEREFORE, premises considered, we partially grant the petition; the assailed
February 24, 2012 decision and the August 2, 2012 resolution of the Court of
Appeals stand but respondent Intel Technology Philippines, Inc. is ordered to pay
petitioner Marlo A. Deoferio nominal damages in the amount of P30,000.00. We
totally deny the petition with respect to respondent Mike Wending.
SO ORDERED.

Due Process
Twin-notice requirement
Hearing; meaning of opportunity to be heard
King of Kings Transport v Mamac
G.R. No. 166208

June 29, 2007

KING OF KINGS TRANSPORT INC., CLAIRE DELA FUENTE and MELISSA

LIM, petitioners,
vs.
SANTIAGO O. MAMAC, respondent.
DECISION
VELASCO, JR., J.:
Is a verbal appraisal of the charges against the employee a breach of the procedural
due process? This is the main issue to be resolved in this plea for review under Rule
45 of the September 16, 2004 Decision1 of the Court of Appeals (CA) in CA-GR SP
No. 81961. Said judgment affirmed the dismissal of bus conductor Santiago O.
Mamac from petitioner King of Kings Transport, Inc. (KKTI), but ordered the bus
company to pay full backwages for violation of the twin-notice requirement and
13th-month pay. Likewise assailed is the December 2, 2004 CA Resolution 2rejecting
KKTIs Motion for Reconsideration.
The Facts
Petitioner KKTI is a corporation engaged in public transportation and managed by
Claire Dela Fuente and Melissa Lim.
Respondent Mamac was hired as bus conductor of Don Mariano Transit Corporation
(DMTC) on April 29, 1999. The DMTC employees including respondent formed the
Damayan ng mga Manggagawa, Tsuper at Conductor-Transport Workers Union and
registered it with the Department of Labor and Employment. Pending the holding of
a certification election in DMTC, petitioner KKTI was incorporated with the Securities
and Exchange Commission which acquired new buses. Many DMTC employees were
subsequently transferred to KKTI and excluded from the election.
The KKTI employees later organized the Kaisahan ng mga Kawani sa King of Kings
(KKKK) which was registered with DOLE. Respondent was elected KKKK president.
Respondent was required to accomplish a "Conductors Trip Report" and submit it to
the company after each trip. As a background, this report indicates the ticket
opening and closing for the particular day of duty. After submission, the company
audits the reports. Once an irregularity is discovered, the company issues an
"Irregularity Report" against the employee, indicating the nature and details of the
irregularity. Thereafter, the concerned employee is asked to explain the incident by
making a written statement or counter-affidavit at the back of the same Irregularity
Report. After considering the explanation of the employee, the company then makes
a determination of whether to accept the explanation or impose upon the employee

a penalty for committing an infraction. That decision shall be stated on said

Irregularity Report and will be furnished to the employee.
Upon audit of the October 28, 2001 Conductors Report of respondent, KKTI noted
an irregularity. It discovered that respondent declared several sold tickets as
returned tickets causing KKTI to lose an income of eight hundred and ninety pesos.
While no irregularity report was prepared on the October 28, 2001 incident, KKTI
nevertheless asked respondent to explain the discrepancy. In his letter, 3 respondent
said that the erroneous declaration in his October 28, 2001 Trip Report was
unintentional. He explained that during that days trip, the windshield of the bus
assigned to them was smashed; and they had to cut short the trip in order to
immediately report the matter to the police. As a result of the incident, he got
confused in making the trip report.
On November 26, 2001, respondent received a letter 4 terminating his employment
effective November 29, 2001. The dismissal letter alleged that the October 28, 2001
irregularity was an act of fraud against the company. KKTI also cited as basis for
respondents dismissal the other offenses he allegedly committed since 1999.
On December 11, 2001, respondent filed a Complaint for illegal dismissal, illegal
deductions, nonpayment of 13th-month pay, service incentive leave, and separation
pay. He denied committing any infraction and alleged that his dismissal was
intended to bust union activities. Moreover, he claimed that his dismissal was
effected without due process.
In its April 3, 2002 Position Paper,5 KKTI contended that respondent was legally
dismissed after his commission of a series of misconducts and misdeeds. It claimed
that respondent had violated the trust and confidence reposed upon him by KKTI.
Also, it averred that it had observed due process in dismissing respondent and
maintained that respondent was not entitled to his money claims such as service
incentive leave and 13th-month pay because he was paid on commission or
percentage basis.
On September 16, 2002, Labor Arbiter Ramon Valentin C. Reyes rendered judgment
dismissing respondents Complaint for lack of merit. 6
Aggrieved, respondent appealed to the National Labor Relations Commission
(NLRC). On August 29, 2003, the NLRC rendered a Decision, the dispositive portion
of which reads:
WHEREFORE, the decision dated 16 September 2002 is MODIFIED in that
respondent King of Kings Transport Inc. is hereby ordered to indemnify complainant
in the amount of ten thousand pesos (P10,000) for failure to comply with due
process prior to termination.
The other findings are AFFIRMED.
SO ORDERED.7
Respondent moved for reconsideration but it was denied through the November 14,
2003 Resolution8 of the NLRC.

Thereafter, respondent filed a Petition for Certiorari before the CA urging the
nullification of the NLRC Decision and Resolution.
The Ruling of the Court of Appeals
Affirming the NLRC, the CA held that there was just cause for respondents
dismissal. It ruled that respondents act in "declaring sold tickets as returned tickets
x x x constituted fraud or acts of dishonesty justifying his dismissal." 9
Also, the appellate court sustained the finding that petitioners failed to comply with
the required procedural due process prior to respondents termination. However,
following the doctrine in Serrano v. NLRC, 10 it modified the award of PhP 10,000 as
indemnification by awarding full backwages from the time respondents
employment was terminated until finality of the decision.
Moreover, the CA held that respondent is entitled to the 13th-month pay benefit.
Hence, we have this petition.
The Issues
Petitioner raises the following assignment of errors for our consideration:
Whether the Honorable Court of Appeals erred in awarding in favor of the
complainant/private respondent, full back wages, despite the denial of his petition
for certiorari.
Whether the Honorable Court of Appeals erred in ruling that KKTI did not comply
with the requirements of procedural due process before dismissing the services of
the complainant/private respondent.
Whether the Honorable Court of Appeals rendered an incorrect decision in that [sic]
it awarded in favor of the complaint/private respondent, 13th month pay benefits
contrary to PD 851.11
The Courts Ruling
The petition is partly meritorious.
The disposition of the first assigned error depends on whether petitioner KKTI
complied with the due process requirements in terminating respondents
employment; thus, it shall be discussed secondly.
Non-compliance with the Due Process Requirements
Due process under the Labor Code involves two aspects: first, substantivethe
valid and authorized causes of termination of employment under the Labor Code;
and second, proceduralthe manner of dismissal. 12 In the present case, the CA
affirmed the findings of the labor arbiter and the NLRC that the termination of
employment of respondent was based on a "just cause." This ruling is not at issue in
this case. The question to be determined is whether the procedural requirements
were complied with.

Art. 277 of the Labor Code provides the manner of termination of employment,
thus:
Art. 277. Miscellaneous Provisions.x x x
(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 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 worker 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.
Accordingly, the implementing rule of the aforesaid provision states:
SEC. 2. Standards of due process; requirements of notice.In all cases of
termination of employment, the following standards of due process shall be
substantially observed:
I. For termination of employment based on just causes as defined in Article 282 of
the Code:
(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving said employee reasonable opportunity within which to
explain his side.
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if he so desires is given opportunity to respond to the charge,
present his evidence, or rebut the evidence presented against him.
(c) A written notice of termination served on the employee, indicating that upon due
consideration of all the circumstances, grounds have been established to justify his
termination. 13
In case of termination, the foregoing notices shall be served on the employees last
known address.14
To clarify, the following should be considered in terminating the services of
employees:
(1) The first written notice to be served on the employees should contain the
specific causes or grounds for termination against them, and a directive that the
employees are given the opportunity to submit their written explanation within a
reasonable period. "Reasonable opportunity" under the Omnibus Rules means every
kind of assistance that management must accord to the employees to enable them

to prepare adequately for their defense.15 This should be construed as a period of at

least five (5) calendar days from receipt of the notice to give the employees an
opportunity to study the accusation against them, consult a union official or lawyer,
gather data and evidence, and decide on the defenses they will raise against the
complaint. Moreover, in order to enable the employees to intelligently prepare their
explanation and defenses, the notice should contain a detailed narration of the facts
and circumstances that will serve as basis for the charge against the employees. A
general description of the charge will not suffice. Lastly, the notice should
specifically mention which company rules, if any, are violated and/or which among
the grounds under Art. 282 is being charged against the employees.
(2) After serving the first notice, the employers should schedule and conduct a
hearing or conference wherein the employees will be given the opportunity to: (1)
explain and clarify their defenses to the charge against them; (2) present evidence
in support of their defenses; and (3) rebut the evidence presented against them by
the management. During the hearing or conference, the employees are given the
chance to defend themselves personally, with the assistance of a representative or
counsel of their choice. Moreover, this conference or hearing could be used by the
parties as an opportunity to come to an amicable settlement.
(3) After determining that termination of employment is justified, the employers
shall serve the employees a written notice of termination indicating that: (1) all
circumstances involving the charge against the employees have been considered;
and (2) grounds have been established to justify the severance of their
employment.
In the instant case, KKTI admits that it had failed to provide respondent with a
"charge sheet."16 However, it maintains that it had substantially complied with the
rules, claiming that "respondent would not have issued a written explanation had he
not been informed of the charges against him." 17
We are not convinced.
First, respondent was not issued a written notice charging him of committing an
infraction. The law is clear on the matter. A verbal appraisal of the charges against
an employee does not comply with the first notice requirement. InPepsi Cola
Bottling Co. v. NLRC,18 the Court held that consultations or conferences are not a
substitute for the actual observance of notice and hearing. Also, in Loadstar
Shipping Co., Inc. v. Mesano,19 the Court, sanctioning the employer for disregarding
the due process requirements, held that the employees written explanation did not
excuse the fact that there was a complete absence of the first notice.
Second, even assuming that petitioner KKTI was able to furnish respondent an
Irregularity Report notifying him of his offense, such would not comply with the
requirements of the law. We observe from the irregularity reports against
respondent for his other offenses that such contained merely a general description
of the charges against him. The reports did not even state a company rule or policy
that the employee had allegedly violated. Likewise, there is no mention of any of

the grounds for termination of employment under Art. 282 of the Labor Code. Thus,
KKTIs "standard" charge sheet is not sufficient notice to the employee.
Third, no hearing was conducted. Regardless of respondents written explanation, a
hearing was still necessary in order for him to clarify and present evidence in
support of his defense. Moreover, respondent made the letter merely to explain the
circumstances relating to the irregularity in his October 28, 2001 Conductors Trip
Report. He was unaware that a dismissal proceeding was already being effected.
Thus, he was surprised to receive the November 26, 2001 termination letter
indicating as grounds, not only his October 28, 2001 infraction, but also his previous
infractions.
Sanction for Non-compliance with Due Process Requirements
As stated earlier, after a finding that petitioners failed to comply with the due
process requirements, the CA awarded full backwages in favor of respondent in
accordance with the doctrine in Serrano v. NLRC. 20 However, the doctrine in Serrano
had already been abandoned in Agabon v. NLRC by ruling that if the dismissal is
done without due process, the employer should indemnify the employee with
nominal damages.21
Thus, for non-compliance with the due process requirements in the termination of
respondents employment, petitioner KKTI is sanctioned to pay respondent the
amount of thirty thousand pesos (PhP 30,000) as damages.
Thirteenth (13th)-Month Pay
Section 3 of the Rules Implementing Presidential Decree No. 851 22 provides the
exceptions in the coverage of the payment of the 13th-month benefit. The provision
states:
SEC. 3. Employers covered.The Decree shall apply to all employers except to:
xxxx
e) Employers of those who are paid on purely commission, boundary, or task basis,
and those who are paid a fixed amount for performing a specific work, irrespective
of the time consumed in the performance thereof, except where the workers are
paid on piece-rate basis in which case the employer shall be covered by this
issuance insofar as such workers are concerned.
Petitioner KKTI maintains that respondent was paid on purely commission basis;
thus, the latter is not entitled to receive the 13th-month pay benefit. However,
applying the ruling in Philippine Agricultural Commercial and Industrial Workers
Union v. NLRC,23 the CA held that respondent is entitled to the said benefit.
It was erroneous for the CA to apply the case of Philippine Agricultural Commercial
and Industrial Workers Union. Notably in the said case, it was established that the
drivers and conductors praying for 13th- month pay were not paid purely on
commission. Instead, they were receiving a commission in addition to a fixed or
guaranteed wage or salary. Thus, the Court held that bus drivers and conductors

who are paid a fixed or guaranteed minimum wage in case their commission be less
than the statutory minimum, and commissions only in case where they are over and
above the statutory minimum, are entitled to a 13th-month pay equivalent to onetwelfth of their total earnings during the calendar year.
On the other hand, in his Complaint,24 respondent admitted that he was paid on
commission only. Moreover, this fact is supported by his pay slips 25 which indicated
the varying amount of commissions he was receiving each trip. Thus, he was
excluded from receiving the 13th-month pay benefit.
WHEREFORE, the petition is PARTLY GRANTED and the September 16, 2004 Decision
of the CA is MODIFIED by deleting the award of backwages and 13th-month pay.
Instead, petitioner KKTI is ordered to indemnify respondent the amount of thirty
thousand pesos (PhP 30,000) as nominal damages for failure to comply with the due
process requirements in terminating the employment of respondent.
No costs.
SO ORDERED.

Unilever Phils. V Rivera

Perez v Phil Telegraph
Esguerra v Valle Verde
Jaka Food v Pacot

Reliefs for Illegal Dismissal

Reinstatement
Pending appeal
Mt Carmel College v Resuena
G.R. No. 173076

October 10, 2007

MT. CARMEL COLLEGE, petitioner,

vs.
JOCELYN RESUENA, EDDIE VILLALON, SYLVIA SEDAYON and ZONSAYDA
EMNACE, respondents.
DECISION
CHICO-NAZARIO, J.:
In this Petition for Review on Certiorari under Rule 45 of the Revised Rules of Court,
petitioner seeks the reversal of the Decision 1 dated 2 June 2006 of the Court of
Appeals in CA-G.R. CEB-SP No. 01615 entitled, Mt. Carmel College v. National Labor
Relations Commission, Labor Arbiter Phibun D. Pura, Jocelyn Resuena, et
al. Petitioner seeks remedy from this Court for an alleged illegal execution of the
Decision2 dated 30 October 2001 by the National Labor Relations Commission

(NLRC) in NLRC CASE No. V-000176-2000 (RAB CASE Nos. 06-06-10393-98; 06-0610394-98; 06-06-10395-98; 06-06-10414-98) as affirmed by the Court of Appeals in
CA-G.R. SP No. 80639 in a Decision3 dated 17 March 2004, insisting it was not in
accord with the dispositive portion thereof. Petitioner is not appealing the judgment
itself but the manner of execution of the same.
The following are the factual antecedents of the instant Petition:
Petitioner Mt. Carmel College is a private educational institution. It is administered
by the Carmelite Fathers at New Escalante, Negros Occidental. Respondents were
employees of petitioner, namely: Jocelyn Resuena (Accounting Clerk), Eddie Villalon
(Elementary Department Principal); Sylvia Sedayon (Treasurer), and Zonsayda
Emnace (Secretary to the Director).
On 21 November 1997, respondents, together with several faculty members, nonacademic personnel, and other students, participated in a protest action against
petitioner. Thereafter, petitioners Director, Rev. Fr. Modesto E. Malandac, issued a
Memorandum to each of the respondents. The Memorandum directed respondents
to explain in writing why they should not be dismissed for loss of trust and
confidence for joining the protest action against the school administration.
Petitioner maintained that respondents were occupying positions of highly
confidential nature. After a hearing conducted by petitioners Fact-Finding
Committee and submission of its Report on 25 April 1998, recommending dismissal
or suspension of respondents, petitioner issued written notices of termination to
respondents on 7 May 1998. Respondents were terminated by petitioner on 15 May
1998.
Separate complaints were filed by each of the four respondents against petitioner
before Regional Arbitration Branch VI of the NLRC in Bacolod City. Respondents
charged petitioner with illegal dismissal and claimed 13 thmonth pay, separation pay,
damages and attorneys fees. The cases were docketed as RAB Cases No. 06-0610393-98, 06-06-10394-98, 06-06-10395-98, and 06-06-10414-98. All four cases
were consolidated, and Labor Arbiter Ray T. Drilon thereafter issued a
Decision4 dated 25 May 1999 affirming the validity of respondents termination by
petitioner on the ground of loss of trust and confidence. Although the Decision
found respondents to have been legally dismissed, as equitable relief, however,
they were awarded separation pay computed at one month pay for every year of
service,5 their proportionate 13th month pay, and attorneys fees. Their claims for
moral and exemplary damages were denied. In issuing the aforesaid Decision, the
Labor Arbiter ruled:
WHEREFORE, premises considered, judgment is hereby rendered ordering [herein
petitioner] Mount Carmel College represented by Fr. Modesto Malandac to pay
[herein respondents] Jocelyn Resuena, Zonsayda Emnace, Eddie Villalon and Sylvia
Sedayon, their respective 13th month pay, separation pay and attorneys fee in the
total sum of THREE HUNDRED THIRTY-FOUR THOUSAND EIGHT HUNDRED SEVENTYFIVE PESOS AND 67/100 (P334,875.47) to be deposited with this office within ten
(10) days from receipt of this decision.

The complaint for moral and exemplary damages is hereby dismissed for lack of
legal basis.
All other claims are hereby dismissed for lack of merit. 6
On 9 September 1999, Labor Arbiter Drilon issued to the parties a Notice of
Judgment/Decision of his 25 May 1999 Decision. The notice indicated that a
"decision of the Labor Arbiter reinstating a dismissed or separated employee, in so
far as the reinstatement aspect is concerned, shall immediately be executory, even
pending appeal. The employee shall either be admitted back to work under the
same terms and conditions prevailing prior to his dismissal or separation or at the
option of the employee (sic) merely reinstated in the payroll." 7
In the meantime, petitioner appealed to the NLRC Fourth Division in Cebu City,
seeking the reversal of the portion of the Labor Arbiters Decision dated 25 May
1999 awarding separation pay to respondents. The NLRC dismissed the appeal in its
Decision dated 30 October 2001. In the same Decision dismissing the appeal, the
NLRC reversed and modified the 25 May 1999 Decision of the Labor Arbiter, and
declared the termination of respondents to be illegal. It ordered the reinstatement
of respondents, with payment of backwages or payment of separation pay in lieu
thereof. The pertinent portion of the 30 October 2001 NLRC Decision reads:
We rule that complainants were illegally dismissed and must therefore be ordered
reinstated with payment of backwages from the time they were illegally dismissed
up to the time of their actual reinstatement.
All other claims are hereby dismissed for lack of merit.
WHEREFORE, premises considered the instant appeal is hereby DISMISSED for lack
of merit and the appealed decision is hereby AFFIRMED with modification ordering
the [herein petitioner] the payment of the backwages of the [herein respondents]
from May 15, 1998 up to May 25, 1999, further directing the reinstatement of the
[respondents] to their original positions without loss of seniority or in lieu thereof
the payment of their separation pay as computed in the appealed decision. 8
Petitioner filed a Motion for Reconsideration of the 30 October 2001 Decision of the
NLRC. The said Motion was denied in the 19 June 2003 Resolution of the NLRC.
The case was elevated to the Court of Appeals via a Special Civil Action
for Certiorari and Prohibition, docketed as CA-G.R. SP No. 80639 where petitioner
assailed the aforementioned NLRC Decision dated 30 October 2001 and Resolution
dated 19 June 2003, arguing that there is more than enough basis for loss of trust
and confidence as ground for dismissing respondents. It also reiterated compliance
with the twin requirements of notice and hearing. The Court of Appeals denied the
petition in a Decision promulgated on 17 March 2004, ruling thus:
Consequently, we find no grave abuse of discretion committed by the NLRC in ruling
that [herein respondents] have been illegally dismissed. Likewise, said [NLRC]
correctly held that even if such participation of [respondents] in the protest picket is
rather improper under the circumstances or disappointing to the School

Administrator who had rightly expected them to take the side of the administration
or at least stayed neutral on the demand for ouster of Fr. Malandac and Barairo,
dismissal is definitely too harsh where a less punitive action such as reprimand or
disciplinary action would have been sufficient. Considering the long years of faithful
service of [respondents] in the School without previous record of misconduct, as
duly noted by the NLRC in its decision, their termination on the basis of alleged loss
of confidence by taking part in an otherwise legitimate and constitutionallyprotected right to free speech and peaceful assembly, is certainly illegal and
unjustified.
xxxx
Having been illegally dismissed, [respondents] are entitled to back wages from the
time of their termination until reinstatement, and if reinstatement is no longer
possible, the grant of separation pay equivalent to one (1) month for every year of
service. However, in this case since the Labor Arbiter did not order reinstatement,
the NLRC correctly excluded the period of the appeal in the computation of back
wages due to [respondents].
Finally, on the prayer for injunctive relief sought by petitioner on the ground that
[public respondent] Labor Arbiter exceeded his jurisdiction in issuing the writ of
execution despite the fact that his decision did not order reinstatement and that he
is bereft of authority to implement the decision of the NLRC (Fourth Division).
xxxx
Considering that there is already an entry of judgment on the Decision dated
October 30, 2001, and in view of Our disposition of this petition, we find no more
obstacle for the enforcement of the said judgment even pending appeal, in
accordance with Sections 1 and 2, Rule VIII of the NLRC Rules of Procedure, as
amended, as well as Sections 2, 4 and 6, Rule III of the NLRC Manual on Execution of
Judgment.
xxxx
WHEREFORE, premises considered, the present petition is hereby DENIED DUE
COURSE and accordingly DISMISSED for lack of merit. The assailed Decision and
Resolution are AFFIRMED.9
No Motion for Reconsideration of the afore-quoted Court of Appeals Decision in CAG.R. SP No. 80639 was filed and it became final and executory on 14 April 2004.
At about the same time as the foregoing developments in CA-G.R. SP No. 80639,
Labor Arbiter Phibun D. Pura issued an Order on 19 May 2003 opining on the selfexecutory nature of a reinstatement order:
To be sure the Court has not been consistent in its interpretation of Art. 223. The
nagging issue has always been whether the reinstatement order is self-executory.
Citing the divergent views of the court beginning with Inciong v. NLRC followed by
the deviation in interpretation in Maranaw Hotel Corporation (Century Park Sheraton
Manila) v. NLRC, as reiterated and adopted in Archilles Manufacturing Corporation v.

NLRC and Purificacion Ram v. NLRC, the Court in the 1997 Pioneer case has laid
down the doctrine that henceforth an Order or award for reinstatement is selfexecutory, meaning that it does not require a writ of execution, much less a motion
for its issuance, as maintained by petitioner. x x x.
Successive writs of execution pertaining to the backwages and accrued salaries of
the respondents were issued by Labor Arbiter Pura on these dates: 9 June 2003, 10 10
December 2003,11 and 20 January 2004.12
The first writ of execution, issued on 9 June 2003, directed the sheriff to collect from
petitioner, the amount ofP503,028.05 representing backwages from 15 May 1998 to
25 May 1999. Based on the Sheriffs Report dated 25 June 2003, reinstatement had
not been effected. There was a Notice of Garnishment issued to the Equitable-PCI
Bank Escalante Branch. Labor Arbiter Pura ordered the release of the garnished
amount of P508,168.05 with the said bank for deposit to the Cashier of NLRC
Regional Arbitration Branch VI in Bacolod City. Petitioner moved to quash the Writ of
Execution dated 9 June 2003. It was denied.
By 4 December 2003, the NLRC entered in its Book of Entries of Judgment its
Decision dated 30 October 2001. The records of the case were endorsed back to
NLRC Regional Arbitration Branch VI for the execution of its final and executory
decision, as no restraining order was issued by the Court of Appeals.
After an exchange of pleadings, respondents filed an Ex-Parte Motion for Issuance of
Writ of Execution with the Labor Arbiter considering that the Entry of Judgment was
already issued by the NLRC. On 10 December 2003, the Labor Arbiter granted the
Motion and issued the second Writ of Execution. On motion of respondents, the
Labor Arbiter ordered the release to them of the garnished amount of P503,028.05
deposited with the Cashier of NLRC Regional Arbitration Branch VI.
However, the foregoing amount was considered to be only a partial payment of the
monetary awards due the respondents and the unpaid balance thereof continued to
grow to P1,307,806.50. Respondents thus filed a motion for partial writ of execution,
which the Labor Arbiter granted by issuing the third Writ of Execution on 20 January
2004.13 Under the foregoing writs of execution, the aggregate amount
of P1,736.592.0814 was garnished by Bailiff/Acting Sheriff Romeo D. Pasustento,
representing respondents accrued salaries, backwages, attorneys fees and
sheriffs fees computed from the promulgation of the NLRC Decision 30 October
2001.
Respondents filed on 14 July 2004 yet another Motion to Issue a Writ of Execution to
collect backwages from 1 January 2004 to 30 June 2004. Petitioner opposed the
motion, but the Motion to Issue a Writ of Execution was granted.
On 31 January 2005, Labor Arbiter Pura issued an Order 15 adopting the computation
of the Fiscal Examiner of NLRC Regional Arbitration Branch VI and issuing a writ of
execution to enforce the NLRC Decision dated 30 October 2001. The dispositive
portion of the said Order reads:

In light of the foregoing, we have no choice but to adopt the computation of the RAB
Fiscal Examiner, hereto attached and forming part of the record of these cases and
conformably thereto, we grant the Motion to Issue Writ of Execution on backwages
for the period stated in this computation, taking into consideration the grant of
differentials as there are benefits which accrued to the [herein respondents] and
which they should have enjoyed had they been employed and/or reinstated, as the
case may be, and such other amount as may accrue until actually reinstated or in
lieu of reinstatement, to pay [respondents] separation pay to be computed at one
(1) month salary for every year of service in addition to backwages the formula
adopted by the Labor Arbiter in the Decision dated May 25, 1999, page 7,
paragraph 1.
Let therefore a Writ of Execution be, as it is hereby issued to enforce judgment in
the above entitled cases.16
On 8 February 2005, petitioner filed a Motion for Reconsideration of the foregoing
Order contending that the judgment of the NLRC mandated the payment of
separation pay as computed in the appealed decision. Respondents likewise filed a
Manifestation and Motion to include the month of November 2004 in the
computation. In an Order dated 10 February 2005, the Labor Arbiter denied the
petitioners Motion for Reconsideration. On 22 February 2005, he issued an Alias
Writ of Execution17 for the collection from petitioner of the amount ofP1,131,035.00
representing respondents backwages, separation pay, and attorneys fees.
Petitioner filed a Motion to Quash the Alias Writ of Execution on 17 March 2005. 18
On 15 April 2005, the Labor Arbiter issued an Order where it found no compelling
reason to warrant the grant of the Motion to Quash the Alias Writ of Execution. The
afore-stated Order thus reads:
WHEREFORE, for lack of merit the Motion to Quash the Alias Writ dated March 17,
2005 is denied. [Respondents] Motion to Include February and March 2005 in the
Computation of wages is hereby GRANTED. The entry of appearance of the
collaborating counsel is duly noted.19
From the said Order of the Labor Arbiter, petitioner filed with the NLRC an appeal
with an application for issuance of a writ of preliminary injunction on the execution
of judgment, docketed as NLRC Case No. V-000377-05. Petitioner assailed the 15
April 2005 Order of the Labor Arbiter averring that the latter seriously committed
errors when he ordered the payment and garnishment of backwages beyond the
period 15 May 1998 to 25 May 1999. The NLRC dismissed the petitioners appeal in
a Resolution20 dated 15 August 2005 for lack of merit. Petitioner filed a Motion for
Reconsideration but it was denied by the NLRC in a Resolution dated 30 November
2005, disposed of as follows:
WHEREFORE, premises considered, the appeal of respondents is hereby DISMISSED
for lack of merit. The 15 April 2005 Order of Labor Arbiter Phibun Pura is
AFFIRMED.21

From the foregoing, petitioner filed with the Court of Appeals a Special Civil Action
for Certiorari and Prohibition, docketed as CA-G.R. CEB-SP No. 01615, praying for
the setting aside and nullification of the Resolutions dated 15 August 2005 and 30
November 2005 of the NLRC in NLRC Case No. V-000377-05. Petitioner contended
that the NLRC acted with grave abuse of discretion when it denied its appeal and
motion for reconsideration and in not ruling that there was already satisfaction of
judgment. The crux of petitioners case, as succinctly worded by the Court of
Appeals in CA-G.R. CEB-SP No. 01615:
[P]etitioner seeks to annul and set aside the resolutions dated August 15, 2005 and
November 30, 2005 of the respondent NLRC in NLRC Case No. V-000377-05 when
the latter refuses to invalidate the various writs of executions and to refund
petitioner of whatever excess there might be on the theory that the execution done
by the respondent Labor Arbiter was illegal and in fact goes beyond what is stated
in the decision dated October 30, 2001 of the respondent NLRC in NLRC Case No. V000176-2000.22
The Court of Appeals eventually dismissed CA-G.R. CEB-SP No. 01615, ruling as
follows:
Thus, petitioners avowal that their liability for private respondents backwages is
limited from May 15, 1998 up to May 25, 1999 is untenable on these grounds:
First, there is no showing, in the case at bench, that petitioner exercised its option
to reinstate private respondents to their former position or to grant them separation
pay. Accordingly, backwages have to be granted to private respondents until their
reinstatement to their former position is effected or upon petitioners payment of
separation pay to private respondents if reinstatement is no longer feasible; and
Second, the decision dated March 17, 2004 of the 17 th Division of the Court of
Appeals in CA-G.R. SP No. 80639 acquiesced the propriety of the issuance of the
writs of execution by the respondent labor arbiter on June 9, 2003, December 10,
2003 and January 30, 2004. On April 14, 2004, the said decision which sanctioned
the payment of backwages even beyond May 25, 1999, became final and executory
x x x.
xxxx
In light of the foregoing disquisition, we hereby find public respondent NLRC to have
acted accordingly and without grave abuse of discretion when it issued the
questioned Resolutions dated August 15, 2005 and November 30, 2005,
respectively. Grave abuse of discretion means such capricious and whimsical
exercise of judgment as is equivalent to lack of jurisdiction, or, in other words where
the power is exercised in an arbitrary or despotic manner by reason of passion or
personal hostility, and it must be so patent and gross as to amount to an evasion of
positive duty or to a virtual refusal to perform the duty enjoined or to act at all in
contemplation of law. It is not sufficient that a tribunal, in the exercise of power,
abused its discretion; such abuse must be grave.

WHEREFORE, in view of the foregoing, the present petition is hereby DISMISSED and
the assailed Resolutions dated August 15, 2005 and November 30, 2005,
respectively, issued by the respondent NLRC in NLRC Case No. V-000377-05 are
hereby AFFIRMED.23
Hence, petitioner filed the instant Petition for Review on Certiorari, raising the
following issues:
I.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE LABOR ARBITER
AND THE NLRC THAT THE AWARD OF BACKWAGES GOES BEYOND THE PERIOD FROM
15 MAY 1998 UP TO 25 MAY 1999 ON THE SUPPOSITION THAT REINSTATEMENT IS
SELF-EXECUTORY AND DOES NOT NEED A WRIT OF EXECUTION FOR ITS
ENFORCEMENT.
II.
THE HONORABLE COURT OF APPEALS ERRED IN NOT FINIDING THAT THE
CONTINUING GRANT AND AWARD OF BACKWAGES UP TO THE PRESENT IS
CONTRARY TO LAW AND JURISPRUDENCE AS LAID DOWN BY THIS HONORABLE
SUPREME COURT.
Petitioner prays that this Court render judgment (a) annulling and setting aside the
assailed Decision on 02 June 2006 of the Court of Appeals in CA-G.R. CEB-SP No.
01615 and all its orders and issuances; (b) ordering that backwages be computed
and executed corresponding only to the period from 15 May 1998 to 25 May 1999;
(c) ordering that separation pay be computed based on the computation as
originally submitted by the Labor Arbiter,P344,875.47, which corresponds to the
date of respondents employment until 15 May 1998; (d) that no other award except
for backwages for the period 15 May 1998 to 25 May 1999 and separation pay
amounting to P344,875.47 shall be paid by petitioner; and (e) that the respondents
be ordered to refund and pay the alleged excess in the amounts garnished by virtue
of the Writs of Execution dated 9 June 2003, 10 December 2003, and 30 January
2004.
In sum, the resolution of this petition hinges on the following issues: (1) whether
reinstatement in the instant case is self-executory and does not need a writ of
execution for its enforcement; and (2) whether the continuing award of backwages
is proper.
Petitioner insists that what is at issue is the manner of execution of the NLRC
Decision dated 30 October 2001 in NLRC CASE No. V-000176-2000 (RAB CASE Nos.
06-06-10393-98; 06-06-10394-98; 06-06-10395-98; 06-06-10414-98), as affirmed by
the Decision dated 17 March 2004 of the Court of Appeals in CA-G.R. No. 80639.
In ruling on the consolidated complaints filed by the four respondents, Labor Arbiter
Drilon found that they were not illegally dismissed but ordered that they be awarded
13th month pay, separation pay and attorneys fees in the amount of P334,875.47.
Upon appeal to the NLRC, the NLRC reversed the findings of the Labor Arbiter ruling

that the termination of respondents was illegal and ordering the payment of
backwages of respondents from 15 May 1998 up to 25 May 1999. It further directed
the reinstatement of respondents or payment of separation pay, with backwages.
This was affirmed by the Court of Appeals.
While petitioner concedes that the case pertaining to the complaints for illegal
dismissal filed by the respondents before the Labor Arbiter had been resolved with
finality by the Court of Appeals in CA-G.R. No. 80639, no other remedy having been
taken therefrom, it however assails the correctness and validity of the execution of
the judgment therein. Petitioner avers that the Court of Appeals erred in upholding
the Labor Arbiter and the NLRC that the award of backwages goes beyond the
period 15 May 1998 to 25 May 1999 on the supposition that reinstatement is selfexecutory and does not need a writ of execution for its enforcement. Petitioner
postulates that the Labor Arbiter went beyond the terms of the NLRC Decision, as
affirmed by the Court of Appeals, and erroneously used as bases inapplicable
law24 and jurisprudence25 in the execution of the same. Petitioner contends that the
Labor Arbiters reliance on Pioneer Texturizing Corp. v. National Labor Relations
Commission26 is misplaced, for it applied Article 223 of the Labor Code 27 since
reinstatement was ordered at the Labor Arbiters level while in the instant case,
reinstatement was ordered upon appeal to the NLRC. Petitioner argues that the
relevant statutory and regulatory provisions herein are Article 224 of the Labor
Code,28 and Rule III of the NLRC Manual for Execution of Judgment, 29 given that there
was no order of reinstatement at the Labor Arbiter level but only at the NLRC level.
Petitioner insists that, applying Article 224 of the Labor Code in the instant case,
any reinstatement aspect of the NLRC Decision, as affirmed by the Court of Appeals,
should have been done through the issuance of a Writ of Execution as it is no longer
self-executory. It furthermore contends that it was impossible to reinstate
respondents, whether by way of an immediate execution or by way of a selfexecutory nature, since there was nothing to execute pending appeal because there
was no order for reinstatement.
Petitioner vehemently raises the argument that the award of backwages subject to
execution is limited to the period prior to the appeal and does not include the period
during the pendency of the appeal, on the contention that reinstatement during
appeal is warranted only when the Labor Arbiter rules that the dismissed employee
should be reinstated. In support of its foregoing argument, petitioner invokes Filflex
Industrial & Manufacturing Corporation v. National Labor Relations
Commission30 where this Court ruled:
In other words, reinstatement during appeal is warranted only when the labor
arbiter (LA) himself rules that the dismissed employee should be reinstated. In the
present case, neither the dispositive portion nor the text of the labor arbiters
decision ordered the reinstatement of private respondent. Further, the back wages
granted to private respondent were specifically limited to the period prior to the
filing of the appeal with Respondent NLRC. In fact, the LAs decision ordered her
separation from service for the parties "mutual advantage and most importantly to
physical and health welfare of the complainant." Hence, it is an error and an abuse

of discretion for the NLRC to hold that the award of limited back wages, by
implication, included an order for private respondents reinstatement.
An order for reinstatement must be specifically declared and cannot be presumed;
like back wages, it is a separate and distinct relief given to an illegally dismissed
employee. There being no specific order for reinstatement and the order being for
complainants separation, there can be no basis for the award of salaries/back
wages during the pendency of appeal.
Petitioners reliance on Filflex is misplaced and inapplicable to the case at bar.
Indeed in Filflex, this Court ruled that the award of backwages is limited to the
period prior to the filing of the appeal with the NLRC. This Court had declared in the
aforesaid case that reinstatement during appeal is warranted only when the Labor
Arbiter himself rules that the dismissed employee should be reinstated. But this was
precisely because on appeal to the NLRC, it found that there was no illegal
dismissal; thus, neither reinstatement nor backwages may be awarded. In
fact, Filfexdeleted the award of backwages granted during appeal, reiterating that
an award of backwages by the NLRC during the period of appeal is totally
inconsistent with its finding of a valid dismissal. In the instant petition, the NLRC
Decision dated 30 October 2001 finding the termination of respondents illegal, had
the effect of reversing Labor Arbiter Drilons Decision dated 25 May 1999.
This Court sees no cogent reason as to the relevance of a discussion on whether or
not reinstatement is self-executory. However, since petitioner raised this issue, this
Court has opted to discuss it. Verily, Article 223 of the Labor Code is not applicable
in the instant case. The said provision stipulates that the decision of the Labor
Arbiter reinstating a dismissed or separated employee, insofar as the reinstatement
aspect is concerned, shall immediately be executory, even pending appeal.
Petitioner contends that the statutory provision applicable is Article 224 of the Labor
Code, as well as Rule III, Section 2(b) of the NLRC Manual on Execution of Judgment,
because the case was decided on appeal. Furthermore, it is a decision which is of a
final and executory nature. The provisions invoked by petitioner reads:
Art. 224. Execution of decisions, orders or awards. -- (a) The Secretary of Labor
and Employment or any Regional Director, the Commission or any Labor Arbiter, or
med-arbiter or voluntary arbitrator may, motu proprio or on motion of any
interested party, issue a writ of execution on a judgment within five (5) years from
the date it becomes final and executory x x x. 31
If the execution be for the reinstatement of any person to any position, office or
employment, such writ shall be served by the sheriff upon the losing party or upon
any other person required by law to obey the same, and such party or person may
be punished for contempt if he disobeys such decisions, order for reinstatement. 32
The records of the case indicate that when Labor Arbiter Drilon issued its 25 May
1999 Decision, there was no order of reinstatement yet although the dispositive
portion of the 31 January 2005 Order issued by Labor Arbiter Pura already provided
for reinstatement or payment of separation pay, to wit:

In light of the foregoing, we have no choice but to adopt the computation of the RAB
Fiscal Examiner, hereto attached and forming part of the record of these cases and
conformably thereto, we grant the Motion to Issue Writ of Execution on backwages
for the period stated in this computation, taking into consideration the grant of
differentials as there are benefits which accrued to the complainants and which they
should have enjoyed had they been employed and/or reinstated, as the case may
be, and such other amount as may accrue until actually reinstated or in lieu of
reinstatement, to pay complainants separation pay to be computed at one (1)
month salary for every year of service in addition to backwages the formula
adopted by the Labor Arbiter in the Decision dated May 25, 1999, page 7,
paragraph 1.
Let therefore a Writ of Execution be, as it is hereby issued to enforce judgment in
the above entitled cases.33
Art. 223 of the Labor Code provides that reinstatement is immediately executory
even pending appeal only when the Labor Arbiter himself ordered the
reinstatement. In this case, the original Decision of Labor Arbiter Drilon did not
order reinstatement. Reinstatement in this case was actually ordered by the NLRC,
affirmed by the Court of Appeals. The order of Labor Arbiter Pura on 31 January
2005 directing reinstatement was issued after the Court of Appeals Decision dated
17 March 2004 which affirmed the NLRCs order of reinstatement. Thus, Art. 223
finds no application in the instant case. Considering that the order for reinstatement
was first decided upon appeal to the NLRC and affirmed with finality by the Court of
Appeals in CA-G.R. SP 80369 on 17 March 2004, petitioner rightly invoked Art. 224
of the Labor Code. As contemplated by Article 224 of the Labor Code, the Secretary
of Labor and Employment or any Regional Director, the Commission or any Labor
Arbiter, or med-arbiter or voluntary arbitrator may, motu proprio or on motion of
any interested party, issue a writ of execution on a judgment within five (5) years
from the date it becomes final and executory. Consequently, under Rule III of the
NLRC Manual on the Execution of Judgment, it is provided that if the execution be
for the reinstatement of any person to a position, an office or an employment, such
writ shall be served by the sheriff upon the losing party or upon any other person
required by law to obey the same, and such party or person may be punished for
contempt if he disobeys such decision or order for reinstatement. 34
However, as we can glean from the succeeding discussion, the above findings will
not affect the award of backwages for the period beyond 25 May 1999.
Anent the second issue, petitioner contends that the 25 May 1999 Decision of Labor
Arbiter Drilon did not order the reinstatement of respondents. Petitioner posits that
since there was no finding of illegal dismissal at the Labor Arbiters level, then it
follows that there was no reinstatement aspect, and its liability for backwages is
limited to the period from 15 May 1998 up to 25 May 1999, i.e., from dismissal to
promulgation of the Labor Arbiters Decision only, as allegedly determined by the
NLRC in its Decision dated 30 October 2001. It argues that while the said NLRC
Decision awarded backwages from 15 May 1998 to 25 May 1999 only, the Writs of

Execution issued pursuant thereto ordered the payment of backwages way beyond
the period stated in the Decision35 it is supposed to execute.
Petitioners argument is absurd. Abbott v. National Labor Relations Commission,36 as
cited by petitioner, declared that there exists a big difference when what is sought
to be reviewed is the manner of execution of a decision and not the decision itself.
"While it is true that the decision itself has become final and executory and so can
no longer be challenged, there is no question that it must be enforced in accordance
with its terms and conditions. Any deviation therefrom can be the subject of a
proper appeal."37 In the instant case, however, the manner of execution falls
squarely within the terms of the Decision it seeks to implement.
The 30 October 2001 NLRC Decision ruled as follows:
We rule that complainants were illegally dismissed and must therefore be ordered
reinstated with payment of backwages from the time they were illegally dismissed
up to the time of their actual reinstatement.
All other claims are hereby dismissed for lack of merit.
WHEREFORE, premises considered the instant appeal is hereby DISMISSED for lack
of merit and the appealed decision is hereby AFFIRMED with modification ordering
the respondents the payment of the backwages of the complainants from May 15,
1998 up to May 25, 1999, further directing the reinstatement of the complainants to
their original positions without loss of seniority or in lieu thereof the payment of
their separation pay as computed in the appealed decision. 38
When the afore-quoted NLRC Decision was appealed to the Court of Appeals in CAG.R. SP No. 80639, there seemed to be a contradiction between the body and
the fallo of the appellate courts Decision dated 17 March 2004. Petitioner cites the
following from the text of the Court of Appeals Decision:
However, in this case since the Labor Arbiter did not order reinstatement, the NLRC
correctly excluded the period of the appeal in the computation of back wages due to
private respondents.39
The dispositive portion of the same Decision, however, concludes:
WHEREFORE, premises considered, the present petition is hereby DENIED DUE
COURSE and accordingly DISMISSED for lack of merit. The assailed Decision and
Resolution are AFFIRMED.40
The general rule is that where there is conflict between the dispositive portion or
the fallo and the body of the decision, the fallo controls. This rule rests on the
theory that the fallo is the final order while the opinion in the body is merely a
statement ordering nothing.41 Clearly, the award of backwages to respondents does
not merely cover the period from 15 May 1998 up to 25 May 1999 alone. 42 The
findings of the NLRC, which were affirmed with finality in CA-G.R. SP No. 80639, and
subject of execution in the instant petition, pronounced:

We rule that [respondents] were illegally dismissed and must therefore be ordered
reinstated with payment of backwages from the time they were illegally dismissed
up to the time of their actual reinstatement.
All other claims are hereby dismissed for lack of merit.
WHEREFORE, premises considered the instant appeal is hereby DISMISSED for lack
of merit and the appealed decision is hereby AFFIRMED with modification ordering
the [petitioner] payment of the backwages of the [respondents] from May 15, 1998
up to May 25, 1999, further directing the reinstatement of the [respondents] to their
original positions without loss of seniority or in lieu thereof the payment of their
separation pay as computed in the appealed decision. 43
The above ruling of the NLRC in its Decision dated 30 October 2001 had the effect
of reversing and modifying the findings of the Labor Arbiter. Under Article 218(c) of
the Labor Code, the Commission is empowered to "correct, amend, or waive any
error, defect or irregularity whether in substance or form," in the exercise of its
appellate jurisdiction.44 The dispositive portion of the Labor Arbiters Decision as
worded is clear and needs no further interpretation. The NLRC found respondents to
have been illegally dismissed by petitioner, and ordered reinstatement and
payment of backwages. Additionally, it stated that where reinstatement is not
possible, separation pay as computed in the appealed decision should be awarded
to respondents. Petitioner interprets the dispositive portion of the NLRC Decision to
mean that it is ordered to pay respondents backwages from 15 May 1998 to 25 May
1999 only. Petitioner seems to have missed that the aforestated NLRC Decision also
directed it to reinstate respondents, or in lieu thereof, pay separation pay. This,
petitioner failed to do. Petitioner did not exercise the option of either reinstatement
or paying the separation pay of respondents.
Backwages are to be computed from the time of illegal dismissal until reinstatement
or upon petitioners payment of separation pay to respondents if reinstatement is
no longer possible. Article 279 of the Labor Code, as amended, states:
Art. 279. Security of Tenure. x x x
In cases of regular employment the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time of his actual
reinstatement.
Thus, an illegally dismissed employee is entitled to two reliefs: backwages and
reinstatement. The two reliefs provided are separate and distinct. In instances
where reinstatement is no longer feasible because of strained relations between the
employee and the employer, separation pay is granted. In effect, an illegally
dismissed employee is entitled to either reinstatement, if viable, or separation pay if
reinstatement is no longer viable, and backwages. 45

The normal consequences of respondents illegal dismissal, then, are reinstatement

without loss of seniority rights, and payment of backwages computed from the time
compensation was withheld up to the date of actual reinstatement. Where
reinstatement is no longer viable as an option, separation pay equivalent to one (1)
month salary for every year of service should be awarded as an alternative. 46 The
payment of separation pay is in addition to payment of backwages.
Concomitantly, it is evident that respondents backwages should not be limited to
the period from 15 May 1998 to 25 May 1999. The backwages due respondents
must be computed from the time they were unjustly dismissed until their actual
reinstatement to their former position or upon petitioners payment of separation
pay to them if reinstatement is no longer feasible. Thus, until petitioner actually
implements the reinstatement aspect of the NLRC Decision dated 30 October 2001,
as affirmed in the Court of Appeals Decision dated 17 March 2004 in CA-G.R. SP No.
80639, its obligation to respondents, insofar as accrued backwages and other
benefits are concerned, continues to accumulate.
This Court takes this occasion to reiterate that execution is the final stage of
litigation, the end of the suit. It can not and should not be frustrated except for
serious reasons demanded by justice and equity. 47 "Litigation must end sometime
and somewhere. An effective and efficient administration of justice requires that,
once a judgment has become final, the winning party be not, through a mere
subterfuge, be deprived of the fruits of the verdicts. Courts must, therefore, guard
against any scheme calculated to bring about that result. Constituted as they are to
put an end to controversies, courts should frown upon any attempt to prolong
them."48
WHEREFORE, the instant petition is dismissed. The Decision dated 2 June 2006 of
the Court of Appeals in CA-G.R. CEB-SP No. 01615 is AFFIRMED. Petitioner
is ORDERED to (1) reinstate respondents to their original positions without loss of
seniority rights, with payment of (a) backwages computed from 15 May 1998, the
time compensation of respondents was withheld from them when they were unjustly
terminated, up to the time of reinstatement; and (b) accrued 13 th month pay for the
same period; OR in lieu of reinstatement, (2) pay respondents (a) separation pay, in
the amount equivalent to one (1) month pay for every year of service; and (b)
backwages, computed from 15 May 1998, the time compensation of respondents
was withheld from them when they were unjustly terminated, up to the time of
payment thereof; and (c) the accrued 13th month pay for the same period. For this
purpose, the records of this case are hereby REMANDED to the Labor Arbiter for
proper computation of the subject money claims as discussed above. Costs against
petitioner.
SO ORDERED.
Ynares-Santiago, Chairperson, Austria-Martinez, Nachura, Reyes, JJ., concur.

Wenphil v Abing
G.R. No. 207983

April 7, 2014

WENPHIL CORPORATION, Petitioner,

vs.
ALMER R. ABING and ANABELLE M. TUAZON, Respondents.
DECISION
BRION, J.:
We resolve this petition for review on certiorari 1 under Rule 45 of the Rules of Court,
challenging the August 31, 2012 decision 2 and the June 20, 2013
resolution3 (assailed CA rulings) of the Court of Appeals (CA) in CA-G.R. SP No.
117366.
These assailed CA rulings annulled and set aside the March 26, 2010 Decision 4 and
September 15, 20105resolution (NLRC rulings) of the National Labor Relations
Commission (NLRC) in NLRC CA No. 02-8233-01 (Rl-08).
The NLRC rulings, in turn, fully affirmed the November 16, 2007 Order 6 of the Labor
Arbiter (LA) in NLRC-NCR Case Nos. 30-03-00993-00 and 30-03-01020-00. The LAs
order found that an illegal dismissal took place. Thus, the LA directed petitioner
Wenphil Corporation (Wenphil) to pay respondents Almer Abing and Anabelle Tuazon
(respondents) their backwages for the period from February 15, 2002 to November
8, 2002, pursuant to the rule that an order of reinstatement is immediately
executory even pending appeal.7
Factual Antecedents
This case stemmed from a complaint for illegal dismissal filed by the respondents
against Wenphil, docketed as NLRC NCR Case No. 30-03-00993-00.
On December 8, 2000, LA Geobel A. Bartolabac ruled 8 that the respondents had
been illegally dismissed by Wenphil. According to the LA, the allegation of serious
misconduct against the respondents had no factual and legal basis. 9 Consequently,
LA Bartolabac ordered Wenphil to immediately reinstate the respondents to their
respective positions or to equivalent ones, whether actuall or in the payroll. Also,
the LA ordered Wenphil to pay the respondents their backwages from February 3,
2000 until the date of their actual reinstatement. 10
Because of the unfavorable LA decision, Wenphil appealed to the NLRC on April 16,
200111. In the meantime, the respondents moved for the immediate execution of
the LAs December 8, 2000 decision.12
On October 29, 2001, Wenphil and the respondents entered into a compromise
agreement13 before LA Bartolabac. They agreed to the respondents payroll
reinstatement while Wenphils appeal with the NLRC was ongoing. Wenphil also
agreed to pay the accumulated salaries of the respondents for the payroll period
from April 5, 2001 until October 15, 2001.14 As for the remaining payroll period
starting October 16, 2001, Wenphil committed itself to credit the respective salaries

of the respondents to their ATM payroll accounts until such time that the questioned
decision of LA Bartolabac is either modified, amended or reversed by the Honorable
National Labor Relations Commission.15
On January 30, 2002, the NLRC issued a resolution 16 affirming LA Bartolabacs
decision with modifications. Instead of ordering the respondents reinstatement, the
NLRC directed Wenphil to pay the respondents their respective separation pay at
the rate of one (1) month salary for every year of service. Also, the NLRC found that
while the respondents had been illegally dismissed, they had not been illegally
suspended. Thus, the period from February 3 to February 28, 2000 during which the
respondents were on preventive suspension was excluded by the NLRC in the
computation of the respondents backwages. 17
Subsequently, Wenphil moved for the reconsideration 18 of the NLRCs January 30,
2002 resolution, but the NLRC denied the motion in another resolution dated
September 24, 2002.19
Wenphil thereafter went up to the CA via a petition for certiorari to question the
NLRCs January 30, 2002 and September 24, 2002 resolutions. 20 On August 27,
2003, the CA rendered its decision21 reversing the NLRCs finding that the
respondents had been illegally dismissed. According to the CA, there was enough
evidence to show that the respondents had been guilty of serious misconduct; thus,
their dismissal was for a valid cause. 22 The respondents moved for the
reconsideration of the CAs decision.23 In a resolution24 dated February 23, 2004, the
CA denied the respondents motion.
On appeal to the Supreme Court (SC) via Rule 45 (docketed as G.R. No.
16244725 and dated December 27, 2006), the SC denied the respondents petition
for review on certiorari26 and affirmed the CAs August 27, 2003 decision and
February 23, 2004 resolution. The respondents did not file any motion for
reconsideration to question the SCs decision; thus, the decision became final and
executory on February 15, 2007.27
The Labor Arbitration Rulings
Sometime after the SCs decision in G.R. No. 162447 became final and executory,
the respondents filed with LA Bartolabac a motion for computation and issuance of
writ of execution.28 The respondents asserted in this motion that although the CAs
ruling on the absence of illegal dismissal (as affirmed by the SC) was adverse to
them, under the law and settled jurisprudence, they were still entitled to backwages
from the time of their dismissal until the NLRCs decision finding them to be illegally
dismissed was reversed with finality. 29
LA Bartolabac granted the respondents motion and, in an order dated November
16, 2007,30 directed Wenphil to pay each complainant their salaries on
reinstatement covering the period from February 15, 2002 (the date Wenphil last
paid the respondents respective salaries) to November 8, 2002 (since the NLRCs
decision finding the respondents illegally dismissed became final and executory on
February 28, 2002).

Both parties appealed to the NLRC to question LA Bartolabacs November 16, 2007
order.31 Wenphil argued that the respondents were no longer entitled to payment of
backwages in view of the compromise agreement they executed on October 29,
2001. According to Wenphil, the compromise agreement provided that Wenphils
obligation to pay the respondents backwages should cease as soon as LA
Bartolabacs decision was "modified, amended or reversed" by the NLRC. Since the
NLRC modified the LAs ruling by ordering the payment of separation pay in lieu of
reinstatement, then the respondents, under the terms of the compromise
agreement, were entitled to backwages only up to the finality of the NLRC
decision.32
The respondents questioned in their appeal the determined period for the
computation of their backwages; they posited that the period for payment should
end, not on November 8, 2002, but on February 14, 2007, since the SCs decision
which upheld the CAs ruling became final and executory on February 15, 2007. 33
The NLRC denied the parties respective appeals in its decision dated March 26,
201034 and affirmed in toto the LAs order. Both parties moved for the
reconsideration of the NLRCs decision but the NLRC denied their respective motions
in the resolution of September 15, 2010.35
The CAs Ruling
In its decision dated August 31, 2012,36 the CA reversed the NLRC rulings and
prescribed a different computation period.
The CA ruled that the NLRC committed grave abuse of discretion when it affirmed
the LAs computed period which was from February 15, 2002 to November 8, 2002.
In arriving at this conclusion, the CA cited the case of Pfizer v. Velasco 37 where this
Court ruled that even if the order of reinstatement of the Labor Arbiter is reversed
on appeal, it is obligatory on the part of the employer to reinstate and pay the
dismissed employees wages during the period of appeal until reversal by the higher
court.38 The CA construed this "higher court" to be the CA, not the SC.
The CA reasoned out that it was a "higher court" than the NLRC when it reversed
the NLRCs rulings; thus, the period for computation should end when it
promulgated its decision reversing that of the NLRC, and not on the date when the
SC affirmed its decision.
The CA likewise held that the compromise agreement did not contain any waiver of
rights for any award the respondents might have received when the NLRC changed
or modified the LAs award.39
The Petition
In its petition for review with this Court, Wenphil maintained that the respondents
were no longer entitled to payment of backwages in view of the modification of the
LAs ruling by the NLRC pursuant with their October 29, 2001 compromise
agreement.

Wenphil argued that the CA utterly disregarded the terms of the parties
compromise agreement whose terms were very clear; the agreement reads:
3. That for the payroll period from October 16-31 and thereafter, their [respondents]
salaries (net of withholding tax, SSS, Philhealth and Pag-ibig) shall be credited every
10th and 25th of the succeeding months through their respective ATM employees
account until such time that the questioned decision of the Honorable Labor Arbiter
Geobel Bartolabac is modified, amended or reversed by the Honorable Labor
Relations Commission.40 [emphasis ours]
It was Wenphils assertion that since the NLRCs decision partly changed the
decision of LA Bartolabac by ordering payment of separation pay in lieu of
reinstatement, the NLRC decision was a "modification" that should operate to
remove Wenphils obligation to pay the respondents backwages for the period of
the CAs reversal of the NLRCs illegal dismissal ruling. 41 According to Wenphil, the
words of the compromise agreement left no room for interpretation as to the
parties intentions;42 as a valid agreement between the parties, it must be given
effect and respected by the court.
Wenphil also contended that the CAs cited Pfizer case cannot apply to the present
case since there was no compromise agreement in Pfizer where the dismissed
employee waived her entitlement to backwages. 43
Finally, Wenphil claimed that the reliefs of reinstatement and backwages are only
available to illegally dismissed employees. A ruling that the respondents were still
entitled to reinstatement pay notwithstanding the validity of their dismissal, would
amount to the courts tolerance of an unjust and equitable situation. 44
The Courts Ruling
We resolve to DENY the petition. An order of reinstatement is immediately
executory even pending appeal. The employer has the obligation to reinstate and
pay the wages of the dismissed employee during the period of appeal until reversal
by the higher court.
Under Article 223 of the Labor Code, "the decision of the Labor Arbiter reinstating a
dismissed or separated employee, insofar as the reinstatement aspect is concerned,
shall immediately be executory, even pending appeal. The employee shall either be
admitted back to work under the same terms and conditions prevailing prior to his
dismissal or separation, or at the option of the employer, merely reinstated in the
payroll. The posting of a bond by the employer shall not stay the execution for
reinstatement."
The Court discussed reason behind this legal policy in Aris v. NLRC, 45 where it
explained:
In authorizing execution pending appeal of the reinstatement aspect of a decision of
the Labor Arbiter reinstating a dismissed or separated employee, the law itself has
laid down a compassionate policy which, once more, vivifies and enhances the
provisions of the 1987 Constitution on labor and the working-man. These provisions

are the quintessence of the aspirations of the workingman for recognition of his role
in the social and economic life of the nation, for the protection of his rights, and the
promotion of his welfare These duties and responsibilities of the State are
imposed not so much to express sympathy for the workingman as to forcefully and
meaningfully underscore labor as a primary social and economic force, which the
Constitution also expressly affirms with equal intensity. Labor is an indispensable
partner for the nation's progress and stability. [emphasis ours]
Since the decision is immediately executory, it is the duty of the employer to
comply with the order of reinstatement, which can be done either actually or
through payroll reinstatement. As provided under Article 223 of the Labor Code, this
immediately executory nature of an order of reinstatement is not affected by the
existence of an ongoing appeal. The employer has the duty to reinstate the
employee in the interim period until a reversal is decreed by a higher court or
tribunal.
In the case of payroll reinstatement, even if the employers appeal turns the tide in
its favor, the reinstated employee has no duty to return or reimburse the salary he
received during the period that the lower court or tribunals governing decision was
for the employees illegal dismissal.
Otherwise, the situation would run counter to the immediately executory nature of
an order of reinstatement. The case of Garcia v. Philippine Airlines 46 is enlightening
on this point:
Even outside the theoretical trappings of the discussion and into the mundane
realities of human experience, the "refund doctrine" easily demonstrates how a
favorable decision by the Labor Arbiter could harm, more than help, a dismissed
employee. The employee, to make both ends meet, would necessarily have to use
up the salaries received during the pendency of the appeal, only to end up having
to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap
leading the employee to a risky cliff of insolvency.
Advisably, the sum is better left unspent. It becomes more logical and practical for
the employee to refuse payroll reinstatement and simply find work elsewhere in the
interim, if any is available.1wphi1 Notably, the option of payroll reinstatement
belongs to the employer, even if the employee is able and raring to return to work.
We see the situation discussed above to be present in the case before us as Wenphil
observed the mandate of Article 223 to immediately comply with the order of
reinstatement by the LA. On October 29, 2001, while Wenphils appeal with the
NLRC was pending, it entered into a compromise agreement with the respondents.
In this agreement, Wenphil committed to reinstate the respondents in its payroll.
However, the commitment came with a condition: Wenphil stipulated that its
obligation to pay the wages due to the respondents would cease if the decision of
the LA would be "modified, amended or reversed" by the NLRC. 47
Thus, when the NLRC rendered its decision on the appeal affirming the LAs finding
that the respondents were illegally dismissed, but modifying the award of

reinstatement to payment of separation pay, Wenphil stopped paying the

respondents wages.
The reinstatement salaries due to the respondents were, by their nature, payment
of unworked backwages. These were salaries due to the respondents because they
had been prevented from working despite the LA and the NLRC findings that they
had been illegally dismissed.
We point out that reinstatement and backwages are two separate reliefs available to
an illegally dismissed employee. The normal consequences of a finding that an
employee has been illegally dismissed are: first, that the employee becomes
entitled to reinstatement to his former position without loss of seniority rights; and
second, the payment of backwages covers the period running from his illegal
dismissal up to his actual reinstatement.48 These two reliefs are not inconsistent
with one another and the labor arbiter can award both simultaneously.
Moreover, the relief of separation pay may be granted in lieu of reinstatement but it
cannot be a substitute for the payment of backwages. In instances where
reinstatement is no longer feasible because of strained relations between the
employee and the employer, separation pay should be granted. In effect, an illegally
dismissed employee should be entitled to either reinstatement if viable, or
separation pay if reinstatement is no longer be viable, plus backwages in either
instance.49 The rationale for such policy of distinction was vividly explained in
Santos v. NLRC under these terms:50
Though the grant of reinstatement commonly carries with it an award of backwages,
the inappropriateness or non-availability of one does not carry with it the
inappropriateness or non-availability of the other. Separation pay was awarded in
favor of petitioner Lydia Santos because the NLRC found that her reinstatement was
no longer feasible or appropriate. As the term suggests, separation pay is the
amount that an employee receives at the time of his severance from the service
and, as correctly noted by the Solicitor General in his Comment, is designed to
provide the employee with "the wherewithal during the period that he is looking for
another employment." In the instant case, the grant of separation pay was a
substitute for immediate and continued re-employment with the private respondent
Bank. The grant of separation pay did not redress the injury that is intended to be
relieved by the second remedy of backwages, that is, the loss of earnings that
would have accrued to the dismissed employee during the period between dismissal
and reinstatement. Put a little differently, payment of backwages is a form of relief
that restores the income that was lost by reason of unlawful dismissal; separation
pay, in contrast, is oriented towards the immediate future, the transitional period
the dismissed employee must undergo before locating a replacement job. It was
grievous error amounting to grave abuse of discretion on the part of the NLRC to
have considered an award of separation pay as equivalent to the aggregate relief
constituted by reinstatement plus payment of backwages under Article 280 of the
Labor Code. The grant of separation pay was a proper substitute only for
reinstatement; it could not be an adequate substitute both for reinstatement and for

backwages. In effect, the NLRC in its assailed decision failed to give to petitioner the
full relief to which she was entitled under the statute. [emphasis ours]
Apparently, when the NLRC changed the LAs decision (specifically, the order to
award separation pay in lieu of reinstatement), Wenphil read this to mean to be the
"modification" envisioned in the compromise agreement, Wenphil likewise
effectively concluded that separation pay and backwages are the same or are
interchangeable reliefs. This conclusion can be deduced from Wenphils insistence
not to pay the respondents remaining backwages under its erroneous reasoning
that this was the effect of the NLRCs order to Wenphil to pay separation pay in lieu
of reinstatement.
We emphasize that the basis for the payment of backwages is different from that of
the award of separation pay. Separation pay is granted where reinstatement is no
longer advisable because of strained relations between the employee and the
employer. Backwages represent compensation that should have been earned but
were not collected because of the unjust dismissal. The basis for computing
separation pay is usually the length of the employees past service, while that for
backwages is the actual period when the employee was unlawfully prevented from
working.51
Had Wenphil really wanted to put a stop to the running of the period for the
payment of the respondents backwages, then it should have immediately complied
with the NLRCs order to award the employees their separation pay in lieu of
reinstatement. This action would have immediately severed the employer-employee
relationship. However, the records are bereft of any evidence that Wenphil actually
paid the respondents separation pay. Thus, the employer-employee relationship
between Wenphil and the respondents never ceased and the employment status
remained pending and uncertain until the CA actually rendered its decision that the
respondents had not been illegally dismissed. In the context of the parties
agreement, it was only at this point that the payment of backwages should have
stopped.
A compromise agreement should not be contrary to law, morals, good customs and
public policy.
While it is true that a compromise agreement is binding between the parties and
becomes the law between them,52 it is also a rule that to be valid, a compromise
agreement must not be contrary to law, morals, good customs and public policy. 53
In the present case, the parties compromise agreement simply provided that
Wenphils obligation to pay the respondents backwages shall end the moment the
NLRC modifies, amends or reverses the illegal dismissal decision of LA Bartolabac.
On its face, there is nothing invalid with such stipulation. Indeed, had the NLRC
reversed the LA, the obligation to pay backwages would have stopped. The NLRC,
however, did not decree a reversal of the finding of illegal dismissal. In fact, it
affirmed the illegal dismissal conclusion, confining itself merely to a modification of
the consequences of the illegal dismissal from reinstatement to the payment of
separation pay.

This "modification" of course we cannot accept; the option under the legal policy is
solely limited to a ruling that the respondents had not been illegally dismissed.
Otherwise, we would be violating the Labor Codes policy entitling illegally
dismissed employees to their right to backwages even during the period of appeal.
As we held in the case of Garcia v. Philippine Airlines: 54
The Court reaffirms the prevailing principle that even if the order of reinstatement of
the Labor Arbiter is reversed on appeal, it is obligatory on the part of the employer
to reinstate and pay the wages of the dismissed employee during the period of
appeal until reversal by the higher court. It settles the view that the Labor Arbiter's
order of reinstatement is immediately executory and the employer has to either readmit them to work under the same terms and conditions prevailing prior to their
dismissal, or to reinstate them in the payroll, and that failing to exercise the options
in the alternative, employer must pay the employees salaries. [emphasis ours]
This ruling embodies a principle and policy of the law that cannot be watered down
by any lesser agreement except perhaps when backwages are already earned
entitlements that the employee chooses to surrender for a valuable consideration
(and even then, the consideration must at least be equitable). This legal policy
emphasizes, too, the rule that separation pay cannot be a substitute for backwages
but only for reinstatement. The award of separation pay is not inconsistent with the
payment of backwages. Thus, until a higher courts or tribunals reversal of the
finding that an employee had been illegally dismissed, the employee would be
entitled to receive his reinstatement salary or backwages during the period of
appeal until such reversal. This is in line with the Labor Codes policy that an order
of reinstatement, which can either be actual or through the payroll, is immediately
executory and is not affected by the period of appeal.
Period for Computation of Backwages
The records show that the inconsistency between the labor arbitration rulings and
the CAs ruling was on the period for the computation of such backwages and not on
whether the respondents were still entitled to such backwages during the period of
appeal until the reversal of the finding of illegal dismissal.
According to the LA, whose ruling the NLRC affirmed, the period for computation
should be from February 15, 2002 until November 8, 2002 since the NLRCs decision
which affirmed the LAs finding of illegal dismissal became final and executory on
November 8, 2002. The LA started the counting of the period on February 15, 2002
since that was the day when Wenphil last paid the respondents backwages.
On the other hand, the CA, in setting aside the NLRCs rulings, relied on the case of
Pfizer v. Velasco where we ruled that the backwages of the dismissed employee
should be granted during the period of appeal until reversal by a higher court. Since
the first CA decision which found that the respondents had not been illegally
dismissed was promulgated on August 27, 2003, then the reversal by the higher
court was effectively made on August 27, 2003.

As against this view, the respondents argued that the period for payment of their
backwages should end on February 14, 2007 since the SC decision in G.R. No.
162447 which affirmed the CAs findings that the respondents had not been legally
dismissed became final and executory on February 15, 2007.
Among these views, the commanding one is the rule in Pfizer, which merely echoes
the rulings we made in the cases of Roquero v. Philippine Airlines 55 and Garcia v.
Philippine Airlines56 that the period for computing the backwages due to the
respondents during the period of appeal should end on the date that a higher court
reversed the labor arbitration ruling of illegal dismissal. In this case, the higher
court which first reversed the NLRCs ruling was not the SC but rather the CA. In this
light, the CA was correct when it found that that the period of computation should
end on August 27, 2003. The date when the SCs decision became final and
executory need not matter as the rule in Roquero, Garcia and Pfizer merely referred
to the date of reversal, not the date of the ultimate finality of such reversal.
As a last minor detail, we do not agree with the CA that the date of computation
should start on February 15, 2002. Rather, it should be on February 16, 2002. The
respondents themselves admitted in their motion for computation and issuance of
writ of execution that the last date when they were paid their backwages was on
February 15, 2002. To start the computation on the same date would result to a
duplication of wages for this day; thus, computation should start on the following
date - February 16, 2002.
WHEREFORE, in light of these considerations, we hereby DENY the petition. The
Court of Appeals' decision dated August 31, 2012 and resolution dated June 20,
2013, which annulled and set aside the March 26, 2010 decision and September 15,
2010 resolution of the NLRC, are hereby AFFIRMED with MODIFICATION. The period
for the computation of backwages of respondents Almer R. Abing and Anabelle M.
Tuazon should be from February 16, 2002 until August 27, 2003, when the Court of
Appeals promulgated its decision reversing the NLRC' s finding of illegal dismissal.
No costs.
SO ORDERED.

Bergonio v South East Asian Airline

G.R. No. 195227

April 21, 2014

FROILAN M. BERGONIO, JR., DEAN G. PELAEZ, CRISANTO O. GEONGO,

WARLITO O. JANAYA, SALVADOR VILLAR, JR., RONALDO CAFIRMA, RANDY
LUCAR, ALBERTO ALBUERA, DENNIS NOPUENTE and ALLAN
SALVACION, Petitioners,
vs.
SOUTH EAST ASIAN AIRLINES and IRENE DORNIER, Respondents.
DECISION
BRION, J.:

We resolve in this petition for review on certiorari 1 the challenge to the September
30, 2010 decision2 and the January 13, 2011 resolution3 of the Court of Appeals (CA)
in CA-G.R. SP No. 112011.
This CA decision reversed the July 16, 2008 decision 4 of the National Labor Relations
Commission (NLRC), which, in turn, affirmed the March 13, 2008 order 5 of the Labor
Arbiter (LA) in NLRC Case No. 00-04-05469- 2004. The LA granted the Motion filed
by petitioners Froilan M. Bergonio, Jr., Dean G. Pelaez, et.al., (collectively, the
petitioners) for the release of the garnished amount to satisfy the petitioners
accrued wages.
The Factual Antecedents
On April 30, 2004, the petitioners filed before the LA a complaint for illegal dismissal
and illegal suspension with prayer for reinstatement against respondents South East
Asian Airlines (SEAIR) and Irene Dornier as SEAIRs President (collectively, the
respondents).
In a decision dated May 31, 2005, the LA found the petitioners illegally dismissed
and ordered the respondents, among others, to immediately reinstate the
petitioners with full backwages. The respondents received their copy of this decision
on July 8, 2005.6
On August 20, 2005, the petitioners filed before the LA a Motion for issuance of Writ
of Execution for their immediate reinstatement.
During the scheduled pre-execution conference held on September 14, 2005, the
respondents manifested their option to reinstate the petitioners in the payroll. The
payroll reinstatement, however, did not materialize. Thus, on September 22, 2005,
the petitioners filed before the LA a manifestation for their immediate
reinstatement.
On October 3, 2005, the respondents filed an opposition to the petitioners motion
for execution.7 They claimed that the relationship between them and the petitioners
had already been strained because of the petitioners threatening text messages,
thus precluding the latters reinstatement.
On October 7, 2005, the LA granted the petitioners motion and issued a writ of
execution.8
The respondents moved to quash the writ of execution with a prayer to hold in
abeyance the implementation of the reinstatement order. 9 They maintained that the
relationship between them and the petitioners had been so strained that
reinstatement was no longer possible.
The October 7, 2005 writ of execution was returned unsatisfied. In response, the
petitioners filed a motion for re-computation of accrued wages, and, on January 25,
2006, a motion for execution of the re-computed amount. On February 16, 2006, the
LA granted this motion and issued an alias writ of execution. 10

On February 21, 2006, the respondents issued a Memorandum 11 directing the

petitioners to report for work on February 24, 2006. The petitioners failed to report
for work on the appointed date. On February 28, 2006, the respondents moved
before the LA to suspend the order for the petitioners reinstatement. 12
Meanwhile, the respondents appealed with the NLRC the May 31, 2005 illegal
dismissal ruling of the LA.
In an order dated August 15, 2006,13 the NLRC dismissed the respondents appeal
for non-perfection. The NLRC likewise denied the respondents motion for
reconsideration in its November 29, 2006 resolution, prompting the respondents to
file before the CA a petition for certiorari.
The NLRC issued an Entry of Judgment on February 6, 2007 declaring its November
29, 2006 resolution final and executory. The petitioners forthwith filed with the LA
another motion for the issuance of a writ of execution, which the LA granted on April
24, 2007. The LA also issued another writ of execution. 14 A Notice of Garnishment
was thereafter issued to the respondents depositary bank Metrobank-San Lorenzo
Village Branch, Makati City in the amount of P1,900,000.00 on June 6, 2007.
On December 18, 2007, the CA rendered its decision (on the illegal dismissal ruling
of the LA) partly granting the respondents petition. The CA declared the petitioners
dismissal valid and awarded them P30,000.00 as nominal damages for the
respondents failure to observe due process.
The records show that the petitioners appealed the December 18, 2007 CA decision
with this Court. In a resolution dated August 4, 2008, the Court denied the petition.
The Court likewise denied the petitioners subsequent motion for reconsideration,
and thereafter issued an Entry of Judgment certifying that its August 4, 2008
resolution had become final and executory on March 9, 2009.
On January 31, 2008, the petitioners filed with the LA an Urgent Ex-Parte Motion for
the Immediate Release of the Garnished Amount.
In its March 13, 2008 order,15 the LA granted the petitioners motion; it directed
Metrobank-San Lorenzo to release the P1,900,000.00 garnished amount. The LA
found valid and meritorious the respondents claim for accrued wages in view of the
respondents refusal to reinstate the petitioners despite the final and executory
nature of the reinstatement aspect of its (LAs) May 31, 2005 decision. The LA noted
that as of the December 18, 2007 CA decision (that reversed the illegal dismissal
findings of the LA), the petitioners accrued wages amounted toP3,078,366.33.
In its July 16, 2008 resolution,16 the NLRC affirmed in toto the LAs March 13, 2008
order. The NLRC afterwards denied the respondents motion for reconsideration for
lack of merit.17
The respondents assailed the July 16, 2008 decision and September 29, 2009
resolution of the NLRC via a petition for certiorari filed with the CA.
The CAs ruling

The CA granted the respondents petition.18 It reversed and set aside the July 16,
2008 decision and the September 29, 2009 resolution of the NLRC and remanded
the case to the Computation and Examination Unit of the NLRC for the proper
computation of the petitioners accrued wages, computed up to February 24, 2006.
The CA agreed that the reinstatement aspect of the LAs decision is immediately
executory even pending appeal, such that the employer is obliged to reinstate and
pay the wages of the dismissed employee during the period of appeal until the
decision (finding the employee illegally dismissed including the reinstatement
order) is reversed by a higher court. Applying this principle, the CA noted that the
petitioners accrued wages could have been properly computed until December 18,
2007, the date of the CAs decision finding the petitioners validly dismissed.
The CA, however, pointed out that when the LAs decision is "reversed by a higher
tribunal, an employee may be barred from collecting the accrued wages if shown
that the delay in enforcing the reinstatement pending appeal was without fault" on
the employers part. In this case, the CA declared that the delay in the execution of
the reinstatement order was not due to the respondents unjustified act or omission.
Rather, the petitioners refusal to comply with the February 21, 2006 return-to-work
Memorandum that the respondents issued and personally delivered to them (the
petitioners) prevented the enforcement of the reinstatement order.
Thus, the CA declared that, given this peculiar circumstance (of the petitioners
failure to report for work), the petitioners accrued wages should only be computed
until February 24, 2006 when they were supposed to report for work per the returnto-work Memorandum. Accordingly, the CA reversed, for grave abuse of discretion,
the NLRCs July 16, 2008 decision that affirmed the LAs order to release the
garnished amount.
The Petition
The petitioners argue that the CA gravely erred when it ruled, contrary to Article
223, paragraph 3 of the Labor Code, that the computation of their accrued wages
stopped when they failed to report for work on February 24, 2006. They maintain
that the February 21, 2006 Memorandum was merely an afterthought on the
respondents part to make it appear that they complied with the LAs October 7,
2005 writ of execution. They likewise argue that had the respondents really
intended to have them report for work to comply with the writ of execution, the
respondents could and should have issued the Memorandum immediately after the
LA issued the first writ of execution. As matters stand, the respondents issued the
Memorandum more than four months after the issuance of this writ and only after
the LA issued the alias writ of execution on February 16, 2006.
Additionally, the petitioners direct the Courts attention to the several pleadings
that the respondents filed to prevent the execution of the reinstatement aspect of
the LAs May 31, 2005 decision, i.e., the Opposition to the Issuance of the Writ of
Execution, the Motion to Quash the Writ of Execution and the Motion to Suspend the
Order of Reinstatement. They also point out that in all these pleadings, the
respondents claimed that strained relationship barred their (the petitioners)

reinstatement, evidently confirming the respondents lack of intention to reinstate

them.
Finally, the petitioners point out that the February 21, 2006 Memorandum directed
them to report for work at Clark Field, Angeles, Pampanga instead of at the NAIADomestic Airport in Pasay City where they had been assigned. They argue that this
directive to report for work at Clark Field violates Article 223, paragraph 3 of the
Labor Code that requires the employees reinstatement to be under the same terms
and conditions prevailing prior to the dismissal. Moreover, they point out that the
respondents handed the Memorandum only to Pelaez, who did not act in
representation of the other petitioners, and only in the afternoon of February 23,
2006.
Thus, the petitioners claim that the delay in their reinstatement was in fact due to
the respondents unjustified acts and that the respondents never really complied
with the LAs reinstatement order.
The Case for the Respondents
The respondents counter, in their comment, 19 that the issues that the petitioners
raise in this petition are all factual in nature and had already considered and
explained in the CA decision. In any case, the respondents maintain that the
petitioners were validly dismissed and that they complied with the LAs
reinstatement order when it directed the petitioners to report back to work, which
directive the petitioners did not heed.
The respondents add that while the reinstatement of an employee found illegally
dismissed is immediately executory, the employer is nevertheless not prohibited
from questioning this rule especially when the latter has valid and legal reasons to
oppose the employees reinstatement. In the petitioners case, the respondents
point out that their relationship had been so strained that reinstatement was no
longer possible. Despite this strained relationship, the respondents point out that
they still required the petitioners to report back to work if only to comply with the
LAs reinstatement order. Instead of reporting for work as directed, the petitioners,
however, insisted for a payroll reinstatement, which option the law grants to them
(the respondents) as employer. Also, contrary to the petitioners claim, the
Memorandum directed them to report at Clark Field, Pampanga only for a reorientation of their respective duties and responsibilities.
Thus, relying on the CAs ruling, the respondents claim that the delay in the
petitioners reinstatement was in fact due to the latters refusal to report for work
after the issuance of the February 21, 2006 Memorandum in addition to their
strained relationship.
The Courts Ruling
We GRANT the petition.
Preliminary considerations: jurisdictional
limitations of the Courts Rule 45 review of
the CAs Rule 65 decision in labor cases

In a Rule 45 petition for review on certiorari, what we review are the legal errors
that the CA may have committed in the assailed decision, in contrast with the
review for jurisdictional errors that we undertake in an original certiorari action. In
reviewing the legal correctness of the CA decision in a labor case taken under Rule
65 of the Rules of Court, we examine the CA decision in the context that it
determined the presence or the absence of grave abuse of discretion in the NLRC
decision before it and not on the basis of whether the NLRC decision, on the merits
of the case, was correct. Otherwise stated, we proceed from the premise that the
CA undertook a Rule 65 review, not a review on appeal, of the NLRC decision
challenged before it. Within this narrow scope of our Rule 45 review, the question
that we ask is: Did the CA correctly determine whether the NLRC committed grave
abuse of discretion in ruling on the case?20
In addition, the Courts jurisdiction in a Rule 45 petition for review on certiorari is
limited to resolving only questions of law.
The present petition essentially raises the question whether the petitioners may
recover the accrued wages prior to the CAs reversal of the LAs May 31, 2005
decision. This is a question of law that falls well within the Courts power in a Rule
45 petition.
Resolution of this question of law, however, is inextricably linked with the largely
factual issue of whether the accrued wages should be computed until December 17,
2008 when the CA reversed the illegal dismissal findings of the LA or only until
February 24, 2006 when the petitioners were supposed to report for work per the
February 21, 2006 Memorandum. In either case, the determination of this factual
issue presupposes another factual issue, i.e., whether the delay in the execution of
the reinstatement order was due to the respondents fault. As questions of fact,
they are proscribed by our Rule 45 jurisdiction; we generally cannot address these
factual issues except to the extent necessary to determine whether the CA correctly
found the NLRC in grave abuse of discretion in affirming the release of the garnished
amount despite the respondents issuance of and the petitioners failure to comply
with the February 21, 2006 return-to-work Memorandum.
The jurisdictional limitations of our Rule 45 review of the CAs Rule 65 decision in
labor cases, notwithstanding, we resolve this petitions factual issues for we find
legal errors in the CAs decision. Our consideration of the facts taken within this
narrow scope of our factual review power convinced us, as our subsequent
discussion will show, that no grave abuse of discretion attended the NLRC decision.
Nature of the reinstatement aspect of the
LAs decision on a finding of illegal
dismissal
Article 223 (now Article 229)21 of the Labor Code governs appeals from, and the
execution of, the LAs decision. Pertinently, paragraph 3, Article 223 of the Labor
Code provides:
Article 223. APPEAL

xxxx
In any event, the decision of the Labor Arbiter reinstating a dismissed or separated
employee, insofar as the reinstatement aspect is concerned, shall immediately be
executory, pending appeal. The employee shall either be admitted back to work
under the same terms and conditions prevailing prior to his dismissal or separation
or, at the option of the employer, merely reinstated in the payroll. The posting of a
bond by the employer shall not stay the execution for reinstatement provided
herein. [Emphasis and underscoring supplied]
Under paragraph 3, Article 223 of the Labor Code, the LAs order for the
reinstatement of an employee found illegally dismissed is immediately executory
even during pendency of the employers appeal from the decision. Under this
provision, the employer must reinstate the employee either by physically
admitting him under the conditions prevailing prior to his dismissal, and paying his
wages; or, at the employers option, merely reinstating the employee in the payroll
until the decision is reversed by the higher court. 22 Failure of the employer to
comply with the reinstatement order, by exercising the options in the alternative,
renders him liable to pay the employees salaries. 23
Otherwise stated, a dismissed employee whose case was favorably decided by the
LA is entitled to receive wages pending appeal upon reinstatement, which
reinstatement is immediately executory. 24 Unless the appellate tribunal issues a
restraining order, the LA is duty bound to implement the order of reinstatement and
the employer has no option but to comply with it. 25
Moreover, and equally worth emphasizing, is that an order of reinstatement issued
by the LA is self-executory, i.e., the dismissed employee need not even apply for
and the LA need not even issue a writ of execution to trigger the employers duty to
reinstate the dismissed employee.
In Pioneer Texturizing Corp. v. NLRC, et. al., 26 decided in 1997, the Court clarified
once and for all this self-executory nature of a reinstatement order. After tracing
back the various Court rulings interpreting the amendments introduced by Republic
Act No. 671527 on the reinstatement aspect of a labor decision under Article 223 of
the Labor Code, the Court concluded that to otherwise "require the application for
and issuance of a writ of execution as prerequisites for the execution of a
reinstatement award would certainly betray and run counter to the very object and
intent of Article 223, i.e., the immediate execution of a reinstatement order." 28
In short, therefore, with respect to decisions reinstating employees, the law itself
has determined a sufficiently overwhelming reason for its immediate and automatic
execution even pending appeal.29 The employer is duty-bound to reinstate the
employee, failing which, the employer is liable instead to pay the dismissed
employees salary. The Courts consistent and prevailing treatment and
interpretation of the reinstatement order as immediately enforceable, in fact,
merely underscores the right to security of tenure of employees that the
Constitution30 protects.

The employer is obliged to pay the

dismissed employees salary if he
refuses to reinstate until actual
reinstatement or reversal by a higher
tribunal; circumstances that may bar an
employee from receiving the accrued wages
As we amply discussed above, an employer is obliged to immediately reinstate the
employee upon the LAs finding of illegal dismissal; if the employer fails, it is liable
to pay the salary of the dismissed employee. Of course, it is not always the case
that the LAs finding of illegal dismissal is, on appeal by the employer, upheld by the
appellate court. After the LAs decision is reversed by a higher tribunal, the
employers duty to reinstate the dismissed employee is effectively terminated. This
means that an employer is no longer obliged to keep the employee in the actual
service or in the payroll. The employee, in turn, is not required to return the wages
that he had received prior to the reversal of the LAs decision. 31
The reversal by a higher tribunal of the LAs finding (of illegal dismissal),
notwithstanding, an employer, who, despite the LAs order of reinstatement, did not
reinstate the employee during the pendency of the appeal up to the reversal by a
higher tribunal may still be held liable for the accrued wages of the employee, i.e.,
the unpaid salary accruing up to the time the higher tribunal reverses the
decision.32 The rule, therefore, is that an employee may still recover the accrued
wages up to and despite the reversal by the higher tribunal. This entitlement of the
employee to the accrued wages proceeds from the immediate and self-executory
nature of the reinstatement aspect of the LAs decision.
By way of exception to the above rule, an employee may be barred from collecting
the accrued wages if shown that the delay in enforcing the reinstatement pending
appeal was without fault on the part of the employer. To determine whether an
employee is thus barred, two tests must be satisfied: (1) actual delay or the fact
that the order of reinstatement pending appeal was not executed prior to its
reversal; and (2) the delay must not be due to the employers unjustified act or
omission. Note that under the second test, the delay must be without the
employers fault. If the delay is due to the employers unjustified refusal, the
employer may still be required to pay the salaries notwithstanding the reversal of
the LAs decision.33
Application of the two-fold test; the
petitioners are entitled to receive their
accrued salaries until December 18, 2007
As we earlier pointed out, the core issue to be resolved is whether the petitioners
may recover the accrued wages until the CAs reversal of the LAs decision. An
affirmative answer to this question will lead us to reverse the assailed CA decision
for legal errors and reinstate the NLRCs decision affirming the release of the
garnished amount. Otherwise, we uphold the CAs decision to be legally correct. To
resolve this question, we apply the two-fold test.

First, the existence of delay - whether there was actual delay or whether the order
of reinstatement pending appeal was not executed prior to its reversal? We answer
this test in the affirmative.
To recall, on May 31, 2005, the LA rendered the decision finding the petitioners
illegally dismissed and ordering their immediate reinstatement. Per the records, the
respondents received copy of this decision on July 8, 2005. On August 20, 2005, the
petitioners filed before the LA a Motion for Issuance of Writ of Execution for their
immediate reinstatement. The LA issued the Writ of Execution on October 7, 2005.
From the time the respondents received copy of the LAs decision, and the issuance
of the writ of execution, until the CA reversed this decision on December 17, 2008,
the respondents had not reinstated the petitioners, either by actual reinstatement
or in the payroll. This continued non-execution of the reinstatement order in fact
moved the LA to issue an alias writ of execution on February 16, 2006 and another
writ of execution on April 24, 2007.
From these facts and without doubt, there was actual delay in the execution of the
reinstatement aspect of the LAs May 31, 2005 decision before it was reversed in
the CAs decision.
Second, the cause of the delay whether the delay was not due to the employers
unjustified act or omission. We answer this test in the negative; we find that the
delay in the execution of the reinstatement pending appeal was due to the
respondents unjustified acts.
In reversing, for grave abuse of discretion, the NLRCs order affirming the release of
the garnished amount, the CA relied on the fact of the issuance of the February 21,
2006 Memorandum and of the petitioners failure to comply with its return-to-work
directive. In other words, with the issuance of this Memorandum, the CA considered
the respondents as having sufficiently complied with their obligation to reinstate the
petitioners. And, the subsequent delay in or the non-execution of the reinstatement
order was no longer the respondents fault, but rather of the petitioners who refused
to report back to work despite the directive.
Our careful consideration of the facts and the circumstances that surrounded the
case convinced us that the delay in the reinstatement pending appeal was due to
the respondents fault. For one, the respondents filed several pleadings to suspend
the execution of the LAs reinstatement order, i.e., the opposition to the petitioners
motion for execution filed on October 3, 2005; the motion to quash the October 7,
2005 writ of execution with prayer to hold in abeyance the implementation of the
reinstatement order; and the motion to suspend the order for the petitioners
reinstatement filed on February 28, 2006 after the LA issued the February 16, 2006
alias writ of execution. These pleadings, to our mind, show a determined effort on
the respondents part to prevent or suspend the execution of the reinstatement
pending appeal.
Another reason is that the respondents, contrary to the CAs conclusion, did not
sufficiently notify the petitioners of their intent to actually reinstate them; neither
did the respondents give them ample opportunity to comply with the return-to-work

directive. We note that the respondents delivered the February 21, 2006
Memorandum (requiring the petitioners to report for work on February 24, 2006)
only in the afternoon of February 23, 2006. Worse, the respondents handed the
notice to only one of the petitioners Pelaez who did not act in representation of
the others. Evidently, the petitioners could not reasonably be expected to comply
with a directive that they had no or insufficient notice of.
Lastly, the petitioners continuously and actively pursued the execution of the
reinstatement aspect of the LAs decision, i.e., by filing several motions for
execution of the reinstatement order, and motion to cite the respondents in
contempt and re-computation of the accrued wages for the respondents continued
failure to reinstate them.
These facts altogether show that the respondents were not at all sincere in
reinstating the petitioners. These facts when taken together with the fact of delay
reveal the respondents obstinate resolve and willful disregard of the immediate
and self-executory nature of the reinstatement aspect of the LAs decision.
A further and final point that we considered in concluding that the delay was due to
the respondents fault is the fact that per the 2005 Revised Rules of Procedure of
the NLRC (2005 NLRC Rules),34 employers are required to submit a report of
compliance within ten (10) calendar days from receipt of the LAs decision,
noncompliance with which signifies a clear refusal to reinstate. Arguably, the 2005
NLRC Rules took effect only on January 7, 2006; hence, the respondents could not
have been reasonably expected to comply with this duty that was not yet in effect
when the LA rendered its decision (finding illegal dismissal) and issued the writ of
execution in 2005. Nevertheless, when the LA issued the February 16, 2006 alias
writ of execution and the April 24, 2007 writ of execution, the 2005 NLRC Rules was
already in place such that the respondents had become duty-bound to submit the
required compliance report; their noncompliance with this rule all the more showed
a clear and determined refusal to reinstate.
All told, under the facts and the surrounding circumstances, the delay was due to
the acts of the respondents that we find were unjustified. We reiterate and
emphasize, Article 223, paragraph 3, of the Labor Code mandates the employer to
immediately reinstate the dismissed employee, either by actually reinstating
him/her under the conditions prevailing prior to the dismissal or, at the option of the
employer, in the payroll. The respondents' failure in this case to exercise either
option rendered them liable for the petitioners' accrued salary until the LA decision
was reversed by the CA on December 17, 2008. We, therefore, find that the NLRC, in
affirming the release of the garnished amount, merely implemented the mandate of
Article 223; it simply recognized as immediate and self-executory the reinstatement
aspect of the LA's decision.
Accordingly, we reverse for legal errors the CA decision.1wphi1 We find no grave
abuse of discretion attended the NLRC's July 16, 2008 resolution that affirmed the
March 13, 2008 decision of the LA granting the release of the garnished amount.

WHEREFORE, in light of these considerations, we hereby GRANT the petition. We

REVERSE and SET ASIDE the September 30, 2010 decision and the January 13, 2011
resolution of the Court of Appeals (CA) in CA-G.R. Sp No. 112011. Accordingly, we
REINSTATE the July 16, 2008 decision of the National Labor Relations Commission
(NLRC) affirming the March 13, 2008 order of the Labor Arbiter in NLRC Case No. 0004-05469-2004.
Costs against the respondents South East Asian Airlines and Irene Dornier.
SO ORDERED.

Alcantara v CA
ABAD, J.:
This case is about a) the consequences of an illegally staged strike upon the
employment status of the union officers and its ordinary members and b) the right
of reinstated union members to go back to work pending the companys appeal
from the order reinstating them.
The Facts and the Case
C. Alcantara & Sons, Inc., (the Company) is a domestic corporation engaged in the
manufacture and processing of plywood. Nagkahiusang Mamumuo sa Alsons-SPFL
(the Union) is the exclusive bargaining agent of the Companys rank and file
employees. The other parties to these cases are the Union officers 1 and their
striking members.2
The Company and the Union entered into a Collective Bargaining Agreement (CBA)
that bound them to hold no strike and no lockout in the course of its life. At some
point the parties began negotiating the economic provisions of their CBA but this
ended in a deadlock, prompting the Union to file a notice of strike. After efforts at
conciliation by the Department of Labor and Employment (DOLE) failed, the Union
conducted a strike vote that resulted in an overwhelming majority of its members
favoring it. The Union reported the strike vote to the DOLE and, after the
observance of the mandatory cooling-off period, went on strike.
During the strike, the Company filed a petition for the issuance of a writ of
preliminary injunction with prayer for the issuance of a temporary restraining order
(TRO) Ex Parte3 with the National Labor Relations Commission (NLRC) to enjoin the
strikers from intimidating, threatening, molesting, and impeding by barricade the
entry of non-striking employees at the Companys premises. The NLRC first issued a
20-day TRO and, after hearing, a writ of preliminary injunction, enjoining the Union
and its officers and members from performing the acts complained of. But several
attempts to implement the writ failed. Only the intervention of law enforcement
units made such implementation possible. Meantime, the Union filed a petition 4 with
the Court of Appeals (CA), questioning the preliminary injunction order. On February
8, 1999 the latter court dismissed the petition. The Union did not appeal from such
dismissal.

The Company, on the other hand, filed a petition with the Regional Arbitration Board
to declare the Unions strike illegal,5 citing its violation of the no strike, no lockout,
provision of their CBA. Subsequently, the Company amended its petition to implead
the named Union members who allegedly committed prohibited acts during the
strike. For their part, the Union, its officers, and its affected members filed against
the Company a counterclaim for unfair labor practices, illegal dismissal, and
damages. The Union also assailed as invalid the service of summons on the
individual Union members included in the amended petition.
On June 29, 1999 the Labor Arbiter rendered a decision, 6 declaring the Unions strike
illegal for violating the CBAs no strike, no lockout, provision. As a consequence, the
Labor Arbiter held that the Union officers should be deemed to have forfeited their
employment with the Company and that they should pay actual damages
of P3,825,000.00 plus 10% interest and attorneys fees. With respect to the striking
Union members, finding no proof that they actually committed illegal acts during
the strike, the Labor Arbiter ordered their reinstatement without backwages. The
Labor Arbiter denied the Unions counterclaim for lack of merit.
On June 29, 1999 the terminated Union members promptly filed a motion for their
immediate reinstatement but the Labor Arbiter did not act on the same. At any rate,
the Company did not reinstate them. Both parties appealed 7 the Labor Arbiters
decision to the NLRC. The Company impugned the Labor Arbiters decision insofar
as it ordered the reinstatement of the terminated Union members. The Union, on
the other hand, questioned the declaration of illegality of the strike as well as the
dismissal of its officers and the order for them to pay damages.
On November 8, 1999 the NLRC rendered a decision, 8 affirming that of the Labor
Arbiter insofar as the latter declared the strike illegal, ordered the Union officers
terminated, and directed them to pay damages to the Company. The NLRC ruled,
however, that the Union members involved, who were identified in the proceedings
held in the case, should also be terminated for having committed prohibited and
illegal acts.
The Union filed a petition for certiorari 9 with the CA, questioning the NLRC decision.
Finding merit in the petition, the CA rendered a decision on March 20,
2002,10 annulling the NLRC decision and reinstating that of the Labor Arbiter. The
Company and the Union with its officers and members filed separate petitions for
review of the CA decision in G.R. 155109 and 155135, respectively.
During the pendency of these cases, the affected Union members filed with the
Labor Arbiter a motion for reinstatement pending appeal by the parties and the
computation of their backwages based on the CA decision. After hearing, the Labor
Arbiter issued a resolution dated November 21, 2002, 11 holding that due to the
delay in the resolution of the dispute and the impracticability of reinstatement
owing to the fact that the relations between the terminated Union members and the
Company had been severely strained by the prolonged litigation, payment of
separation pay to such Union members was in order. The Labor Arbiter thus
approved the computation and payment of their separation pay and denied all their
other claims.

Both parties appealed the Labor Arbiters resolution 12 to the NLRC. Initially, in its
resolution dated April 30, 2003,13the NLRC declared the Labor Arbiters resolution of
November 21, 2002 void for lack of factual and legal basis but ordered the Company
to pay the affected employees accrued wages and 13th month pay considering the
Companys refusal to reinstate them pending appeal. On motion for reconsideration
by both parties, however, the NLRC issued a resolution on August 29,
2003,14 modifying its earlier resolution by deleting the grant of accrued wages and
13th month pay to the subject employees, thus denying their motion for
computation.
Upon the Unions petition for certiorari 15 with the CA, questioning the NLRCs denial
of the terminated Union members claim for separation pay, accrued wages, and
other benefits, the CA rendered a decision on February 24, 2005, 16 dismissing the
petition. The CA ruled that the reinstatement pending appeal provided under Article
223 of the Labor Code contemplated illegal dismissal or termination cases and not
cases under Article 263. Thus, the CA ruled that the resolution ordering the
reinstatement of the terminated Union members and the payment of their wages
and other benefits had no basis. Aggrieved, the Union sought intervention by this
Court.
The Issues Presented
The issues presented in these cases are:
1. Whether or not the NLRC properly acquired jurisdiction over the persons of the
individual Union members impleaded in the case;
2. Whether or not the Union staged an illegal strike;
3. Assuming the strike to be illegal, whether or not the impleaded Union members
committed illegal acts during the strike, justifying their termination from
employment;
4. Whether or not the terminated Union members are entitled to the payment of
backwages on account of the Companys refusal to reinstate them, pending appeal
by the parties, from the Labor Arbiters decision of June 29, 1999; and
5. Whether or not the terminated Union members are entitled to accrued
backwages and separation pay.
The Rulings of the Court
One. The NLRC acquires jurisdiction over parties in cases before it either by
summons served on them or by their voluntary appearance before its Labor Arbiter.
Here, while the Union insists that summons were not properly served on the
impleaded Union members with respect to the Companys amended petition that
sought to declare the strike illegal, the records show that they were so served. The
Return of Service of Summons17 indicated that 74 out of the 8118 impleaded Union
members were served with summons. But they refused either to accept the
summons or to acknowledge receipt of the same. Such refusal cannot of course
frustrate the NLRCs acquisition of jurisdiction over them. Besides, the affected

Union members voluntarily entered their appearance in the case when they sought
affirmative relief in the course of the proceedings like an award of damages in their
favor.
Two. A strike may be regarded as invalid although the labor union has complied
with the strict requirements for staging one as provided in Article 263 of the Labor
Code when the same is held contrary to an existing agreement, such as a no strike
clause or conclusive arbitration clause.19 Here, the CBA between the parties
contained a "no strike, no lockout" provision that enjoined both the Union and the
Company from resorting to the use of economic weapons available to them under
the law and to instead take recourse to voluntary arbitration in settling their
disputes.
No law or public policy prohibits the Union and the Company from mutually waiving
the strike and lockout maces available to them to give way to voluntary arbitration.
Indeed, no less than the 1987 Constitution recognizes in Section 3, Article XIII,
preferential use of voluntary means to settle disputes. Thus
The State shall promote the principle of shared responsibility between workers and
employers and the preferential use of voluntary modes in settling disputes,
including conciliation, and shall enforce their mutual compliance therewith to foster
industrial peace.
The Court finds no compelling reason to depart from the findings of the Labor
Arbiter, the NLRC, and the CA regarding the illegality of the strike. Social justice is
not one-sided. It cannot be used as a badge for not complying with a lawful
agreement.
Three. Since the Unions strike has been declared illegal, the Union officers can, in
accordance with law be terminated from employment for their actions. This includes
the shop stewards. They cannot be shielded from the coverage of Article 264 of the
Labor Code since the Union appointed them as such and placed them in positions of
leadership and power over the men in their respective work units.
As regards the rank and file Union members, Article 264 of the Labor Code provides
that termination from employment is not warranted by the mere fact that a union
member has taken part in an illegal strike. It must be shown that such a union
member, clearly identified, performed an illegal act or acts during the
strike.201avvphi1
Here, although the Labor Arbiter found no proof that the dismissed rank and file
Union members committed illegal acts, the NLRC found following the injunction
hearing in NLRC IC M-000126-98 that the Union members concerned committed
such acts, for which they had in fact been criminally charged before various courts
and the prosecutors office in Davao City. Since the CA held that the existence of
criminal complaints against the Union members did not warrant their dismissal, it
becomes necessary for the Court to go into the records to settle the issue.
The striking Union members allegedly committed the following prohibited acts:

a. They threatened, coerced, and intimidated non-striking employees, officers,

suppliers and customers;
b. They obstructed the free ingress to and egress from the company premises; and
c. They resisted and defied the implementation of the writ of preliminary injunction
issued against the strikers.
Cornelio Caguiat, Ruben Tungapalan, and Eufracio Rabusa depicted the above
prohibited acts in their affidavits and testimonies. The Sheriff of the NLRC said in his
Report21 that, in the course of his implementation of the writ of injunction, he
observed that the striking employees blocked the exit lane of the Alson drive with
their tent. Tungapalan, a non-striking employee, identified the Union members who
threatened and coerced him. Indeed, he filed criminal actions against them. Lastly,
the photos taken of the strike show the strikers, properly identified, committing the
acts complained of. These constitute substantial evidence in support of the
termination of the subject Union members.
The mere fact that the criminal complaints against the terminated Union members
were subsequently dismissed for one reason or another does not extinguish their
liability under the Labor Code. Nor does such dismissal bar the admission of the
affidavits, documents, and photos presented to establish their identity and guilt
during the hearing of the petition to declare the strike illegal. The technical grounds
that the Union interposed for denying admission of the photos are also not binding
on the NLRC.22
Four. The terminated Union members contend that, since the Company refused to
reinstate them after the Labor Arbiter rendered a decision in their favor, the
Company should be ordered to pay them their wages during the pendency of the
appeals from the Labor Arbiters decision.
It will be recalled that after the Labor Arbiter rendered his decision on June 29,
1999, which decision ordered the reinstatement of the terminated Union members,
the latter promptly filed a motion for their reinstatement pending appeal. But the
Labor Arbiter did not for some reason act on the motion. As it happened, after about
four months or on November 8, 1999, the NLRC reversed the Labor Arbiters
reinstatement order. It cannot be said, therefore, that the Company had resisted a
standing order of reinstatement directed at it at this point.
Of course, on March 20, 2002 the CA restored the Labor Arbiters reinstatement
order. And this prompted the affected Union members to again file with the Labor
Arbiter a motion for their reinstatement pending appeal. But, acting on the motion,
the Labor Arbiter resolved at this point that reinstatement was no longer practicable
because of the severely strained relation between the company and the terminated
Union members. In place of reinstatement, the Labor Arbiter ordered the Company
to pay them their separation pays.
Both parties appealed the Labor Arbiters above ruling 23 to the NLRC. But, as it
turned out the NLRC did not also favor reinstatement. It instead ordered the
Company to pay the terminated Union members their accrued wages and 13th

month pay considering its refusal to reinstate them pending appeal. On motion for
reconsideration, however, the NLRC reconsidered and deleted altogether the grant
of accrued wages and 13th month pay. The Union appealed the NLRC ruling to the
CA on behalf of its terminated members but the CA denied their appeal.
The CA denied reinstatement for the reason that the reinstatement pending appeal
provided under Article 223 of the Labor Code contemplated illegal dismissal or
termination cases and not cases under Article 264. But this perceived distinction
does not find support in the provisions of the Labor Code.
The grounds for termination under Article 264 are based on prohibited acts that
employees could commit during a strike. On the other hand, the grounds for
termination under Articles 282 to 284 are based on the employees conduct in
connection with his assigned work. Still, Article 217, which defines the powers of
Labor Arbiters, vests in the latter jurisdiction over all termination cases, whatever
be the grounds given for the termination of employment. Consequently, Article 223,
which provides that the decision of the Labor Arbiter reinstating a dismissed
employee shall immediately be executory pending appeal, cannot but apply to all
terminations irrespective of the grounds on which they are based.
Here, although the Labor Arbiter failed to act on the terminated Union members
motion for reinstatement pending appeal, the Company had the duty under Article
223 to immediately reinstate the affected employees even if it intended to appeal
from the decision ordaining such reinstatement. The Companys failure to do so
makes it liable for accrued backwages until the eventual reversal of the order of
reinstatement by the NLRC on November 8, 1999, 24 a period of four months and
nine days.1avvphi1
Five. While it is true that generally the grant of separation pay is not available to
employees who are validly dismissed, there are, in furtherance of the laws policy of
compassionate justice, certain circumstances that warrant the grant of some relief
in favor of the terminated Union members based on equity.
Bitter labor disputes, especially strikes, always generate a throng of odium and
abhorrence that sometimes result in unpleasant, although unwanted,
consequences.25 Considering this, the striking employees breach of certain
restrictions imposed on their concerted actions at their employers doorsteps cannot
be regarded as so inherently wicked that the employer can totally disregard their
long years of service prior to such breach. 26 The records also fail to disclose any
past infractions committed by the dismissed Union members. Taking these
circumstances in consideration, the Court regards the award of financial assistance
to these Union members in the form of one-half month salary for every year of
service to the company up to the date of their termination as equitable and
reasonable.
WHEREFORE, the Court DENIES the petition of the Nagkahiusang Mamumuo sa
Alsons-SPFL and its officers and members in G.R. 155135 for lack of merit, and
REVERSES and SETS ASIDE the decision of the Court of Appeals in CA-G.R. SP 59604
dated March 20, 2002. The Court, on the other hand, GRANTS the petition of C.

Alcantara & Sons, Inc. in G.R. 155109 and REINSTATES the decision of the National
Labor Relations Commission in NLRC CA M-004996-99 dated November 8, 1999.
Further, the Court PARTIALLY GRANTS the petition of the Nagkahiusang Mamumuo
sa Alsons-SPFL and their dismissed members in G.R. 179220 and ORDERS C.
Alcantara & Sons, Inc. to pay the terminated Union members backwages for four (4)
months and nine (9) days and separation pays equivalent to one-half month salary
for every year of service to the company up to the date of their termination, with
interest of 12% per annum from the time this decision becomes final and executory
until such backwages and separation pays are paid. The Court DENIES all other
claims.
SO ORDERED.

Lansangan v Amkor
G.R. No. 177026

January 30, 2009

LUNESA O. LANSANGAN AND ROCITA CENDAA, Petitioners,

vs.
AMKOR TECHNOLOGY PHILIPPINES, INC., Respondent.
x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
CARPIO MORALES, J.:
An anonymous e-mail was sent to the General Manager of Amkor Technology
Philippines (respondent) detailing allegations of malfeasance on the part of its
supervisory employees Lunesa Lansangan and Rosita Cendaa (petitioners) for
"stealing company time."1 Respondent thus investigated the matter, requiring
petitioners to submit their written explanation. In handwritten letters,
petitioners admitted their wrongdoing.2 Respondent thereupon terminated
petitioners for "extremely serious offenses" as defined in its Code of
Discipline,3 prompting petitioners to file a complaint for illegal dismissal against it. 4
Labor Arbiter Arthur L. Amansec, by Decision of October 20, 2004, 5 dismissed
petitioners complaint, he having found them guilty of
"[s]wiping another employees [sic] I.D. card or requesting another employee to
swipe ones I.D. card to gain personal advantage and/or in the interest of cheating",
an offense of dishonesty punishable as a serious form of misconduct and fraud or
breach of trust under Article 282 of the Labor Code:
xxxx
which allows the dismissal of an employee for a valid cause. (Emphasis and
underscoring supplied)

The Arbiter, however, ordered the reinstatement of petitioners to their former

positions without backwages "as a measure of equitable and compassionate relief"
owing mainly to petitioners prior unblemished employment records, show of
remorse, harshness of the penalty and defective attendance monitoring system of
respondent.6
Respondent assailed the reinstatement aspect of the Arbiters order before the
National Labor Relations Commission (NLRC).
In the meantime, petitioners, without appealing the Arbiters finding them guilty of
"dishonesty as a form of serious misconduct and fraud or breach of trust," moved
for the issuance of a "writ of reinstatement." 7
After a series of oppositions, motions and orders, 8 the Arbiter issued an alias writ of
execution following which respondents bank account at Equitable-PCI Bank was
garnished. Respondent thereupon moved for the quashal of the alias writ of
execution and lifting of the notice of garnishment, which the Arbiter denied by Order
of January 26, 2005, drawing respondent to appeal to the NLRC.
After consolidating respondents appeal from the Labor Arbiters order of
reinstatement and subsequent appeal/order denying the quashal of the alias writ of
execution and lifting of the notice of garnishment, the NLRC, by Resolution of June
30, 2005,9 granted respondents appeals by deleting the reinstatement aspect of
the Arbiters decision and setting aside the Arbiters Alias Writ of Execution and
Notice of Garnishment. Thus the NLRC disposed as follows:
ACCORDINGLY, the appeal is hereby GRANTED. The Labor Arbiters Decision dated
October 20, 2004 is hereby MODIFIED by DELETING the portion that ruled for
appelle[e]s reinstatement. Consequently, the Writ of Execution dated November
19, 2004, the subsequent Alias Writ of Execution dated January 26, 2005, and the
Notice of Garnishment dated January 14, 2005 served upon Equitable PCI Bank by
Sheriff Agripina Sangel are hereby ordered to be SET ASIDE.
SO ORDERED. (Underscoring supplied)
Petitioners motion for reconsideration of the NLRC Resolution having been denied,
they filed a petition for certiorari before the Court of Appeals which, by Decision 10 of
September 19, 2006, while affirming the finding that petitioners were guilty of
misconduct and the like, ordered respondent to "pay petitioners their corresponding
backwageswithout qualification and deduction for the period covering October 20,
2004 (date of the Arbiters decision) up to June 30, 2005 (date of the NLRC
Decision)," citing Article 223 of the Labor Code and Roquero v. Philippine Airlines. 11
Both parties filed their respective motions for partial reconsideration which were
denied.12 Only petitioners have come to this Court via the present petition for
review,13 contending that:
I
WITH ALL DUE RESPECT, THE ORDER OF THE HONORABLE COURT OF
APPEALS LIMITING THE PAYMENT OF BACKWAGES [TO] THE PETITIONERS FROM

OCTOBER 20, 2004 (ARBITER DECISION) UP TO JUNE 30, 2005 (NLRC DECISION)
ONLY IS CONTRARY TO THE CASE OF ALEJANDRO ROQUERO VS. PHILIPPINE
AIRLINES, INC.[,] G.R. NO. 152329, APRIL [22,] 2003 [AND]
II
. . . THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF
DISCRETION INCONCLUDING THAT THE PETITIONERS COMMITTED SERIOUS
MISCONDUCT, FRAUD, DISHONESTY AND BREACH OF TRUST. BUT EVEN ASSUMING
THAT THE PETITIONERS COMMITTED THE SWIPING IN OF IDENTIFICATION CARD, THE
PENALTY OF DISMISSAL IS TOO SEVERE, HARSH AND CONTRARY TO ARTICLE 282 OF
THE LABOR CODE OF THE PHILIPPINES AND EXISTING JURISPRUDENCE. 14
Since respondent did not appeal from the appellate courts decision, the said courts
order for it to pay backwages to petitioners for the therein specified period has
become final.
Petitioners highlight the Courts ruling in Roquero v. Philippine Airlines 15 where the
therein employer was ordered to pay the wages to which the therein employee was
entitled from the time the reinstatement order was issued until the finality of this
Courts decision16 in favor of the therein employee. Thus, petitioners contend that
the payment of backwages should not be computed only up to the promulgation by
the NLRC of its decision.
In its Comment,17 respondent asserts that, inter alia, petitioners reliance on
Roquero is misplaced in view of the glaring factual differences between said case
and the present case.
The petition fails.
The decision of the Arbiter finding that petitioners committed "dishonesty as a form
of serious misconduct and fraud, or breach of trust" had become final, petitioners
not having appealed the same before the NLRC as in fact they even moved for the
execution of the reinstatement aspect of the decision. It bears recalling that it was
only respondent which assailed the Arbiters decision to the NLRC to solely
question the propriety of the order for reinstatement, and it
succeeded.1avvphil.zw+
Roquero, as well as Article 22318 of the Labor Code on which the appellate court also
relied, finds no application in the present case. Article 223 concerns itself with an
interim relief, granted to a dismissed or separated employee while the case
for illegal dismissal is pending appeal, as what happened in Roquero. It does not
apply where there is no finding of illegal dismissal, as in the present case.
The Arbiter found petitioners dismissal to be valid. Such finding had, as stated
earlier, become final, petitioners not having appealed it. Following Article 279 which
provides:
xxxx

In cases of regular employment, the employer shall not terminate the services of an
employee except for a just cause or when authorized by this Title. An employee who
is unjustly dismissed from work shall be entitled to reinstatement without loss of
seniority rights and other privileges and to his full backwages, inclusive of
allowances, and to his other benefits or their monetary equivalent computed from
the time his compensation was withheld from him up to the time of his actual
reinstatement (Emphasis, underscoring and italics supplied),
petitioners are not entitled to full backwages as their dismissal was not found to be
illegal. Agabon v. NLRC19 so states payment of backwages and other benefits is
justified only if the employee was unjustly dismissed.
WHEREFORE, the petition is DENIED.
No costs.
SO ORDERED.

Pfizer v Velasco
G.R. No. 177467

March 9, 2011

PFIZER, INC. AND/OR REY GERARDO BACARRO, AND/OR FERDINAND

CORTES, AND/OR ALFRED MAGALLON, AND/OR ARISTOTLE
ARCE, Petitioners,
vs.
GERALDINE VELASCO, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Civil
Procedure to annul and set aside the Resolution 1 dated October 23, 2006 as well as
the Resolution2 dated April 10, 2007 both issued by the Court of Appeals in CA-G.R.
SP No. 88987 entitled, "Pfizer, Inc. and/or Rey Gerardo Bacarro, and/or Ferdinand
Cortes, and/or Alfred Magallon, and/or Aristotle Arce v. National Labor Relations
Commission Second Division and Geraldine Velasco." The October 23, 2006
Resolution modified upon respondents motion for reconsideration the
Decision3 dated November 23, 2005 of the Court of Appeals by requiring PFIZER,
Inc. (PFIZER) to pay respondents wages from the date of the Labor Arbiters
Decision4 dated December 5, 2003 until it was eventually reversed and set aside by
the Court of Appeals. The April 10, 2007 Resolution, on the other hand, denied
PFIZERs motion for partial reconsideration.
The facts of this case, as stated in the Court of Appeals Decision dated November
23, 2005, are as follows:
Private respondent Geraldine L. Velasco was employed with petitioner PFIZER, INC.
as Professional Health Care Representative since 1 August 1992. Sometime in April

2003, Velasco had a medical work up for her high-risk pregnancy and was
subsequently advised bed rest which resulted in her extending her leave of
absence. Velasco filed her sick leave for the period from 26 March to 18 June 2003,
her vacation leave from 19 June to 20 June 2003, and leave without pay from 23
June to 14 July 2003.
On 26 June 2003, while Velasco was still on leave, PFIZER through its Area Sales
Manager, herein petitioner Ferdinand Cortez, personally served Velasco a "Showcause Notice" dated 25 June 2003. Aside from mentioning about an investigation on
her possible violations of company work rules regarding "unauthorized deals and/or
discounts in money or samples and unauthorized withdrawal and/or pull-out of
stocks" and instructing her to submit her explanation on the matter within 48 hours
from receipt of the same, the notice also advised her that she was being placed
under "preventive suspension" for 30 days or from that day to 6 August 2003 and
consequently ordered to surrender the following "accountabilities;" 1) Company Car,
2) Samples and Promats, 3) CRF/ER/VEHICLE/SOA/POSAP/MPOA and other related
Company Forms, 4) Cash Card, 5) Caltex Card, and 6) MPOA/TPOA Revolving Travel
Fund. The following day, petitioner Cortez together with one Efren Dariano retrieved
the above-mentioned "accountabilities" from Velascos residence.
In response, Velasco sent a letter addressed to Cortez dated 28 June 2003 denying
the charges. In her letter, Velasco claimed that the transaction with Mercury Drug,
Magsaysay Branch covered by her check (no. 1072) in the amount of P23,980.00
was merely to accommodate two undisclosed patients of a certain Dr. Renato
Manalo. In support thereto, Velasco attached the Doctors letter and the affidavit of
the latters secretary.
On 12 July 2003, Velasco received a "Second Show-cause Notice" informing her of
additional developments in their investigation. According to the notice, a certain
Carlito Jomen executed an affidavit pointing to Velasco as the one who transacted
with a printing shop to print PFIZER discount coupons. Jomen also presented text
messages originating from Velascos company issued cellphone referring to the
printing of the said coupons. Again, Velasco was given 48 hours to submit her
written explanation on the matter. On 16 July 2003, Velasco sent a letter to PFIZER
via Aboitiz courier service asking for additional time to answer the second Showcause Notice.
That same day, Velasco filed a complaint for illegal suspension with money claims
before the Regional Arbitration Branch. The following day, 17 July 2003, PFIZER sent
her a letter inviting her to a disciplinary hearing to be held on 22 July 2003. Velasco
received it under protest and informed PFIZER via the receiving copy of the said
letter that she had lodged a complaint against the latter and that the issues that
may be raised in the July 22 hearing "can be tackled during the hearing of her case"
or at the preliminary conference set for 5 and 8 of August 2003. She likewise opted
to withhold answering the Second Show-cause Notice. On 25 July 2003, Velasco
received a "Third Show-cause Notice," together with copies of the affidavits of two
Branch Managers of Mercury Drug, asking her for her comment within 48 hours.

Finally, on 29 July 2003, PFIZER informed Velasco of its "Management Decision"

terminating her employment.
On 5 December 2003, the Labor Arbiter rendered its decision declaring the
dismissal of Velasco illegal, ordering her reinstatement with backwages and further
awarding moral and exemplary damages with attorneys fees. On appeal, the NLRC
affirmed the same but deleted the award of moral and exemplary damages. 5
The dispositive portion of the Labor Arbiters Decision dated December 5, 2003 is as
follows:
WHEREFORE, judgment is hereby rendered declaring that complainant was illegally
dismissed. Respondents are ordered to reinstate the complainant to her former
position without loss of seniority rights and with full backwages and to pay the
complainant the following:
1.

Full backwages (basic salary, company benefits, all allowances

as of December 5, 2003 in the amount of

P572,780.00);

13th Month Pay, Midyear, Christmas and performance bonuses

in the amount of

P105,300.00;

3.

Moral damages of

P50,000.00;

4.

Exemplary damages in the amount of

P30,000.00;

5.

Attorneys Fees of 10% of the award excluding damages in the

amount of

P67,808.00.

The total award is in the amount of

P758,080.00.6

2.

PFIZER appealed to the National Labor Relations Commission (NLRC) but its appeal
was denied via the NLRC Decision7 dated October 20, 2004, which affirmed the
Labor Arbiters ruling but deleted the award for damages, the dispositive portion of
which is as follows:
WHEREFORE, premises considered, the instant appeal and the motion praying for
the deposit in escrow of complainants payroll reinstatement are hereby denied and
the Decision of the Labor Arbiter is affirmed with the modification that the award of
moral and exemplary damages is deleted and attorneys fees shall be based on the
award of 13th month pay pursuant to Article III of the Labor Code. 8
PFIZER moved for reconsideration but its motion was denied for lack of merit in a
NLRC Resolution9 dated December 14, 2004.
Undaunted, PFIZER filed with the Court of Appeals a special civil action for the
issuance of a writ of certiorari under Rule 65 of the Rules of Court to annul and set
aside the aforementioned NLRC issuances. In a Decision dated November 23, 2005,

the Court of Appeals upheld the validity of respondents dismissal from

employment, the dispositive portion of which reads as follows:
WHEREFORE, the instant petition is GRANTED. The assailed Decision of the NLRC
dated 20 October 2004 as well as its Resolution of 14 December 2004 is hereby
ANNULED and SET ASIDE. Having found the termination of Geraldine L. Velascos
employment in accordance with the two notice rule pursuant to the due process
requirement and with just cause, her complaint for illegal dismissal is hereby
DISMISSED.10
Respondent filed a Motion for Reconsideration which the Court of Appeals resolved
in the assailed Resolution dated October 23, 2006 wherein it affirmed the validity of
respondents dismissal from employment but modified its earlier ruling by directing
PFIZER to pay respondent her wages from the date of the Labor Arbiters Decision
dated December 5, 2003 up to the Court of Appeals Decision dated November 23,
2005, to wit:
IN VIEW WHEREOF, the dismissal of private respondent Geraldine Velasco is
AFFIRMED, but petitioner PFIZER, INC. is hereby ordered to pay her the wages to
which she is entitled to from the time the reinstatement order was issued until
November 23, 2005, the date of promulgation of Our Decision. 11
Respondent filed with the Court a petition for review under Rule 45 of the Rules of
Civil Procedure, which assailed the Court of Appeals Decision dated November 23,
2005 and was docketed as G.R. No. 175122. Respondents petition, questioning the
Court of Appeals dismissal of her complaint, was denied by this Courts Second
Division in a minute Resolution12 dated December 5, 2007, the pertinent portion of
which states:
Considering the allegations, issues and arguments adduced in the petition for
review on certiorari, the Court resolves to DENY the petition for failure to sufficiently
show any reversible error in the assailed judgment to warrant the exercise of this
Courts discretionary appellate jurisdiction, and for raising substantially factual
issues.
On the other hand, PFIZER filed the instant petition assailing the aforementioned
Court of Appeals Resolutions and offering for our resolution a single legal issue, to
wit:
Whether or not the Court of Appeals committed a serious but reversible error when
it ordered Pfizer to pay Velasco wages from the date of the Labor Arbiters decision
ordering her reinstatement until November 23, 2005, when the Court of Appeals
rendered its decision declaring Velascos dismissal valid. 13
The petition is without merit.
PFIZER argues that, contrary to the Court of Appeals pronouncement in its assailed
Decision dated November 23, 2005, the ruling in Roquero v. Philippine Airlines,
Inc.14 is not applicable in the case at bar, particularly with regard to the nature and
consequences of an order of reinstatement, to wit:

The order of reinstatement is immediately executory. The unjustified refusal of the

employer to reinstate a dismissed employee entitles him to payment of his salaries
effective from the time the employer failed to reinstate him despite the issuance of
a writ of execution. Unless there is a restraining order issued, it is ministerial upon
the Labor Arbiter to implement the order of reinstatement. In the case at bar, no
restraining order was granted. Thus, it was mandatory on PAL to actually reinstate
Roquero or reinstate him in the payroll. Having failed to do so, PAL must pay
Roquero the salary he is entitled to, as if he was reinstated, from the time of the
decision of the NLRC until the finality of the decision of the Court. 15 (Emphases
supplied.)
It is PFIZERs contention in its Memorandum16 that "there was no unjustified refusal
on [its part] to reinstate [respondent] Velasco during the pendency of the
appeal,"17 thus, the pronouncement in Roquero cannot be made to govern this case.
During the pendency of the case with the Court of Appeals and prior to its
November 23, 2005 Decision, PFIZER claimed that it had already required
respondent to report for work on July 1, 2005. However, according to PFIZER, it was
respondent who refused to return to work when she wrote PFIZER, through counsel,
that she was opting to receive her separation pay and to avail of PFIZERs early
retirement program.
In PFIZERs view, it should no longer be required to pay wages considering that (1) it
had already previously paid an enormous sum to respondent under the writ of
execution issued by the Labor Arbiter; (2) it was allegedly ready to reinstate
respondent as of July 1, 2005 but it was respondent who unjustifiably refused to
report for work; (3) it would purportedly be tantamount to allowing respondent to
choose "payroll reinstatement" when by law it was the employer which had the right
to choose between actual and payroll reinstatement; (4) respondent should be
deemed to have "resigned" and therefore not entitled to additional backwages or
separation pay; and (5) this Court should not mechanically apply Roquero but rather
should follow the doctrine in Genuino v. National Labor Relations
Commission18 which was supposedly "more in accord with the dictates of fairness
and justice."19
We do not agree.
At the outset, we note that PFIZERs previous payment to respondent of the amount
of P1,963,855.00 (representing her wages from December 5, 2003, or the date of
the Labor Arbiter decision, until May 5, 2005) that was successfully garnished under
the Labor Arbiters Writ of Execution dated May 26, 2005 cannot be considered in its
favor. Not only was this sum legally due to respondent under prevailing
jurisprudence but also this circumstance highlighted PFIZERs unreasonable delay in
complying with the reinstatement order of the Labor Arbiter. A perusal of the
records, including PFIZERs own submissions, confirmed that it only required
respondent to report for work on July 1, 2005, as shown by its Letter 20 dated June
27, 2005, which is almost two years from the time the order of reinstatement was
handed down in the Labor Arbiters Decision dated December 5, 2003.

As far back as 1997 in the seminal case of Pioneer Texturizing Corporation v.

National Labor Relations Commission,21 the Court held that an award or order of
reinstatement is immediately self-executory without the need for the issuance of a
writ of execution in accordance with the third paragraph of Article 223 22 of the Labor
Code. In that case, we discussed in length the rationale for that doctrine, to wit:
The provision of Article 223 is clear that an award [by the Labor Arbiter] for
reinstatement shall be immediately executory even pending appeal and the posting
of a bond by the employer shall not stay the execution for reinstatement. The
legislative intent is quite obvious, i.e., to make an award of reinstatement
immediately enforceable, even pending appeal. To require the application for and
issuance of a writ of execution as prerequisites for the execution of a reinstatement
award would certainly betray and run counter to the very object and intent of Article
223, i.e., the immediate execution of a reinstatement order. The reason is simple.
An application for a writ of execution and its issuance could be delayed for
numerous reasons. A mere continuance or postponement of a scheduled hearing,
for instance, or an inaction on the part of the Labor Arbiter or the NLRC could easily
delay the issuance of the writ thereby setting at naught the strict mandate and
noble purpose envisioned by Article 223. In other words, if the requirements of
Article 224 [including the issuance of a writ of execution] were to govern, as we so
declared in Maranaw, then the executory nature of a reinstatement order or award
contemplated by Article 223 will be unduly circumscribed and rendered ineffectual.
In enacting the law, the legislature is presumed to have ordained a valid and
sensible law, one which operates no further than may be necessary to achieve its
specific purpose. Statutes, as a rule, are to be construed in the light of the purpose
to be achieved and the evil sought to be prevented. x x x In introducing a new rule
on the reinstatement aspect of a labor decision under Republic Act No. 6715,
Congress should not be considered to be indulging in mere semantic exercise. x x
x23 (Italics in the original; emphasis and underscoring supplied.)
In the case at bar, PFIZER did not immediately admit respondent back to work
which, according to the law, should have been done as soon as an order or award of
reinstatement is handed down by the Labor Arbiter without need for the issuance of
a writ of execution. Thus, respondent was entitled to the wages paid to her under
the aforementioned writ of execution. At most, PFIZERs payment of the same can
only be deemed partial compliance/execution of the Court of Appeals Resolution
dated October 23, 2006 and would not bar respondent from being paid her wages
from May 6, 2005 to November 23, 2005.
It would also seem that PFIZER waited for the resolution of its appeal to the NLRC
and, only after it was ordered by the Labor Arbiter to pay the amount
of P1,963,855.00 representing respondents full backwages from December 5, 2003
up to May 5, 2005, did PFIZER decide to require respondent to report back to
work via the Letter dated June 27, 2005.
PFIZER makes much of respondents non-compliance with its return- to-work
directive by downplaying the reasons forwarded by respondent as less than
sufficient to justify her purported refusal to be reinstated. In PFIZERs view, the

return-to-work order it sent to respondent was adequate to satisfy the

jurisprudential requisites concerning the reinstatement of an illegally dismissed
employee.
It would be useful to reproduce here the text of PFIZERs Letter dated June 27, 2005:
Dear Ms. Velasco:
Please be informed that, pursuant to the resolutions dated 20 October 2004 and 14
December 2004 rendered by the National Labor Relations Commission and the order
dated 24 May 2005 issued by Executive Labor Arbiter Vito C. Bose, you are required
to report for work on 1 July 2005, at 9:00 a.m., at Pfizers main office at the 23rd
Floor, Ayala LifeFGU Center, 6811 Ayala Avenue, Makati City, Metro Manila.
Please report to the undersigned for a briefing on your work assignments and other
responsibilities, including the appropriate relocation benefits.
For your information and compliance.
Very truly yours,
(Sgd.)
Ma. Eden Grace Sagisi
Labor and Employee Relations Manager 24
To reiterate, under Article 223 of the Labor Code, an employee entitled to
reinstatement "shall either be admitted back to work under the same terms and
conditions prevailing prior to his dismissal or separation or, at the option of the
employer, merely reinstated in the payroll."
It is established in jurisprudence that reinstatement means restoration to a state or
condition from which one had been removed or separated. The person reinstated
assumes the position he had occupied prior to his dismissal. Reinstatement
presupposes that the previous position from which one had been removed still
exists, or that there is an unfilled position which is substantially equivalent or of
similar nature as the one previously occupied by the employee. 25
Applying the foregoing principle to the case before us, it cannot be said that with
PFIZERs June 27, 2005 Letter, in belated fulfillment of the Labor Arbiters
reinstatement order, it had shown a clear intent to reinstate respondent to her
former position under the same terms and conditions nor to a substantially
equivalent position. To begin with, the return-to-work order PFIZER sent respondent
is silent with regard to the position or the exact nature of employment that it
wanted respondent to take up as of July 1, 2005. Even if we assume that the job
awaiting respondent in the new location is of the same designation and pay
category as what she had before, it is plain from the text of PFIZERs June 27, 2005
letter that such reinstatement was not "under the same terms and conditions" as
her previous employment, considering that PFIZER ordered respondent to report to
its main office in Makati City while knowing fully well that respondents previous job
had her stationed in Baguio City (respondents place of residence) and it was still

necessary for respondent to be briefed regarding her work assignments and

responsibilities,including her relocation benefits.
The Court is cognizant of the prerogative of management to transfer an employee
from one office to another within the business establishment, provided that there is
no demotion in rank or diminution of his salary, benefits and other privileges and
the action is not motivated by discrimination, made in bad faith, or effected as a
form of punishment or demotion without sufficient cause. 26 Likewise, the
management prerogative to transfer personnel must be exercised without grave
abuse of discretion and putting to mind the basic elements of justice and fair play.
There must be no showing that it is unnecessary, inconvenient and prejudicial to the
displaced employee.27
The June 27, 2005 return-to-work directive implying that respondent was being
relocated to PFIZERs Makati main office would necessarily cause hardship to
respondent, a married woman with a family to support residing in Baguio City.
However, PFIZER, as the employer, offered no reason or justification for the
relocation such as the filling up of respondents former position and the
unavailability of substantially equivalent position in Baguio City. A transfer of work
assignment without any justification therefor, even if respondent would be
presumably doing the same job with the same pay, cannot be deemed faithful
compliance with the reinstatement order. In other words, in this instance, there was
no real, bona fide reinstatement to speak of prior to the reversal by the Court of
Appeals of the finding of illegal dismissal.
In view of PFIZERs failure to effect respondent's actual or payroll reinstatement, it is
indubitable that the Roqueroruling is applicable to the case at bar. The circumstance
that respondent opted for separation pay in lieu of reinstatement as manifested in
her counsels Letter28 dated July 18, 2005 is of no moment. We do not see
respondents letter as taking away the option from management to effect actual or
payroll reinstatement but, rather under the factual milieu of this case, where the
employer failed to categorically reinstate the employee to her former or equivalent
position under the same terms, respondent was not obliged to comply with PFIZERs
ambivalent return-to-work order. To uphold PFIZERs view that it was respondent
who unjustifiably refused to work when PFIZER did not reinstate her to her former
position, and worse, required her to report for work under conditions prejudicial to
her, is to open the doors to potential employer abuse. Foreseeably, an employer
may circumvent the immediately enforceable reinstatement order of the Labor
Arbiter by crafting return-to-work directives that are ambiguous or meant to be
rejected by the employee and then disclaim liability for backwages due to nonreinstatement by capitalizing on the employees purported refusal to work. In sum,
the option of the employer to effect actual or payroll reinstatement must be
exercised in good faith.
Moreover, while the Court has upheld the employers right to choose between
actually reinstating an employee or merely reinstating him in the payroll, we have
also in the past recognized that reinstatement might no longer be possible under

certain circumstances. In F.F. Marine Corporation v. National Labor Relations

Commission,29 we had the occasion to state:
It is well-settled that when a person is illegally dismissed, he is entitled to
reinstatement without loss of seniority rights and other privileges and to his full
backwages. In the event, however, that reinstatement is no longer feasible,or if the
employee decides not be reinstated, the employer shall pay him separation pay
in lieu of reinstatement. Such a rule is likewise observed in the case of a strained
employer-employee relationship or when the work or position formerly held by the
dismissed employee no longer exists. In sum, an illegally dismissed employee is
entitled to: (1) either reinstatement if viable or separation pay if reinstatement is no
longer viable, and (2) backwages.30 (Emphasis supplied.)
Similarly, we have previously held that an employees demand for separation pay
may be indicative of strained relations that may justify payment of separation pay
in lieu of reinstatement.31 This is not to say, however, that respondent is entitled to
separation pay in addition to backwages. We stress here that a finding of strained
relations must nonetheless still be supported by substantial evidence. 32
In the case at bar, respondents decision to claim separation pay over reinstatement
had no legal effect, not only because there was no genuine compliance by the
employer to the reinstatement order but also because the employer chose not to
act on said claim. If it was PFIZERs position that respondents act amounted to a
"resignation" it should have informed respondent that it was accepting her
resignation and that in view thereof she was not entitled to separation pay. PFIZER
did not respond to respondents demand at all. As it was, PFIZERs failure to effect
reinstatement and accept respondents offer to terminate her employment
relationship with the company meant that, prior to the Court of Appeals reversal in
the November 23, 2005 Decision, PFIZERs liability for backwages continued to
accrue for the period not covered by the writ of execution dated May 24, 2005 until
November 23, 2005.
Lastly, PFIZER exhorts the Court to re-examine the application of Roquero with a
view that a mechanical application of the same would cause injustice since, in the
present case, respondent was able to gain pecuniary benefit notwithstanding the
circumstance of reversal by the Court of Appeals of the rulings of the Labor Arbiter
and the NLRC thereby allowing respondent to profit from the dishonesty she
committed against PFIZER which was the basis for her termination. In its stead,
PFIZER proposes that the Court apply the ruling in Genuino v. National Labor
Relations Commission33 which it believes to be more in accord with the dictates of
fairness and justice. In that case, we canceled the award of salaries from the date of
the decision of the Labor Arbiter awarding reinstatement in light of our subsequent
ruling finding that the dismissal is for a legal and valid ground, to wit:
Anent the directive of the NLRC in its September 3, 1994 Decision ordering Citibank
"to pay the salaries due to the complainant from the date it reinstated complainant
in the payroll (computed at P60,000.00 a month, as found by the Labor Arbiter) up
to and until the date of this decision," the Court hereby cancels said award in view
of its finding that the dismissal of Genuino is for a legal and valid ground.

Ordinarily, the employer is required to reinstate the employee during the pendency
of the appeal pursuant to Art. 223, paragraph 3 of the Labor Code, which states:
xxxx
If the decision of the labor arbiter is later reversed on appeal upon the finding that
the ground for dismissal is valid, then the employer has the right to require the
dismissed employee on payroll reinstatement to refund the salaries s/he received
while the case was pending appeal, or it can be deducted from the accrued benefits
that the dismissed employee was entitled to receive from his/her employer under
existing laws, collective bargaining agreement provisions, and company practices.
However, if the employee was reinstated to work during the pendency of the
appeal, then the employee is entitled to the compensation received for actual
services rendered without need of refund.
Considering that Genuino was not reinstated to work or placed on payroll
reinstatement, and her dismissal is based on a just cause, then she is not entitled to
be paid the salaries stated in item no. 3 of the fallo of the September 3, 1994 NLRC
Decision.34 (Emphases supplied.)
Thus, PFIZER implores the Court to annul the award of backwages and separation
pay as well as to require respondent to refund the amount that she was able to
collect by way of garnishment from PFIZER as her accrued salaries.
The contention cannot be given merit since this question has been settled by the
Court en banc.
In the recent milestone case of Garcia v. Philippine Airlines, Inc.,35 the Court
wrote finis to the stray posture inGenuino requiring the dismissed employee placed
on payroll reinstatement to refund the salaries in case a final decision upholds the
validity of the dismissal. In Garcia, we clarified the principle of reinstatement
pending appeal due to the emergence of differing rulings on the issue, to wit:
On this score, the Court's attention is drawn to seemingly divergent decisions
concerning reinstatement pending appeal or, particularly, the option of payroll
reinstatement. On the one hand is the jurisprudential trend as expounded in a line
of cases including Air Philippines Corp. v. Zamora, while on the other is the recent
case of Genuino v. National Labor Relations Commission. At the core of the seeming
divergence is the application of paragraph 3 of Article 223 of the Labor Code x x x.
xxxx
The view as maintained in a number of cases is that:
x x x [E]ven if the order of reinstatement of the Labor Arbiter is reversed
on appeal, it is obligatory on the part of the employer to reinstate and pay
the wages of the dismissed employee during the period of appeal until
reversal by the higher court. On the other hand, if the employee has been
reinstated during the appeal period and such reinstatement order is reversed with
finality, the employee is not required to reimburse whatever salary he received for

he is entitled to such, more so if he actually rendered services during the

period. (Emphasis in the original; italics and underscoring supplied)
In other words, a dismissed employee whose case was favorably decided by the
Labor Arbiter is entitled to receive wages pending appeal upon reinstatement, which
is immediately executory. Unless there is a restraining order, it is ministerial upon
the Labor Arbiter to implement the order of reinstatement and it is mandatory on
the employer to comply therewith.
The opposite view is articulated in Genuino which states:
If the decision of the labor arbiter is later reversed on appeal upon the finding that
the ground for dismissal is valid, then the employer has the right to require the
dismissed employee on payroll reinstatement to refund the salaries [he]
received while the case was pending appeal, or it can be deducted from the
accrued benefits that the dismissed employee was entitled to receive from [his]
employer under existing laws, collective bargaining agreement provisions, and
company practices. However, if the employee was reinstated to work during the
pendency of the appeal, then the employee is entitled to the compensation received
for actual services rendered without need of refund.
Considering that Genuino was not reinstated to work or placed on payroll
reinstatement, and her dismissal is based on a just cause, then she is not entitled to
be paid the salaries stated in item no. 3 of the fallo of the September 3, 1994 NLRC
Decision. (Emphasis, italics and underscoring supplied)
It has thus been advanced that there is no point in releasing the wages to
petitioners since their dismissal was found to be valid, and to do so would constitute
unjust enrichment.
Prior to Genuino, there had been no known similar case containing a dispositive
portion where the employee was required to refund the salaries received on payroll
reinstatement. In fact, in a catena of cases, the Court did not order the refund of
salaries garnished or received by payroll-reinstated employees despite a
subsequent reversal of the reinstatement order.
The dearth of authority supporting Genuino is not difficult to fathom for it would
otherwise render inutile the rationale of reinstatement pending appeal.
xxxx
x x x Then, by and pursuant to the same power (police power), the State may
authorize an immediate implementation, pending appeal, of a decision reinstating a
dismissed or separated employee since that saving act is designed to stop,
although temporarily since the appeal may be decided in favor of the appellant, a
continuing threat or danger to the survival or even the life of the dismissed or
separated employee and his family.36
Furthermore, in Garcia, the Court went on to discuss the illogical and unjust effects
of the "refund doctrine" erroneously espoused in Genuino:

Even outside the theoretical trappings of the discussion and into the mundane
realities of human experience, the "refund doctrine" easily demonstrates how a
favorable decision by the Labor Arbiter could harm, more than help, a dismissed
employee. The employee, to make both ends meet, would necessarily have to use
up the salaries received during the pendency of the appeal, only to end up having
to refund the sum in case of a final unfavorable decision. It is mirage of a stop-gap
leading the employee to a risky cliff of insolvency.1avvphi1
Advisably, the sum is better left unspent. It becomes more logical and practical for
the employee to refuse payroll reinstatement and simply find work elsewhere in the
interim, if any is available. Notably, the option of payroll reinstatement belongs to
the employer, even if the employee is able and raring to return to work. Prior
to Genuino, it is unthinkable for one to refuse payroll reinstatement. In the face of
the grim possibilities, the rise of concerned employees declining payroll
reinstatement is on the horizon.
Further, the Genuino ruling not only disregards the social justice principles behind
the rule, but also institutes a scheme unduly favorable to management. Under such
scheme, the salaries dispensed pendente lite merely serve as a bond posted in
installment by the employer. For in the event of a reversal of the Labor Arbiter's
decision ordering reinstatement, the employer gets back the same amount without
having to spend ordinarily for bond premiums. This circumvents, if not directly
contradicts, the proscription that the "posting of a bond [even a cash bond] by the
employer shall not stay the execution for reinstatement."
In playing down the stray posture in Genuino requiring the dismissed employee on
payroll reinstatement to refund the salaries in case a final decision upholds the
validity of the dismissal, the Court realigns the proper course of the prevailing
doctrine on reinstatement pending appeal vis--vis the effect of a reversal on
appeal.
xxxx
The Court reaffirms the prevailing principle that even if the order of
reinstatement of the Labor Arbiter is reversed on appeal, it is obligatory
on the part of the employer to reinstate and pay the wages of the
dismissed employee during the period of appeal until reversal by the
higher court. x x x.37 (Emphasis supplied.)
In sum, the Court reiterates the principle that reinstatement pending appeal
necessitates that it must be immediately self-executory without need for a writ of
execution during the pendency of the appeal, if the law is to serve its noble
purpose, and any attempt on the part of the employer to evade or delay its
execution should not be allowed. Furthermore, we likewise restate our ruling that an
order for reinstatement entitles an employee to receive his accrued backwages from
the moment the reinstatement order was issued up to the date when the same was
reversed by a higher court without fear of refunding what he had received. It cannot
be denied that, under our statutory and jurisprudential framework, respondent is
entitled to payment of her wages for the period after December 5, 2003 until the

Court of Appeals Decision dated November 23, 2005, notwithstanding the finding
therein that her dismissal was legal and for just cause. Thus, the payment of such
wages cannot be deemed as unjust enrichment on respondents part.
WHEREFORE, the petition is DENIED and the assailed Resolution dated October 23,
2006 as well as the Resolution dated April 10, 2007 both issued by the Court of
Appeals in CA-G.R. SP No. 88987 are hereby AFFIRMED.
SO ORDERED.
TERESITA J. LEONARDO-DE CASTRO
Associate Justice

Separation Pay in lieu of Reinstatement

Backwages
Computation
Limited Backwages

Preventive Suspension
Constructive Dismissal