MATERNITY CHILDREN'S HOSPITAL, represented by ANTERA L. DORADO,
01), representing underpayment of wages and ecola to
President, petitioner,
vs.
THE HONORABLE SECRETARY OF LABOR AND THE REGIONAL DlRECTOR OF LABOR, REGION
X, respondents.
MEDIALDEA, J.:
This is a petition for certiorari seeking the annulment of the Decision of the respondent
Secretary of Labor dated September 24, 1986, affirming with modification the Order of
respondent Regional Director of Labor, Region X, dated August 4, 1986, awarding salary
differentials and emergency cost of living allowances (ECOLAS) to employees of petitioner,
and the Order denying petitioner's motion for reconsideration dated May 13, 1987, on the
ground of grave abuse of discretion.
Petitioner is a semi-government hospital, managed by the Board of Directors of the Cagayan
de Oro Women's Club and Puericulture Center, headed by Mrs. Antera Dorado, as holdover
President. The hospital derives its finances from the club itself as well as from paying
patients, averaging 130 per month. It is also partly subsidized by the Philippine Charity
Sweepstakes Office and the Cagayan De Oro City government.
Petitioner has forty-one (41) employees. Aside from salary and living allowances, the
employees are given food, but the amount spent therefor is deducted from their respective
salaries (pp. 77-78, Rollo).
On May 23, 1986, ten (10) employees of the petitioner employed in different
capacities/positions filed a complaint with the Office of the Regional Director of Labor and
Employment, Region X, for underpayment of their salaries and ECOLAS, which was docketed
as ROX Case No. CW-71-86.
On June 16, 1986, the Regional Director directed two of his Labor Standard and Welfare
Officers to inspect the records of the petitioner to ascertain the truth of the allegations in the
complaints (p. 98, Rollo). Payrolls covering the periods of May, 1974, January, 1985,
November, 1985 and May, 1986, were duly submitted for inspection.
On July 17, 1986, the Labor Standard and Welfare Officers submitted their report confirming
that there was underpayment of wages and ECOLAs of all the employees by the petitioner,
the dispositive portion of which reads:
IN VIEW OF THE FOREGOING, deficiency on wage and ecola as verified
and confirmed per review of the respondent payrolls and interviews with
the complainant workers and all other information gathered by the team,
it is respectfully recommended to the Honorable Regional Director, this
office, that Antera Dorado, President be ORDERED to pay the amount of
SIX HUNDRED FIFTY FOUR THOUSAND SEVEN HUNDRED FIFTY SIX &
01/100 (P654,756.
the THIRTY SIX (36) employees of the said hospital as appearing in the
attached Annex "F" worksheets and/or whatever action equitable under
the premises. (p. 99, Rollo)
Based on this inspection report and recommendation, the Regional Director issued an Order
dated August 4, 1986, directing the payment of P723,888.58, representing underpayment of
wages and ECOLAs to all the petitioner's employees, the dispositive portion of which reads:
WHEREFORE, premises considered, respondent Maternity and Children
Hospital is hereby ordered to pay the above-listed complainants the total
amount indicated opposite each name, thru this Office within ten (10)
days from receipt thereof. Thenceforth, the respondent hospital is also
ordered to pay its employees/workers the prevailing statutory minimum
wage and allowance.
SO ORDERED. (p. 34, Rollo)
Petitioner appealed from this Order to the Minister of Labor and Employment, Hon. Augusto
S. Sanchez, who rendered a Decision on September 24, 1986, modifying the said Order in that
deficiency wages and ECOLAs should be computed only from May 23, 1983 to May 23, 1986,
the dispositive portion of which reads:
WHEREFORE, the August 29, 1986 order is hereby MODIFIED in that the
deficiency wages and ECOLAs should only be computed from May 23,
1983 to May 23, 1986. The case is remanded to the Regional Director,
Region X, for recomputation specifying the amounts due each the
complainants under each of the applicable Presidential Decrees. (p.
40, Rollo)
On October 24, 1986, the petitioner filed a motion for reconsideration which was denied by
the Secretary of Labor in his Order dated May 13, 1987, for lack of merit (p. 43 Rollo).
The instant petition questions the all-embracing applicability of the award involving salary
differentials and ECOLAS, in that it covers not only the hospital employees who signed the
complaints, but also those (a) who are not signatories to the complaint, and (b) those who
were no longer in the service of the hospital at the time the complaints were filed.
Petitioner likewise maintains that the Order of the respondent Regional Director of Labor, as
affirmed with modifications by respondent Secretary of Labor, does not clearly and distinctly
state the facts and the law on which the award was based. In its "Rejoinder to Comment",
petitioner further questions the authority of the Regional Director to award salary
differentials and ECOLAs to private respondents, (relying on the case of Encarnacion vs.
Baltazar, G.R. No. L-16883, March 27, 1961, 1 SCRA 860, as authority for raising the additional
issue of lack of jurisdiction at any stage of the proceedings, p. 52, Rollo), alleging that the
original and exclusive jurisdiction over money claims is properly lodged in the Labor Arbiter,
based on Article 217, paragraph 3 of the Labor Code.
The primary issue here is whether or not the Regional Director had jurisdiction over the case
and if so, the extent of coverage of any award that should be forthcoming, arising from his
visitorial and enforcement powers under Article 128 of the Labor Code. The matter of
whether or not the decision states clearly and distinctly statement of facts as well as the law
upon which it is based, becomes relevant after the issue on jurisdiction has been resolved.
This is a labor standards case, and is governed by Art. 128-b of the Labor Code, as amended
by E.O. No. 111. Labor standards refer to the minimum requirements prescribed by existing
laws, rules, and regulations relating to wages, hours of work, cost of living allowance and
other monetary and welfare benefits, including occupational, safety, and health standards
(Section 7, Rule I, Rules on the Disposition of Labor Standards Cases in the Regional Office,
dated September 16, 1987). 1 Under the present rules, a Regional Director
exercises both visitorial and enforcement power over labor standards cases, and is therefore
empowered to adjudicate money claims, providedthere still exists an employer-employee
relationship, and the findings of the regional office is not contested by the employer
concerned.
Prior to the promulgation of E.O. No. 111 on December 24, 1986, the Regional Director's
authority over money claims was unclear. The complaint in the present case was filed on May
23, 1986 when E.O. No. 111 was not yet in effect, and the prevailing view was that stated in
the case of Antonio Ong, Sr. vs. Henry M. Parel, et al., G.R. No. 76710, dated December 21,
1987, thus:
. . . the Regional Director, in the exercise of his visitorial and enforcement
powers under Article 128 of the Labor Code, has no authority to award
money claims, properly falling within the jurisdiction of the labor arbiter. .
..
. . . If the inspection results in a finding that the employer has violated
certain labor standard laws, then the regional director must order the
necessary rectifications. However, this does not include adjudication of
money claims, clearly within the ambit of the labor arbiter's authority
under Article 217 of the Code.
The Ong case relied on the ruling laid down in Zambales Base Metals Inc. vs. The Minister of
Labor, et al., (G.R. Nos. 73184-88, November 26, 1986, 146 SCRA 50) that the "Regional
Director was not empowered to share in the original and exclusive jurisdiction conferred on
Labor Arbiters by Article 217."
We believe, however, that even in the absence of E. O. No. 111, Regional Directors already
had enforcement powers over money claims, effective under P.D. No. 850, issued on
December 16, 1975, which transferred labor standards cases from the arbitration system to
the enforcement system.
To clarify matters, it is necessary to enumerate a series of rules and provisions of law on the
disposition of labor standards cases.
Prior to the promulgation of PD 850, labor standards cases were an exclusive function of labor
arbiters, under Article 216 of the then Labor Code (PD No. 442, as amended by PD 570-a),
which read in part:
Art. 216. Jurisdiction of the Commission. The Commission shall have
exclusive appellate jurisdiction over all cases decided by the Labor
Arbiters and compulsory arbitrators.
The Labor Arbiters shall have exclusive jurisdiction to hear and decide the
following cases involving all workers whether agricultural or non-
agricultural.
xxx xxx xxx
(c) All money claims of workers, involving non-
payment or underpayment of wages, overtime
compensation, separation pay, maternity leave and
other money claims arising from employee-employer
relations, except claims for workmen's compensation,
social security and medicare benefits;
(d) Violations of labor standard laws;
xxx xxx xxx
(Emphasis supplied)
The Regional Director exercised visitorial rights only under then Article 127 of the Code as
follows:
ART. 127. Visitorial Powers. The Secretary of Labor or his duly
authorized representatives, including, but not restricted, to the labor
inspectorate, shall have access to employers' records and premises at any
time of the day or night whenever work is being undertaken therein, and
the right to copy therefrom, to question any employee and investigate
any fact, condition or matter which may be necessary to determine
violations or in aid in the enforcement of this Title and of any Wage Order
or regulation issued pursuant to this Code.
With the promulgation of PD 850, Regional Directors were given enforcement powers, in
addition to visitorial powers. Article 127, as amended, provided in part:
 SEC. 10. Article 127 of the Code is hereby amended to read as follows: medicare benefits and as
otherwise provided in Article 127
Art. 127. Visitorial and enforcement powers. of this Code.

xxx xxx xxx xxx xxx xxx

(b) The Secretary of Labor or his (Emphasis supplied)

duly authorized
representatives shall have the Under the then Labor Code therefore (PD 442 as amended by PD 570-a, as further amended
power to order and administer, by PD 850), there were three adjudicatory units: The Regional Director, the Bureau of Labor
after due notice and Relations and the Labor Arbiter. It became necessary to clarify and consolidate all governing
hearing, compliance with the provisions on jurisdiction into one document. 2 On April 23, 1976, MOLE Policy Instructions
labor standards provisions of this No. 6 was issued, and provides in part (on labor standards cases) as follows:
Code based on the findings of
labor regulation officers or POLICY INSTRUCTIONS NO. 6
industrial safety engineers made
in the course of inspection, and to
TO: All Concerned
issue writs of execution to the
appropriate authority for the
enforcement of their order. SUBJECT: DISTRIBUTION OF JURISDICTION OVER LABOR CASES

xxx xxx xxx xxx xxx xxx

Labor Arbiters, on the other hand, lost jurisdiction over labor standards cases. Article 216, as 1. The following cases are under the exclusive original
then amended by PD 850, provided in part: jurisdiction of the Regional Director.

SEC. 22. Article 216 of the Code is hereby amended to read as follows: a) Labor standards cases arising
from violations of labor standard
laws discovered in the course of
Art. 216. Jurisdiction of Labor Arbiters and the
inspection or complaints where
Commission. (a) The Labor Arbiters shall
employer-employee relations still
have exclusive jurisdiction to hear and decide the
exist;
following cases involving all workers, whether
agricultural or non-agricultural:
xxx xxx xxx
xxx xxx xxx
2. The following cases are under the exclusive original
jurisdiction of the Conciliation Section of the Regional
(3) All money claims of workers
Office:
involving non-payment or
underpayment of wages, overtime
or premium compensation, a) Labor standards cases where
maternity or service incentive employer-employee
leave, separation pay and other relations no longer exist;
money claims arising from
employer-employee relations, xxx xxx xxx
except claims for employee's
compensation, social security and
 6. The following cases are certifiable to the Labor
Arbiters:
a) Cases not settled by the
Conciliation Section of the
Regional Office, namely:
1) labor standard cases where
employer-employee relations no
longer exist;
xxx xxx xxx
(Emphasis supplied)
MOLE Policy Instructions No. 7 (undated) was likewise subsequently issued, enunciating the
rationale for, and the scope of, the enforcement power of the Regional Director, the first and
second paragraphs of which provide as follows:
POLICY INSTRUCTIONS NO. 7
TO: All Regional Directors
SUBJECT: LABOR STANDARDS CASES
Under PD 850, labor standards cases have been taken from the arbitration
system and placed under the enforcement system, except where a)
questions of law are involved as determined by the Regional Director, b)
the amount involved exceeds P100,000.00 or over 40% of the equity of
the employer, whichever is lower, c) the case requires evidentiary matters
not disclosed or verified in the normal course of inspection, or d) there is
no more employer-employee relationship.
The purpose is clear: to assure the worker the rights and benefits due to
him under labor standards laws without having to go through arbitration.
The worker need not litigate to get what legally belongs to him. The
whole enforcement machinery of the Department of Labor exists to
insure its expeditious delivery to him free of charge. (Emphasis supplied)
Under the foregoing, a complaining employee who was denied his rights and benefits due
him under labor standards law need not litigate. The Regional Director, by virtue of his
enforcement power, assured "expeditious delivery to him of his rights and benefits free of
charge", provided of course, he was still in the employ of the firm.
After PD 850, Article 216 underwent a series of amendments (aside from being re-numbered
as Article 217) and with it a corresponding change in the jurisdiction of, and supervision over,
the Labor Arbiters:
1. PD 1367 (5-1-78) gave Labor Arbiters exclusive
jurisdiction over unresolved issues in collective
bargaining, etc., and those cases arising from
employer-employee relations duly indorsed by the
Regional Directors. (It also removed his jurisdiction
over moral or other damages) In other words, the
Labor Arbiter entertained cases certified to him.
(Article 228, 1978 Labor Code.)
2. PD 1391 (5-29-78) all regional units of the
National Labor Relations Commission (NLRC) were
integrated into the Regional Offices Proper of the
Ministry of Labor; effectively transferring direct
administrative control and supervision over the
Arbitration Branch to the Director of the Regional
Office of the Ministry of Labor. "Conciliable cases"
which were thus previously under the jurisdiction of
the defunct Conciliation Section of the Regional Office
for purposes of conciliation or amicable settlement,
became immediately assignable to the Arbitration
Branch for joint conciliation and compulsory
arbitration. In addition, the Labor Arbiter had
jurisdiction even over termination and labor-
standards cases that may be assigned to them for
compulsory arbitration by the Director of the Regional
Office. PD 1391 merged conciliation and compulsory
arbitration functions in the person of the Labor
Arbiter. The procedure governing the disposition of
cases at the Arbitration Branch paralleled those in the
Special Task Force and Field Services Division, with
one major exception: the Labor Arbiter exercised full
and untrammelled authority in the disposition of the
case, particularly in the substantive aspect, his
decisions and orders subject to review only on appeal
to the NLRC. 3
3. MOLE Policy Instructions No. 37 Because of the
seemingly overlapping functions as a result of PD
1391, MOLE Policy Instructions No. 37 was issued on
October 7, 1978, and provided in part:
POLICY INSTRUCTIONS NO. 37
TO: All Concerned
SUBJECT: ASSIGNMENT OF CASES TO LABOR ARBITERS
Pursuant to the provisions of Presidential Decree No.
1391 and to insure speedy disposition of labor cases,
the following guidelines are hereby established for
the information and guidance of all concerned.
1. Conciliable Cases.
Cases which are conciliable per se i.e., (a) labor
standards cases where employer-employee
relationship no longer exists; (b) cases involving
deadlock in collective bargaining, except those falling
under P.D. 823, as amended; (c) unfair labor practice
cases; and (d) overseas employment cases, except
those involving overseas seamen, shall be assigned by
the Regional Director to the Labor Arbiter for
conciliation and arbitration without coursing them
through the conciliation section of the Regional
Office.
2. Labor Standards Cases.
Cases involving violation of labor standards laws
where employer- employee relationship still
exists shall be assigned to the Labor Arbiters where:
a) intricate questions of law are
involved; or
b) evidentiary matters not
disclosed or verified in the normal
course of inspection by labor
regulations officers are required
for their proper disposition.
3. Disposition of Cases.
When a case is assigned to a Labor Arbiter, all issues
raised therein shall be resolved by him including
those which are originally cognizable by the Regional
Director to avoid multiplicity of proceedings. In other
words, the whole case, and not merely issues involved
therein, shall be assigned to and resolved by him.
xxx xxx xxx
(Emphasis supplied)
4. PD 1691(5-1-80) original and exclusive
jurisdiction over unresolved issues in collective
bargaining and money claims, which includes moral or
other damages.
Despite the original and exclusive jurisdiction of labor arbiters over
money claims, however, the Regional Director nonetheless retained his
enforcement power, and remained empowered to
adjudicate uncontested money claims.
5. BP 130 (8-21-8l) strengthened voluntary
arbitration. The decree also returned the Labor
Arbiters as part of the NLRC, operating as Arbitration
Branch thereof.
6. BP 227(6-1- 82) original and exclusive
jurisdiction over questions involving legality of strikes
and lock-outs.
The present petition questions the authority of the Regional Director to issue the Order,
dated August 4, 1986, on the basis of his visitorial and enforcement powers under Article 128
(formerly Article 127) of the present Labor Code. It is contended that based on the rulings in
the Ong vs. Parel (supra) and the Zambales Base Metals, Inc. vs. TheMinister of Labor
(supra) cases, a Regional Director is precluded from adjudicating money claims on the ground
that this is an exclusive function of the Labor Arbiter under Article 217 of the present Code.
On August 4, 1986, when the order was issued, Article 128(b) 4 read as follows:
(b) The Minister of Labor or his duly authorized
representatives shall have the power to order and
administer, after due notice and hearing, compliance
with the labor standards provisions of this Code based
on the findings of labor regulation officers or
industrial safety engineers made in the course of
inspection, and to issue writs of execution to the
appropriate authority for the enforcement of
their order, except in cases where the employer
contests the findings of the labor regulations officer
and raises issues which cannot be resolved without
considering evidentiary matters that are not verifiable
in the normal course of inspection. (Emphasis
supplied)
On the other hand, Article 217 of the Labor Code as amended by P.D. 1691, effective May 1,
1980; Batas Pambansa Blg. 130, effective August 21, 1981; and Batas Pambansa Blg. 227,
effective June 1, 1982, inter alia, provides:
ART. 217. Jurisdiction of Labor Arbiters and the Commission. (a) The
Labor Arbiters shall have the original and exclusive jurisdiction to hear
and decide within thirty (30) working days after submission of the case by
the parties for decision, the following cases involving all workers, whether
agricultural or non-agricultural:
1. Unfair labor practice cases;
2. Those that workers may file involving wages, hours
of work and other terms and conditions of
employment;
3. All money claims of workers, including those based
on non-payment or underpayment of wages,
overtime compensation, separation pay and other
benefits provided by law or appropriate agreement,
except claims for employees' compensation, social
security, medicare and maternity benefits;
4. Cases involving household services; and
5. Cases arising from any violation of Article 265 of
this Code, including questions involving the legality of
strikes and lock-outs. (Emphasis supplied)
The Ong and Zambales cases involved workers who were still connected with the company.
However, in the Ong case, the employer disputed the adequacy of the evidentiary foundation
(employees' affidavits) of the findings of the labor standards inspectors while in the Zambales
case, the money claims which arose from alleged violations of labor standards provisions
were not discovered in the course of normal inspection. Thus, the provisions of MOLE Policy
Instructions Nos. 6, (Distribution of Jurisdiction Over Labor Cases) and 37 (Assignment of
Cases to Labor Arbiters) giving Regional Directors adjudicatory powers over uncontested
money claims discovered in the course of normal inspection, provided an employer-employee
relationship still exists, are inapplicable.
In the present case, petitioner admitted the charge of underpayment of wages to workers still
in its employ; in fact, it pleaded for time to raise funds to satisfy its obligation. There was thus
no contest against the findings of the labor inspectors.
Barely less than a month after the promulgation on November 26, 1986 of the Zambales Base
Metals case, Executive Order No. 111 was issued on December 24, 1986, 5 amending Article
128(b) of the Labor Code, to read as follows:
(b) THE PROVISIONS OF ARTICLE 217 OF THIS CODE
TO THE CONTRARY NOTWITHSTANDING AND IN
CASES WHERE THE RELATIONSHIP OF EMPLOYER-
EMPLOYEE STILL EXISTS, the Minister of Labor and
Employment or his duly authorized representatives
shall have the power to order and administer, after
due notice and hearing, compliance with the labor
standards provisions of this Code AND OTHER LABOR
LEGISLATION based on the findings of labor regulation
officers or industrial safety engineers made in the
course of inspection, and to issue writs of execution
to the appropriate authority for the enforcement of
their orders, except in cases where the employer
contests the findings of the labor regulation officer
and raises issues which cannot be resolved without
considering evidentiary matters that are not verifiable
in the normal course of inspection. (Emphasis
supplied)
As seen from the foregoing, EO 111 authorizes a Regional Director to order compliance by an
employer with labor standards provisions of the Labor Code and other legislation. It is Our
considered opinion however, that the inclusion of the phrase, " The provisions of Article 217
of this Code to the contrary notwithstanding and in cases where the relationship of employer-
employee still exists" ... in Article 128(b), as amended, above-cited,
merely confirms/reiterates the enforcement adjudication authority of the Regional Director
over uncontested money claims in cases where an employer-employee relationship still
exists. 6
Viewed in the light of PD 850 and read in coordination with MOLE Policy Instructions Nos. 6, 7
and 37, it is clear that it has always been the intention of our labor authorities to provide our
workers immediate access (when still feasible, as where an employer-employee relationship
still exists) to their rights and benefits, without being inconvenienced by arbitration/litigation
processes that prove to be not only nerve-wracking, but financially burdensome in the long
run.
Note further the second paragraph of Policy Instructions No. 7 indicating that the transfer of
labor standards cases from the arbitration system to the enforcement system is
. . to assure the workers the rights and benefits due to him under labor
standard laws, without having to go through arbitration. . .
so that
. . the workers would not litigate to get what legally belongs to him. ..
ensuring delivery . . free of charge.
Social justice legislation, to be truly meaningful and rewarding to our workers, must not be
hampered in its application by long-winded arbitration and litigation. Rights must be asserted
and benefits received with the least inconvenience. Labor laws are meant to promote, not
defeat, social justice.
This view is in consonance with the present "Rules on the Disposition of Labor Standard Cases
in the Regional Offices " 7 issued by the Secretary of Labor, Franklin M. Drilon on September
16, 1987.
Thus, Sections 2 and 3 of Rule II on "Money Claims Arising from Complaint Routine
Inspection", provide as follows:
Section 2. Complaint inspection. All such complaints shall immediately
be forwarded to the Regional Director who shall refer the case to the
appropriate unit in the Regional Office for assignment to a Labor
Standards and Welfare Officer (LSWO) for field inspection. When the field
inspection does not produce the desired results, the Regional Director
shall summon the parties for summary investigation to expedite the
disposition of the case. . . .
Section 3. Complaints where no employer-employee relationship actually
exists. Where employer-employee relationship no longer exists by
reason of the fact that it has already been severed, claims for payment of
monetary benefits fall within the exclusive and original jurisdiction of the
labor arbiters. . . . (Emphasis supplied)
Likewise, it is also clear that the limitation embodied in MOLE Policy Instructions No. 7 to
amounts not exceeding P100,000.00 has been dispensed with, in view of the following
provisions of pars. (b) and (c), Section 7 on "Restitution", the same Rules, thus:
xxx xxx xxx
(b) Plant-level restitutions may be effected for money
claims not exceeding Fifty Thousand (P50,000.00). . . .
(c) Restitutions in excess of the aforementioned
amount shall be effected at the Regional Office or at
the worksite subject to the prior approval of the
Regional Director.
which indicate the intention to empower the Regional Director to award money claims in
excess of P100,000.00; provided of course the employer does not contest the findings made,
based on the provisions of Section 8 thereof:
Section 8. Compromise agreement. Should the parties arrive at an
agreement as to the whole or part of the dispute, said agreement shall be
reduced in writing and signed by the parties in the presence of the
Regional Director or his duly authorized representative.
E.O. No. 111 was issued on December 24, 1986 or three (3) months after the promulgation of
the Secretary of Labor's decision upholding private respondents' salary differentials and
ECOLAs on September 24, 1986. The amendment of the visitorial and enforcement powers of
the Regional Director (Article 128-b) by said E.O. 111 reflects the intention enunciated in
Policy Instructions Nos. 6 and 37 to empower the Regional Directors to resolve uncontested
money claims in cases where an employer-employee relationship still exists. This intention
must be given weight and entitled to great respect. As held in Progressive Workers' Union, et.
al. vs. F.P. Aguas, et. al. G.R. No. 59711-12, May 29, 1985, 150 SCRA 429:
. . The interpretation by officers of laws which are entrusted to their
administration is entitled to great respect. We see no reason to detract
from this rudimentary rule in administrative law, particularly when later
events have proved said interpretation to be in accord with the legislative
intent. ..
The proceedings before the Regional Director must, perforce, be upheld on the basis of
Article 128(b) as amended by E.O. No. 111, dated December 24, 1986, this executive order
"to be considered in the nature of a curative statute with retrospective application."
(Progressive Workers' Union, et al. vs. Hon. F.P. Aguas, et al. (Supra); M. Garcia vs. Judge A.
Martinez, et al., G.R. No. L- 47629, May 28, 1979, 90 SCRA 331).
We now come to the question of whether or not the Regional Director erred in extending the
award to all hospital employees. We answer in the affirmative.
The Regional Director correctly applied the award with respect to those employees
who signed the complaint, as well as those who did not sign the complaint, but were still
connected with the hospital at the time the complaint was filed (See Order, p. 33 dated
August 4, 1986 of the Regional Director, Pedrito de Susi, p. 33, Rollo).
The justification for the award to this group of employees who were not signatories to the
complaint is that the visitorial and enforcement powers given to the Secretary of Labor is
relevant to, and exercisable over establishments, not over the individual
members/employees, because what is sought to be achieved by its exercise is the observance
of, and/or compliance by, such firm/establishment with the labor standards regulations.
Necessarily, in case of an award resulting from a violation of labor legislation by such
establishment, the entire members/employees should benefit therefrom. As aptly stated by
then Minister of Labor Augusto S. Sanchez:
. . It would be highly derogatory to the rights of the workers, if after
categorically finding the respondent hospital guilty of underpayment of
wages and ECOLAs, we limit the award to only those who signed the
complaint to the exclusion of the majority of the workers who are
similarly situated. Indeed, this would be not only render the enforcement
power of the Minister of Labor and Employment nugatory, but would be
 the pinnacle of injustice considering that it would not only discriminate arbitration proceedings and therefore within the original and exclusive jurisdiction of the
but also deprive them of legislated benefits. Labor Arbiter.

. . . (pp. 38-39, Rollo). Petitioner has likewise questioned the order dated August 4, 1986 of the Regional Director in
that it does not clearly and distinctly state the facts and the law on which the award is based.
This view is further bolstered by the provisions of Sec. 6, Rule II of the "Rules on the
Disposition of Labor Standards cases in the Regional Offices" (supra) presently enforced, viz: We invite attention to the Minister of Labor's ruling thereon, as follows:

SECTION 6. Coverage of complaint inspection. A complaint inspection
shall not be limited to the specific allegations or violations raised by the
complainants/workers but shall be a thorough inquiry into and
verification of the compliance by employer with existing labor
standards and shall cover all workers similarly situated. (Emphasis
supplied)
However, there is no legal justification for the award in favor of those employees who were
no longer connected with the hospital at the time the complaint was filed, having resigned
therefrom in 1984, viz:
1. Jean (Joan) Venzon (See Order, p. 33, Rollo)
Finally, the respondent hospital assails the order under appeal as null and
void because it does not clearly and distinctly state the facts and the law
on which the awards were based. Contrary to the pretensions of the
respondent hospital, we have carefully reviewed the order on appeal and
we found that the same contains a brief statement of the (a) facts of the
case; (b) issues involved; (c) applicable laws; (d) conclusions and the
reasons therefor; (e) specific remedy granted (amount awarded). (p.
40, Rollo)
ACCORDINGLY, this petition should be dismissed, as it is hereby DISMISSED, as regards all
persons still employed in the Hospital at the time of the filing of the complaint, but GRANTED
as regards those employees no longer employed at that time.

2. Rosario Paclijan SO ORDERED.

3. Adela Peralta Fernan, C.J., Narvasa, Gutierrez, Jr., Cruz, Paras, Feliciano, Gancayco, Padilla, Bidin, Cortes,
Grio-Aquino and Regalado, JJ., concur.
4. Mauricio Nagales

5. Consesa Bautista

6. Teresita Agcopra

7. Felix Monleon

8. Teresita Salvador

9. Edgar Cataluna; and

10. Raymond Manija ( p.7, Rollo)

The enforcement power of the Regional Director cannot legally be upheld in cases of
separated employees. Article 129 of the Labor Code, cited by petitioner (p. 54, Rollo) is not
applicable as said article is in aid of the enforcement power of the Regional Director; hence,
not applicable where the employee seeking to be paid underpayment of wages is already
separated from the service. His claim is purely a money claim that has to be the subject of

CHARLITO PEARANDA, Petitioner,
vs.
BAGANGA PLYWOOD CORPORATION and HUDSON CHUA, Respondents.
DECISION
PANGANIBAN, CJ:
Managerial employees and members of the managerial staff are exempted from the
provisions of the Labor Code on labor standards. Since petitioner belongs to this class of
employees, he is not entitled to overtime pay and premium pay for working on rest days.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January
27, 20032 and July 4, 20033 Resolutions of the Court of Appeals (CA) in CA-GR SP No. 74358.
The earlier Resolution disposed as follows:
"WHEREFORE, premises considered, the instant petition is hereby DISMISSED."4
The latter Resolution denied reconsideration.
On the other hand, the Decision of the National Labor Relations Commission (NLRC)
challenged in the CA disposed as follows:
"WHEREFORE, premises considered, the decision of the Labor Arbiter below awarding
overtime pay and premium pay for rest day to complainant is hereby REVERSED and SET
ASIDE, and the complaint in the above-entitled case dismissed for lack of merit. 5
The Facts
Sometime in June 1999, Petitioner Charlito Pearanda was hired as an employee of Baganga
Plywood Corporation (BPC) to take charge of the operations and maintenance of its steam
plant boiler.6 In May 2001, Pearanda filed a Complaint for illegal dismissal with money claims
against BPC and its general manager, Hudson Chua, before the NLRC. 7
After the parties failed to settle amicably, the labor arbiter8 directed the parties to file their
position papers and submit supporting documents. 9 Their respective allegations are
summarized by the labor arbiter as follows:
"[Pearanda] through counsel in his position paper alleges that he was employed by
respondent [Baganga] on March 15, 1999 with a monthly salary of P5,000.00 as
Foreman/Boiler Head/Shift Engineer until he was illegally terminated on December 19, 2000.
Further, [he] alleges that his services [were] terminated without the benefit of due process
and valid grounds in accordance with law. Furthermore, he was not paid his overtime pay,
premium pay for working during holidays/rest days, night shift differentials and finally claims
for payment of damages and attorneys fees having been forced to litigate the present
complaint.
"Upon the other hand, respondent [BPC] is a domestic corporation duly organized and
existing under Philippine laws and is represented herein by its General Manager HUDSON
CHUA, [the] individual respondent. Respondents thru counsel allege that complainants
separation from service was done pursuant to Art. 283 of the Labor Code. The respondent
[BPC] was on temporary closure due to repair and general maintenance and it applied for
clearance with the Department of Labor and Employment, Regional Office No. XI to shut
down and to dismiss employees (par. 2 position paper). And due to the insistence of herein
complainant he was paid his separation benefits (Annexes C and D, ibid). Consequently, when
respondent [BPC] partially reopened in January 2001, [Pearanda] failed to reapply. Hence,
he was not terminated from employment much less illegally. He opted to severe employment
when he insisted payment of his separation benefits. Furthermore, being a managerial
employee he is not entitled to overtime pay and if ever he rendered services beyond the
normal hours of work, [there] was no office order/or authorization for him to do so. Finally,
respondents allege that the claim for damages has no legal and factual basis and that the
instant complaint must necessarily fail for lack of merit." 10
The labor arbiter ruled that there was no illegal dismissal and that petitioners Complaint was
premature because he was still employed by BPC.11 The temporary closure of BPCs plant did
not terminate his employment, hence, he need not reapply when the plant reopened.
According to the labor arbiter, petitioners money claims for illegal dismissal was also
weakened by his quitclaim and admission during the clarificatory conference that he
accepted separation benefits, sick and vacation leave conversions and thirteenth month pay. 12
Nevertheless, the labor arbiter found petitioner entitled to overtime pay, premium pay for
working on rest days, and attorneys fees in the total amount of P21,257.98.13
Ruling of the NLRC
Respondents filed an appeal to the NLRC, which deleted the award of overtime pay and
premium pay for working on rest days. According to the Commission, petitioner was not
entitled to these awards because he was a managerial employee. 14
Ruling of the Court of Appeals
In its Resolution dated January 27, 2003, the CA dismissed Pearandas Petition for Certiorari.
The appellate court held that he failed to: 1) attach copies of the pleadings submitted before
the labor arbiter and NLRC; and 2) explain why the filing and service of the Petition was not
done by personal service.15
In its later Resolution dated July 4, 2003, the CA denied reconsideration on the ground that
petitioner still failed to submit the pleadings filed before the NLRC. 16
Hence this Petition.17
The Issues
Petitioner states the issues in this wise:
"The [NLRC] committed grave abuse of discretion amounting to excess or lack of jurisdiction
when it entertained the APPEAL of the respondent[s] despite the lapse of the mandatory
period of TEN DAYS.1avvphil.net
"The [NLRC] committed grave abuse of discretion amounting to an excess or lack of
jurisdiction when it rendered the assailed RESOLUTIONS dated May 8, 2002 and AUGUST 16,
2002 REVERSING AND SETTING ASIDE the FACTUAL AND LEGAL FINDINGS of the [labor
arbiter] with respect to the following:
"I. The finding of the [labor arbiter] that [Pearanda] is a regular, common
employee entitled to monetary benefits under Art. 82 [of the Labor Code].
"II. The finding that [Pearanda] is entitled to the payment of OVERTIME PAY and
OTHER MONETARY BENEFITS."18
The Courts Ruling
The Petition is not meritorious.
Preliminary Issue:
Resolution on the Merits
The CA dismissed Pearandas Petition on purely technical grounds, particularly with regard
to the failure to submit supporting documents.
In Atillo v. Bombay,19 the Court held that the crucial issue is whether the documents
accompanying the petition before the CA sufficiently supported the allegations therein. Citing
this case, Piglas-Kamao v. NLRC20 stayed the dismissal of an appeal in the exercise of its equity
jurisdiction to order the adjudication on the merits.
The Petition filed with the CA shows a prima facie case. Petitioner attached his evidence to
challenge the finding that he was a managerial employee. 21 In his Motion for Reconsideration,
petitioner also submitted the pleadings before the labor arbiter in an attempt to comply with
the CA rules.22 Evidently, the CA could have ruled on the Petition on the basis of these
attachments. Petitioner should be deemed in substantial compliance with the procedural
requirements.
Under these extenuating circumstances, the Court does not hesitate to grant liberality in
favor of petitioner and to tackle his substantive arguments in the present case. Rules of
procedure must be adopted to help promote, not frustrate, substantial justice. 23 The Court
frowns upon the practice of dismissing cases purely on procedural grounds. 24 Considering that
there was substantial compliance,25 a liberal interpretation of procedural rules in this labor
case is more in keeping with the constitutional mandate to secure social justice. 26
First Issue:
Timeliness of Appeal
Under the Rules of Procedure of the NLRC, an appeal from the decision of the labor arbiter
should be filed within 10 days from receipt thereof. 27
Petitioners claim that respondents filed their appeal beyond the required period is not
substantiated. In the pleadings before us, petitioner fails to indicate when respondents
received the Decision of the labor arbiter. Neither did the petitioner attach a copy of the
challenged appeal. Thus, this Court has no means to determine from the records when the
10-day period commenced and terminated. Since petitioner utterly failed to support his claim
that respondents appeal was filed out of time, we need not belabor that point. The parties
alleging have the burden of substantiating their allegations. 28
Second Issue:
Nature of Employment
Petitioner claims that he was not a managerial employee, and therefore, entitled to the
award granted by the labor arbiter.
Article 82 of the Labor Code exempts managerial employees from the coverage of labor
standards. Labor standards provide the working conditions of employees, including
entitlement to overtime pay and premium pay for working on rest days. 29 Under this
provision, managerial employees are "those whose primary duty consists of the management
of the establishment in which they are employed or of a department or subdivision." 30
The Implementing Rules of the Labor Code state that managerial employees are those who
meet the following conditions:
"(1) Their primary duty consists of the management of the establishment in which
they are employed or of a department or subdivision thereof;
"3. To evaluate performance of machinery and manpower.
"4. To follow-up supply of waste and other materials for fuel.
"5. To train new employees for effective and safety while working.

"(2) They customarily and regularly direct the work of two or more employees "6. Recommend parts and supplies purchases.
therein;
"7. To recommend personnel actions such as: promotion, or disciplinary action.
"(3) They have the authority to hire or fire other employees of lower rank; or their
suggestions and recommendations as to the hiring and firing and as to the
"8. To check water from the boiler, feedwater and softener, regenerate softener if
promotion or any other change of status of other employees are given particular
beyond hardness limit.
weight."31

"9. Implement Chemical Dosing.

The Court disagrees with the NLRCs finding that petitioner was a managerial employee.
However, petitioner was a member of the managerial staff, which also takes him out of the
coverage of labor standards. Like managerial employees, officers and members of the
managerial staff are not entitled to the provisions of law on labor standards. 32 The
Implementing Rules of the Labor Code define members of a managerial staff as those with
the following duties and responsibilities:
"(1) The primary duty consists of the performance of work directly related to
management policies of the employer;
"(2) Customarily and regularly exercise discretion and independent judgment;
"(3) (i) Regularly and directly assist a proprietor or a managerial employee whose
primary duty consists of the management of the establishment in which he is
employed or subdivision thereof; or (ii) execute under general supervision work
along specialized or technical lines requiring special training, experience, or
knowledge; or (iii) execute under general supervision special assignments and tasks;
and
"(4) who do not devote more than 20 percent of their hours worked in a workweek
to activities which are not directly and closely related to the performance of the
work described in paragraphs (1), (2), and (3) above."33
As shift engineer, petitioners duties and responsibilities were as follows:
"10. Perform other task as required by the superior from time to time." 34
The foregoing enumeration, particularly items 1, 2, 3, 5 and 7 illustrates that petitioner was a
member of the managerial staff. His duties and responsibilities conform to the definition of a
member of a managerial staff under the Implementing Rules.
Petitioner supervised the engineering section of the steam plant boiler. His work involved
overseeing the operation of the machines and the performance of the workers in the
engineering section. This work necessarily required the use of discretion and independent
judgment to ensure the proper functioning of the steam plant boiler. As supervisor, petitioner
is deemed a member of the managerial staff.35
Noteworthy, even petitioner admitted that he was a supervisor. In his Position Paper, he
stated that he was the foreman responsible for the operation of the boiler. 36 The term
foreman implies that he was the representative of management over the workers and the
operation of the department.37 Petitioners evidence also showed that he was the supervisor
of the steam plant.38 His classification as supervisor is further evident from the manner his
salary was paid. He belonged to the 10% of respondents 354 employees who were paid on a
monthly basis; the others were paid only on a daily basis. 39
On the basis of the foregoing, the Court finds no justification to award overtime pay and
premium pay for rest days to petitioner.

WHEREFORE, the Petition is DENIED. Costs against petitioner.

"1. To supply the required and continuous steam to all consuming units at minimum
cost.

"2. To supervise, check and monitor manpower workmanship as well as operation

of boiler and accessories.

CMS ESTATE, INC., petitioner,
vs.
SOCIAL SECURITY SYSTEM and SOCIAL SECURITY COMMISSION, respondents.
Sison Dominguez & Cervantes for petitioner.
The Legal Counsel for respondent SSS.
CUEVAS, J.:
This appeal by the CMS Estate, Inc. from the decision rendered by the Social Security
Commission in its Case No. 12, entitled "CMS Estate, Inc. vs. Social Security System, declaring
CMS subject to compulsory coverage as of September 1, 1957 and "directing the Social
Security System to effect such coverage of the petitioner's employees in its logging and real
estate business conformably to the provision of Republic Act No. 1161, as amended was
certified to Us by the defunct Court of Appeals 1 for further disposition considering that
purely questions of law are involved.
Petitioner is a domestic corporation organized primarily for the purpose of engaging in the
real estate business. On December 1, 1952, it started doing business with only six (6)
employees. It's Articles of Incorporation was amended on June 4, 1956 in order to engage in
the logging business. The Securities and Exchange Commission issued the certificate of filing
of said amended articles on June 18, 1956. Petitioner likewise obtained an ordinary license
from the Bureau of Forestry to operate a forest concession of 13,000 hectares situated in the
municipality of Baganga, Province of Davao.
On January 28, 1957, petitioner entered into a contract of management with one Eufracio D.
Rojas for the operation and exploitation of the forest concession The logging operation
actually started on April 1, 1957 with four monthly salaried employees. As of September 1,
1957, petitioner had 89 employees and laborers in the logging operation. On December 26,
1957, petitioner revoked its contract of management with Mr. Rojas.
On August 1, 1958, petitioner became a member of the Social Security System with respect to
its real estate business. On September 6, 1958, petitioner remitted to the System the sum of
P203.13 representing the initial premium on the monthly salaries of the employees in its
logging business. However, on October 9, 1958, petitioner demanded the refund of the said
amount, claiming that it is not yet subject to compulsory coverage with respect to its logging
business. The request was denied by respondent System on the ground that the logging
business was a mere expansion of petitioner's activities and for purposes of the Social
Security Act, petitioner should be considered a member of the System since December 1,
1952 when it commenced its real estate business.
On November 10, 1958, petitioner filed a petition with the Social Security Commission
praying for the determination of the effectivity date of the compulsory coverage of
petitioner's logging business.
After both parties have submitted their respective memoranda, the Commission issued on
January 14, 1960, Resolution No. 91, 2 the dispositive portion of which reads as follows:
Premises considered, the instant petition is hereby denied and petitioner
is hereby adjudged to be subject to compulsory coverage as of Sept. 1,
1957 and the Social Security System is hereby directed to effect such
coverage of petitioner's employees in its logging and real estate business
conformably to the provisions of Rep. Act No. 1161, as amended.
SO ORDERED.
Petitioner's motion for reconsideration was denied in Resolution No. 609 of the Commission.
These two (2) resolutions are now the subject of petitioner's appeal. Petitioner submits that
respondent Commission erred in holding
(1) that the contributions required of employers and employees under
our Social Security Act of 1954 are not in the nature of excise taxes
because the said Act was allegedly enacted by Congress in the exercise of
the police power of the State, not of its taxing power;
(2) that no contractee independent contractor relationship existed
between petitioner and Eufracio D. Rojas during the time that he was
operating its forest concession at Baganga, Davao;
(3) that a corporation which has been in operation for more than two
years in one business is immediately covered with respect to any new and
independent business it may subsequently engage in;
(4) that a corporation should be treated as a single employing unit for
purposes of coverage under the Social Security Act, irrespective of its
separate, unrelated and independent business established and operated
at different places and on different dates; and
(5) that Section 9 of the Social Security Act on the question of compulsory
membership and employers should be given a liberal interpretation.
Respondent, on the other hand, advances the following propositions, inter alia:
(1) that the Social Security Act speaks of compulsory coverage of
employers and not of business;
 (2) that once an employer is initially covered under the Social Security
Act, any other business undertaken or established by the same employer
is likewise subject in spite of the fact that the latter has not been in
operation for at least two years;
(3) that petitioner's logging business while actually of a different, distinct,
separate and independent nature from its real estate business should be
considered as an operation under the same management;
(4) that the amendment of petitioner's articles of incorporation, so as to
enable it to engage in the logging business did not alter the juridical
personality of petitioner; and
(5) the petitioner's logging operation is a mere expansion of its business
activities.
The Social Security Law was enacted pursuant to the policy of the government "to develop,
establish gradually and perfect a social security system which shall be suitable to the needs of
the people throughout the Philippines, and shall provide protection against the hazards of
disability, sickness, old age and death" (Sec. 2, RA 1161, as amended). It is thus clear that said
enactment implements the general welfare mandate of the Constitution and constitutes a
legitimate exercise of the police power of the State. As held in the case of Philippine
Blooming Mills Co., Inc., et al. vs. SSS 3
Membership in the SSS is not a result of bilateral, concensual agreement
where the rights and obligations of the parties are defined by and subject
to their will, RA 1161 requires compulsory coverage of employees and
employers under the System. It is actually a legal imposition on said
employers and employees, designed to provide social security to the
workingmen. Membership in the SSS is therefore, in compliance with the
lawful exercise of the police power of the State, to which the principle of
non-impairment of the obligation of contract is not a proper defense.
xxx xxx xxx
The taxing power of the State is exercised for the purpose of raising revenues. However,
under our Social Security Law, the emphasis is more on the promotion of the general welfare.
The Act is not part of out Internal Revenue Code nor are the contributions and premiums
therein dealt with and provided for, collectible by the Bureau of Internal Revenue. The funds
contributed to the System belong to the members who will receive benefits, as a matter of
right, whenever the hazards provided by the law occur.
All that is required of appellant is to make monthly contributions to the
System for covered employees in its employ. These contributions,
contrary to appellant's contention, are not 'in the nature of taxes on
employment.' Together with the contributions imposed upon employees
and the Government, they are intended for the protection of said
employees against the hazards of disability, sickness, old age and death in
line with the constitutional mandate to promote social justice to insure
the well-being and economic security of all the people. 4
Because of the broad social purpose of the Social Security Act, all doubts in construing the
Act should favor coverage rather than exemption.
Prior to its amendment, Sec. 9 of the Act provides that before an employer could be
compelled to become a member of the System, he must have been in operation for at least
two years and has at the time of admission at least six employees. It should be pointed out
that it is the employer, either natural, or judicial person, who is subject to compulsory
coverage and not the business. If the intention of the legislature was to consider every
venture of the employer as the basis of a separate coverage, an express provision to that
effect could have been made. Unfortunately, however, none of that sort appeared provided
for in the said law.
Should each business venture of the employer be considered as the basis of the coverage, an
employer with more than one line of business but with less than six employees in each,
would never be covered although he has in his employ a total of more than six employees
which is sufficient to bring him within the ambit of compulsory coverage. This would frustrate
rather than foster the policy of the Act. The legislative intent must be respected. In the
absence of an express provision for a separate coverage for each kind of business, the
reasonable interpretation is that once an employer is covered in a particular kind of business,
he should be automatically covered with respect to any new name. Any interpretation which
would defeat rather than promote the ends for which the Social Security Act was enacted
should be eschewed. 5
Petitioner contends that the Commission cannot indiscriminately combine for purposes of
coverage two distinct and separate businesses when one has not yet been in operation for
more than two years thus rendering nugatory the period for more than two years thus
rendering nugatory the period of stabilization fixed by the Act. This contention lacks merit
since the amendatory law, RA 2658, which was approved on June 18, 1960, eliminated the
two-year stabilization period as employers now become automatically covered immediately
upon the start of the business.
Section 10 (formerly Sec. 9) of RA 1161, as amended by RA 2658 now provides:
Sec. 10. Effective date of coverage. Compulsory coverage of the
employer shall take effect on the first day of his operation, and that of the
employee on the date of his employment. (Emphasis supplied)
As We have previously mentioned, it is the intention of the law to cover as many persons as
possible so as to promote the constitutional objective of social justice. It is axiomatic that a
later law prevails over a prior statute and moreover the legislative in tent must be given
effect. 6
Petitioner further submits that Eufrancio Rojas is an independent contractor who engages in
an independent business of his own consisting of the operation of the timber concession of
the former. Rojas was appointed as operations manager of the logging consession; 7 he has no
power to appoint or hire employees; as the term implies, he only manages the employees
and it is petitioner who furnishes him the necessary equipment for use in the logging
business; and he is not free from the control and direction of his employer in matter
connected with the performance of his work. These factors clearly indicate that Rojas is not
an independent contractor but merely an employee of petitioner; and should be entitled to
the compulsory coverage of the Act.

The records indubitably show that petitioner started its real estate business on December 1,
1952 while its logging operation was actually commenced on April 1, 1957. Applying the
provision of Sec. 10 of the Act, petitioner is subject to compulsory coverage as of December
1, 1952 with respect to the real estate business and as of April 1, 1957 with respect to its
logging operation.

WHEREFORE, premises considered, the appeal is hereby DISMISSED. With costs against
petitioner.
DOLE PHILIPPINES, INC., petitioner, vs. PAWIS NG MAKABAYANG OBRERO (PAMAO-
NFL), respondent.
DECISION
CORONA, J.:
Before us is a petition for review filed under Rule 45 of the 1997 Rules of Civil
Procedure, assailing the January 9, 2001 resolution of the Court of Appeals which denied
petitioners motion for reconsideration of its September 22, 2000 decision [1] which in turn
upheld the Order issued by the voluntary arbitrator [2] dated 12 October 1998, the dispositive
portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
complainant. Respondent is hereby directed to extend the free meal benefit as provided for
in Article XVIII, Section 3 of the collective bargaining agreement to those employees who
have actually performed overtime works even for exactly three (3) hours only.
SO ORDERED. [3]
The core of the present controversy is the interpretation of the provision for free meals
under Section 3 of Article XVIII of the 1996-2001 Collective Bargaining Agreement (CBA)
between petitioner Dole Philippines, Inc. and private respondent labor union PAMAO-
NFL. Simply put, how many hours of overtime work must a Dole employee render to be
entitled to the free meal under Section 3 of Article XVIII of the 1996-2001 CBA? Is it when he
has rendered (a) exactly, or no less than, three hours of actual overtime work or (b) more
than three hours of actual overtime work?
The antecedents are as follows:
On February 22, 1996, a new five-year Collective Bargaining Agreement for the period
starting February 1996 up to February 2001, was executed by petitioner Dole Philippines, Inc.,
and private respondent Pawis Ng Makabayang Obrero-NFL (PAMAO-NFL). Among the
provisions of the new CBA is the disputed section on meal allowance under Section 3 of
Article XVIII on Bonuses and Allowances, which reads:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of TEN
PESOS (P10.00) to all employees who render at least TWO (2) hours or more of actual
overtime work on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY
FIVE PESOS (P25.00) after THREE (3) hours of actual overtime work.[4]
Pursuant to the above provision of the CBA, some departments of Dole reverted to the
previous practice of granting free meals after exactly three hours of actual overtime
work. However, other departments continued the practice of granting free meals only after
more than three hours of overtime work. Thus, private respondent filed a complaint before
the National Conciliation and Mediation Board alleging that petitioner Dole refused to comply
with the provisions of the 1996-2001 CBA because it granted free meals only to those who
rendered overtime work for more than three hours and not to those who rendered exactly
three hours overtime work.
The parties agreed to submit the dispute to voluntary arbitration. Thereafter, the
voluntary arbitrator, deciding in favor of the respondent, issued an order directing petitioner
Dole to extend the free meal benefit to those employees who actually did overtime work
even for exactly three hours only.
Petitioner sought a reconsideration of the above order but the same was
denied. Hence, petitioner elevated the matter to the Court of Appeals by way of a petition for
review on certiorari.
On September 22, 2000, the Court of Appeals rendered its decision upholding the
assailed order.
Thus, the instant petition.
Petitioner Dole asserts that the phrase after three hours of actual overtime work should
be interpreted to mean after more than three hours of actual overtime work.
On the other hand, private respondent union and the voluntary arbitrator see it as
meaning after exactly three hours of actual overtime work.
The meal allowance provision in the 1996-2001 CBA is not new. It was also in the 1985-
1988 CBA and the 1990-1995 CBA. The 1990-1995 CBA provision on meal allowance was
amended by the parties in the 1993-1995 CBA Supplement. The clear changes in each CBA
provision on meal allowance were in the amount of the meal allowance and free meals, and
the use of the words after and after more than to qualify the amount of overtime work to be
performed by an employee to entitle him to the free meal.
To arrive at a correct interpretation of the disputed provision of the CBA, a review of
the pertinent section of past CBAs is in order.
The CBA covering the period 21 September 1985 to 20 September 1988 provided:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of FOUR
(P4.00) PESOS to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, after THREE (3) hours of actual
overtime work.[5]
The CBA for 14 January 1990 to 13 January 1995 likewise provided:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL ALLOWANCE of EIGHT
PESOS (P8.00) to all employees who render at least TWO (2) hours or more of actual overtime
work on a workday, and FREE MEALS, as presently practiced, not exceeding SIXTEEN PESOS
(P16.00) after THREE (3) hours of actual overtime work.[6]
The provision above was later amended when the parties renegotiated the economic
provisions of the CBA pursuant to Article 253-A of the Labor Code. Section 3 of Article XVIII of
the 14 January 1993 to 13 January 1995 Supplement to the 1990-1995 CBA reads:
Section 3. MEAL ALLOWANCE. The COMPANY agrees to grant a MEAL SUBSIDY of NINE PESOS its employees and, if so, under what conditions. To see it otherwise would amount to an
(P9.00) to all employees who render at least TWO (2) hours or more of actual overtime work impairment of its rights as an employer.
on a workday, and FREE MEALS, as presently practiced, not exceeding TWENTY ONE PESOS
(P21.00) after more than THREE (3) hours of actual overtime work (Section 3, as amended).[7] We do not think so.

The exercise of management prerogative is not unlimited. It is subject to the limitations

We note that the phrase more than was neither in the 1985-1988 CBA nor in the
original 1990-1995 CBA. It was inserted only in the 1993-1995 CBA Supplement. But said
phrase is again absent in Section 3 of Article XVIII of the 1996-2001 CBA, which reverted to
the phrase after three (3) hours.
Petitioner asserts that the phrase after three (3) hours of actual overtime work does
not mean after exactly three hours of actual overtime work; it means after more than three
hours of actual overtime work. Petitioner insists that this has been the interpretation and
practice of Dole for the past thirteen years.
Respondent, on the other hand, maintains that after three (3) hours of actual overtime
work simply means after rendering exactly, or no less than, three hours of actual overtime
work.
found in law, a collective bargaining agreement or the general principles of fair play and
justice.[9] This situation constitutes one of the limitations. The CBA is the norm of conduct
between petitioner and private respondent and compliance therewith is mandated by the
express policy of the law.[10]
Petitioner Dole cannot assail the voluntary arbitrators interpretation of the CBA for the
supposed impairment of its management prerogatives just because the same interpretation is
contrary to its own.
WHEREFORE, petition is hereby denied.

The Court finds logic in private respondents interpretation.

The omission of the phrase more than between after and three hours in the present
CBA spells a big difference.

No amount of legal semantics can convince the Court that after more than means the
same as after.

Petitioner asserts that the more than in the 1993-1995 CBA Supplement was mere
surplusage because, regardless of the absence of said phrase in all the past CBAs, it had
always been the policy of petitioner corporation to give the meal allowance only after more
than 3 hours of overtime work. However, if this were true, why was it included only in the
1993-1995 CBA Supplement and the parties had to negotiate its deletion in the 1996-2001
CBA?

Clearly then, the reversion to the wording of previous CBAs can only mean that the
parties intended that free meals be given to employees after exactly, or no less than, three
hours of actual overtime work.

The disputed provision of the CBA is clear and unambiguous. The terms are explicit and
the language of the CBA is not susceptible to any other interpretation. Hence, the literal
meaning of free meals after three (3) hours of overtime work shall prevail, which is simply
that an employee shall be entitled to a free meal if he has rendered exactly, or no less than,
three hours of overtime work, not after more than or in excess of three hours overtime work.

Petitioner also invokes the well-entrenched principle of management prerogative that

the power to grant benefits over and beyond the minimum standards of law, or the Labor
Code for that matter, belongs to the employer x x x. According to this principle, even if the
law is solicitous of the welfare of the employees, it must also protect the right of the
employer to exercise what clearly are management prerogatives. [8] Petitioner claims that,
being the employer, it has the right to determine whether it will grant a free meal benefit to
DAVAO FRUITS CORPORATION, petitioner,
vs.
ASSOCIATED LABOR UNIONS (ALU) for in behalf of all the rank-and-file workers/employees
of DAVAO FRUITS CORPORATION and NATIONAL LABOR RELATIONS
COMMISSION, respondents.
Dominguez & Paderna Law Offices for petitioners.
The Solicitor General for public respondents.
QUIASON, J.:
This is a petition for certiorari to set aside the resolution of the National Labor Relations
Commission (NLRC), dismissing for lack of merit petitioner's appeal from the decision of the
Labor Arbiter in NLRC Case No. 1791-MC-X1-82.
On December 28, 1982 respondent Associated Labor Unions (ALU), for and in behalf of all the
rank-and-file workers and employees of petitioner, filed a complaint (NLRC Case No. 1791-
MC-XI-82) before the Ministry of Labor and Employment, Regional Arbitration Branch XI,
Davao City, against petitioner, for "Payment of the Thirteenth-Month Pay Differentials."
Respondent ALU sought to recover from petitioner the thirteenth month pay differential for
1982 of its rank-and-file employees, equivalent to their sick, vacation and maternity leaves,
premium for work done on rest days and special holidays, and pay for regular holidays which
petitioner, allegedly in disregard of company practice since 1975, excluded from the
computation of the thirteenth month pay for 1982.
In its answer, petitioner claimed that it erroneously included items subject of the complaint in
the computation of the thirteenth month pay for the years prior to 1982, upon a doubtful and
difficult question of law. According to petitioner, this mistake was discovered only in 1981
after the promulgation of the Supreme Court decision in the case of San Miguel Corporation
v. Inciong (103 SCRA 139).
A decision was rendered on March 7, 1984 by Labor Arbiter Pedro C. Ramos, in favor of
respondent ALU. The dispositive portion of the decision reads as follows:
WHEREFORE, in view of all the foregoing considerations, judgment is
hereby rendered ordering respondent to pay the 1982 13th month pay
differential to all its rank-and-file workers/employees herein represented
by complainant Union (Rollo, p. 32).
Petitioner appealed the decision of the Labor Arbiter to the NLRC, which affirmed the said
decision accordingly dismissed the appeal for lack of merit.
Petitioner elevated the matter to this Court in a petition for review under Rule 45 of the
Revised Rules of Court. This error notwithstanding and in the interest of justice, this Court
resolved to treat the instant petition as a special civil action for certiorari under Rule 65 of the
Revised Rules of Court (P.D. No. 1391, Sec. 5; Rules Implementing P.D. No. 1391, Rule II, Sec.
7; Cando v. National Labor Relations Commission, 189 SCRA 666 [1990]: Pearl S. Buck
Foundation, Inc. v. National Labor Relations Commission, 182 SCRA 446 [1990]).
The crux of the present controversy is whether in the computation of the thirteenth month
pay given by employers to their employees under P.D.
No. 851, payments for sick, vacation and maternity leaves, premiums for work done on rest
days and special holidays, and pay for regular holidays may be excluded in the computation
and payment thereof, regardless of long-standing company practice.
Presidential Decree No. 851, promulgated on December 16, 1975, mandates all employers to
pay their employees a thirteenth month pay. How this pay shall be computed is set forth in
Section 2 of the "Rules and Regulations Implementing Presidential Decree No. 851," thus:
SECTION 2. . . .
(a) "Thirteenth month pay" shall mean one twelfth (1/12) of the basic
salary of an employee within a calendar year.
(b) "Basic Salary" shall include all renumerations or earnings paid by an
employer to an employee for services rendered but may not include cost
of living allowances granted pursuant to Presidential Decree No. 525 or
Letter of Instructions No. 174, profit-sharing payments, and all allowances
and monetary benefits which are not considered or integrated as part of
the regular or basic salary of the employee at the time of the
promulgation of the Decree on December 16, 1975.
The Department of Labor and Employment issued on January 16, 1976 the "Supplementary
Rules and Regulations Implementing P.D. No. 851" which in paragraph 4 thereof further
defines the term "basic salary," thus:
4. Overtime pay, earnings and other renumerations which are not part of
the basic salary shall not be included in the computation of the 13th
month pay.
Clearly, the term "basic salary" includes renumerations or earnings paid by the employer to
employee, but excludes cost-of-living allowances, profit-sharing payments, and all allowances
and monetary benefits which have not been considered as part of the basic salary of the
employee as of December 16, 1975. The exclusion of cost-of-living allowances and profit
sharing payments shows the intention to strip "basic salary" of payments which are otherwise
considered as "fringe" benefits. This intention is emphasized in the catch all phrase "all
allowances and monetary benefits which are not considered or integrated as part of the basic
salary." Basic salary, therefore does not merely exclude the benefits expressly mentioned but
all payments which may be in the form of "fringe" benefits or allowances (San Miguel
Corporation v. Inciong, supra, at 143-144). In fact, the Supplementary Rules and Regulations
Implementing P.D. No. 851 are very emphatic in declaring that overtime pay, earnings and as early as January 16, 1976, barely one month after the effectivity of P.D. No. 851 and its
other renumerations shall be excluded in computing the thirteenth month pay. Implementing Rules. And yet, petitioner computed and paid the thirteenth month pay,
without excluding the subject items therein until 1981. Petitioner continued its practice in
In other words, whatever compensation an employee receives for an eight-hour work daily or December 1981, after promulgation of the afore-quoted San Miguel decision on February 24,
the daily wage rate in the basic salary. Any compensation or remuneration other than the 1981, when petitioner purportedly "discovered" its mistake.
daily wage rate is excluded. It follows therefore, that payments for sick, vacation and
maternity leaves, premium for work done on rest days special holidays, as well as pay for From 1975 to 1981, petitioner had freely, voluntarily and continuously included in the
regular holidays, are likewise excluded in computing the basic salary for the purpose of computation of its employees' thirteenth month pay, the payments for sick, vacation and
determining the thirteen month pay. maternity leaves, premiums for work done on rest days and special holidays, and pay for
regular holidays. The considerable length of time the questioned items had been included by
Petitioner claims that the mistake in the interpretation of "basic salary" was caused by the petitioner indicates a unilateral and voluntary act on its part, sufficient in itself to negate any
opinions, orders and rulings rendered by then Acting Labor Secretary Amado C. Inciong, claim of mistake.
expressly including the subject items in computing the thirteenth month pay. The inclusion of
these items is clearly not sanctioned under P.D. No. 851, the governing law and its A company practice favorable to the employees had indeed been established and the
implementing rules, which speak only of "basis salary" as the basis for determining the payments made pursuant thereto, ripened into benefits enjoyed by them. And any benefit
thirteenth month pay. and supplement being enjoyed by the employees cannot be reduced, diminished,
discontinued or eliminated by the employer, by virtue of Section 10 of the Rules and
Moreover, whatever doubt arose in the interpretation of P.D. No. 851 was erased by the Regulations Implementing P.D. No. 851, and Article 100 of the labor of the Philippines, which
Supplementary Rules and Regulations which clarified the definition of "basic salary." prohibit the diminution or elimination by the employer of the employees' existing benefits
(Tiangco v. Leogardo, Jr., 122 SCRA 267, [1983]).
As pointed out in San Miguel Corporation v. Inciong, (supra):
Petitioner cannot invoke the principle of solutio indebiti which as a civil law concept that is
not applicable in Labor Law. Besides, in solutio indebiti, the obligee is required to return to
While doubt may have been created by the prior Rules and Regulations
the obligor whatever he received from the latter (Civil Code of the Philippines, Arts. 2154 and
and Implementing Presidential Decree 851 which defines basic salary to
2155). Petitioner in the instant case, does not demand the return of what it paid respondent
include all remunerations or earnings paid by an employer to an
ALU from 1975 until 1981; it merely wants to "rectify" the error it made over these years by
employee, this cloud is dissipated in the later and more controlling
excluding unilaterally from the thirteenth month pay in 1982 the items subject of
Supplementary Rules and Regulations which categorically, exclude from
litigation. Solutio indebiti, therefore, is not applicable to the instant case.
the definition of basic salary earnings and other remunerations paid by
employer to an employee. A cursory perusal of the two sets of Rules
indicates that what has hitherto been the subject of broad inclusion is WHEREFORE, finding no grave abuse of discretion on the part of the NLRC, the petition is
now a subject of broad exclusion. The Supplementary Rules and hereby DISMISSED, and the questioned decision of respondent NLRC is AFFIRMED
Regulations cure the seeming tendency of the former rules to include all accordingly.
remunerations and earnings within the definition of basic salary.
Cruz, Grio-Aquino, Davide, Jr. and Bellosillo, JJ., concur.
The all-embracing phrase "earnings and other remunerations which are
deemed not part of the basic salary includes within its meaning payments
for sick, vacation, or maternity leaves, premium for work performed on
rest days and special holidays, pay for regular holidays and night
differentials. As such they are deemed not part of the basic salary and
shall not be considered in the computation of the 13th-month pay. If they
were not so excluded, it is hard to find any "earnings and other
remunerations" expressly excluded in computation of the 13th month-
pay. Then the exclusionary provision would prove to be idle and with
purpose.

The "Supplementary Rules and Regulations Implementing P.D. No. 851," which put to rest all
doubts in the computation of the thirteenth month pay, was issued by the Secretary of Labor
EDI STAFF BUILDERS INTERNATIONAL, INC. and LEOCADIO J. DOMINGUEZ, petitioners,
vs. FERMINA D. MAGSINO, respondent.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari of the decision,[1] dated March 11, 1999, and
the resolution,[2]dated July 20, 1999, of the Court of Appeals, affirming the finding of the
National Labor Relations Commission that respondent Fermina D. Magsino had been illegally
dismissed and ordering petitioner EDI Staffbuilders International, Inc. (EDI) and Leocadio J.
Dominguez to pay separation pay to respondent at the rate of P10,000.00 a month for every
year of service.
The antecedent facts are as follows:
Petitioner EDI is a duly licensed recruitment agency. Petitioner Leocadio J. Dominguez is
its president, while respondent Fermina D. Magsino was until her dismissal the supervisor of
its Processing and Documentation Group responsible for ensuring that all the documentary
and other requirements for the deployment abroad of contract workers recruited by
petitioner were complied with. Among the requirements was the remittance of premium
payments on the repatriation bonds of contract workers. Under Department Order No. 28,
series of 1991 of the Department of Labor and Employment, overseas contract workers
whose employment contracts have terms of six months or longer are required to post
repatriation bonds to guarantee the reimbursement of the costs of repatriation, including air
fare from the job site and other incidental expenses, in the event of the termination of their
employment.
In compliance with the DOLE order, petitioner EDI required overseas contract workers
recruited by it to pay P400.00 a year as premium depending on the length of their respective
employment contracts. The premiums were remitted to a bonding company accredited by the
Philippine Overseas Employment Agency.The bonding company issues a Certificate of
Coverage or COC indicating the name of the covered overseas contract worker, the duration
of the repatriation bond, and the premiums paid. The COCs are submitted together with
other documents to the POEA.
On April 16, 1993, Dan de Guzman, the manager of petitioners Processing and
Documentation Group, sent respondent the following memorandum:
Management has received reports on your withholding of collected premium payments for [the]
workers mandatory repatriation bond.
As you well know, all collections are supposed to be properly documented, accounted for, and
subsequently remitted/reported to accounting, whether these are official service fees of EDI-SBII
or payments to government offices for processing of workers travel documents. When PDG
records were reviewed, it was discovered that our document analyst has been collecting premium
payments from workers for a two-year bond coverage in accordance with their employment
contract[s]. However, based on your alleged instructions, collections for two-year premium
payments had been turned over to you.Subsequently, you released to the POEA liaison officer
premium payments only for one year. In effect, you withheld one-year premium payment[s] which
remain unaccounted to this day. It appears that this procedure has been going on since January
1992.
In this connection, you are required to submit to the undersigned within three (3) working days
from receipt hereof your written clarification and/or explanations on the foregoing acts, and to
show and justify why no disciplinary action should be taken against you.[3]
Instead of complying with the memorandum, respondent tendered her resignation
effective May 30, 1993.[4] However, action on her resignation letter was held in abeyance
pending the result of the investigation of the charge against her. [5] On May 20, 1993,
respondent was given notice of her termination.[6]
On July 12, 1993, respondent filed a complaint for illegal dismissal, nonpayment of
salaries, leave pay, 13th month pay, profit sharing for 1992, service award for 10 years, and
maternity benefits against herein petitioners. She claimed she had been dismissed without
cause and without notices.
As no amicable settlement had been reached, the Labor Arbiter on August 25, 1993
directed both parties to file their position papers.
Only respondent complied. The Labor Arbiter deemed as unrebutted the allegations in
respondents complaint and position paper. On May 19, 1994, the Labor Arbiter rendered his
decision, ordering petitioners to reinstate respondent to her former position without loss of
seniority rights and to pay her P91,492.80 backwages and P7,624.40 13th month pay.[7]
Petitioners appealed to the NLRC which, in its decision,[8] dated March 22, 1996,
affirmed the Labor Arbiters decision. The NLRC held:
The submission of [petitioners] position paper in the guise of an appeal could not be
entertained under the criteria set forth in Sec. 2 of Rule VI of the Rules of Procedure of the
NLRC, to wit:
Section 2. Grounds. The appeal may be entertained only on any of the following grounds:
a) If there is prima facie evidence of abuse of discretion on the part of the Labor Arbiter,
Regional Director or duly authorized Hearing Officer or Administrator of POEA;
b) If the decision, order or award was secured through fraud or coercion, including graft and
corruption;
c) If made purely on questions of law; and/or
d) If serious errors in the findings of facts are raised which, if not corrected, would cause
grave or irreparable damage or injury to the appellant. [9]
Through a new counsel, petitioners moved for a reconsideration, alleging that their
former lawyer deliberately did not file a position paper in their behalf before the Labor
Arbiter and did not even explain his failure to do so on appeal to the NLRC. However, the
NLRC found petitioners claim not supported by evidence and consequently denied their
motion for lack of merit.[10]
Petitioners then filed a petition for certiorari. Originally filed with this Court, the
petition was referred to the Court of Appeals pursuant to the ruling in St. Martin Funeral
Homes v. NLRC.[11] On March 11, 1999, the appeals court rendered a decision, the dispositive
portion of which reads:
WHEREFORE, finding no reversible error on the part of the NLRC, the assailed decision and
orders are hereby AFFIRMED with modification that in lieu of the order of reinstatement, a
separation pay shall be awarded to private respondent to be computed at the rate of Ten
Thousand Pesos (P10,000.00) for every month for every year of service. [12]
The Court of Appeals affirmed the NLRCs holding that petitioners could not present
their evidence on appeal for the first time. It further held that even considering their
evidence, petitioners had failed to prove that respondent was responsible for the
discrepancies between the premiums paid and the premiums remitted so as to justify her
termination since no documents were presented by petitioners to substantiate the
same.Petitioners moved for a reconsideration, but their motion was denied on July 20, 1999.
Hence this petition. Petitioners argue that respondent was dismissed for cause, for loss
of trust and confidence, and, therefore, should not have been granted separation pay.
In support of their contention, petitioners cite evidence they presented before the
National Labor Relations Commission in their memorandum on appeal and motion for
reconsideration, consisting of the following: (1) petitioner EDIs April 16, 1993 notice of
violation to respondent, (2) respondents letter of resignation, (3) notice of hearing of April 28,
1993, (4) notice of hearing of April 29, 1993, (5) notice of hearing of May 6, 1993, (6) May 6,
1993 letter of petitioner EDI notifying respondent that her letter of resignation could not be
considered pending results of the respondents investigation, and (7) May 20, 1993 notice of
respondents termination.[13]
The issues in this case are (1) whether the NLRC correctly disregarded the evidence
presented by petitioners on appeal on the ground that they failed to file their position paper
before the Labor Arbiter and (2) whether considering such evidence, respondent was
dismissed for cause, specifically, for loss of trust and confidence, and after due notice to her.
With respect to the first question, the Labor Code provides:
ART. 221. Technical rules not binding and prior resort to amicable settlement. In any
proceeding before the Commission or any of the Labor Arbiters, the 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. . . .
Accordingly, it has been settled that no undue sympathy is to be accorded to any claim of a
procedural misstep in labor cases. Such cases must be decided according to justice and equity
and the substantial merits of the controversy. [14] Thus, in Bristol Laboratories Employees
Association v. NLRC,[15] the Court held that the NLRC did not commit grave abuse of its
discretion in considering additional documentary evidence submitted by the employer on
appeal to prove breach of trust and loss of confidence as bases for the dismissal of the
petitioner in that case.
In this case, petitioners not implausibly ascribed to the fault of their counsel their
failure to file a position paper (which would have constituted their evidence) before the Labor
Arbiter. Considering that respondent had also been given the opportunity (in the NLRC, Court
of Appeals, and also here in this Court) to rebut petitioners evidence against her, the Court
deems it best to admit such evidence and to decide this case on the merits.
Considering, however, the evidence presented by petitioners on appeal, the Court finds
the same to be insufficient in establishing that respondent was dismissed for loss of trust and
confidence.
At the outset, it should be stressed that in an unlawful dismissal case, the employer has
the burden of proving the lawful cause for the employees dismissal. [16] Without sufficient
proof of loss of confidence, an employee cannot be dismissed on this ground. [17] It was,
therefore, error for both the NLRC and the Court of Appeals to disallow evidence on appeal
which petitioners tried to present.
In this case, there is no proof either of the amount collected by document analyst Mary
Ann Samson and turned over to respondent or of the amount which respondent turned over
to POEA liaison officer Ferdinand De la Cruz for eventual payment to the bonding
company. Proof of these amounts is necessary so that it can be determined whether
respondent was responsible for any defalcation. Petitioners simply alleged that respondent
failed to account for P201,600.00 without showing how this figure was arrived at. According
to petitioners, three individuals, namely, Mary Ann Samson, Ferdinand De la Cruz, and
respondent Fermina D. Magsino, actually handled the money for payment of the premiums of
the overseas contract workers bonds. It is, therefore, necessary for petitioners to show how
much was turned over by Mary Ann Samson to respondent and how much the latter in turn
turned over to Ferdinand De la Cruz. As the Court of Appeals aptly stated, if there are no
records to speak of, it follows that the discovered anomalies have no basis too. [18]
Nor can the Court of Appeals be faulted for ordering payment of separation pay in lieu
of reinstatement.Indeed, if any party can complain against this feature of the decision of the
Court of Appeals, it should be respondent, as employee, and not petitioners, who are the
employers. The strain in the relationship between the parties, not to mention the length of
time respondent has been out of petitioners employ, make an award of separation pay
appropriate.[19] The grant of separation pay is of course to be understood as separate and in
addition to the payment of backwages which, in accordance with the ruling in Bustamante
v. NLRC,[20] should be computed from the time of respondents dismissal up to the time of
finality of this decision and without any deduction and qualification.
WHEREFORE, the decision and resolution of the Court of Appeals are AFFIRMED with the
MODIFICATION that in addition to the grant of separation pay, respondent Fermina D. Magsino is
awarded backwages, inclusive of allowances, and other benefits, including 13th month pay, which should
be computed from the time of her dismissal up to the time of finality of this decision, without any
deduction and qualification.
SO ORDERED.
 Bellosillo, (Chairman), Quisumbing, Buena, and De Leon, Jr., JJ., concur.
MAXIMO CALALANG, Petitioner, v. A. D. WILLIAMS, ET AL., Respondents.
Maximo Calalang in his own behalf.
Solicitor General Ozaeta and Assistant Solicitor General Amparo for respondents Williams,
Fragante and Bayan
City Fiscal Mabanag for the other respondents.
SYLLABUS
3. ID.; ID.; SOCIAL JUSTICE. Social justice is "neither communism, nor despotism, nor atomism, nor
anarchy," but the humanization of laws and the equalization of social and economic forces by the State so
that justice in its rational and objectively secular conception may at least be approximated. Social justice
means the promotion of the welfare of all the people, the adoption by the Government of measures
calculated to insure economic stability of all the competent elements of society, through the
maintenance of a proper economic and social equilibrium in the interrelations of the members of the
community, constitutionally, through the adoption of measures legally justifiable, or extra-
constitutionally, through the exercise of powers underlying the existence of all governments on the time-
honored principle of salus populi est suprema lex. Social justice, therefore, must be founded on the
recognition of the necessity of interdependence among divers and diverse units of a society and of the
protection that should be equally and evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective of the state of promoting the
health, comfort, and quiet of all persons, and of bringing about "the greatest good to the greatest
number."
DECISION
LAUREL, J.:
Maximo Calalang, in his capacity as a private citizen and as a taxpayer of Manila, brought
before this court this petition for a writ of prohibition against the respondents, A. D. Williams,
as Chairman of the National Traffic Commission; Vicente Fragante, as Director of Public
Works; Sergio Bayan, as Acting Secretary of Public Works and Communications; Eulogio
Rodriguez, as Mayor of the City of Manila; and Juan Dominguez, as Acting Chief of Police of
Manila.
It is alleged in the petition that the National Traffic Commission, in its resolution of July 17,
1940, resolved to recommend to the Director of Public Works and to the Secretary of Public
Works and Communications that animal-drawn vehicles be prohibited from passing along
Rosario Street extending from Plaza Calderon de la Barca to Dasmarias Street, from 7:30
a.m. to 12:30 p.m. and from 1:30 p.m. to 5:30 p.m.; and along Rizal Avenue extending from
the railroad crossing at Antipolo Street to Echague Street, from 7 a.m. to 11 p.m., from a
period of one year from the date of the opening of the Colgante Bridge to traffic; that the
Chairman of the National Traffic Commission, on July 18, 1940 recommended to the Director
of Public Works the adoption of the measure proposed in the resolution aforementioned, in
pursuance of the provisions of Commonwealth Act No. 548 which authorizes said Director of
Public Works, with the approval of the Secretary of Public Works and Communications, to
promulgate rules and regulations to regulate and control the use of and traffic on national
roads; that on August 2, 1940, the Director of Public Works, in his first indorsement to the
Secretary of Public Works and Communications, recommended to the latter the approval of
the recommendation made by the Chairman of the National Traffic Commission as aforesaid,
with the modification that the closing of Rizal Avenue to traffic to animal-drawn vehicles be
limited to the portion thereof extending from the railroad crossing at Antipolo Street to
Azcarraga Street; that on August 10, 1940, the Secretary of Public Works and
Communications, in his second indorsement addressed to the Director of Public Works,
approved the recommendation of the latter that Rosario Street and Rizal Avenue be closed to
traffic of animal-drawn vehicles, between the points and during the hours as above indicated,
for a period of one year from the date of the opening of the Colgante Bridge to traffic; that
the Mayor of Manila and the Acting Chief of Police of Manila have enforced and caused to be
enforced the rules and regulations thus adopted; that as a consequence of such enforcement,
all animal-drawn vehicles are not allowed to pass and pick up passengers in the places above-
mentioned to the detriment not only of their owners but of the riding public as well.
It is contended by the petitioner that Commonwealth Act No. 548 by which the Director of
Public Works, with the approval of the Secretary of Public Works and Communications, is
authorized to promulgate rules and regulations for the regulation and control of the use of
and traffic on national roads and streets is unconstitutional because it constitutes an undue
delegation of legislative power. This contention is untenable. As was observed by this court in
Rubi v. Provincial Board of Mindoro (39 Phil, 660, 700), "The rule has nowhere been better
stated than in the early Ohio case decided by Judge Ranney, and since followed in a multitude
of cases, namely: The true distinction therefore is between the delegation of power to make
the law, which necessarily involves a discretion as to what it shall be, and conferring an
authority or discretion as to its execution, to be exercised under and in pursuance of the law.
The first cannot be done; to the latter no valid objection can be made. (Cincinnati, W. & Z. R.
Co. v. Commrs. Clinton County, 1 Ohio St., 88.) Discretion, as held by Chief Justice Marshall in
Wayman v. Southard (10 Wheat., 1) may be committed by the Legislature to an executive
department or official. The Legislature may make decisions of executive departments or
subordinate officials thereof, to whom it has committed the execution of certain acts, final on
questions of fact. (U.S. v. Kinkead, 248 Fed., 141.) The growing tendency in the decisions is to
give prominence to the necessity of the case."cralaw virtua1aw library
Section 1 of Commonwealth Act No. 548 reads as follows:jgc:chanrobles.com.ph
"SECTION 1. To promote safe transit upon, and avoid obstructions on, roads and streets
designated as national roads by acts of the National Assembly or by executive orders of the
President of the Philippines, the Director of Public Works, with the approval of the Secretary
of Public Works and Communications, shall promulgate the necessary rules and regulations to
regulate and control the use of and traffic on such roads and streets. Such rules and
regulations, with the approval of the President, may contain provisions controlling or
regulating the construction of buildings or other structures within a reasonable distance from
along the national roads. Such roads may be temporarily closed to any or all classes of traffic
by the Director of Public Works and his duly authorized representatives whenever the
condition of the road or the traffic thereon makes such action necessary or advisable in the
public convenience and interest, or for a specified period, with the approval of the Secretary
of Public Works and Communications."cralaw virtua1aw library
The above provisions of law do not confer legislative power upon the Director of Public Works
and the Secretary of Public Works and Communications. The authority therein conferred
upon them and under which they promulgated the rules and regulations now complained of
is not to determine what public policy demands but merely to carry out the legislative policy
laid down by the National Assembly in said Act, to wit, "to promote safe transit upon and
avoid obstructions on, roads and streets designated as national roads by acts of the National
Assembly or by executive orders of the President of the Philippines" and to close them
temporarily to any or all classes of traffic "whenever the condition of the road or the traffic
makes such action necessary or advisable in the public convenience and interest." The
delegated power, if at all, therefore, is not the determination of what the law shall be, but
merely the ascertainment of the facts and circumstances upon which the application of said
law is to be predicated. To promulgate rules and regulations on the use of national roads and
to determine when and how long a national road should be closed to traffic, in view of the
condition of the road or the traffic thereon and the requirements of public convenience and
interest, is an administrative function which cannot be directly discharged by the National
Assembly. It must depend on the discretion of some other government official to whom is
confided the duty of determining whether the proper occasion exists for executing the law.
But it cannot be said that the exercise of such discretion is the making of the law. As was said
in Lockes Appeal (72 Pa. 491): "To assert that a law is less than a law, because it is made to
depend on a future event or act, is to rob the Legislature of the power to act wisely for the
public welfare whenever a law is passed relating to a state of affairs not yet developed, or to
things future and impossible to fully know." The proper distinction the court said was this:
"The Legislature cannot delegate its power to make the law; but it can make a law to delegate
a power to determine some fact or state of things upon which the law makes, or intends to
make, its own action depend. To deny this would be to stop the wheels of government. There
are many things upon which wise and useful legislation must depend which cannot be known
to the law-making power, and, must, therefore, be a subject of inquiry and determination
outside of the halls of legislation." (Field v. Clark, 143 U. S. 649, 694; 36 L. Ed. 294.)
In the case of People v. Rosenthal and Osmea, G.R. Nos. 46076 and 46077, promulgated
June 12, 1939, and in Pangasinan Transportation v. The Public Service Commission, G.R. No.
47065, promulgated June 26, 1940, this Court had occasion to observe that the principle of
separation of powers has been made to adapt itself to the complexities of modern
governments, giving rise to the adoption, within certain limits, of the principle of
"subordinate legislation," not only in the United States and England but in practically all
modern governments. Accordingly, with the growing complexity of modern life, the
multiplication of the subjects of governmental regulations, and the increased difficulty of
administering the laws, the rigidity of the theory of separation of governmental powers has,
to a large extent, been relaxed by permitting the delegation of greater powers by the
legislative and vesting a larger amount of discretion in administrative and executive officials,
not only in the execution of the laws, but also in the promulgation of certain rules and
regulations calculated to promote public interest.
The petitioner further contends that the rules and regulations promulgated by the
respondents pursuant to the provisions of Commonwealth Act No. 548 constitute an unlawful
interference with legitimate business or trade and abridge the right to personal liberty and
freedom of locomotion. Commonwealth Act No. 548 was passed by the National Assembly in
the exercise of the paramount police power of the state.
Said Act, by virtue of which the rules and regulations complained of were promulgated, aims
to promote safe transit upon and avoid obstructions on national roads, in the interest and
convenience of the public. In enacting said law, therefore, the National Assembly was
prompted by considerations of public convenience and welfare. It was inspired by a desire to
relieve congestion of traffic. which is, to say the least, a menace to public safety. Public
welfare, then, lies at the bottom of the enactment of said law, and the state in order to
promote the general welfare may interfere with personal liberty, with property, and with
business and occupations. Persons and property may be subjected to all kinds of restraints
and burdens, in order to secure the general comfort, health, and prosperity of the state (U.S.
v. Gomez Jesus, 31 Phil., 218). To this fundamental aim of our Government the rights of the
individual are subordinated. Liberty is a blessing without which life is a misery, but liberty
should not be made to prevail over authority because then society will fall into anarchy.
Neither should authority be made to prevail over liberty because then the individual will fall
into slavery. The citizen should achieve the required balance of liberty and authority in his
mind through education and personal discipline, so that there may be established the
resultant equilibrium, which means peace and order and happiness for all. The moment
greater authority is conferred upon the government, logically so much is withdrawn from the
residuum of liberty which resides in the people. The paradox lies in the fact that the apparent
curtailment of liberty is precisely the very means of insuring its preservation.
The scope of police power keeps expanding as civilization advances. As was said in the case of
Dobbins v. Los Angeles (195 U.S. 223, 238; 49 L. ed. 169), "the right to exercise the police
power is a continuing one, and a business lawful today may in the future, because of the
changed situation, the growth of population or other causes, become a menace to the public
health and welfare, and be required to yield to the public good." And in People v. Pomar (46
Phil., 440), it was observed that "advancing civilization is bringing within the police power of
the state today things which were not thought of as being within such power yesterday. The
development of civilization, the rapidly increasing population, the growth of public opinion,
with an increasing desire on the part of the masses and of the government to look after and
care for the interests of the individuals of the state, have brought within the police power
many questions for regulation which formerly were not so considered."cralaw virtua1aw
library
The petitioner finally avers that the rules and regulations complained of infringe upon the
constitutional precept regarding the promotion of social justice to insure the well-being and
economic security of all the people. The promotion of social justice, however, is to be
achieved not through a mistaken sympathy towards any given group. Social justice is "neither
communism, nor despotism, nor atomism, nor anarchy," but the humanization of laws and
the equalization of social and economic forces by the State so that justice in its rational and
objectively secular conception may at least be approximated. Social justice means the
promotion of the welfare of all the people, the adoption by the Government of measures
calculated to insure economic stability of all the competent elements of society, through the
maintenance of a proper economic and social equilibrium in the interrelations of the
members of the community, constitutionally, through the adoption of measures legally
justifiable, or extra-constitutionally, through the exercise of powers underlying the existence
of all governments on the time-honored principle of salus populi est suprema lex.
Social justice, therefore, must be founded on the recognition of the necessity of
interdependence among divers and diverse units of a society and of the protection that
should be equally and evenly extended to all groups as a combined force in our social and
economic life, consistent with the fundamental and paramount objective of the state of
promoting the health, comfort, and quiet of all persons, and of bringing about "the greatest
good to the greatest number."cralaw virtua1aw library

In view of the foregoing, the writ of prohibition prayed for is hereby denied, with costs
against the petitioner. So ordered.

Avancea, C.J., Imperial, Diaz. and Horrilleno. JJ. concur.

PHILIPPINE AIRLINES, INC., petitioner,
vs.
ALBERTO SANTOS, JR., HOUDIEL MAGADIA, GILBERT ANTONIO, REGINO DURAN, PHILIPPINE
AIRLINES EMPLOYEES ASSOCIATION, and THE NATIONAL LABOR RELATIONS
COMMISSION, respondents.
Fortunato Gupit, Jr., Solon R. Garcia, Rene B. Gorospe, Bienvinodo T. Jamoralin, jr. and Paulino
D. Ungos, Jr. for petitioner.
Adolpho M. Guerzon for private respondents.
REGALADO, J.:
The instant petition for certiorari seeks to set aside the decision of The National Labor
Relations Commission (NLRC) in NLRC Case No. 4-1206-85, promulgated on December 11,
1986,1 containing the following disposition:
WHEREFORE, in view of the foregoing consideration, the Decision
appealed from is set aside and another one entered, declaring the
suspension of complainants to be illegal and consequently, respondent
PAL is directed to pay complainants their salaries corresponding to the
respective period(s) of their suspension, and to delete the disciplinary
action from complainants' service records.2
These material facts recited in the basic petition are virtually undisputed and we reproduce
the same hereunder:
1. Individual respondents are all Port Stewards of Catering Sub-
Department, Passenger Services Department of petitioner. Their duties
and responsibilities, among others, are:
Prepares meal orders and checklists, setting up
standard equipment in accordance with the
requirements of the type of service for each flight;
skiing, binning, and inventorying of Commissary
supplies and equipment.
2. On various occasions, several deductions were made from their salary.
The deductions represented losses of inventoried items charged to them
for mishandling of company properties . . . which respondents resented.
Such that on August 21, 1984, individual respondents, represented by the
union, made a formal notice regarding the deductions to petitioner thru
Mr. Reynaldo Abad, Manager for Catering. . . .
3. As there was no action taken on said representation, private
respondents filed a formal grievance on November 4, 1984 pursuant to
the grievance machinery Step 1 of the Collective Bargaining Agreement
between petitioner and the union. . . . The topics which the union wanted
to be discussed in the said grievance were the illegal/questionable salary
deductions and inventory of bonded goods and merchandise being done
by catering service personnel which they believed should not be their
duty.
4. The said grievance was submitted on November 21, 1984 to the office
of Mr. Reynaldo Abad, Manager for Catering, who at the time was on
vacation leave. . . .
5. Subsequently, the grievants (individual respondents) thru the shop
steward wrote a letter on December 5, 1984 addressed to the office of
Mr. Abad, who was still on leave at the time, that inasmuch as no reply
was made to their grievance which "was duly received by your secretary"
and considering that petitioner had only five days to resolve the grievance
as provided for in the CBA, said grievance as believed by them (private
respondents) was deemed resolved in their favor. . . .
6. Upon Mr. Abad's return on December 7, 1984, he immediately
informed the grievants and scheduled a meeting on December 12, 1984. .
..
7. Thereafter, the individual respondents refused to conduct inventory
works. Alberto Santos, Jr. did not conduct ramp inventory on December 7,
10 and 12. Gilbert Antonio did not conduct ramp inventory on December
10. In like manner, Regino Duran and Houdiel Magadia did not conduct
the same on December 10 and 12.
8. At the grievance meeting which was attended by some union
representatives, Mr. Abad resolved the grievance by denying the petition
of individual respondents and adopted the position that inventory of
bonded goods is part of their duty as catering service personnel, and as
for the salary deductions for losses, he rationalized:
1. It was only proper that employees are charged for
the amount due to mishandling of company property
which resulted to losses. However, loss may be cost
price 1/10 selling price.
9. As there was no ramp inventory conducted on the mentioned dates,
Mr. Abad, on January 3, 1985 wrote by an inter-office memorandum
addressed to the grievants, individual respondents herein, for them to
explain on (sic) why no disciplinary action should be taken against them
for not conducting ramp inventory. . . .
 10. The directive was complied with . . . . The reason for not conducting
ramp inventory was put forth as:
4. Since the grievance step 1 was not decided and no
action was done by your office within 5 days from
November 21, 1984, per provision of the PAL-PALEA
CBA, Art. IV, Sec. 2, the grievance is deemed resolved
in PALEA's favor.
11. Going over the explanation, Mr. Abad found the same unsatisfactory.
Thus, a penalty of suspension ranging from 7 days to 30 days were (sic)
imposed depending on the number of infractions committed. *
12. After the penalty of suspension was meted down, PALEA filed another
grievance asking for lifting of, or at least, holding in abeyance the
execution of said penalty. The said grievance was forthwith denied but
the penalty of suspension with respect to respondent Ramos was
modified, such that his suspension which was originally from January 15,
1985 to April 5, 1985 was shortened by one month and was lifted on
March 5, 1985. The union, however, made a demand for the
reimbursement of the salaries of individual respondents during the
period of their suspension.
13. Petitioner stood pat (o)n the validity of the suspensions. Hence, a
complaint for illegal suspension was filed before the
Arbitration Branch of the Commission, . . . Labor Arbiter Ceferina J.
Diosana, on March 17, 1986, ruled in favor of petitioner by dismissing the
complaint. . . .3
Private respondents appealed the decision of the labor arbiter to respondent commission
which rendered the aforequoted decision setting aside the labor arbiter's order of dismissal.
Petitioner's motion for reconsideration having been denied, it interposed the present
petition.
The Court is accordingly called upon to resolve the issue of whether or not public respondent
NLRC acted with grave abuse of discretion amounting to lack of jurisdiction in rendering the
aforementioned decision.
Evidently basic and firmly settled is the rule that judicial review by this Court in labor cases
does not go so far as to evaluate the sufficiency of the evidence upon which the labor officer
or office based his or its determination, but is limited to issues of jurisdiction and grave abuse
of discretion.4 It has not been shown that respondent NLRC has unlawfully neglected the
performance of an act which the law specifically enjoins it to perform as a duty or has
otherwise unlawfully excluded petitioner from the exercise of a right to which it is entitled.
The instant case hinges on the interpretation of Section 2, Article IV of the PAL-PALEA
Collective Bargaining Agreement, (hereinafter, CBA), to wit:
Sec. 2 Processing of Grievances
xxx xxx xxx
STEP 1 Any employee who believes that he has a justifiable grievance
shall take the matter up with his shop steward. If the shop steward feels
there is justification for taking the matter up with the Company, he shall
record the grievance on the grievance form heretofore agreed upon by
the parties. Two (2) copies of the grievance form properly filled, accepted,
and signed shall then be presented to and discussed by the shop steward
with the division head. The division head shall answer the grievance
within five (5) days from the date of presentation by inserting his decision
on the grievance form, signing and dating same, and returning one copy
to the shop steward. If the division head fails to act within the five (5)-day
regl(e)mentary period, the grievance must be resolved in favor of the
aggrieved party. If the division head's decision is not appealed to Step II,
the grievance shall be considered settled on the basis of the decision
made, and shall not be eligible for further appeal. 5(Emphasis ours.)
Petitioner submits that since the grievance machinery was established for both labor and
management as a vehicle to thresh out whatever problems may arise in the course of their
relationship, every employee is duty bound to present the matter before management and
give the latter an opportunity to impose whatever corrective measure is possible. Under
normal circumstances, an employee should not preempt the resolution of his grievance;
rather, he has the duty to observe the status quo.6
Citing Section 1, Article IV of the CBA, petitioner further argues that respondent employees
have the obligation, just as management has, to settle all labor disputes through friendly
negotiations. Thus, Section 2 of the CBA should not be narrowly interpreted. 7 Before the
prescriptive period of five days begins to run, two concurrent requirements must be
met, i.e., presentment of the grievance and its discussion between the shop steward and the
division head who in this case is Mr. Abad. Section 2 is not self-executing; the mere filing of
the grievance does not trigger the tolling of the prescriptive period. 8
Petitioner has sorely missed the point.
It is a fact that the sympathy of the Court is on the side of the laboring classes, not only
because the Constitution imposes such sympathy, but because of the one-sided relation
between labor and capital.9 The constitutional mandate for the promotion of labor is as
explicit as it is demanding. The purpose is to place the workingman on an equal plane with
management with all its power and influence in negotiating for the advancement of his
interests and the defense of his rights. 10 Under the policy of social justice, the law bends over
backward to accommodate the interests of the working class on the humane justification that
those with less privileges in life should have more privileges in law. 11
It is clear that the grievance was filed with Mr. Abad's secretary during his absence. 12 Under
Section 2 of the CBA aforequoted, the division head shall act on the grievance within five (5)
days from the date of presentation thereof, otherwise "the grievance must be resolved in
favor of the aggrieved party." It is not disputed that the grievants knew that division head
Reynaldo Abad was then "on leave" when they filed their grievance which was received by
Abad's secretary.13 This knowledge, however, should not prevent the application of the CBA.
of the pertinent provision of the CBA, much less the benevolent policy underlying our labor
laws.
ACCORDINGLY, on the foregoing premises, the instant petition is hereby DENIED and the
assailed decision of respondent National Labor Relations Commission is AFFIRMED. This
judgment is immediately executory.

On this score, respondent NLRC aptly ruled: SO ORDERED.

. . . Based on the facts heretofore narrated, division head Reynaldo Abad Narvasa, C.J., Feliciano, Nocon and Campos, Jr., JJ., concur.
had to act on the grievance of complainants within five days from 21
November 1984. Therefore, when Reynaldo Abad, failed to act within the
reglementary period, complainants, believing in good faith that the effect
of the CBA had already set in, cannot be blamed if they did not conduct
ramp inventory for the days thereafter. In this regard, respondent PAL
argued that Reynaldo Abad was on leave at the time the grievance was
presented. This, however, is of no moment, for it is hard to believe that
everything under Abad's authority would have to stand still during his
absence from office. To be sure, it is to be expected that someone has to
be left to attend to Abad's duties. Of course, this may be a product of
inadvertence on the part of PAL management, but certainly, complainants
should not be made to suffer the consequences. 14

Contrary to petitioner's submission,15 the grievance of employees is not a matter which

requires the personal act of Mr. Abad and thus could not be delegated. Petitioner could at
least have assigned an officer-in-charge to look into the grievance and possibly make his
recommendation to Mr. Abad. It is of no moment that Mr. Abad immediately looked into the
grievance upon returning to work, for it must be remembered that the grievants are
workingmen who suffered salary deductions and who rely so much on their meager income
for their daily subsistence and survival. Besides, it is noteworthy that when these employees
first presented their complaint on August 21, 1984, petitioner failed to act on it. It was only
after a formal grievance was filed and after Mr. Abad returned to work on December 7, 1984
that petitioner decided to turn an ear to their plaints.

As respondent NLRC has pointed out, Abad's failure to act on the matter may have been due
to petitioner's inadvertence,16 but it is clearly too much of an injustice if the employees be
made to bear the dire effects thereof. Much as the latter were willing to discuss their
grievance with their employer, the latter closed the door to this possibility by not assigning
someone else to look into the matter during Abad's absence. Thus, private respondents
should not be faulted for believing that the effects of the CBA in their favor had already
stepped into the controversy.

If the Court were to follow petitioner's line of reasoning, it would be easy for management to
delay the resolution of labor problems, the complaints of the workers in particular, and hide
under the cloak of its officers being "on leave" to avoid being caught by the 5-day deadline
under the CBA. If this should be allowed, the workingmen will suffer great injustice for they JENNY M. AGABON and VIRGILIO C. AGABON, petitioners,
will necessarily be at the mercy of their employer. That could not have been the intendment vs.
NATIONAL LABOR RELATIONS COMMISSION (NLRC), RIVIERA HOME IMPROVEMENTS, INC.
and VICENTE ANGELES, respondents.
DECISION
YNARES-SANTIAGO, J.:
This petition for review seeks to reverse the decision1 of the Court of Appeals dated January
23, 2003, in CA-G.R. SP No. 63017, modifying the decision of National Labor Relations
Commission (NLRC) in NLRC-NCR Case No. 023442-00.
Private respondent Riviera Home Improvements, Inc. is engaged in the business of selling and
installing ornamental and construction materials. It employed petitioners Virgilio Agabon and
Jenny Agabon as gypsum board and cornice installers on January 2, 1992 2 until February 23,
1999 when they were dismissed for abandonment of work.
Petitioners then filed a complaint for illegal dismissal and payment of money claims 3 and on
December 28, 1999, the Labor Arbiter rendered a decision declaring the dismissals illegal and
ordered private respondent to pay the monetary claims. The dispositive portion of the
decision states:
WHEREFORE, premises considered, We find the termination of the complainants
illegal. Accordingly, respondent is hereby ordered to pay them their backwages up
to November 29, 1999 in the sum of:
1. Jenny M. Agabon - P56, 231.93
2. Virgilio C. Agabon - 56, 231.93
and, in lieu of reinstatement to pay them their separation pay of one (1) month for
every year of service from date of hiring up to November 29, 1999.
Respondent is further ordered to pay the complainants their holiday pay and
service incentive leave pay for the years 1996, 1997 and 1998 as well as their
premium pay for holidays and rest days and Virgilio Agabon's 13th month pay
differential amounting to TWO THOUSAND ONE HUNDRED FIFTY (P2,150.00) Pesos,
or the aggregate amount of ONE HUNDRED TWENTY ONE THOUSAND SIX
HUNDRED SEVENTY EIGHT & 93/100 (P121,678.93) Pesos for Jenny Agabon, and
ONE HUNDRED TWENTY THREE THOUSAND EIGHT HUNDRED TWENTY EIGHT &
93/100 (P123,828.93) Pesos for Virgilio Agabon, as per attached computation of
Julieta C. Nicolas, OIC, Research and Computation Unit, NCR.
SO ORDERED.4
On appeal, the NLRC reversed the Labor Arbiter because it found that the petitioners had
abandoned their work, and were not entitled to backwages and separation pay. The other
money claims awarded by the Labor Arbiter were also denied for lack of evidence. 5
Upon denial of their motion for reconsideration, petitioners filed a petition for certiorari with
the Court of Appeals.
The Court of Appeals in turn ruled that the dismissal of the petitioners was not illegal because
they had abandoned their employment but ordered the payment of money claims. The
dispositive portion of the decision reads:
WHEREFORE, the decision of the National Labor Relations Commission is REVERSED
only insofar as it dismissed petitioner's money claims. Private respondents are
ordered to pay petitioners holiday pay for four (4) regular holidays in 1996, 1997,
and 1998, as well as their service incentive leave pay for said years, and to pay the
balance of petitioner Virgilio Agabon's 13th month pay for 1998 in the amount of
P2,150.00.
SO ORDERED.6
Hence, this petition for review on the sole issue of whether petitioners were illegally
dismissed.7
Petitioners assert that they were dismissed because the private respondent refused to give
them assignments unless they agreed to work on a "pakyaw" basis when they reported for
duty on February 23, 1999. They did not agree on this arrangement because it would mean
losing benefits as Social Security System (SSS) members. Petitioners also claim that private
respondent did not comply with the twin requirements of notice and hearing. 8
Private respondent, on the other hand, maintained that petitioners were not dismissed but
had abandoned their work.9 In fact, private respondent sent two letters to the last known
addresses of the petitioners advising them to report for work. Private respondent's manager
even talked to petitioner Virgilio Agabon by telephone sometime in June 1999 to tell him
about the new assignment at Pacific Plaza Towers involving 40,000 square meters of cornice
installation work. However, petitioners did not report for work because they had
subcontracted to perform installation work for another company. Petitioners also demanded
for an increase in their wage to P280.00 per day. When this was not granted, petitioners
stopped reporting for work and filed the illegal dismissal case. 10
It is well-settled that findings of fact of quasi-judicial agencies like the NLRC are accorded not
only respect but even finality if the findings are supported by substantial evidence. This is
especially so when such findings were affirmed by the Court of Appeals. 11 However, if the
factual findings of the NLRC and the Labor Arbiter are conflicting, as in this case, the
reviewing court may delve into the records and examine for itself the questioned findings. 12
Accordingly, the Court of Appeals, after a careful review of the facts, ruled that petitioners'
dismissal was for a just cause. They had abandoned their employment and were already
working for another employer.
To dismiss an employee, the law requires not only the existence of a just and valid cause but
also enjoins the employer to give the employee the opportunity to be heard and to defend
himself.13 Article 282 of the Labor Code enumerates the just causes for termination by the
employer: (a) serious misconduct or willful disobedience by the employee of the lawful
orders of his employer or the latter's representative in connection with the employee's work;
(b) gross and habitual neglect by the employee of his duties; (c) fraud or willful breach by the
employee of the trust reposed in him by his employer or his duly authorized representative;
(d) commission of a crime or offense by the employee against the person of his employer or
any immediate member of his family or his duly authorized representative; and (e) other
causes analogous to the foregoing.
Abandonment is the deliberate and unjustified refusal of an employee to resume his
employment.14 It is a form of neglect of duty, hence, a just cause for termination of
employment by the employer.15 For a valid finding of abandonment, these two factors should
be present: (1) the failure to report for work or absence without valid or justifiable reason;
and (2) a clear intention to sever employer-employee relationship, with the second as the
more determinative factor which is manifested by overt acts from which it may be deduced
that the employees has no more intention to work. The intent to discontinue the
employment must be shown by clear proof that it was deliberate and unjustified. 16
In February 1999, petitioners were frequently absent having subcontracted for an installation
work for another company. Subcontracting for another company clearly showed the intention
to sever the employer-employee relationship with private respondent. This was not the first
time they did this. In January 1996, they did not report for work because they were working
for another company. Private respondent at that time warned petitioners that they would be
dismissed if this happened again. Petitioners disregarded the warning and exhibited a clear
intention to sever their employer-employee relationship. The record of an employee is a
relevant consideration in determining the penalty that should be meted out to him. 17
In Sandoval Shipyard v. Clave,18 we held that an employee who deliberately absented from
work without leave or permission from his employer, for the purpose of looking for a job
elsewhere, is considered to have abandoned his job. We should apply that rule with more
reason here where petitioners were absent because they were already working in another
company.
The law imposes many obligations on the employer such as providing just compensation to
workers, observance of the procedural requirements of notice and hearing in the termination
of employment. On the other hand, the law also recognizes the right of the employer to
expect from its workers not only good performance, adequate work and diligence, but also
good conduct19 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. 20
After establishing that the terminations were for a just and valid cause, we now determine if
the procedures for dismissal were observed.
The procedure for terminating an employee is found in Book VI, Rule I, Section 2(d) of
the Omnibus Rules Implementing the Labor Code:
Standards of due process: requirements of notice. In all cases of termination of
employment, the following standards of due process shall be substantially
observed:
I. For termination of employment based on just causes as defined in Article 282 of
the Code:
(a) A written notice served on the employee specifying the ground or grounds for
termination, and giving to said employee reasonable opportunity within which to
explain his side;
(b) A hearing or conference during which the employee concerned, with the
assistance of counsel if the employee so desires, is given opportunity to respond to
the charge, present his evidence or rebut the evidence presented against him; and
(c) A written notice of termination served on the employee indicating that upon
due consideration of all the circumstances, grounds have been established to justify
his termination.
In case of termination, the foregoing notices shall be served on the employee's last
known address.
Dismissals based on just causes contemplate acts or omissions attributable to the employee
while dismissals based on authorized causes involve grounds under the Labor Code which
allow the employer to terminate employees. A termination for an authorized cause requires
payment of separation pay. When the termination of employment is declared illegal,
reinstatement and full backwages are mandated under Article 279. If reinstatement is no
longer possible where the dismissal was unjust, separation pay may be granted.
Procedurally, (1) if the dismissal is based on a just cause under Article 282, the employer must
give the employee two written notices and a hearing or opportunity to be heard if requested
by the employee before terminating the employment: a notice specifying the grounds for
which dismissal is sought a hearing or an opportunity to be heard and after hearing or
opportunity to be heard, a notice of the decision to dismiss; and (2) if the dismissal is based
on authorized causes under Articles 283 and 284, the employer must give the employee and
the Department of Labor and Employment written notices 30 days prior to the effectivity of
his separation.
From the foregoing rules four possible situations may be derived: (1) the dismissal is for a just
cause under Article 282 of the Labor Code, for an authorized cause under Article 283, or for
health reasons under Article 284, and due process was observed; (2) the dismissal is without
just or authorized cause but due process was observed; (3) the dismissal is without just or
authorized cause and there was no due process; and (4) the dismissal is for just or authorized
cause but due process was not observed.
In the first situation, the dismissal is undoubtedly valid and the employer will not suffer any
liability.
In the second and third situations where the dismissals are illegal, Article 279 mandates that
the employee is entitled to reinstatement without loss of seniority rights and other privileges
and full backwages, inclusive of allowances, and other benefits or their monetary equivalent
computed from the time the compensation was not paid up to the time of actual
reinstatement.
In the fourth situation, the dismissal should be upheld. While the procedural infirmity cannot
be cured, it should not invalidate the dismissal. However, the employer should be held liable
for non-compliance with the procedural requirements of due process.
The present case squarely falls under the fourth situation. The dismissal should be upheld
because it was established that the petitioners abandoned their jobs to work for another
company. Private respondent, however, did not follow the notice requirements and instead
argued that sending notices to the last known addresses would have been useless because
they did not reside there anymore. Unfortunately for the private respondent, this is not a
valid excuse because the law mandates the twin notice requirements to the employee's last
known address.21 Thus, it should be held liable for non-compliance with the procedural
requirements of due process.
A review and re-examination of the relevant legal principles is appropriate and timely to
clarify the various rulings on employment termination in the light of Serrano v. National
Labor Relations Commission.22
Prior to 1989, the rule was that a dismissal or termination is illegal if the employee was not
given any notice. In the 1989 case of Wenphil Corp. v. National Labor Relations
Commission,23 we reversed this long-standing rule and held that the dismissed employee,
although not given any notice and hearing, was not entitled to reinstatement and backwages
because the dismissal was for grave misconduct and insubordination, a just ground for
termination under Article 282. The employee had a violent temper and caused trouble during
office hours, defying superiors who tried to pacify him. We concluded that reinstating the
employee and awarding backwages "may encourage him to do even worse and will render a
mockery of the rules of discipline that employees are required to observe." 24 We further held
that:
Under the circumstances, the dismissal of the private respondent for just cause
should be maintained. He has no right to return to his former employment.
However, the petitioner must nevertheless be held to account for failure to extend
to private respondent his right to an investigation before causing his dismissal. The
rule is explicit as above discussed. The dismissal of an employee must be for just or
authorized cause and after due process. Petitioner committed an infraction of the
second requirement. Thus, it must be imposed a sanction for its failure to give a
formal notice and conduct an investigation as required by law before dismissing
petitioner from employment. Considering the circumstances of this case petitioner
must indemnify the private respondent the amount of P1,000.00. The measure of
this award depends on the facts of each case and the gravity of the omission
committed by the employer.25
The rule thus evolved: where the employer had a valid reason to dismiss an employee but did
not follow the due process requirement, the dismissal may be upheld but the employer will
be penalized to pay an indemnity to the employee. This became known as the Wenphil or
Belated Due Process Rule.
On January 27, 2000, in Serrano, the rule on the extent of the sanction was changed. We held
that the violation by the employer of the notice requirement in termination for just or
authorized causes was not a denial of due process that will nullify the termination. However,
the dismissal is ineffectual and the employer must pay full backwages from the time of
termination until it is judicially declared that the dismissal was for a just or authorized cause.
The rationale for the re-examination of the Wenphil doctrine in Serrano was the significant
number of cases involving dismissals without requisite notices. We concluded that the
imposition of penalty by way of damages for violation of the notice requirement was not
serving as a deterrent. Hence, we now required payment of full backwages from the time of
dismissal until the time the Court finds the dismissal was for a just or authorized cause.
Serrano was confronting the practice of employers to "dismiss now and pay later" by
imposing full backwages.
We believe, however, that the ruling in Serrano did not consider the full meaning of Article
279 of the Labor Code which states:
ART. 279. Security of Tenure. In cases of regular employment, the employer shall
not terminate the services of an employee except for a just cause or when
authorized by this Title. An employee who is unjustly dismissed from work shall be
entitled to reinstatement without loss of seniority rights and other privileges and to
his full backwages, inclusive of allowances, and to his other benefits or their
monetary equivalent computed from the time his compensation was withheld from
him up to the time of his actual reinstatement.
This means that the termination is illegal only if it is not for any of the justified or authorized
causes provided by law. Payment of backwages and other benefits, including reinstatement, is
justified only if the employee was unjustly dismissed.
The fact that the Serrano ruling can cause unfairness and injustice which elicited strong
dissent has prompted us to revisit the doctrine.
To be sure, the Due Process Clause in Article III, Section 1 of the Constitution embodies a
system of rights based on moral principles so deeply imbedded in the traditions and feelings
of our people as to be deemed fundamental to a civilized society as conceived by our entire
history. Due process is that which comports with the deepest notions of what is fair and right
and just.26 It is a constitutional restraint on the legislative as well as on the executive and
judicial powers of the government provided by the Bill of Rights.
Due process under the Labor Code, like Constitutional due process, has two aspects:
substantive, i.e., the valid and authorized causes of employment termination under the Labor
Code; and procedural, i.e., the manner of dismissal. Procedural due process requirements for
dismissal are found in the Implementing Rules of P.D. 442, as amended, otherwise known as
the Labor Code of the Philippines in Book VI, Rule I, Sec. 2, as amended by Department Order
Nos. 9 and 10.27 Breaches of these due process requirements violate the Labor Code.
Therefore statutory due process should be differentiated from failure to comply
with constitutional due process.
Constitutional due process protects the individual from the government and assures him of
his rights in criminal, civil or administrative proceedings; while statutory due process found in
the Labor Code and Implementing Rules protects employees from being unjustly terminated
without just cause after notice and hearing.
In Sebuguero v. National Labor Relations Commission,28 the dismissal was for a just and valid
cause but the employee was not accorded due process. The dismissal was upheld by the
Court but the employer was sanctioned. The sanction should be in the nature of
indemnification or penalty, and depends on the facts of each case and the gravity of the
omission committed by the employer.
In Nath v. National Labor Relations Commission,29 it was ruled that even if the employee was
not given due process, the failure did not operate to eradicate the just causes for dismissal.
The dismissal being for just cause, albeitwithout due process, did not entitle the employee to
reinstatement, backwages, damages and attorney's fees.
Mr. Justice Jose C. Vitug, in his separate opinion in MGG Marine Services, Inc. v. National
Labor Relations Commission,30 which opinion he reiterated in Serrano, stated:
C. Where there is just cause for dismissal but due process has not been properly
observed by an employer, it would not be right to order either the reinstatement of
the dismissed employee or the payment of backwages to him. In failing, however,
to comply with the procedure prescribed by law in terminating the services of the
employee, the employer must be deemed to have opted or, in any case, should be
made liable, for the payment of separation pay. It might be pointed out that the
notice to be given and the hearing to be conducted generally constitute the two-
part due process requirement of law to be accorded to the employee by the
employer. Nevertheless, peculiar circumstances might obtain in certain situations
where to undertake the above steps would be no more than a useless formality and
where, accordingly, it would not be imprudent to apply the res ipsa loquitur rule
and award, in lieu of separation pay, nominal damages to the employee. x x x. 31
After carefully analyzing the consequences of the divergent doctrines in the law on
employment termination, we believe that in cases involving dismissals for cause but without
observance of the twin requirements of notice and hearing, the better rule is to abandon the
Serrano doctrine and to follow Wenphil by holding that the dismissal was for just cause but
imposing sanctions on the employer. Such sanctions, however, must be stiffer than that
imposed in Wenphil. By doing so, this Court would be able to achieve a fair result by
dispensing justice not just to employees, but to employers as well.
The unfairness of declaring illegal or ineffectual dismissals for valid or authorized causes but
not complying with statutory due process may have far-reaching consequences.
This would encourage frivolous suits, where even the most notorious violators of company
policy are rewarded by invoking due process. This also creates absurd situations where there
is a just or authorized cause for dismissal but a procedural infirmity invalidates the
termination. Let us take for example a case where the employee is caught stealing or
threatens the lives of his co-employees or has become a criminal, who has fled and cannot be
found, or where serious business losses demand that operations be ceased in less than a
month. Invalidating the dismissal would not serve public interest. It could also discourage
investments that can generate employment in the local economy.
The constitutional policy to provide full protection to labor is not meant to be a sword to
oppress employers. The commitment of this Court to the cause of labor does not prevent us
from sustaining the employer when it is in the right, as in this case. 32 Certainly, an employer
should not be compelled to pay employees for work not actually performed and in fact
abandoned.
The employer should not be compelled to continue employing a person who is admittedly
guilty of misfeasance or malfeasance and whose continued employment is patently inimical
to the employer. The law protecting the rights of the laborer authorizes neither oppression
nor self-destruction of the employer.33
It must be stressed that in the present case, the petitioners committed a grave offense, i.e.,
abandonment, which, if the requirements of due process were complied with, would
undoubtedly result in a valid dismissal.
An employee who is clearly guilty of conduct violative of Article 282 should not be protected
by the Social Justice Clause of the Constitution. Social justice, as the term suggests, should be
used only to correct an injustice. As the eminent Justice Jose P. Laurel observed, social justice
must be founded on the recognition of the necessity of interdependence among diverse units
of a society and of the protection that should be equally and evenly extended to all groups as
a combined force in our social and economic life, consistent with the fundamental and
paramount objective of the state of promoting the health, comfort, and quiet of all persons,
and of bringing about "the greatest good to the greatest number."34
This is not to say that the Court was wrong when it ruled the way it did
in Wenphil, Serrano and related cases. Social justice is not based on rigid formulas set in
stone. It has to allow for changing times and circumstances.
Justice Isagani Cruz strongly asserts the need to apply a balanced approach to labor-
management relations and dispense justice with an even hand in every case:
We have repeatedly stressed that social justice or any justice for that matter is
for the deserving, whether he be a millionaire in his mansion or a pauper in his
hovel. It is true that, in case of reasonable doubt, we are to tilt the balance in favor
of the poor to whom the Constitution fittingly extends its sympathy and
compassion. But never is it justified to give preference to the poor simply because
they are poor, or reject the rich simply because they are rich, for justice must
always be served for the poor and the rich alike, according to the mandate of the
law.35
Justice in every case should only be for the deserving party. It should not be presumed that
every case of illegal dismissal would automatically be decided in favor of labor, as
management has rights that should be fully respected and enforced by this Court. As
interdependent and indispensable partners in nation-building, labor and management need
each other to foster productivity and economic growth; hence, the need to weigh and
balance the rights and welfare of both the employee and employer.
Where the dismissal is for a just cause, as in the instant case, the lack of statutory due
process should not nullify the dismissal, or render it illegal, or ineffectual. However, the
employer should indemnify the employee for the violation of his statutory rights, as ruled
in Reta v. National Labor Relations Commission.36 The indemnity to be imposed should be
stiffer to discourage the abhorrent practice of "dismiss now, pay later," which we sought to
deter in the Serrano ruling. The sanction should be in the nature of indemnification or
penalty and should depend on the facts of each case, taking into special consideration the
gravity of the due process violation of the employer.
Under the Civil Code, nominal damages is adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may be vindicated or recognized, and
not for the purpose of indemnifying the plaintiff for any loss suffered by him. 37
As enunciated by this Court in Viernes v. National Labor Relations Commissions,38 an employer
is liable to pay indemnity in the form of nominal damages to an employee who has been
dismissed if, in effecting such dismissal, the employer fails to comply with the requirements
of due process. The Court, after considering the circumstances therein, fixed the indemnity at
P2,590.50, which was equivalent to the employee's one month salary. This indemnity is
intended not to penalize the employer but to vindicate or recognize the employee's right to
statutory due process which was violated by the employer. 39
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.40 Considering the prevailing circumstances in the case at bar, we deem it
proper to fix it at P30,000.00. We believe this form of damages would serve to deter
employers from future violations of the statutory due process rights of employees. At the
very least, it provides a vindication or recognition of this fundamental right granted to the
latter under the Labor Code and its Implementing Rules.
Private respondent claims that the Court of Appeals erred in holding that it failed to pay
petitioners' holiday pay, service incentive leave pay and 13th month pay.
We are not persuaded.
We affirm the ruling of the appellate court on petitioners' money claims. Private respondent
is liable for petitioners' holiday pay, service incentive leave pay and 13th month pay without
deductions.
As a general rule, one who pleads payment has the burden of proving it. Even where the
employee must allege non-payment, the general rule is that the burden rests on the
employer to prove payment, rather than on the employee to prove non-payment. The reason
for the rule is that the pertinent personnel files, payrolls, records, remittances and other
similar documents which will show that overtime, differentials, service incentive leave and
other claims of workers have been paid are not in the possession of the worker but in the
custody and absolute control of the employer. 41
In the case at bar, if private respondent indeed paid petitioners' holiday pay and service
incentive leave pay, it could have easily presented documentary proofs of such monetary
benefits to disprove the claims of the petitioners. But it did not, except with respect to the
13th month pay wherein it presented cash vouchers showing payments of the benefit in the
years disputed.42 Allegations by private respondent that it does not operate during holidays
and that it allows its employees 10 days leave with pay, other than being self-serving, do not
constitute proof of payment. Consequently, it failed to discharge the onus probandi thereby
making it liable for such claims to the petitioners.
Anent the deduction of SSS loan and the value of the shoes from petitioner Virgilio Agabon's
13th month pay, we find the same to be unauthorized. The evident intention of Presidential
Decree No. 851 is to grant an additional income in the form of the 13th month pay to
employees not already receiving the same43 so as "to further protect the level of real wages
from the ravages of world-wide inflation."44 Clearly, as additional income, the 13th month pay
is included in the definition of wage under Article 97(f) of the Labor Code, to wit:
(f) "Wage" paid to any employee shall mean the remuneration or earnings,
however designated, capable of being expressed in terms of money whether fixed
or ascertained on a time, task, piece , or commission basis, or other method of
calculating the same, which is payable by an employer to an employee under a
written or unwritten contract of employment for work done or to be done, or for
services rendered or to be rendered and includes the fair and reasonable value, as
determined by the Secretary of Labor, of board, lodging, or other facilities
customarily furnished by the employer to the employee"
from which an employer is prohibited under Article 11345 of the same Code from making any
deductions without the employee's knowledge and consent. In the instant case, private
respondent failed to show that the deduction of the SSS loan and the value of the shoes from
petitioner Virgilio Agabon's 13th month pay was authorized by the latter. The lack of authority
to deduct is further bolstered by the fact that petitioner Virgilio Agabon included the same as
one of his money claims against private respondent.

The Court of Appeals properly reinstated the monetary claims awarded by the Labor Arbiter
ordering the private respondent to pay each of the petitioners holiday pay for four regular
holidays from 1996 to 1998, in the amount of P6,520.00, service incentive leave pay for the
same period in the amount of P3,255.00 and the balance of Virgilio Agabon's thirteenth
month pay for 1998 in the amount of P2,150.00.

WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of
Appeals dated January 23, 2003, in CA-G.R. SP No. 63017, finding that petitioners' Jenny and
Virgilio Agabon abandoned their work, and ordering private respondent to pay each of the
petitioners holiday pay for four regular holidays from 1996 to 1998, in the amount of
P6,520.00, service incentive leave pay for the same period in the amount of P3,255.00 and
the balance of Virgilio Agabon's thirteenth month pay for 1998 in the amount of P2,150.00
is AFFIRMED with the MODIFICATION that private respondent Riviera Home Improvements,
Inc. is further ORDERED to pay each of the petitioners the amount of P30,000.00 as nominal
damages for non-compliance with statutory due process.

No costs.

SO ORDERED.

Davide, Jr., C.J., Puno, Panganiban, Quisumbing, Sandoval-Gutierrez, Carpio, Austria-

Martinez, Corona, Carpio-Morales, Callejo, Sr., Azcuna, Tinga, Chico-Nazario, and Garcia,
JJ., concur.

ANG TIBAY, represented by TORIBIO TEODORO, manager and propietor, and

NATIONAL WORKERS BROTHERHOOD, petitioners,
vs.
THE COURT OF INDUSTRIAL RELATIONS and NATIONAL LABOR UNION, INC., respondents.
LAUREL, J.:
The Solicitor-General in behalf of the respondent Court of Industrial Relations in the above-
entitled case has filed a motion for reconsideration and moves that, for the reasons stated in
his motion, we reconsider the following legal conclusions of the majority opinion of this
Court:
1. Que un contrato de trabajo, asi individual como colectivo, sin termino fijo de
duracion o que no sea para una determinada, termina o bien por voluntad de
cualquiera de las partes o cada vez que ilega el plazo fijado para el pago de los
salarios segun costumbre en la localidad o cunado se termine la obra;
2. Que los obreros de una empresa fabril, que han celebrado contrato, ya individual
ya colectivamente, con ell, sin tiempo fijo, y que se han visto obligados a cesar en
sus tarbajos por haberse declarando paro forzoso en la fabrica en la cual tarbajan,
dejan de ser empleados u obreros de la misma;
3. Que un patrono o sociedad que ha celebrado un contrato colectivo de trabajo
con sus osbreros sin tiempo fijo de duracion y sin ser para una obra determiminada
y que se niega a readmitir a dichos obreros que cesaron como consecuencia de un
paro forzoso, no es culpable de practica injusta in incurre en la sancion penal del
articulo 5 de la Ley No. 213 del Commonwealth, aunque su negativa a readmitir se
deba a que dichos obreros pertenecen a un determinado organismo obrero, puesto
que tales ya han dejado deser empleados suyos por terminacion del contrato en
virtud del paro.
The respondent National Labor Union, Inc., on the other hand, prays for the vacation of the
judgement rendered by the majority of this Court and the remanding of the case to the Court
of Industrial Relations for a new trial, and avers:
1. That Toribio Teodoro's claim that on September 26, 1938, there was shortage of
leather soles in ANG TIBAY making it necessary for him to temporarily lay off the
members of the National Labor Union Inc., is entirely false and unsupported by the
records of the Bureau of Customs and the Books of Accounts of native dealers in
leather.
2. That the supposed lack of leather materials claimed by Toribio Teodoro was but a
scheme to systematically prevent the forfeiture of this bond despite the breach of
his CONTRACT with the Philippine Army.
3. That Toribio Teodoro's letter to the Philippine Army dated September 29, 1938,
(re supposed delay of leather soles from the States) was but a scheme to
systematically prevent the forfeiture of this bond despite the breach of his
CONTRACT with the Philippine Army.
4. That the National Worker's Brotherhood of ANG TIBAY is a company or employer
union dominated by Toribio Teodoro, the existence and functions of which are
illegal. (281 U.S., 548, petitioner's printed memorandum, p. 25.)
5. That in the exercise by the laborers of their rights to collective bargaining,
majority rule and elective representation are highly essential and indispensable.
(Sections 2 and 5, Commonwealth Act No. 213.)
6. That the century provisions of the Civil Code which had been (the) principal
source of dissensions and continuous civil war in Spain cannot and should not be
made applicable in interpreting and applying the salutary provisions of a modern
labor legislation of American origin where the industrial peace has always been the
rule.
7. That the employer Toribio Teodoro was guilty of unfair labor practice for
discriminating against the National Labor Union, Inc., and unjustly favoring the
National Workers' Brotherhood.
8. That the exhibits hereto attached are so inaccessible to the respondents that
even with the exercise of due diligence they could not be expected to have
obtained them and offered as evidence in the Court of Industrial Relations.
9. That the attached documents and exhibits are of such far-reaching importance
and effect that their admission would necessarily mean the modification and
reversal of the judgment rendered herein.
The petitioner, Ang Tibay, has filed an opposition both to the motion for reconsideration of
the respondent National Labor Union, Inc.
In view of the conclusion reached by us and to be herein after stead with reference to the
motion for a new trial of the respondent National Labor Union, Inc., we are of the opinion
that it is not necessary to pass upon the motion for reconsideration of the Solicitor-General.
We shall proceed to dispose of the motion for new trial of the respondent labor union. Before
doing this, however, we deem it necessary, in the interest of orderly procedure in cases of this
nature, in interest of orderly procedure in cases of this nature, to make several observations
regarding the nature of the powers of the Court of Industrial Relations and emphasize certain
guiding principles which should be observed in the trial of cases brought before it. We have
re-examined the entire record of the proceedings had before the Court of Industrial Relations
in this case, and we have found no substantial evidence that the exclusion of the 89 laborers
here was due to their union affiliation or activity. The whole transcript taken contains what
transpired during the hearing and is more of a record of contradictory and conflicting
statements of opposing counsel, with sporadic conclusion drawn to suit their own views. It is
evident that these statements and expressions of views of counsel have no evidentiary value.
The Court of Industrial Relations is a special court whose functions are specifically stated in
the law of its creation (Commonwealth Act No. 103). It is more an administrative than a part
of the integrated judicial system of the nation. It is not intended to be a mere receptive organ
of the Government. Unlike a court of justice which is essentially passive, acting only when its
jurisdiction is invoked and deciding only cases that are presented to it by the parties litigant,
the function of the Court of Industrial Relations, as will appear from perusal of its organic law,
is more active, affirmative and dynamic. It not only exercises judicial or quasi-judicial
functions in the determination of disputes between employers and employees but its
functions in the determination of disputes between employers and employees but its
functions are far more comprehensive and expensive. It has jurisdiction over the entire
Philippines, to consider, investigate, decide, and settle any question, matter controversy or
dispute arising between, and/or affecting employers and employees or laborers, and regulate
the relations between them, subject to, and in accordance with, the provisions of
Commonwealth Act No. 103 (section 1). It shall take cognizance or purposes of prevention,
arbitration, decision and settlement, of any industrial or agricultural dispute causing or likely
to cause a strike or lockout, arising from differences as regards wages, shares or
compensation, hours of labor or conditions of tenancy or employment, between landlords
and tenants or farm-laborers, provided that the number of employees, laborers or tenants of
farm-laborers involved exceeds thirty, and such industrial or agricultural dispute is submitted
to the Court by the Secretary of Labor or by any or both of the parties to the controversy and
certified by the Secretary of labor as existing and proper to be by the Secretary of Labor as
existing and proper to be dealth with by the Court for the sake of public interest. (Section
4, ibid.) It shall, before hearing the dispute and in the course of such hearing, endeavor to
reconcile the parties and induce them to settle the dispute by amicable agreement.
(Paragraph 2, section 4, ibid.) When directed by the President of the Philippines, it shall
investigate and study all industries established in a designated locality, with a view to
determinating the necessity and fairness of fixing and adopting for such industry or locality a
minimum wage or share of laborers or tenants, or a maximum "canon" or rental to be paid by
the "inquilinos" or tenants or less to landowners. (Section 5, ibid.) In fine, it may appeal to
voluntary arbitration in the settlement of industrial disputes; may employ mediation or
conciliation for that purpose, or recur to the more effective system of official investigation
and compulsory arbitration in order to determine specific controversies between labor and
capital industry and in agriculture. There is in reality here a mingling of executive and judicial
functions, which is a departure from the rigid doctrine of the separation of governmental
powers.
In the case of Goseco vs. Court of Industrial Relations et al., G.R. No. 46673, promulgated
September 13, 1939, we had occasion to joint out that the Court of Industrial Relations et al.,
G. R. No. 46673, promulgated September 13, 1939, we had occasion to point out that the
Court of Industrial Relations is not narrowly constrained by technical rules of procedure, and
the Act requires it to "act according to justice and equity and substantial merits of the case,
without regard to technicalities or legal forms and shall not be bound by any technicalities or
legal forms and shall not be bound by any technical rules of legal evidence but may inform its
mind in such manner as it may deem just and equitable." (Section 20, Commonwealth Act
No. 103.) It shall not be restricted to the specific relief claimed or demands made by the
parties to the industrial or agricultural dispute, but may include in the award, order or
decision any matter or determination which may be deemed necessary or expedient for the
purpose of settling the dispute or of preventing further industrial or agricultural disputes.
(section 13, ibid.) And in the light of this legislative policy, appeals to this Court have been
especially regulated by the rules recently promulgated by the rules recently promulgated by
this Court to carry into the effect the avowed legislative purpose. The fact, however, that the
Court of Industrial Relations may be said to be free from the rigidity of certain procedural
requirements does not mean that it can, in justifiable cases before it, entirely ignore or
disregard the fundamental and essential requirements of due process in trials and
investigations of an administrative character. There are primary rights which must be
respected even in proceedings of this character:
(1) The first of these rights is the right to a hearing, which includes the right of the
party interested or affected to present his own case and submit evidence in support
thereof. In the language of Chief Hughes, in Morgan v. U.S., 304 U.S. 1, 58 S. Ct.
773, 999, 82 Law. ed. 1129, "the liberty and property of the citizen shall be
protected by the rudimentary requirements of fair play.
(2) Not only must the party be given an opportunity to present his case and to
adduce evidence tending to establish the rights which he asserts but the
tribunal must consider the evidence presented. (Chief Justice Hughes in Morgan v.
U.S. 298 U.S. 468, 56 S. Ct. 906, 80 law. ed. 1288.) In the language of this court
in Edwards vs. McCoy, 22 Phil., 598, "the right to adduce evidence, without the
corresponding duty on the part of the board to consider it, is vain. Such right is
conspicuously futile if the person or persons to whom the evidence is presented
can thrust it aside without notice or consideration."
(3) "While the duty to deliberate does not impose the obligation to decide right, it
does imply a necessity which cannot be disregarded, namely, that of having
something to support it is a nullity, a place when directly attached." (Edwards vs.
McCoy, supra.) This principle emanates from the more fundamental is contrary to
the vesting of unlimited power anywhere. Law is both a grant and a limitation upon
power.
(4) Not only must there be some evidence to support a finding or conclusion (City
of Manila vs. Agustin, G.R. No. 45844, promulgated November 29, 1937, XXXVI O.
G. 1335), but the evidence must be "substantial." (Washington, Virginia and
Maryland Coach Co. v. national labor Relations Board, 301 U.S. 142, 147, 57 S. Ct.
648, 650, 81 Law. ed. 965.) It means such relevant evidence as a reasonable mind
accept as adequate to support a conclusion." (Appalachian Electric Power v.
National Labor Relations Board, 4 Cir., 93 F. 2d 985, 989; National Labor Relations
Board v. Thompson Products, 6 Cir., 97 F. 2d 13, 15; Ballston-Stillwater Knitting Co. v.
National Labor Relations Board, 2 Cir., 98 F. 2d 758, 760.) . . . The statute provides
that "the rules of evidence prevailing in courts of law and equity shall not be
controlling.' The obvious purpose of this and similar provisions is to free
administrative boards from the compulsion of technical rules so that the mere
admission of matter which would be deemed incompetent inn judicial proceedings
would not invalidate the administrative order. (Interstate Commerce Commission v.
Baird, 194 U.S. 25, 44, 24 S. Ct. 563, 568, 48 Law. ed. 860; Interstate Commerce
Commission v. Louisville and Nashville R. Co., 227 U.S. 88, 93 33 S. Ct. 185, 187, 57
Law. ed. 431; United States v. Abilene and Southern Ry. Co. S. Ct. 220, 225, 74 Law.
ed. 624.) But this assurance of a desirable flexibility in administrative procedure
does not go far as to justify orders without a basis in evidence having rational
 probative force. Mere uncorroborated hearsay or rumor does not constitute
substantial evidence. (Consolidated Edison Co. v. National Labor Relations Board, 59
S. Ct. 206, 83 Law. ed. No. 4, Adv. Op., p. 131.)"
(5) The decision must be rendered on the evidence presented at the hearing, or at
least contained in the record and disclosed to the parties affected. (Interstate
Commence Commission vs. L. & N. R. Co., 227 U.S. 88, 33 S. Ct. 185, 57 Law. ed.
431.) Only by confining the administrative tribunal to the evidence disclosed to the
parties, can the latter be protected in their right to know and meet the case against
them. It should not, however, detract from their duty actively to see that the law is
enforced, and for that purpose, to use the authorized legal methods of securing
evidence and informing itself of facts material and relevant to the controversy.
Boards of inquiry may be appointed for the purpose of investigating and
determining the facts in any given case, but their report and decision are only
advisory. (Section 9, Commonwealth Act No. 103.) The Court of Industrial Relations
may refer any industrial or agricultural dispute or any matter under its
consideration or advisement to a local board of inquiry, a provincial fiscal. a justice
of the peace or any public official in any part of the Philippines for investigation,
report and recommendation, and may delegate to such board or public official such
powers and functions as the said Court of Industrial Relations may deem necessary,
but such delegation shall not affect the exercise of the Court itself of any of its
powers. (Section 10, ibid.)
Accounts of native dealers in leather"; that "the National Workers Brotherhood Union of Ang
Tibay is a company or employer union dominated by Toribio Teodoro, the existence and
functions of which are illegal." Petitioner further alleges under oath that the exhibits attached
to the petition to prove his substantial avernments" are so inaccessible to the respondents
that even within the exercise of due diligence they could not be expected to have obtained
them and offered as evidence in the Court of Industrial Relations", and that the documents
attached to the petition "are of such far reaching importance and effect that their admission
would necessarily mean the modification and reversal of the judgment rendered herein." We
have considered the reply of Ang Tibay and its arguments against the petition. By and large,
after considerable discussions, we have come to the conclusion that the interest of justice
would be better served if the movant is given opportunity to present at the hearing the
documents referred to in his motion and such other evidence as may be relevant to the main
issue involved. The legislation which created the Court of Industrial Relations and under
which it acts is new. The failure to grasp the fundamental issue involved is not entirely
attributable to the parties adversely affected by the result. Accordingly, the motion for a new
trial should be and the same is hereby granted, and the entire record of this case shall be
remanded to the Court of Industrial Relations, with instruction that it reopen the case,
receive all such evidence as may be relevant and otherwise proceed in accordance with the
requirements set forth hereinabove. So ordered.
Avancea, C. J., Villa-Real, Imperial, Diaz, Concepcion and Moran, JJ., concur.

(6) The Court of Industrial Relations or any of its judges, therefore, must act on its
or his own independent consideration of the law and facts of the controversy, and
not simply accept the views of a subordinate in arriving at a decision. It may be that
the volume of work is such that it is literally Relations personally to decide all
controversies coming before them. In the United States the difficulty is solved with
the enactment of statutory authority authorizing examiners or other subordinates
to render final decision, with the right to appeal to board or commission, but in our
case there is no such statutory authority.

(7) The Court of Industrial Relations should, in all controversial questions, render its
decision in such a manner that the parties to the proceeding can know the various
issues involved, and the reasons for the decision rendered. The performance of this
duty is inseparable from the authority conferred upon it.

In the right of the foregoing fundamental principles, it is sufficient to observe here that,
except as to the alleged agreement between the Ang Tibay and the National Worker's
Brotherhood (appendix A), the record is barren and does not satisfy the thirst for a factual
basis upon which to predicate, in a national way, a conclusion of law.

This result, however, does not now preclude the concession of a new trial prayed for the by
respondent National Labor Union, Inc., it is alleged that "the supposed lack of material
claimed by Toribio Teodoro was but a scheme adopted to systematically discharged all the
members of the National Labor Union Inc., from work" and this avernment is desired to be
proved by the petitioner with the "records of the Bureau of Customs and the Books of
BREW MASTER INTERNATIONAL INC., petitioner, vs. NATIONAL FEDERATION OF LABOR
UNIONS (NAFLU), ANTONIO D. ESTRADA and HONORABLE NATIONAL LABOR
RELATIONS COMMISSION (Third Division), respondents.
 DECISION
DAVIDE, JR., J.:
This is a special civil action for certiorari seeking the reversal of the 7 October 1994
decision[1]of the National Labor Relations Commission (NLRC) in NLRC Case No. 00-06-04136-
93 (CA No. L-007370-94), which modified the 11 July 1994 decision [2] of the Labor Arbiter by
directing the reinstatement of private respondent Antonio D. Estrada, the complainant,
without loss of seniority rights and benefits.
Private respondent National Federation of Labor Unions (NAFLU), a co-complainant in
the labor case, is a labor union of which complainant is a member.
The factual and procedural antecedents are summarized in the decision of the Labor
Arbiter which we quote verbatim:
Complainant was first employed by respondent on 16 September 1991 as route helper with
the latest daily wage of P119.00. From 19 April 1993 up to 19 May 1993, for a period of one
(1) month, complainant went on absent without permission (AWOP). On 20 May 1993,
respondent thru Mr. Rodolfo Valentin, sent a Memo to complainant, to wit:
Please explain in writing within 24 hours of your receipt of this memo why no disciplinary
action should be taken against you for the following offense:
You were absent since April 19, 1993 up to May 19, 1993.
For your strict compliance.
In answer to the aforesaid memo, complainant explained:
Sa dahilan po na ako ay hindi nakapagpaalam sainyo [sic] dahil inuwi ko ang mga anak ko sa
Samar dahil ang asawa ko ay lumayas at walang mag-aalaga sa mga anak ko. Kaya naman
hindi ako naka long distance or telegrama dahil wala akong pera at ibinili ko ng gamot ay puro
utang pa.
Finding said explanation unsatisfactory, on 16 June 1993, respondent thru its Sales Manager,
Mr. Henry A. Chongco issued a Notice of Termination which reads:
We received your letter of explanation dated May 21, 1993 but we regret to inform you that
we do not consider it valid. You are aware of the company Rules and Regulations that
absence without permission for six (6) consecutive working days is considered abandonment
of work.
In view of the foregoing, the company has decided to terminate your employment effective
June 17, 1993 for abandonment of work.
Hence, this complaint.
Complainants contend that individual complainants dismissal was done without just cause;
that it was not sufficiently established that individual complainants absence from April 19,
1993 to June 16, 1993 are unjustified; that the penalty of dismissal for such violation is too
severe; that in imposing such penalty, respondent should have taken into consideration
complainants length of service and as a first offender, a penalty less punitive will suffice such
as suspension for a definite period, (Position Paper, complainants).
Upon the other hand, respondent contends that individual complainant was dismissed for
cause allowed by the company Rules and Regulations and the Labor Code; that the act of
complainant in absenting from work for one (1) month without official leave is deleterious to
the business of respondent; that it will result to stoppage of production which will not only
destructive to respondents interests but also to the interest of its employees in general; that
the dismissal of complainant from the service is legal, (Position Paper, respondent). [3]
The Labor Arbiter dismissed the complaint for lack of merit, citing the principle of
managerial control, which recognizes the employers prerogative to prescribe reasonable rules
and regulations to govern the conduct of his employees. The principle allows the imposition
of disciplinary measures which are necessary for the efficiency of both the employer and the
employees. In complainant's case, he persisted in not reporting for work until 16 June 1993
notwithstanding his receipt of the memorandum requiring him to explain his absence
without approval. The Labor Arbiter, relying on Shoemart, Inc. vs. NLRC,[4] thus concluded:
Verily, it is crystal clear that individual complainant has indeed abandoned his work. The filing
of the complaint on 25 June 1993 or almost two (2) months from the date complainant failed
to report for work affirms the findings of this Office and therefore, under the law and
jurisprudence which upholds the right of an employer to discharge an employee who incurs
frequent, prolonged and unexplained absences as being grossly remiss in his duties to the
employer and is therefore, dismissed for cause, (Shoemart, Inc. vs. NLRC, 176 SCRA 385). An
employee is deemed to have abandoned his position or to have resigned from the same,
whenever he has been absent therefrom without previous permission of the employer for
three consecutive days or more. This justification is the obvious harm to employers interest,
resulting from [sic] the non-availability of the workers services, (Supra). (underscoring
supplied)[5]
and ruled that complainants termination from his employment was legal, the same with just
or authorized cause and due process. [6]
Complainant appealed to the NLRC, alleging that the immediate filing of a complaint for
illegal dismissal verily indicated that he never intended to abandon his work, then
cited Policarpio v. Vicente Dy Sun, Jr., [7] where the NLRC ruled that prolonged absence does
not, by itself, necessarily mean abandonment. Accordingly, there must be a concurrence of
intention and overt acts from which it can be inferred that the employee is no longer
interested in working. Complainant likewise invoked compassion in the application of
sanctions, as dismissal from employment brings untold hardship and sorrows on the
dependents of the wage earners. In his case, a penalty less punitive than dismissal could have
sufficed.
 In the assailed decision[8] of 7 October 1994, the NLRC modified the Labor Arbiter's
decision and held that complainants dismissal was invalid for the following reasons:
Complainant-appellants prolonged absences, although unauthorized, may not amount to
gross neglect or abandonment of work to warrant outright termination of
employment. Dismissal is too severe a penalty. For one, the mere fact that complainant-
appellant is a first offender must be considered in his favor. Besides, it is generally impossible
for an employee to anticipate when he would be ill or compelled to attend to some family
problems or emergency like in the case at bar.
Reliance on the ruling enunciated in the cited case of Shoemart Inc. vs. National Labor
Relations, 176 SCRA 385, is quite misplaced because of the obvious dissimilarities of the
attendant circumstances in the said case vis-a-vis those obtaining in the case at bar. Unlike in
the aforecited Shoemart Case, herein complainant-appellant was not dismissed for
unauthorized absences and eventually reinstated anterior to his second dismissal for the
same offense nor was he given a second chance which he could have ignored.
Otherwise stated, the difference between the two cases greatly lies [in] the fact that
complainant in the Shoemart Case in the language of the Supreme Court was an inveterate
absentee who does not deserve reinstatement compared to herein complainant-appellant
who is a first offender[9]
The NLRC then decreed as follows:
PREMISES CONSIDERED, and [sic] the Decision of the Labor Arbiter, dated 11 July 1994 is
hereby MODIFIED, by directing the reinstatement of complainant-appellant to his former
position without loss of seniority rights and other benefits, but without backwages. The other
findings in the appealed decision stand AFFIRMED.[10]
Petitioners motion for the reconsideration[11] was denied by the NLRC in its 7 December
1994 resolution.[12] Petitioner thus filed this special civil action contending that the NLRC
committed grave abuse of discretion in ordering complainant's reinstatement, which in effect
countenances the reinstatement of an employee who is found guilty of excessive absences
without prior approval. It further argued that the NLRC failed to consider the rationale behind
petitioners Rules and Regulations; that it was deprived of its prerogative to enforce them; and
that complainant's reinstatement would adversely affect its business and send the wrong
signals to its employees.
In its comment[13] for public respondent NLRC, the Office of the Solicitor General
maintained that dismissal from employment was too severe a penalty for a first time offender
like complainant.Although he violated petitioners rules and regulations, his absences were
justified: he had to bring his children to Samar, his home province, as his wife deserted
him. While that by itself might not excuse the failure to seek permission, the Office of the
Solicitor General submitted, however, that it would be at [sic] the height of callousness if one,
considering his plight under the circumstance[s], would not give due consideration to
[complainants] explanation. There has to be an exception.[14]
Applying Itogon-Suyoc Mines, Inc. v. NLRC,[15] the Office of the Solicitor General
recommended complainants reinstatement, which would be more harmonious to the
dictates of social justice and equity. It further emphasized that the reinstatement should not
be considered a condonation of complainants irresponsible behavior, rather, it must be
viewed as a mitigation of the severity of the penalty of dismissal. Accordingly, it prays that
this petition be dismissed.
In its reply,[16] petitioner disputed the application of Itogon-Suyoc because: (1) the
employee involved therein had been in the service for twenty-three years while complainant
herein had served petitioner for only two years; and (2) the offense in Itogon-Suyoc was
limited to a single act of high grading while complainant herein committed a series
of unexcused absences.
We gave due course to the petition and dispensed with complainants comment.
The sole issue to be resolved is whether the NLRC committed grave abuse of discretion
in modifying the decision of the Labor Arbiter.
The answer must be in the negative.
A scrutiny of the facts discloses that complainants absence was precipitated by a grave
family problem as his wife unexpectedly deserted him and abandoned the family. Considering
that he had a full-time job, there was no one to whom he could entrust the children and he
was thus compelled to bring them to the province. It would have been extremely difficult for
him to have been husband and wife/father and mother at the same time to the children in
the metropolis. He was then under emotional, psychological, spiritual and physical stress and
strain. The reason for his absence is, under these circumstances, justified. While his failure to
inform and seek petitioner's approval was an omission which must be corrected and
chastised, he did not merit the severest penalty of dismissal from the service.
Petitioners finding that complainant was guilty of abandonment is misplaced.
Abandonment as a just and valid ground for dismissal requires the deliberate, unjustified
refusal of the employee to resume his employment. Two elements must then be satisfied: (1)
the failure to report for work or absence without valid or justifiable reason; and (2) a clear
intention to sever the employer-employee relationship. The second element is the more
determinative factor and must be evinced by overt acts. [17] Likewise, the burden of proof is on
the employer to show the employees clear and deliberate intent to discontinue his
employment without any intention of returning, [18] mere absence is not sufficient. [19] These
elements are not present here. First, as held above, complainant's absence was justified
under the circumstances. As to the second requisite, we are not convinced that complainant
ever intended to sever the employer-employee relationship. Complainant immediately
complied with the memo requiring him to explain his absence, and upon knowledge of his
termination, immediately sued for illegal dismissal. These plainly refuted any claim that he
was no longer interested in returning to work. [20] Without doubt, the intention is lacking.
Moreover, petitioner failed to discharge the burden of proof that complainant was
guilty of abandonment. No evidence other than complainants letter explaining his absence
was presented.Needless to state, the letter did not indicate, in the least, that complainant
was no longer interested in returning to work. On the contrary, complainant sought
petitioners understanding. In declaring him guilty of abandonment, petitioner merely relied
on its Rules and Regulations which limited its application to a six-day continuous absence,
contrary to the purpose of the law. While the employer is not precluded from prescribing
rules and regulations to govern the conduct of his employees, these rules and their
implementation must be fair, just and reasonable. It must be underscored that no less than
our Constitution looks with compassion on the workingman and protects his rights not only
under a general statement of a state policy, [21] but under the Article on Social Justice and
Human Rights,[22] thus placing labor contracts on a higher plane and with greater
safeguards. Verily, relations between capital and labor are not merely contractual. They are
impressed with public interest and labor contracts must, perforce, yield to the common good.
[23]

We then conclude that complainants "prolonged" absence without approval does not
fall within the definition of abandonment and that his dismissal was unjustified. While we do
not decide here the validity of petitioner's Rules and Regulations on continuous,
unauthorized absences, what is plain is that it was wielded with undue haste resulting in a
deprivation of due process, thus not allowing for a determination of just cause or
abandonment. In this light, petitioner's dismissal was illegal. This is not to say that his
absence should go unpunished, as impliedly noted by the NLRC in declining to award back
wages. In the absence of the appropriate offense which defines complainants infraction in the
companys Rules and Regulations, equity dictates that a penalty commensurate to the
infraction be imposed.

WHEREFORE, the petition is hereby DISMISSED and the decision of the National Labor
Relations Commission in NLRC Case No. 06-04136-93 is hereby AFFIRMED. No
pronouncement as to costs.

SO ORDERED.

Narvasa, C.J., (Chairman), Melo, Francisco, and Panganiban, JJ., concur.

INTERNATIONAL SCHOOL ALLIANCE OF EDUCATORS (ISAE), petitioner, vs. HON. LEONARDO
A. QUISUMBING in his capacity as the Secretary of Labor and Employment; HON.
CRESENCIANO B. TRAJANO in his capacity as the Acting Secretary of Labor and
Employment; DR. BRIAN MACCAULEY in his capacity as the Superintendent of International
School-Manila; and INTERNATIONAL SCHOOL, INC., respondents.
DECISION
KAPUNAN, J.:
Receiving salaries less than their counterparts hired abroad, the local-hires of private
respondent School, mostly Filipinos, cry discrimination. We agree. That the local-hires are
paid more than their colleagues in other schools is, of course, beside the point. The point is
that employees should be given equal pay for work of equal value. That is a principle long
honored in this jurisdiction. That is a principle that rests on fundamental notions of justice.
That is the principle we uphold today.
Private respondent International School, Inc. (the School, for short), pursuant to Presidential
Decree 732, is a domestic educational institution established primarily for dependents of
foreign diplomatic personnel and other temporary residents. [1] To enable the School to
continue carrying out its educational program and improve its standard of instruction, Section
2(c) of the same decree authorizes the School to
employ its own teaching and management personnel selected by it either
locally or abroad, from Philippine or other nationalities, such personnel
being exempt from otherwise applicable laws and regulations attending
their employment, except laws that have been or will be enacted for the
protection of employees.
Accordingly, the School hires both foreign and local teachers as members of its faculty,
classifying the same into two: (1) foreign-hires and (2) local-hires. The School employs four
tests to determine whether a faculty member should be classified as a foreign-hire or a local
hire:
a.....What is one's domicile?
b.....Where is one's home economy?
c.....To which country does one owe economic allegiance?
d.....Was the individual hired abroad specifically to work in the School and
was the School responsible for bringing that individual to the Philippines?
[2]
Should the answer to any of these queries point to the Philippines, the faculty member is
classified as a local hire; otherwise, he or she is deemed a foreign-hire.
The School grants foreign-hires certain benefits not accorded local-hires. These include
housing, transportation, shipping costs, taxes, and home leave travel allowance. Foreign-hires
are also paid a salary rate twenty-five percent (25%) more than local-hires. The School
justifies the difference on two "significant economic disadvantages" foreign-hires have to
endure, namely: (a) the "dislocation factor" and (b) limited tenure. The School explains:
A foreign-hire would necessarily have to uproot himself from his home
country, leave his family and friends, and take the risk of deviating from a
promising career path-all for the purpose of pursuing his profession as an
educator, but this time in a foreign land. The new foreign hire is faced
with economic realities: decent abode for oneself and/or for one's family,
effective means of transportation, allowance for the education of one's
children, adequate insurance against illness and death, and of course the
primary benefit of a basic salary/retirement compensation.
Because of a limited tenure, the foreign hire is confronted again with the
same economic reality after his term: that he will eventually and
inevitably return to his home country where he will have to confront the
uncertainty of obtaining suitable employment after a long period in a
foreign land.
The compensation scheme is simply the School's adaptive measure to
remain competitive on an international level in terms of attracting
competent professionals in the field of international education. [3]
When negotiations for a new collective bargaining agreement were held on June 1995,
petitioner International School Alliance of Educators, "a legitimate labor union and the
collective bargaining representative of all faculty members"[4] of the School, contested the
difference in salary rates between foreign and local-hires. This issue, as well as the question
of whether foreign-hires should be included in the appropriate bargaining unit, eventually
caused a deadlock between the parties.
On September 7, 1995, petitioner filed a notice of strike. The failure of the National
Conciliation and Mediation Board to bring the parties to a compromise prompted the
Department of Labor and Employment (DOLE) to assume jurisdiction over the dispute. On
June 10, 1996, the DOLE Acting Secretary, Crescenciano B. Trajano, issued an Order resolving
the parity and representation issues in favor of the School. Then DOLE Secretary Leonardo A.
Quisumbing subsequently denied petitioner's motion for reconsideration in an Order dated
March 19, 1997. Petitioner now seeks relief in this Court.
Petitioner claims that the point-of-hire classification employed by the School is discriminatory
to Filipinos and that the grant of higher salaries to foreign-hires constitutes racial
discrimination.
The School disputes these claims and gives a breakdown of its faculty members, numbering
38 in all, with nationalities other than Filipino, who have been hired locally and classified as
local hires.[5]The Acting Secretary of Labor found that these non-Filipino local-hires received
the same benefits as the Filipino local-hires:
The compensation package given to local-hires has been shown to apply to all, regardless of
race. Truth to tell, there are foreigners who have been hired locally and who are paid equally
as Filipino local hires.[6]
The Acting Secretary upheld the point-of-hire classification for the distinction in salary rates:
The principle "equal pay for equal work" does not find application in the
present case. The international character of the School requires the hiring
of foreign personnel to deal with different nationalities and different
cultures, among the student population.
We also take cognizance of the existence of a system of salaries and
benefits accorded to foreign hired personnel which system is universally
recognized. We agree that certain amenities have to be provided to these
people in order to entice them to render their services in the Philippines
and in the process remain competitive in the international market.
Furthermore, we took note of the fact that foreign hires have limited
contract of employment unlike the local hires who enjoy security of
tenure. To apply parity therefore, in wages and other benefits would also
require parity in other terms and conditions of employment which
include the employment contract.
A perusal of the parties' 1992-1995 CBA points us to the conditions and
provisions for salary and professional compensation wherein the parties
agree as follows:
All members of the bargaining unit shall be
compensated only in accordance with Appendix C
hereof provided that the Superintendent of the
School has the discretion to recruit and hire
expatriate teachers from abroad, under terms and
conditions that are consistent with accepted
international practice.
Appendix C of said CBA further provides:
The new salary schedule is deemed at equity with the
Overseas Recruited Staff (OSRS) salary schedule. The
25% differential is reflective of the agreed value of
system displacement and contracted status of the
OSRS as differentiated from the tenured status of
Locally Recruited Staff (LRS).
To our mind, these provisions demonstrate the parties' recognition of the
difference in the status of two types of employees, hence, the difference
in their salaries.
The Union cannot also invoke the equal protection clause to justify its
claim of parity. It is an established principle of constitutional law that the
guarantee of equal protection of the laws is not violated by legislation or
private covenants based on reasonable classification. A classification is
reasonable if it is based on substantial distinctions and apply to all
members of the same class. Verily, there is a substantial distinction
between foreign hires and local hires, the former enjoying only a limited
tenure, having no amenities of their own in the Philippines and have to be
given a good compensation package in order to attract them to join the
teaching faculty of the School.[7]
We cannot agree.
That public policy abhors inequality and discrimination is beyond contention. Our
Constitution and laws reflect the policy against these evils. The Constitution [8] in the Article on
Social Justice and Human Rights exhorts Congress to "give highest priority to the enactment
of measures that protect and enhance the right of all people to human dignity, reduce social,
economic, and political inequalities." The very broad Article 19 of the Civil Code requires
every person, "in the exercise of his rights and in the performance of his duties, [to] act with
justice, give everyone his due, and observe honesty and good faith."
International law, which springs from general principles of law, [9] likewise proscribes
discrimination. General principles of law include principles of equity, [10] i.e., the general
principles of fairness and justice, based on the test of what is reasonable. [11] The Universal
Declaration of Human Rights,[12]the International Covenant on Economic, Social, and Cultural
Rights,[13] the International Convention on the Elimination of All Forms of Racial
Discrimination,[14] the Convention against Discrimination in Education,[15] the Convention (No.
111) Concerning Discrimination in Respect of Employment and Occupation [16] - all embody the
general principle against discrimination, the very antithesis of fairness and justice. The
Philippines, through its Constitution, has incorporated this principle as part of its national
laws.
In the workplace, where the relations between capital and labor are often skewed in favor of
capital, inequality and discrimination by the employer are all the more reprehensible.
The Constitution[17] specifically provides that labor is entitled to "humane conditions of work."
These conditions are not restricted to the physical workplace - the factory, the office or the
field - but include as well the manner by which employers treat their employees.
The Constitution[18] also directs the State to promote "equality of employment opportunities
for all." Similarly, the Labor Code[19] provides that the State shall "ensure equal work
opportunities regardless of sex, race or creed." It would be an affront to both the spirit and
letter of these provisions if the State, in spite of its primordial obligation to promote and
ensure equal employment opportunities, closes its eyes to unequal and discriminatory terms
and conditions of employment.[20]
Discrimination, particularly in terms of wages, is frowned upon by the Labor Code. Article
135, for example, prohibits and penalizes [21] the payment of lesser compensation to a female
employee as against a male employee for work of equal value. Article 248 declares it an
unfair labor practice for an employer to discriminate in regard to wages in order to encourage
or discourage membership in any labor organization.
Notably, the International Covenant on Economic, Social, and Cultural Rights, supra, in Article
7 thereof, provides:
The States Parties to the present Covenant recognize the right of
everyone to the enjoyment of just and favourable conditions of work,
which ensure, in particular:
a.....Remuneration which provides all workers, as a minimum, with:
i.....Fair wages and equal remuneration for work of
equal value without distinction of any kind, in
particular women being guaranteed conditions of
work not inferior to those enjoyed by men, with equal
pay for equal work;
x x x.
The foregoing provisions impregnably institutionalize in this jurisdiction the long honored
legal truism of "equal pay for equal work." Persons who work with substantially equal
qualifications, skill, effort and responsibility, under similar conditions, should be paid similar
salaries.[22] This rule applies to the School, its "international character" notwithstanding.
The School contends that petitioner has not adduced evidence that local-hires perform work
equal to that of foreign-hires. [23] The Court finds this argument a little cavalier. If an employer
accords employees the same position and rank, the presumption is that these employees
perform equal work. This presumption is borne by logic and human experience. If the
employer pays one employee less than the rest, it is not for that employee to explain why he
receives less or why the others receive more. That would be adding insult to injury. The
employer has discriminated against that employee; it is for the employer to explain why the
employee is treated unfairly.
The employer in this case has failed to discharge this burden. There is no evidence here that
foreign-hires perform 25% more efficiently or effectively than the local-hires. Both groups
have similar functions and responsibilities, which they perform under similar working
conditions.
The School cannot invoke the need to entice foreign-hires to leave their domicile to
rationalize the distinction in salary rates without violating the principle of equal work for
equal pay.
"Salary" is defined in Black's Law Dictionary (5th ed.) as "a reward or recompense for services
performed." Similarly, the Philippine Legal Encyclopedia states that "salary" is the
"[c]onsideration paid at regular intervals for the rendering of services." In Songco v. National
Labor Relations Commission,[24] we said that:
"salary" means a recompense or consideration made to a person for his
pains or industry in another man's business. Whether it be derived from
"salarium," or more fancifully from "sal," the pay of the Roman soldier, it
carries with it the fundamental idea of compensation for services
rendered. (Emphasis supplied.)
While we recognize the need of the School to attract foreign-hires, salaries should not be
used as an enticement to the prejudice of local-hires. The local-hires perform the same
services as foreign-hires and they ought to be paid the same salaries as the latter. For the
same reason, the "dislocation factor" and the foreign-hires' limited tenure also cannot serve
as valid bases for the distinction in salary rates. The dislocation factor and limited tenure
affecting foreign-hires are adequately compensated by certain benefits accorded them which
are not enjoyed by local-hires, such as housing, transportation, shipping costs, taxes and
home leave travel allowances.
The Constitution enjoins the State to "protect the rights of workers and promote their
welfare,"[25] "to afford labor full protection."[26] The State, therefore, has the right and duty to
regulate the relations between labor and capital.[27] These relations are not merely
contractual but are so impressed with public interest that labor contracts, collective
bargaining agreements included, must yield to the common good. [28] Should such contracts
contain stipulations that are contrary to public policy, courts will not hesitate to strike down
these stipulations.
In this case, we find the point-of-hire classification employed by respondent School to justify
the distinction in the salary rates of foreign-hires and local hires to be an invalid classification.
There is no reasonable distinction between the services rendered by foreign-hires and local-
hires. The practice of the School of according higher salaries to foreign-hires contravenes
public policy and, certainly, does not deserve the sympathy of this Court.
We agree, however, that foreign-hires do not belong to the same bargaining unit as the local-
hires.
A bargaining unit is "a group of employees of a given employer, comprised of all or less than
all of the entire body of employees, consistent with equity to the employer indicate to be the
best suited to serve the reciprocal rights and duties of the parties under the collective
bargaining provisions of the law."[29] The factors in determining the appropriate collective
bargaining unit are (1) the will of the employees (Globe Doctrine); (2) affinity and unity of the
employees' interest, such as substantial similarity of work and duties, or similarity of
compensation and working conditions (Substantial Mutual Interests Rule); (3) prior collective
bargaining history; and (4) similarity of employment status. [30] The basic test of an asserted
bargaining unit's acceptability is whether or not it is fundamentally the combination which
will best assure to all employees the exercise of their collective bargaining rights. [31]

It does not appear that foreign-hires have indicated their intention to be grouped together
with local-hires for purposes of collective bargaining. The collective bargaining history in the
School also shows that these groups were always treated separately. Foreign-hires have
limited tenure; local-hires enjoy security of tenure. Although foreign-hires perform similar
functions under the same working conditions as the local-hires, foreign-hires are accorded
certain benefits not granted to local-hires. These benefits, such as housing, transportation,
shipping costs, taxes, and home leave travel allowance, are reasonably related to their status
as foreign-hires, and justify the exclusion of the former from the latter. To include foreign-
hires in a bargaining unit with local-hires would not assure either group the exercise of their
respective collective bargaining rights.

WHEREFORE, the petition is GIVEN DUE COURSE. The petition is hereby GRANTED IN PART.
The Orders of the Secretary of Labor and Employment dated June 10, 1996 and March 19,
1997, are hereby REVERSED and SET ASIDE insofar as they uphold the practice of respondent
School of according foreign-hires higher salaries than local-hires.

SO ORDERED.

Puno, and Pardo, JJ., concur.

Davide, Jr., C.J., (Chairman), on official leave.

Ynares-Santiago, J., on leave.